ARBOR REALTY TRUST INC
For the period ended Mar 31, 2025. Filed May 2, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 2, 2025
ABR$1.61-3.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001628280-24-044661
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-02.
0001628280-25-021683
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 150 previous paragraphs and 124 current paragraphs.
57 unchanged; 43 reworded; 23 added; 39 removed; 11 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
Financing and Capital Markets Activity
Current report
•We entered into a new $1.15 billion repurchase facility to finance loans primarily held in our CLOs. The facility can be upsized to $1.25 billion within the first 90 days and has a 24-month reinvestment period. The facility has an interest rate of SOFR plus 1.85% and matures at the latest maturity date of all purchased assets, which is currently February 2028. Additionally, this facility is approximately 88% non-recourse to us and has an 80% advance rate;
Current report
•Unwound CLOs 14 and 19, redeeming the remaining $1.08 billion of outstanding notes using the proceeds from the new $1.15 billion repurchase facility;
Current report
•Paid down outstanding notes on existing securitizations totaling $260.1 million; and
Current report
•Raised $29.3 million from issuances of approximately 2.4 million shares of common stock under our “At-The-Market” equity offering sales agreement.
Current report
•Increased our REO asset portfolio through the foreclosure of seven multifamily loans with a net carrying value of $192.7 million, partially offset by the sale of two REO assets for $77.0 million.
Current report
Agency Business Activity. Loan originations totaled $605.9 million and our fee-based servicing portfolio was up slightly to $33.48 billion.
Current report
Dividend. We declared a cash dividend of $0.30 per share, a reduction from our previous quarterly dividend of $0.43 per share.
Current report
There has been a high level of interest rate volatility and uncertainty since the announcement of the current administration's imposition of increased tariffs. Over the last six months the five and ten-year interest rates have increased substantially with the ten-year rate moving from a low of 3.60% in September 2024 to a high of 4.80% in January 2025 and the forward yield curve is predicting the ten-year rate will likely remain elevated for the balance of 2025. Additionally, the short term rate curve is currently expected to continue to decrease by approximately another 90 basis points in 2025. As a result of the significant volatility in rates and the uncertainty of the outcome of the tariff negotiations, it is very difficult to predict where short and long term rates will settle for the remainder of the year. This current unpredictable interest rate environment is creating increased headwinds for commercial real estate and is likely to result in decreased origination volumes, especially in our GSE/Agency business in 2025, which is a highly profitable segment of our overall business. This rate environment will also have a negative impact on the ability for borrowers to refinance our balance sheet loans with fixed rate agency product, which could increase our delinquencies and defaults and reduce available liquidity. This environment could also limit our ability to resolve delinquent loans, leading to potential additional foreclosures and REO assets on our balance sheet, all of which could have a material adverse effect on our future results of operations, financial condition, liquidity and our ability to make distributions to our stockholders.
Current report
Credit and repurchase facilities increased $1.22 billion, primarily due to refinancing loans from the unwind of two CLOs with our new $1.15 billion repurchase facility.
Current report
Mortgage notes payable — real estate owned increased $49.0 million, primarily due to the addition of mortgage notes payable totaling $98.1 million on recently foreclosed loans, through which we took back the underlying property, partially offset by the payoff of $49.1 million of mortgage notes payable associated with the sale of two REO assets.
Current report
The decrease in income from MSRs was primarily due to a 31% decrease in loan commitment volume ($288.8 million), partially offset by a 16% increase in the MSR rate from 1.09% to 1.26%. The increase in the MSR rate was due to $160.2 million of loan commitments in the first quarter of 2024 not serviced for a fee. Excluding the loan commitments for which we do not receive a servicing fee, the MSR rate was 1.32% for the three months ended March 31, 2024.
Current report
The increases in property operating income and expenses were due to the increase in our REO assets.
Current report
The increase in other income, net was primarily due to increases in the fair values of our Private Label loans from our Agency Business.
Current report
The decrease in the provision for credit losses (net of recoveries) was primarily related to general improvements in the forecasted outlook for commercial real estate in 2025.
Current report
Loss on Real Estate
Current report
The loss on real estate in 2025 is comprised of a $1.8 million loss on the foreclosure of loans we took back as REO, and a $2.8 million loss on below market debt on the sale of two existing REOs, partially offset by a $1.9 million gain on the REO sales.
Current report
(Loss) Income from Equity Affiliates
Current report
There has been a high level of interest rate volatility and uncertainty since the announcement of the current adminstration's imposition of increased tariffs. Over the last six months the five and ten-year interest rates have increased substantially with the ten-year rate moving from a low of 3.60% in September 2024 to a high of 4.80% in January 2025 and the forward yield curve is predicting the ten-year rate will remain elevated for the balance of 2025. Additionally, the short term rate curve is currently expected to continue to decrease by approximately another 90 basis points in 2025. As a result of the significant volatility in rates and the uncertainty of the outcome of the tariff negotiations, it is very difficult to predict where short and long term rates will settle for the remainder of the year. This current unpredictable interest rate environment is creating increased headwinds for commercial real estate and is likely to result in decreased origination volumes, especially in our GSE/Agency business in 2025, which is a highly profitable segment of our overall business. This rate environment will also have a negative impact on the ability for borrowers to refinance our balance sheet loans with fixed rate agency product, which could increase our delinquencies and defaults and reduce available liquidity. This environment could also limit our ability to resolve delinquent loans, leading to potential additional foreclosures and REO assets on our balance sheet, all of which could have a material adverse effect on our future results of operations, financial condition, liquidity and our ability to make distributions to our stockholders.
Current report
•Entered into a new repurchase facility totaling $1.15 billion;
Current report
•Unwound CLO 14 and 19 repaying $1.08 billion of outstanding notes;
Current report
•Paid down outstanding notes on existing securitizations totaling $260.1 million; and
Current report
(2)The diluted weighted average shares outstanding were adjusted to exclude the potential shares issuable upon conversion and settlement of our convertible senior notes principal balance. No adjustment was necessary at March 31, 2025, as their effect was anti-dilutive and not reflected in the GAAP diluted weighted average shares outstanding.
Removed paragraphs (39)
Previous report
Financing and Capital Markets Activity. We entered into two new Structured Business debt facilities totaling $650.0 million of warehouse capacity.
Previous report
Agency Business Activity.
Previous report
•Loan originations totaled $1.10 billion and includes $383.1 million of new Agency loans that were recaptured from our Structured Business runoff; and
Previous report
•Grew our fee-based servicing portfolio $733.1 million, or 2%, to $33.01 billion.
Previous report
Recent Developments in October 2024. Raised $100.0 million from the issuance of our 9.00% senior unsecured notes due 2027, and redeemed our 4.75% senior unsecured notes.
Previous report
These current market conditions may continue to limit our ability to grow our Structured Business since this business is more reliant on the capital markets to grow, but can also present us with options to build on existing relationships or create new relationships with lenders. Runoff in our Structured Business also provides an opportunity to refinance these loans with new Agency loans, when practical and appropriate to do so. Since our Agency Business requires limited capital to grow, as originations are financed through warehouse facilities for generally up to 60 days before the loans are sold, tightening liquidity conditions in equity and capital markets should not have a substantial impact on our ability to sustain this business.
Previous report
Capitalized mortgage servicing rights decreased $14.9 million, primarily due to amortization and prepayment write-downs exceeding additions from new originations, as a result of a decline in the weighted average servicing fee rate.
Previous report
Investments in equity affiliates decreased $3.0 million, primarily due to distributions received from our investments in AWC and a residential mortgage banking business totaling $19.0 million, substantially offset by contributions made in our investments in AWC and AMAC III totaling $16.3 million.
Previous report
Due from related party increased $32.4 million, due to an increase in funds from payoffs to be remitted by our affiliated servicing operations related to real estate transactions at the end of the reporting period, which were remitted to us subsequent to quarter end.
Previous report
Other assets increased $70.0 million, primarily due to additional fundings of unsecured line of credit loans totaling $39.6 million, an increase in interest receivables from fundings on existing loans and an increase in deferred interest on modified loans.
Previous report
Credit and repurchase facilities increased $19.9 million, primarily due to refinancing loans from the unwind of CLOs in our Structured Business, substantially offset by loan sales exceeding originations in our Agency Business.
Previous report
Senior unsecured notes decreased $87.1 million, due to the repayment at maturity of our 5.75% notes.
Previous report
Due to related party increased $11.7 million, due to the timing of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations.
Previous report
Due to borrowers decreased $64.7 million, primarily due to the funding of previously committed originations in our Structured Business.
Previous report
The decrease in income from MSRs was primarily due to a 13% decrease in loan commitment volume ($154.9 million), partially offset by an 8% increase in the MSR rate from 1.16% to 1.25%. The increase in the MSR rate was primarily due to higher rates on Fannie Mae loan volume from an increase in servicing fees retained.
Previous report
The decrease in servicing revenue, net was primarily due to a decrease in the average escrow balances largely due to runoff, partially offset by an increase in interest rates.
Previous report
Other income, net in 2024 primarily reflects loan origination and modification fees from our Structured Business and reserve recoveries on SFR and Private Label loans from our Agency Business.
Previous report
The provision for credit losses (net of recoveries) in 2024 includes $13.9 million in specific loan reserves and a $1.4 million increase related to forecasted economic and market conditions, while 2023 includes $12.8 million in specific loan reserves and a $4.5 million increase related to forecasted economic and market conditions.
Previous report
Income from Equity Affiliates
Previous report
nm — not meaningful
Previous report
Net Interest Income
Previous report
The decrease in interest income was mainly due to a $98.2 million decrease from our Structured Business. The decline was primarily from a decrease in the average balance of our core interest-earning assets as loan runoff exceeded loan originations, slightly offset by an increase in the average yield on core interest-earning assets from an increase in SOFR, partially offset by a rise in non-performing and other non-accrued loans.
Previous report
Agency Business Revenue
Previous report
The decrease in income from MSRs was primarily due to a 20% decrease in loan commitment volume ($754.3 million) and a 3% decrease in the MSR rate from 1.27% to 1.23%. The decrease in the MSR rate was primarily due to a higher percentage of Freddie Mac loan commitments, which contain lower servicing fees.
Previous report
Other Income (Loss)
Previous report
The increase in other income, net was primarily from an increase in loan origination and modification fees from our Structured Business
Previous report
Other Expenses
Previous report
The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation and commissions from higher bonus allocation targets, annual merit increases and commission rates.
Previous report
The decrease in the provision for loss sharing (net of recoveries) reflects less specific loan impairment reserves taken in the current year period as well as a decrease in general reserves.
Previous report
The increase in the provision for credit losses (net of recoveries) primarily reflects an increase in reserves on specifically impaired loans due to a decline in general economic and market conditions.
Previous report
Gain on Sale of Real Estate
Previous report
In 2024, we sold a real estate owned asset for $14.2 million and recognized a $3.8 million gain.
Previous report
Income from Equity Affiliates
Previous report
Income from equity affiliates in 2024 primarily reflects $9.0 million in distributions received from our Lexford joint venture, partially offset by a $1.7 million loss from our AMAC III investment, while income in 2023 primarily reflects $14.5 million received from equity participation interests on properties that were sold and $7.2 million in distributions received from our Lexford joint venture.
Previous report
Provision for Income Taxes
Previous report
•Entered into three new debt facilities totaling $900.0 million;
Previous report
•Unwound CLO 15 repaying $674.4 million of outstanding notes;
Previous report
•Paid down outstanding notes on CLOs 14 and 16 and Q Series securitization totaling $954.6 million; and
Previous report
•Repaid at maturity the remaining $90.0 million of our 5.75% senior notes.
Reworded paragraphs (43)
Previous wording
Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD. We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and 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.
Current wording
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, seller/servicer 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 that are generally underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as “Private Label” loans, and originate and sell finance products through 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.
Previous wording
We conduct our operations to qualify as a REIT. 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.
Current wording
We conduct our operations to qualify as a REIT. 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 REIT-taxable income is distributed and provided that certain other requirements are met.
Previous wording
One of our core business strategies is to generate additional agency lending opportunities by refinancing our multifamily balance sheet bridge loan portfolio when it is practical and appropriate to do so. We execute this strategy by underwriting the multifamily bridge loans we originate to a potential future agency financing. We then continue to work with our borrowers on this execution through the life cycle of the multifamily bridge loan. When effective, this strategy allows us to recapture refinancing opportunities, delever our balance sheet, and generate additional income streams through our capital-light Agency Business.
Current wording
One of our core business strategies is to generate additional agency lending opportunities by refinancing our multifamily balance sheet bridge loan portfolio when it is practical and appropriate to do so. We execute this strategy by underwriting the multifamily bridge loans we originate to a potential future agency financing. We then continue to work with our borrowers on this execution through the life cycle of the multifamily bridge loan. When effective, this strategy allows us to recapture refinancing opportunities, deleverage our balance sheet, and generate additional income streams through our capital-light Agency Business.
Previous wording
Significant Developments During the Third Quarter of 2024
Current wording
Significant Developments During the First Quarter of 2025
Previous wording
•We reduced our balance sheet portfolio by 3% to $11.57 billion, as loan runoff of $521.3 million outpaced loan originations totaling $258.5 million; and
Current wording
•We increased our balance sheet portfolio by 2% to $11.49 billion, as loan originations of $747.1 million outpaced loan runoff totaling $421.9 million;
Previous wording
•We modified twenty-four loans with a total UPB of $1.15 billion. Borrowers of eighteen of these loans with a total UPB of $710.7 million invested additional capital to recapitalize their deals in exchange for temporary rate relief, which we provided through a pay and accrual feature. See Note 3 for details.
Current wording
•We modified 21 loans with a total UPB of $949.8 million. Borrowers of 19 of these loans with a total UPB of $849.4 million invested additional capital to recapitalize their deals in exchange for temporary rate relief, which we provided through a pay and accrual feature (see Note 3 for details); and
Previous wording
These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses, while safeguarding the integrity of our portfolio, which may include modifying original loan terms. Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the terms originally established.
Current wording
The Federal Reserve lowered the federal funds rate three times during 2024 for a total reduction of 100 basis points, which marked the first rate cut since 2020, and it is possible that they will continue to reduce short term rates in 2025. Although short term rates have declined 100 basis points, we currently remain in a high interest rate environment which could remain for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations. These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses, while safeguarding the integrity of our portfolio, which may include modifying original loan terms. Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the current loan terms.
Previous wording
Historically, the high interest rate environment has positively impacted our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating rate based on SOFR. Additionally, since a greater portion of our debt consists of fixed-rate instruments (such as convertible and senior unsecured notes), as compared to our structured loan portfolio, the increase in interest income from high interest rates tends to outpace the rise in interest expense on our debt. Furthermore, our earnings on escrows and cash balances also benefit from an elevated rate environment. However, the prolonged period of elevated interest rates has led to an increase in loan delinquencies, a decrease in loan originations and lower cash and escrow balances, which is having, and may continue to have, a negative impact on our net interest income. Additionally, the prolonged high interest rate environment has contributed to a decline in certain commercial real estate values, leading to increased reserves, as the collateral value is insufficient to fully repay the loans.
Current wording
In the past, the high interest rate environment has sometimes positively impacted our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating rate based on SOFR. Additionally, since a greater portion of our debt consists of fixed-rate instruments (such as convertible and senior unsecured notes), as compared to our structured loan portfolio, the increase in interest income from high interest rates tends to outpace the rise in interest expense on our debt. Furthermore, our earnings on escrows and cash balances also benefit from an elevated rate environment. However, the prolonged period of elevated interest rates has led to an increase in loan delinquencies, a decrease in loan originations and lower cash and escrow balances, which is having, and may continue to have, a negative impact on our net interest income. Additionally, the prolonged high interest rate environment has contributed to a decline in certain commercial real estate values, leading to increased reserves, when the collateral value is considered insufficient to fully repay the loans.
Previous wording
As discussed earlier, the Federal Reserve began lowering interest rates in September 2024 and may continue to cut interest rates during the remainder of 2024 and 2025. If these rate reductions continue, this would likely lead to immediate decreases in net interest income on our floating rate loan book and reduce earnings on our cash and escrow balances. However, the prolonged rate reductions could also lead to increases in our loan originations and improved credit, resulting in decreases in delinquencies and potential future losses. For additional details, please see “Quantitative and Qualitative Disclosures about Market Risk” below.
Current wording
As discussed earlier, the Federal Reserve began lowering short term interest rates in 2024 and may continue to cut interest rates during 2025. These rate reductions have resulted in and will continue to result in a decrease in the net interest income on our floating rate loan book and reductions in the earnings on our cash and escrow balances. For additional details, please see “Quantitative and Qualitative Disclosures about Market Risk” below.
Previous wording
Inflation, high interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions in many market segments, including the financial services, real estate and credit markets, which has, and may continue, to result in a further dislocation in capital markets and a continual reduction of available liquidity. Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to continue to operate and grow our business.
Current wording
Inflation, high interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions in many market segments, including the financial services, real estate and credit markets, which has, and may continue, to result in a further dislocation in capital markets and a continual reduction of available liquidity. Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to continue to operate and strengthen our business.
Previous wording
We are a national originator with Fannie Mae and Freddie Mac, and the GSEs remain the most significant providers of capital to the multifamily market. In November 2023, FHFA set its 2024 Caps for Fannie Mae and Freddie Mac at $70 billion for each enterprise for a total opportunity of $140 billion, which is a decrease from its 2023 Caps of $75 billion for each enterprise. FHFA stated they will continue to monitor the market and reserves the right to increase the 2024 Caps if warranted, however, they will not reduce the 2024 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2024 Caps. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2024 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market. Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs, and servicing revenues. The current high interest rate environment could lead to a decline in our GSE originations, which could negatively impact our financial results. We are unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future.
Current wording
We are a national originator with Fannie Mae and Freddie Mac, and the GSEs remain the most significant providers of capital to the multifamily market. FHFA set its 2025 Caps for Fannie Mae and Freddie Mac at $73 billion for each enterprise for a total opportunity of $146 billion, which is an increase from its 2024 Caps of $70 billion for each enterprise. FHFA stated they will continue to monitor the market and reserves the right to increase the 2025 Caps if warranted, however, they will not reduce the 2025 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2025 Caps. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2025 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market. Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs, and servicing revenues. As discussed above, the current high interest rate environment could lead to a continued decline in our GSE originations, which could continue to negatively impact our financial results. We are also unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future.
Previous wording
Our Structured loan and investment portfolio balance was $11.57 billion and $12.62 billion at September 30, 2024 and December 31, 2023, respectively. This decrease was primarily due to loan runoff exceeding loan originations by $1.05 billion. See below for details.
Current wording
Our Structured loan and investment portfolio balance was $11.49 billion and $11.30 billion at March 31, 2025 and December 31, 2024, respectively. This increase was primarily due to loan originations exceeding loan runoff by $325.2 million (see below for details), partially offset by loans we foreclosed on and received ownership of the underlying collateral as REO assets.
Previous wording
The portfolio had a weighted average current interest pay rate of 7.25% and 8.42% at September 30, 2024 and December 31, 2023, respectively. Including certain fees earned and costs, the weighted average current interest rate was 8.16% and 8.98% at September 30, 2024 and December 31, 2023, respectively. Our debt that finances our Structured loan and investment portfolio totaled $9.97 billion and $11.57 billion at September 30, 2024 and December 31, 2023, respectively, with a weighted average funding cost of 6.86% and 7.14%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 7.18% and 7.45% at September 30, 2024 and December 31, 2023, respectively.
Current wording
The portfolio had a weighted average current interest pay rate of 6.94% and 6.90% at March 31, 2025 and December 31, 2024, respectively. Including certain fees earned and costs, the weighted average current interest rate was 7.85% and 7.80% at March 31, 2025 and December 31, 2024, respectively. Our debt that finances our Structured loan and investment portfolio totaled $9.49 billion and $9.46 billion at March 31, 2025 and December 31, 2024, respectively, with a weighted average funding cost of 6.47% and 6.55%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.82% and 6.88% at March 31, 2025 and December 31, 2024, respectively.
Previous wording
Loans held-for-sale from the Agency Business decreased $225.6 million, primarily from loan sales exceeding loan originations by $247.5 million as noted in the following table. Activity from our Agency Business portfolio is comprised of the following (in thousands):
Current wording
Loans held-for-sale from the Agency Business decreased $121.1 million, primarily from loan sales exceeding loan originations by $124.9 million as noted in the following table. Activity from our Agency Business portfolio is comprised of the following (in thousands):
Previous wording
Real estate owned increased $40.9 million, primarily due to the foreclosure of two multifamily bridge loans, which we took back the underlying collateral, partially offset by the sale of an office property.
Current wording
Real estate owned increased $125.6 million, primarily due to the foreclosure of seven multifamily bridge loans, through which we took back the underlying collateral, partially offset by the sale of two multifamily properties.
Previous wording
Securitized debt decreased $1.62 billion, primarily due to the unwind of CLO 15 and paydowns on our remaining securitizations.
Current wording
Securitized debt decreased $1.34 billion, primarily due to the unwind of CLO 14 and CLO 19 totaling $1.08 billion and paydowns on our remaining securitizations of $260.1 million.
Previous wording
Other liabilities decreased $28.4 million, primarily due to a decrease in accrued interest payable as a result of the unwind of CLO 15, paydowns on remaining securitizations and interest payments made on our convertible notes, along with a decrease in deferred tax liabilities.
Current wording
Other liabilities decreased $40.9 million, primarily due to payments of accrued incentive compensation and commissions during the first quarter of 2025, related to 2024 performance, and a decrease in accrued interest payable as a result of the unwind of CLOs, paydowns on remaining securitizations, and interest payments made on our convertible notes.
Previous wording
See Note 16 for details of our share repurchases, dividends declared and deferred compensation transactions.
Current wording
See Note 16 for details of our issuances of common stock, dividends declared and deferred compensation transactions.
Previous wording
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At September 30, 2024 and December 31, 2023, delinquent loans totaled $427.0 million and $411.1 million, respectively. At September 30, 2024, there were two loans totaling $4.8 million in bankruptcy and three loans totaling $21.4 million have been foreclosed. At December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and no loans in foreclosure.
Current wording
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At March 31, 2025 and December 31, 2024, delinquent loans totaled $582.5 million and $524.5 million, respectively. At March 31, 2025, there were two loans totaling $27.6 million in bankruptcy and eight loans totaling $32.1 million have been foreclosed. At December 31, 2024, there were two loans totaling $4.8 million in bankruptcy and six loans totaling $28.2 million were foreclosed.
Previous wording
The decrease in interest income was mainly due to a $48.7 million decrease from our Structured Business. The decline was primarily from a decrease in the average balance of our core interest-earning assets as loan runoff exceeds loan originations, a decrease in the average yield on core interest-earning assets from a rise in non-performing and other non-accrued loans and a reduction in interest earned on cash balances due to lower average bank balances.
Current wording
The decrease in interest income was mainly due to a $77.8 million decrease from our Structured Business. The decline was primarily due to a decrease in the average balance of our core interest-earning assets, as loan runoff exceeds loan originations in 2024, and a decrease in the average yield on core interest-earning assets. The decrease in the average yield was mainly from a reduction in back interest received on loan modifications and a decrease in SOFR. To a lesser extent, the decline also reflects a decrease in interest earned on our cash balances as a result of lower average bank balances in 2025.
Previous wording
The decrease in interest expense was mainly due to a $30.1 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities from loan runoff and note paydowns in our securitizations and senior unsecured notes, partially offset by an increase in the average cost of interest-bearing liabilities, mainly from increases in SOFR.
Current wording
The decrease in interest expense was mainly due to a $51.0 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities, from loan runoff and note paydowns in our securitizations, and a decrease in the average cost of interest-bearing liabilities, mainly from a decrease in SOFR.
Previous wording
The decrease in gain on sales, including fee-based services, net was primarily due to an 8% decrease in loan sales volume ($279.2 million), partially offset by a 3% increase in the sales margin from 1.54% to 1.58%.
Current wording
The decrease in gain on sales, including fee-based services, net was primarily due to a 33% decrease in loan sales volume ($354.5 million), partially offset by a 14% increase in the sales margin from 1.54% to 1.75%. The increase in the sales margin was mainly due to the portfolio mix in the first quarter of 2025 that produced higher margins.
Previous wording
The decrease in servicing revenue, net was primarily due to a decrease in average escrow balances largely due to runoff, partially offset by an increase in interest rates.
Current wording
The decrease in servicing revenue, net was primarily due to a decrease in earnings on escrow balances from lower average balances.
Previous wording
The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation and commissions from higher bonus allocation targets, annual merit increases and commission rates.
Current wording
The decrease in employee compensation and benefits expense was primarily due to a decrease in incentive compensation, including commissions, from lower bonus allocation targets and lower GSE/Agency loan sales volume.
Previous wording
The increase in the provision for loss sharing (net of recoveries) primarily reflects an increase in reserves related to general economic and market conditions.
Current wording
The increase in the provision for loss sharing (net of recoveries) primarily reflects an increase in reserves related to specifically identified assets.
Previous wording
The loss on extinguishment of debt in both 2024 and 2023 reflects deferred financing fees recognized in connection with the unwind of CLOs.
Current wording
The loss on extinguishment of debt in 2025 represents deferred financing fees recognized in connection with the unwind of CLOs.
Previous wording
Income from equity affiliates in 2024 primarily reflects a $4.9 million distribution received from our Lexford joint venture, partially offset by losses from our investments in a residential mortgage banking business and our AMAC III investment totaling $1.5 million, while income in 2023 primarily reflects $3.5 million received from an equity participation interest on a property that was sold, substantially offset by an aggregate loss of $2.7 million from our ongoing equity investments.
Current wording
Loss from equity affiliates in 2025 primarily reflects losses from our investments in a residential mortgage banking business and our AMAC III investment totaling $2.3 million, partially offset by income from several of our other investments; while income in 2024 primarily reflects $1.6 million of income from our investment in a residential mortgage banking business.
Previous wording
In the three months ended September 30, 2024, we recorded a tax provision of $5.2 million, which consisted of a current tax provision of $7.2 million and a deferred tax benefit of $2.0 million. In the three months ended September 30, 2023, we recorded a tax provision of $5.9 million, which consisted of a current tax provision of $8.3 million and a deferred tax benefit of $2.4 million.
Current wording
In the three months ended March 31, 2025, we recorded a tax provision of $3.6 million, which consisted of a current tax provision of $3.7 million and a deferred tax benefit of $0.1 million. In the three months ended March 31, 2024, we recorded a tax provision of $3.6 million, which consisted of a current tax provision of $7.6 million and a deferred tax benefit of $4.0 million.
Previous wording
The noncontrolling interest relates to the outstanding OP Units (see Note 16). There were 16,293,589 OP Units outstanding at both September 30, 2024 and 2023, which represented 8.0% of our outstanding stock at both September 30, 2024 and 2023.
Current wording
The noncontrolling interest relates to the outstanding OP Units (see Note 16). There were 16,173,761 and 16,293,589 OP Units outstanding at March 31, 2025 and 2024, respectively, which represented 7.8% and 7.9% of our outstanding stock at March 31, 2025 and 2024, respectively.
Previous wording
The ongoing adverse economic and market conditions, including inflation, high interest rate environment, bank failures and geopolitical uncertainty, continues to cause significant disruptions and liquidity constraints in many market segments, including the financial services, real estate and credit markets. These conditions have created, and may continue to create, a dislocation in capital markets and a continual reduction of available liquidity. Instability in the banking sector, such as the regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital. The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all. If our financing sources, borrowers and their tenants continue to be impacted by these adverse economic and market conditions, or by the other risks disclosed in our filings with the SEC, it would have a material adverse effect on our liquidity and capital resources.
Current wording
The ongoing adverse economic and market conditions, including inflation, a high interest rate environment, bank failures and geopolitical uncertainty, including tariffs, has caused significant disruptions and liquidity constraints in many market segments, including the financial services, real estate and credit markets. These conditions have created, and may continue to create, further dislocations in capital markets and a continual reduction of available liquidity. Instability in the banking sector, such as the regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital. The increased cost of credit, or degradation in debt financing terms, has impacted, and may continue to impact, our ability to identify and execute investments on attractive terms, or at all. If our financing sources, borrowers and their tenants continue to be impacted by these adverse economic and market conditions, or by the other risks disclosed in our filings with the SEC, it would have a material adverse effect on our liquidity and capital resources.
Previous wording
We had $9.97 billion in total structured debt outstanding at September 30, 2024. Of this total, $7.02 billion, or 70%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes. The remaining $2.95 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with. At September 30, 2024, we had $1.51 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads.
Current wording
We had $9.49 billion in total structured debt outstanding at March 31, 2025. Of this total, $4.98 billion, or 52%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes. The remaining $4.51 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with. At March 31, 2025, we had $1.81 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads.
Previous wording
At October 30, 2024, we had approximately $600 million in cash and liquidity. In addition to our ability to extend our credit and repurchase facilities and raise funds from equity and debt offerings, we also have a $33.01 billion agency servicing portfolio at September 30, 2024, which is mostly prepayment protected and generates approximately $125.4 million per year in recurring gross cash flow.
Current wording
At April 29, 2025, we had approximately $315 million in cash and liquidity. In addition to our ability to extend our credit and repurchase facilities and raise funds from equity and debt offerings, we also have a $33.48 billion agency servicing portfolio at March 31, 2025, which is mostly prepayment protected and generates approximately $126 million per year in recurring gross cash flow.
Previous wording
To maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our taxable income. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations. However, we believe that our capital resources and access to financing will provide us with financial flexibility and market responsiveness at levels sufficient to meet current and anticipated capital and liquidity requirements.
Current wording
To maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT-taxable income. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations. However, we believe that our capital resources and access to financing will provide us with financial flexibility and market responsiveness at levels sufficient to meet current and anticipated capital and liquidity requirements.
Previous wording
Cash Flows. Cash flows provided by operating activities totaled $414.8 million during the nine months ended September 30, 2024 and consisted primarily of net cash inflows of $220.3 million from loan sales exceeding loan originations in our Agency Business and net income (adjusted for the increase in CECL reserves of $72.7 million) of $281.3 million, partially offset by a $32.4 million increase in funds from payoffs due from our affiliated servicing operations.
Current wording
Cash Flows. Cash flows provided by operating activities totaled $150.5 million during the three months ended March 31, 2025 and consisted primarily of net cash inflows of $122.0 million from loan sales exceeding loan originations in our Agency Business and net income (adjusted for the increase in CECL reserves of $10.9 million) of $54.2 million.
Previous wording
Cash flows provided by investing activities totaled $946.1 million during the nine months ended September 30, 2024. Loan and investment activity (originations and payoffs/paydowns) comprise the majority of our investing activities. Loan payoffs and paydowns from our Structured Business totaling $1.87 billion, net of originations of $912.5 million, resulted in net cash inflows of $961.4 million.
Current wording
Cash flows used in investing activities totaled $314.8 million during the three months ended March 31, 2025. Loan and investment activity (originations and payoffs/paydowns) comprise the majority of our investing activities. Loan originations from our Structured Business totaling $733.1 million, net of payoffs and paydowns of $418.6 million, resulted in net cash outflows of $314.5 million.
Previous wording
Cash flows used in financing activities totaled $2.03 billion during the nine months ended September 30, 2024 and consisted primarily of $1.63 billion of payoffs and paydowns on existing securitizations, $295.9 million of distributions to our stockholders and OP Unit holders and $90.0 million from the repayment at maturity of our 5.75% senior unsecured notes.
Current wording
Cash flows used in financing activities totaled $146.5 million during the three months ended March 31, 2025 and consisted primarily of $1.34 billion of payoffs and paydowns on securitizations and $99.4 million of distributions to our stockholders and OP Unit holders, partially offset by net cash inflows of $1.22 billion from debt facility activities (financed loan originations were greater than facility paydowns) and net cash inflows of $49.0 million from mortgage notes payable activities (proceeds exceeded payoffs and paydowns).
Previous wording
(2)See Note 14 for a breakdown of debt maturities by year.
Current wording
(2)See Note 14 for a breakdown of debt maturities by year. These maturity dates exclude extension options.
Previous wording
(4)The ASAP agreement we have with Fannie Mae has no expiration date.
Current wording
(4)The $750 million As Soon as Pooled ® Plus (“ASAP”) agreement we have with Fannie Mae has no expiration date.
Previous wording
Inflation. The Federal Reserve lowered the federal funds rate by 50 basis points in September 2024, which marks the first rate cut since 2020, and it is possible that rates will continue to decline during the remainder of 2024 and 2025. Although rates have started to decline, we currently remain in a high interest rate environment which could remain higher for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations. If these rate reductions continue, this would likely lead to immediate decreases in net interest income on our floating rate loan book and reduce earnings on our cash and escrow balances. However, if a prolonged rate cut occurs, this could lead to increases in our loan origination business and improved credit, resulting in decreases in delinquencies and potential future losses. For additional details, please see “Current Market Conditions, Risks and Recent Trends” above and “Quantitative and Qualitative Disclosures about Market Risk” below.
Current wording
Inflation. The Federal Reserve lowered the federal funds rate three times during 2024 for a total reduction of 100 basis points, which marked the first rate cuts since 2020, and it is possible that rates will continue to decline during 2025. Although short term rates have declined 100 basis points, we currently remain in a high interest rate environment which could remain for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations. These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. If these rate reductions continue, this would likely lead to immediate decreases in net interest income on our floating rate loan book and reduce earnings on our cash and escrow balances. However, if a prolonged rate cut occurs, this could lead to increases in our loan origination business and improved credit, resulting in decreases in delinquencies and potential future losses. For additional details, please see “Current Market Conditions, Risks and Recent Trends” above and “Quantitative and Qualitative Disclosures about Market Risk” below.
Previous wording
Contractual Obligations. During the nine months ended September 30, 2024, the following significant changes were made to our contractual obligations disclosed in our 2023 Annual Report:
Current wording
Contractual Obligations. During the three months ended March 31, 2025, the following significant changes were made to our contractual obligations disclosed in our 2024 Annual Report:
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
For additional details, please see “Current Market Conditions, Risks and Recent Trends” above and “Quantitative and Qualitative Disclosures about Market Risk” below.
Rearranged previous paragraphs (11)
Previous report — wording carried elsewhere
The Federal Reserve lowered the federal funds rate by 50 basis points in September 2024, which marks the first rate cut since 2020, and it is possible that rates will continue to decline during the remainder of 2024 and 2025. Although rates have started to decline, we currently remain in a high interest rate environment which could remain higher for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations.
Previous report — wording carried elsewhere
Comparison of Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Previous report — wording carried elsewhere
The following table provides our consolidated operating results ($ in thousands):
Previous report — wording carried elsewhere
The following table presents the average balance of our Structured Business interest-earning assets and interest-bearing liabilities, associated interest income (expense) and the corresponding weighted average yields ($ in thousands):
Previous report — wording carried elsewhere
(1)Based on UPB for loans, amortized cost for securities and principal amount of debt.
Previous report — wording carried elsewhere
(2)Weighted average yield calculated based on annualized interest income or expense divided by average carrying value.
Previous report — wording carried elsewhere
The decrease in interest expense was mainly due to a $50.2 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities from loan runoff and note paydowns in our securitizations and senior unsecured notes, partially offset by an increase in the average cost of interest-bearing liabilities, mainly from increases in SOFR.
Previous report — wording carried elsewhere
The losses on derivative instruments in 2024 and 2023 were related to changes in the fair values of our forward sale commitments and swaps held by our Agency Business as a result of changes in market interest rates as well as from the timing of GSE Agency loan sales.
Previous report — wording carried elsewhere
In the nine months ended September 30, 2024, we recorded a tax provision of $12.7 million, which consisted of a current tax provision of $21.6 million and a deferred tax benefit of $8.9 million. In the nine months ended September 30, 2023, we recorded a tax provision of $19.4 million, which consisted of a current tax provision of $26.0 million and a deferred tax benefit of $6.6 million.
Previous report — wording carried elsewhere
Net Income Attributable to Noncontrolling Interest
Previous report — wording carried elsewhere
The noncontrolling interest relates to the outstanding OP Units (see Note 16). There were 16,293,589 OP Units outstanding at both September 30, 2024 and 2023, which represented 8.0% of our outstanding stock at both September 30, 2024 and 2023.