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BrightSpring Health Services (Nasdaq: BTSG) posted solid top-line expansion in Q2 2025. Net sales climbed 29% YoY to $3.15 bn, led by Pharmacy Solutions (≈89% of revenue) where Medicare D and Commercial payors drove volume. Provider Services added 11% of revenue.
Cost inflation pressured margins—gross margin slipped 90 bp to 11.9%—yet operating income still improved 26% to $48.6 m as scale offset higher SG&A. Net income rose 42% to $27.5 m ($0.14 basic EPS) with discontinued Community Living operations contributing $19.0 m; income from continuing ops was steady at $8.5 m.
Six-month results show momentum: revenue +28% to $6.03 bn, net income swung to $56.6 m from a $26.9 m loss, and operating cash flow improved to $150.7 m versus a $94.1 m outflow last year.
Balance sheet trends:
- Cash & equivalents up to $70.1 m
- Long-term debt cut to $2.48 bn (-$84 m YTD); net debt leverage declining
- Equity climbed 6% to $1.74 bn, aided by option exercises and profit retention
The planned $835 m sale of the Community Living unit (assets now held for sale) represents a strategic pivot toward higher-margin senior & specialty pharmacy. Walgreens Boots Alliance fully exited its stake and KKR reduced holdings via a secondary offering, ending BrightSpring’s “controlled company” status and triggering full Nasdaq governance compliance.
Key EPS figures (basic): continuing ops $0.05; discontinued ops $0.09; total $0.14. Diluted EPS $0.13.
Management highlights regulatory reimbursement pressure, labor availability, and execution of the Community Living divestiture as ongoing risks.
BrightSpring Health Services (Nasdaq: BTSG) ha registrato una solida crescita dei ricavi nel secondo trimestre del 2025. Le vendite nette sono aumentate del 29% su base annua, raggiungendo 3,15 miliardi di dollari, trainate principalmente da Pharmacy Solutions (circa l'89% del fatturato), dove Medicare D e i pagatori commerciali hanno guidato il volume. Provider Services ha contribuito con l'11% del fatturato.
L'inflazione dei costi ha esercitato pressione sui margini: il margine lordo è sceso di 90 punti base all'11,9%, ma l'utile operativo è comunque cresciuto del 26% a 48,6 milioni di dollari, grazie alla scala che ha compensato l'aumento delle spese generali e amministrative. L'utile netto è salito del 42% a 27,5 milioni di dollari (utile base per azione di 0,14 dollari), con le operazioni discontinue di Community Living che hanno contribuito per 19,0 milioni; l'utile dalle operazioni in corso è rimasto stabile a 8,5 milioni.
I risultati dei sei mesi mostrano slancio: ricavi +28% a 6,03 miliardi di dollari, utile netto passato a 56,6 milioni da una perdita di 26,9 milioni, e flusso di cassa operativo migliorato a 150,7 milioni rispetto a un deflusso di 94,1 milioni dell'anno precedente.
Tendenze del bilancio:
- Liquidità e equivalenti aumentati a 70,1 milioni di dollari
- Debito a lungo termine ridotto a 2,48 miliardi (-84 milioni da inizio anno); leva finanziaria netta in calo
- Patrimonio netto aumentato del 6% a 1,74 miliardi, sostenuto dall'esercizio di opzioni e dalla ritenzione degli utili
La prevista vendita da 835 milioni di dollari dell'unità Community Living (attività ora classificate come in vendita) rappresenta una svolta strategica verso una farmacia per anziani e specializzata con margini più elevati. Walgreens Boots Alliance ha completamente ceduto la sua partecipazione e KKR ha ridotto la propria quota tramite un'offerta secondaria, ponendo fine allo status di "azienda controllata" di BrightSpring e attivando la piena conformità alla governance Nasdaq.
Principali dati sull'utile per azione (base): operazioni in corso 0,05 dollari; operazioni discontinue 0,09 dollari; totale 0,14 dollari. Utile diluito per azione 0,13 dollari.
La direzione sottolinea come rischi continui la pressione sui rimborsi regolatori, la disponibilità di manodopera e l'esecuzione della dismissione di Community Living.
BrightSpring Health Services (Nasdaq: BTSG) reportó una sólida expansión de ingresos en el segundo trimestre de 2025. Las ventas netas aumentaron un 29% interanual hasta 3.15 mil millones de dólares, impulsadas por Pharmacy Solutions (≈89% de los ingresos), donde Medicare D y los pagadores comerciales impulsaron el volumen. Provider Services aportó el 11% de los ingresos.
La inflación de costos presionó los márgenes: el margen bruto disminuyó 90 puntos básicos hasta el 11.9%, pero la utilidad operativa mejoró un 26% hasta 48.6 millones de dólares, ya que la escala compensó el aumento en gastos generales y administrativos. La utilidad neta creció un 42% hasta 27.5 millones de dólares (EPS básico de 0.14 dólares), con las operaciones discontinuadas de Community Living aportando 19.0 millones; la utilidad de operaciones continuas se mantuvo estable en 8.5 millones.
Los resultados de seis meses muestran impulso: ingresos +28% a 6.03 mil millones, utilidad neta pasó a 56.6 millones desde una pérdida de 26.9 millones, y flujo de caja operativo mejoró a 150.7 millones frente a una salida de 94.1 millones del año anterior.
Tendencias del balance:
- Efectivo y equivalentes aumentaron a 70.1 millones
- Deuda a largo plazo reducida a 2.48 mil millones (-84 millones en lo que va del año); apalancamiento neto en descenso
- El patrimonio subió un 6% a 1.74 mil millones, favorecido por el ejercicio de opciones y la retención de ganancias
La venta planificada de 835 millones de dólares de la unidad Community Living (activos ahora clasificados como mantenidos para la venta) representa un giro estratégico hacia una farmacia para personas mayores y especialidades con márgenes más altos. Walgreens Boots Alliance salió completamente de su participación y KKR redujo su participación mediante una oferta secundaria, terminando el estatus de "compañía controlada" de BrightSpring y activando el cumplimiento total de la gobernanza Nasdaq.
Cifras clave de EPS (básico): operaciones continuas 0.05; operaciones discontinuadas 0.09; total 0.14. EPS diluido 0.13.
La administración destaca como riesgos continuos la presión regulatoria en reembolsos, la disponibilidad de mano de obra y la ejecución de la desinversión de Community Living.
BrightSpring Health Services (나스닥: BTSG)는 2025년 2분기에 견고한 매출 성장세를 기록했습니다. 순매출은 전년 대비 29% 증가한 31억 5천만 달러에 달했으며, 매출의 약 89%를 차지하는 Pharmacy Solutions 부문에서 Medicare D와 상업 보험사가 거래량을 견인했습니다. Provider Services는 매출의 11%를 차지했습니다.
비용 인플레이션으로 인해 마진이 압박을 받았으며, 총마진은 90bp 하락한 11.9%를 기록했지만, 운영 규모 확대와 SG&A 비용 증가를 상쇄하며 영업이익은 26% 증가한 4,860만 달러로 개선되었습니다. 순이익은 42% 증가한 2,750만 달러(기본 주당순이익 0.14달러)를 기록했으며, 중단된 Community Living 사업부가 1,900만 달러를 기여했습니다. 지속 영업 이익은 850만 달러로 안정적이었습니다.
6개월 실적은 모멘텀을 보여줍니다: 매출은 28% 증가한 60억 3천만 달러, 순이익은 2,660만 달러 손실에서 5,660만 달러 흑자로 전환되었으며, 영업 현금 흐름은 작년 9,410만 달러 유출에서 1억 5,070만 달러 유입으로 개선되었습니다.
재무 상태 동향:
- 현금 및 현금성 자산 7,010만 달러로 증가
- 장기 부채는 24억 8천만 달러로 축소(-올해 누계 8,400만 달러 감소); 순부채 레버리지 감소
- 지분은 옵션 행사 및 이익 유보에 힘입어 17억 4천만 달러로 6% 상승
커뮤니티 리빙 부문(현재 매각 대기 자산)의 8억 3,500만 달러 매각 계획은 고마진 고령자 및 전문 약국으로의 전략적 전환을 의미합니다. Walgreens Boots Alliance는 지분을 완전히 매각했고, KKR도 2차 공모를 통해 지분을 축소하여 BrightSpring의 "지배 회사" 지위를 종료시키고 나스닥 거버넌스 완전 준수를 촉발했습니다.
주요 주당순이익(EPS) 수치 (기본): 지속 영업 0.05달러; 중단 영업 0.09달러; 총 0.14달러. 희석 EPS 0.13달러.
경영진은 규제 상환 압박, 노동력 확보, Community Living 매각 실행을 지속적인 위험 요인으로 강조했습니다.
BrightSpring Health Services (Nasdaq : BTSG) a affiché une solide croissance de son chiffre d'affaires au deuxième trimestre 2025. Le chiffre d'affaires net a progressé de 29 % en glissement annuel pour atteindre 3,15 milliards de dollars, porté par Pharmacy Solutions (≈89 % des revenus), où Medicare D et les payeurs commerciaux ont stimulé le volume. Provider Services a contribué à hauteur de 11 % des revenus.
L'inflation des coûts a pesé sur les marges – la marge brute a reculé de 90 points de base à 11,9 % – mais le résultat d'exploitation s'est tout de même amélioré de 26 % à 48,6 millions de dollars, la taille compensant les frais généraux et administratifs plus élevés. Le résultat net a augmenté de 42 % à 27,5 millions de dollars (BPA de base de 0,14 $), les opérations abandonnées de Community Living ayant contribué pour 19,0 millions ; le résultat des activités poursuivies est resté stable à 8,5 millions.
Les résultats semestriels montrent un élan : chiffre d'affaires +28 % à 6,03 milliards, résultat net passé à 56,6 millions contre une perte de 26,9 millions, et flux de trésorerie opérationnel amélioré à 150,7 millions contre une sortie de 94,1 millions l'an dernier.
Tendances du bilan :
- Trésorerie et équivalents en hausse à 70,1 millions
- Dette à long terme réduite à 2,48 milliards (-84 millions depuis le début de l'année) ; effet de levier net en baisse
- Capitaux propres en hausse de 6 % à 1,74 milliard, soutenus par l'exercice d'options et la rétention des bénéfices
La vente prévue de l'unité Community Living pour 835 millions de dollars (actifs désormais classés comme détenus en vue de la vente) représente un virage stratégique vers une pharmacie senior et spécialisée à plus forte marge. Walgreens Boots Alliance a totalement cédé sa participation et KKR a réduit ses parts via une offre secondaire, mettant fin au statut de « société contrôlée » de BrightSpring et déclenchant la pleine conformité à la gouvernance Nasdaq.
Principaux chiffres du BPA (de base) : activités poursuivies 0,05 $ ; activités abandonnées 0,09 $ ; total 0,14 $. BPA dilué 0,13 $.
La direction souligne comme risques persistants la pression réglementaire sur les remboursements, la disponibilité de la main-d'œuvre et l'exécution de la cession de Community Living.
BrightSpring Health Services (Nasdaq: BTSG) verzeichnete im zweiten Quartal 2025 ein solides Umsatzwachstum. Der Nettoumsatz stieg im Jahresvergleich um 29 % auf 3,15 Mrd. USD, angetrieben von Pharmacy Solutions (≈89 % des Umsatzes), wo Medicare D und kommerzielle Zahler das Volumen erhöhten. Provider Services trugen 11 % zum Umsatz bei.
Die Kosteninflation belastete die Margen – die Bruttomarge sank um 90 Basispunkte auf 11,9 % – dennoch verbesserte sich das Betriebsergebnis um 26 % auf 48,6 Mio. USD, da Skaleneffekte die höheren Vertriebs- und Verwaltungskosten kompensierten. Der Nettogewinn stieg um 42 % auf 27,5 Mio. USD (Basis-Gewinn je Aktie 0,14 USD), wobei die eingestellten Community Living-Geschäfte 19,0 Mio. USD beitrugen; der Gewinn aus fortgeführten Geschäften blieb stabil bei 8,5 Mio. USD.
Die Halbjahresergebnisse zeigen Schwung: Umsatz +28 % auf 6,03 Mrd. USD, Nettogewinn drehte auf 56,6 Mio. USD von einem Verlust von 26,9 Mio., und der operative Cashflow verbesserte sich auf 150,7 Mio. USD gegenüber einem Abfluss von 94,1 Mio. USD im Vorjahr.
Bilanztrends:
- Barmittel und Äquivalente stiegen auf 70,1 Mio. USD
- Langfristige Schulden wurden auf 2,48 Mrd. USD reduziert (-84 Mio. USD im Jahresverlauf); Nettoverschuldung sinkt
- Eigenkapital stieg um 6 % auf 1,74 Mrd. USD, unterstützt durch Optionsausübungen und Gewinnthesaurierung
Der geplante Verkauf der Community Living-Einheit für 835 Mio. USD (Vermögenswerte jetzt als zum Verkauf gehalten klassifiziert) stellt eine strategische Neuausrichtung auf margenstärkere Senior- und Spezialapotheken dar. Walgreens Boots Alliance hat seine Beteiligung vollständig veräußert, und KKR reduzierte seine Anteile durch ein Sekundärangebot, wodurch BrightSprings "kontrollierter Unternehmensstatus" endete und die vollständige Nasdaq-Governance-Konformität ausgelöst wurde.
Wichtige EPS-Zahlen (Basis): fortgeführte Geschäfte 0,05 USD; eingestellte Geschäfte 0,09 USD; gesamt 0,14 USD. Verwässertes EPS 0,13 USD.
Das Management hebt regulatorischen Erstattungsdruck, Arbeitskräfteverfügbarkeit und die Durchführung des Community Living-Verkaufs als fortdauernde Risiken hervor.
Positive
- Revenue up 29% YoY, outpacing most peers and indicating strong demand in Pharmacy Solutions.
- Return to profitability: six-month net income of $56.6 m versus prior-year loss of $26.9 m.
- Operating cash flow turned positive at $150.7 m, strengthening liquidity.
- Long-term debt reduced by $84 m, lowering leverage ahead of expected $835 m divestiture proceeds.
- Governance upgrade: loss of “controlled company” status may improve institutional appeal.
Negative
- Gross margin contracted 90 bp due to higher product costs.
- Earnings from continuing operations nearly flat (+0.6%), with most profit growth from soon-to-be-sold unit.
- Debt load remains high at $2.48 bn, equating to significant interest expense ($38.8 m in quarter).
- Sale of Community Living not yet closed; delay or regulatory hurdles could affect deleveraging plans.
- High dependence on government reimbursement (>70% of revenue) subjects cash flows to policy risk.
Insights
TL;DR: Strong revenue growth, debt down, but margin compression and divestiture execution risk keep outlook balanced.
The 29% YoY revenue jump confirms BrightSpring is gaining share in Medicare-linked pharmacy channels. Operating leverage is visible—SG&A grew 19% vs. a 29% sales rise—but cost of goods inflation trimmed gross margin. Debt reduction and positive FCF are encouraging given the $2.5 bn leverage. The pending $835 m Community Living sale could further delever, yet closing is late-2025 and subject to regulatory review. With Walgreens fully out and KKR trimming, float expands and governance improves, potentially widening the investor base. Overall impact: modestly positive.
TL;DR: Core pharmacy engine healthy; reliance on government payors and large goodwill remain watch points.
Medicare and Medicaid represent >70% of revenue, exposing BTSG to policy shifts. Continued flat earnings from continuing ops suggest pharmacy volumes must keep scaling to absorb reimbursement pressure. Goodwill/intangibles total $2.9 bn—over 49% of assets—so any integration miss could spark impairments. Nonetheless, the pivot away from Community Living should streamline operations and boost blended margins once proceeds are redeployed or debt is retired.
BrightSpring Health Services (Nasdaq: BTSG) ha registrato una solida crescita dei ricavi nel secondo trimestre del 2025. Le vendite nette sono aumentate del 29% su base annua, raggiungendo 3,15 miliardi di dollari, trainate principalmente da Pharmacy Solutions (circa l'89% del fatturato), dove Medicare D e i pagatori commerciali hanno guidato il volume. Provider Services ha contribuito con l'11% del fatturato.
L'inflazione dei costi ha esercitato pressione sui margini: il margine lordo è sceso di 90 punti base all'11,9%, ma l'utile operativo è comunque cresciuto del 26% a 48,6 milioni di dollari, grazie alla scala che ha compensato l'aumento delle spese generali e amministrative. L'utile netto è salito del 42% a 27,5 milioni di dollari (utile base per azione di 0,14 dollari), con le operazioni discontinue di Community Living che hanno contribuito per 19,0 milioni; l'utile dalle operazioni in corso è rimasto stabile a 8,5 milioni.
I risultati dei sei mesi mostrano slancio: ricavi +28% a 6,03 miliardi di dollari, utile netto passato a 56,6 milioni da una perdita di 26,9 milioni, e flusso di cassa operativo migliorato a 150,7 milioni rispetto a un deflusso di 94,1 milioni dell'anno precedente.
Tendenze del bilancio:
- Liquidità e equivalenti aumentati a 70,1 milioni di dollari
- Debito a lungo termine ridotto a 2,48 miliardi (-84 milioni da inizio anno); leva finanziaria netta in calo
- Patrimonio netto aumentato del 6% a 1,74 miliardi, sostenuto dall'esercizio di opzioni e dalla ritenzione degli utili
La prevista vendita da 835 milioni di dollari dell'unità Community Living (attività ora classificate come in vendita) rappresenta una svolta strategica verso una farmacia per anziani e specializzata con margini più elevati. Walgreens Boots Alliance ha completamente ceduto la sua partecipazione e KKR ha ridotto la propria quota tramite un'offerta secondaria, ponendo fine allo status di "azienda controllata" di BrightSpring e attivando la piena conformità alla governance Nasdaq.
Principali dati sull'utile per azione (base): operazioni in corso 0,05 dollari; operazioni discontinue 0,09 dollari; totale 0,14 dollari. Utile diluito per azione 0,13 dollari.
La direzione sottolinea come rischi continui la pressione sui rimborsi regolatori, la disponibilità di manodopera e l'esecuzione della dismissione di Community Living.
BrightSpring Health Services (Nasdaq: BTSG) reportó una sólida expansión de ingresos en el segundo trimestre de 2025. Las ventas netas aumentaron un 29% interanual hasta 3.15 mil millones de dólares, impulsadas por Pharmacy Solutions (≈89% de los ingresos), donde Medicare D y los pagadores comerciales impulsaron el volumen. Provider Services aportó el 11% de los ingresos.
La inflación de costos presionó los márgenes: el margen bruto disminuyó 90 puntos básicos hasta el 11.9%, pero la utilidad operativa mejoró un 26% hasta 48.6 millones de dólares, ya que la escala compensó el aumento en gastos generales y administrativos. La utilidad neta creció un 42% hasta 27.5 millones de dólares (EPS básico de 0.14 dólares), con las operaciones discontinuadas de Community Living aportando 19.0 millones; la utilidad de operaciones continuas se mantuvo estable en 8.5 millones.
Los resultados de seis meses muestran impulso: ingresos +28% a 6.03 mil millones, utilidad neta pasó a 56.6 millones desde una pérdida de 26.9 millones, y flujo de caja operativo mejoró a 150.7 millones frente a una salida de 94.1 millones del año anterior.
Tendencias del balance:
- Efectivo y equivalentes aumentaron a 70.1 millones
- Deuda a largo plazo reducida a 2.48 mil millones (-84 millones en lo que va del año); apalancamiento neto en descenso
- El patrimonio subió un 6% a 1.74 mil millones, favorecido por el ejercicio de opciones y la retención de ganancias
La venta planificada de 835 millones de dólares de la unidad Community Living (activos ahora clasificados como mantenidos para la venta) representa un giro estratégico hacia una farmacia para personas mayores y especialidades con márgenes más altos. Walgreens Boots Alliance salió completamente de su participación y KKR redujo su participación mediante una oferta secundaria, terminando el estatus de "compañía controlada" de BrightSpring y activando el cumplimiento total de la gobernanza Nasdaq.
Cifras clave de EPS (básico): operaciones continuas 0.05; operaciones discontinuadas 0.09; total 0.14. EPS diluido 0.13.
La administración destaca como riesgos continuos la presión regulatoria en reembolsos, la disponibilidad de mano de obra y la ejecución de la desinversión de Community Living.
BrightSpring Health Services (나스닥: BTSG)는 2025년 2분기에 견고한 매출 성장세를 기록했습니다. 순매출은 전년 대비 29% 증가한 31억 5천만 달러에 달했으며, 매출의 약 89%를 차지하는 Pharmacy Solutions 부문에서 Medicare D와 상업 보험사가 거래량을 견인했습니다. Provider Services는 매출의 11%를 차지했습니다.
비용 인플레이션으로 인해 마진이 압박을 받았으며, 총마진은 90bp 하락한 11.9%를 기록했지만, 운영 규모 확대와 SG&A 비용 증가를 상쇄하며 영업이익은 26% 증가한 4,860만 달러로 개선되었습니다. 순이익은 42% 증가한 2,750만 달러(기본 주당순이익 0.14달러)를 기록했으며, 중단된 Community Living 사업부가 1,900만 달러를 기여했습니다. 지속 영업 이익은 850만 달러로 안정적이었습니다.
6개월 실적은 모멘텀을 보여줍니다: 매출은 28% 증가한 60억 3천만 달러, 순이익은 2,660만 달러 손실에서 5,660만 달러 흑자로 전환되었으며, 영업 현금 흐름은 작년 9,410만 달러 유출에서 1억 5,070만 달러 유입으로 개선되었습니다.
재무 상태 동향:
- 현금 및 현금성 자산 7,010만 달러로 증가
- 장기 부채는 24억 8천만 달러로 축소(-올해 누계 8,400만 달러 감소); 순부채 레버리지 감소
- 지분은 옵션 행사 및 이익 유보에 힘입어 17억 4천만 달러로 6% 상승
커뮤니티 리빙 부문(현재 매각 대기 자산)의 8억 3,500만 달러 매각 계획은 고마진 고령자 및 전문 약국으로의 전략적 전환을 의미합니다. Walgreens Boots Alliance는 지분을 완전히 매각했고, KKR도 2차 공모를 통해 지분을 축소하여 BrightSpring의 "지배 회사" 지위를 종료시키고 나스닥 거버넌스 완전 준수를 촉발했습니다.
주요 주당순이익(EPS) 수치 (기본): 지속 영업 0.05달러; 중단 영업 0.09달러; 총 0.14달러. 희석 EPS 0.13달러.
경영진은 규제 상환 압박, 노동력 확보, Community Living 매각 실행을 지속적인 위험 요인으로 강조했습니다.
BrightSpring Health Services (Nasdaq : BTSG) a affiché une solide croissance de son chiffre d'affaires au deuxième trimestre 2025. Le chiffre d'affaires net a progressé de 29 % en glissement annuel pour atteindre 3,15 milliards de dollars, porté par Pharmacy Solutions (≈89 % des revenus), où Medicare D et les payeurs commerciaux ont stimulé le volume. Provider Services a contribué à hauteur de 11 % des revenus.
L'inflation des coûts a pesé sur les marges – la marge brute a reculé de 90 points de base à 11,9 % – mais le résultat d'exploitation s'est tout de même amélioré de 26 % à 48,6 millions de dollars, la taille compensant les frais généraux et administratifs plus élevés. Le résultat net a augmenté de 42 % à 27,5 millions de dollars (BPA de base de 0,14 $), les opérations abandonnées de Community Living ayant contribué pour 19,0 millions ; le résultat des activités poursuivies est resté stable à 8,5 millions.
Les résultats semestriels montrent un élan : chiffre d'affaires +28 % à 6,03 milliards, résultat net passé à 56,6 millions contre une perte de 26,9 millions, et flux de trésorerie opérationnel amélioré à 150,7 millions contre une sortie de 94,1 millions l'an dernier.
Tendances du bilan :
- Trésorerie et équivalents en hausse à 70,1 millions
- Dette à long terme réduite à 2,48 milliards (-84 millions depuis le début de l'année) ; effet de levier net en baisse
- Capitaux propres en hausse de 6 % à 1,74 milliard, soutenus par l'exercice d'options et la rétention des bénéfices
La vente prévue de l'unité Community Living pour 835 millions de dollars (actifs désormais classés comme détenus en vue de la vente) représente un virage stratégique vers une pharmacie senior et spécialisée à plus forte marge. Walgreens Boots Alliance a totalement cédé sa participation et KKR a réduit ses parts via une offre secondaire, mettant fin au statut de « société contrôlée » de BrightSpring et déclenchant la pleine conformité à la gouvernance Nasdaq.
Principaux chiffres du BPA (de base) : activités poursuivies 0,05 $ ; activités abandonnées 0,09 $ ; total 0,14 $. BPA dilué 0,13 $.
La direction souligne comme risques persistants la pression réglementaire sur les remboursements, la disponibilité de la main-d'œuvre et l'exécution de la cession de Community Living.
BrightSpring Health Services (Nasdaq: BTSG) verzeichnete im zweiten Quartal 2025 ein solides Umsatzwachstum. Der Nettoumsatz stieg im Jahresvergleich um 29 % auf 3,15 Mrd. USD, angetrieben von Pharmacy Solutions (≈89 % des Umsatzes), wo Medicare D und kommerzielle Zahler das Volumen erhöhten. Provider Services trugen 11 % zum Umsatz bei.
Die Kosteninflation belastete die Margen – die Bruttomarge sank um 90 Basispunkte auf 11,9 % – dennoch verbesserte sich das Betriebsergebnis um 26 % auf 48,6 Mio. USD, da Skaleneffekte die höheren Vertriebs- und Verwaltungskosten kompensierten. Der Nettogewinn stieg um 42 % auf 27,5 Mio. USD (Basis-Gewinn je Aktie 0,14 USD), wobei die eingestellten Community Living-Geschäfte 19,0 Mio. USD beitrugen; der Gewinn aus fortgeführten Geschäften blieb stabil bei 8,5 Mio. USD.
Die Halbjahresergebnisse zeigen Schwung: Umsatz +28 % auf 6,03 Mrd. USD, Nettogewinn drehte auf 56,6 Mio. USD von einem Verlust von 26,9 Mio., und der operative Cashflow verbesserte sich auf 150,7 Mio. USD gegenüber einem Abfluss von 94,1 Mio. USD im Vorjahr.
Bilanztrends:
- Barmittel und Äquivalente stiegen auf 70,1 Mio. USD
- Langfristige Schulden wurden auf 2,48 Mrd. USD reduziert (-84 Mio. USD im Jahresverlauf); Nettoverschuldung sinkt
- Eigenkapital stieg um 6 % auf 1,74 Mrd. USD, unterstützt durch Optionsausübungen und Gewinnthesaurierung
Der geplante Verkauf der Community Living-Einheit für 835 Mio. USD (Vermögenswerte jetzt als zum Verkauf gehalten klassifiziert) stellt eine strategische Neuausrichtung auf margenstärkere Senior- und Spezialapotheken dar. Walgreens Boots Alliance hat seine Beteiligung vollständig veräußert, und KKR reduzierte seine Anteile durch ein Sekundärangebot, wodurch BrightSprings "kontrollierter Unternehmensstatus" endete und die vollständige Nasdaq-Governance-Konformität ausgelöst wurde.
Wichtige EPS-Zahlen (Basis): fortgeführte Geschäfte 0,05 USD; eingestellte Geschäfte 0,09 USD; gesamt 0,14 USD. Verwässertes EPS 0,13 USD.
Das Management hebt regulatorischen Erstattungsdruck, Arbeitskräfteverfügbarkeit und die Durchführung des Community Living-Verkaufs als fortdauernde Risiken hervor.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission file number: 001-32136
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) | ||||
(Registrant’s telephone number, including area code): (516 ) 506-4200
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbols | Name of each exchange on which registered | ||||||||||||
Redeemable, par value $0.01 per share | ||||||||||||||
Redeemable, par value $0.01 per share | ||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| þ | Accelerated filer | o | Non-accelerated filer | o | |||||||||||||
| Smaller reporting company | Emerging growth company | ||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Issuer has 192,301,414 shares of common stock outstanding at July 25, 2025.
Table of Contents
INDEX
PART I. FINANCIAL INFORMATION | |||||
Item 1. Financial Statements (Unaudited) | 2 | ||||
Consolidated Balance Sheets | 2 | ||||
Consolidated Statements of Income | 3 | ||||
Consolidated Statements of Changes in Equity | 4 | ||||
Consolidated Statements of Cash Flows | 6 | ||||
Notes to Consolidated Financial Statements | 8 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 54 | ||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 68 | ||||
Item 4. Controls and Procedures | 69 | ||||
PART II. OTHER INFORMATION | |||||
Item 1. Legal Proceedings | 69 | ||||
Item 1A. Risk Factors | 69 | ||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 70 | ||||
Item 5. Other Information | 70 | ||||
Item 6. Exhibits | 71 | ||||
Signatures | 72 | ||||
Table of Contents
Forward-Looking Statements
The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in Arbor Realty Trust, Inc. We urge you to carefully review and consider the various disclosures in this report, as well as information in our annual report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on February 21, 2025 and in our other reports and filings with the SEC.
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs. We use words such as “anticipate,” “expect,” “believe,” “intend,” “should,” “could,” “will,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. Factors that could have a material adverse effect on our results of operations, financial condition and future prospects include, but are not limited to, changes in economic, macroeconomic and geopolitical conditions generally, and the real estate market specifically; adverse changes in our status with government-sponsored enterprises affecting our ability to originate loans through such programs; changes in interest rates; the quality and size of the investment pipeline and the rate at which we can invest our cash; impairments in the value of the collateral underlying our loans and investments; inflation; changes in federal and state laws and regulations, including changes in tax laws; the availability and cost of capital for future investments; and competition. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this report. The factors noted above could cause our actual results to differ significantly from those contained in any forward-looking statement.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.
1
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share and per share data)
| June 30, 2025 | |||||||||||
| (Unaudited) | December 31, 2024 | ||||||||||
| Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Loans and investments, net (allowance for credit losses of $ | |||||||||||
| Loans held-for-sale, net | |||||||||||
| Capitalized mortgage servicing rights, net | |||||||||||
Securities held-to-maturity, net (allowance for credit losses of $ | |||||||||||
| Investments in equity affiliates | |||||||||||
| Real estate owned, net | |||||||||||
| Due from related party | |||||||||||
| Goodwill and other intangible assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Equity: | |||||||||||
| Credit and repurchase facilities | $ | $ | |||||||||
| Securitized debt | |||||||||||
| Senior unsecured notes | |||||||||||
| Convertible senior unsecured notes | |||||||||||
| Junior subordinated notes to subsidiary trust issuing preferred securities | |||||||||||
| Mortgage notes payable — real estate owned | |||||||||||
| Due to related party | |||||||||||
| Due to borrowers | |||||||||||
| Allowance for loss-sharing obligations | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 14) | |||||||||||
| Equity: | |||||||||||
| Arbor Realty Trust, Inc. stockholders' equity: | |||||||||||
Preferred stock, cumulative, redeemable, $ | |||||||||||
Special voting preferred shares - | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| (Accumulated deficit) retained earnings | ( | ||||||||||
| Total Arbor Realty Trust, Inc. stockholders' equity | |||||||||||
| Noncontrolling interest | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
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 June 30, 2025 and December 31, 2024, assets of our consolidated VIEs totaled $4,852,140 and $6,124,925 , respectively, and the liabilities of our consolidated VIEs totaled $3,520,197 and $4,637,744 , respectively. See Note 15 for discussion of our VIEs.
See Notes to Consolidated Financial Statements.
2
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($ in thousands, except share and per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Other revenue: | |||||||||||||||||||||||
| Gain on sales, including fee-based services, net | |||||||||||||||||||||||
| Mortgage servicing rights | |||||||||||||||||||||||
| Servicing revenue, net | |||||||||||||||||||||||
| Property operating income | |||||||||||||||||||||||
| Gain (loss) on derivative instruments, net | ( | ( | |||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Total other revenue | |||||||||||||||||||||||
| Other expenses: | |||||||||||||||||||||||
| Employee compensation and benefits | |||||||||||||||||||||||
| Selling and administrative | |||||||||||||||||||||||
| Property operating expenses | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Provision for loss sharing (net of recoveries) | |||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | |||||||||||||||||||||||
| Total other expenses | |||||||||||||||||||||||
| Income before extinguishment of debt, (loss) gain on real estate, income from equity affiliates and income taxes | |||||||||||||||||||||||
| Loss on extinguishment of debt | ( | ( | ( | ||||||||||||||||||||
| (Loss) gain on real estate | ( | ( | |||||||||||||||||||||
| Income from equity affiliates | |||||||||||||||||||||||
| Provision for income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Net income attributable to noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Dividends declared per common share | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Consolidated Financial Statements.
3
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
($ in thousands, except shares)
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock Shares | Preferred Stock Value | Common Stock Shares | Common Stock Par Value | Additional Paid-in Capital | (Accumulated Deficit) Retained Earnings | Total Arbor Realty Trust, Inc. Stockholders’ Equity | Noncontrolling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance – April 1, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance - common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | ( | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - common stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - preferred stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2025 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Issuance - common stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions - common stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - preferred stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Redemption of OP Units | ( | ( | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
4
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (Continued)
($ in thousands, except shares)
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 – April 1, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase - common stock | — | — | ( | ( | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions - common stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - preferred stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase - common stock | — | — | ( | ( | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions - common stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - preferred stock | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions - noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
5
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | |||||||||||
| Amortization and accretion of interest and fees, net | ( | ||||||||||
| Amortization of capitalized mortgage servicing rights | |||||||||||
| Originations of loans held-for-sale | ( | ( | |||||||||
| Proceeds from sales of loans held-for-sale, net of gain on sale | |||||||||||
| Mortgage servicing rights | ( | ( | |||||||||
| Write-off of capitalized mortgage servicing rights from payoffs | |||||||||||
| Provision for loss sharing (net of recoveries) | |||||||||||
| Provision for credit losses (net of recoveries) | |||||||||||
| Net recoveries for loss sharing obligations | |||||||||||
| Deferred tax benefit | ( | ( | |||||||||
| Income from equity affiliates | ( | ( | |||||||||
| Distributions from operations of equity affiliates | |||||||||||
| Change in fair value of held-for-sale loans | ( | ||||||||||
| (Gain) loss on derivative instruments, net | ( | ||||||||||
| Loss on extinguishment of debt | |||||||||||
| Loss (gain) on real estate | ( | ||||||||||
| Payoffs and paydowns of loans held-for-sale | |||||||||||
| Changes in operating assets and liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Investing Activities: | |||||||||||
| Loans and investments funded, originated and purchased, net | ( | ( | |||||||||
| Payoffs and paydowns of loans and investments | |||||||||||
| Deferred fees | |||||||||||
| Proceeds from sale of real estate, net | |||||||||||
| Contributions to equity affiliates | ( | ( | |||||||||
| Distributions from equity affiliates | |||||||||||
| Payoffs and paydowns of securities held-to-maturity | |||||||||||
| Investment in real estate, net | ( | ||||||||||
| Change in due to borrowers and reserves | ( | ( | |||||||||
| Net cash (used in) provided by investing activities | ( | ||||||||||
| Financing activities: | |||||||||||
| Proceeds from credit and repurchase facilities | |||||||||||
| Payoffs and paydowns of credit and repurchase facilities | ( | ( | |||||||||
| Payoffs and paydowns of securitized debt | ( | ( | |||||||||
| Proceeds from issuance of securitized debt | |||||||||||
| Proceeds from mortgage note payable - REO | |||||||||||
| Payoffs and paydowns of mortgage notes payable - REO | ( | ( | |||||||||
| Proceeds from issuance of common stock | |||||||||||
| Payoffs and paydowns of senior unsecured notes | ( | ||||||||||
| Payments of withholding taxes on net settlement of vested stock | ( | ( | |||||||||
| Repurchase of common stock | ( | ||||||||||
| Distributions to stockholders | ( | ( | |||||||||
| Payment of deferred financing costs | ( | ( | |||||||||
| Redemption of operating partnership units | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
6
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See Notes to Consolidated Financial Statements.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
(in thousands)
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Reconciliation of cash, cash equivalents and restricted cash: | |||||||||||
| Cash and cash equivalents at beginning of period | $ | $ | |||||||||
| Restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | $ | $ | |||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Restricted cash at end of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash used to pay interest | $ | $ | |||||||||
| Cash used to pay taxes | |||||||||||
| Supplemental schedule of non-cash investing and financing activities: | |||||||||||
| Real estate acquired in settlement of loans and investments, net | |||||||||||
| Settlement of loans and investments, net of real estate | ( | ( | |||||||||
| Derecognition of real estate owned | |||||||||||
| Loan funded in conjunction with real estate sold | ( | ( | |||||||||
| Distributions accrued on preferred stock | |||||||||||
See Notes to Consolidated Financial Statements.
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 — Description of Business
Arbor Realty Trust, Inc. (“we,” “us,” “our,” or the "Company") is a Maryland corporation formed in 2003. We are a nationwide real estate investment trust (“REIT”) and direct lender, providing loan origination and servicing for commercial real estate assets. We operate through two business segments: our Structured Loan Origination and Investment Business, or “Structured Business,” and our Agency Loan Origination and Servicing Business, or “Agency Business.”
Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental (“SFR”) and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred equity. We also invest in real estate-related joint ventures and may directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.
Through our Agency Business, we originate, sell and service a range of multifamily finance products through the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the government-sponsored enterprises, or “GSEs”), the Government National Mortgage Association (“Ginnie Mae”), Federal Housing Authority (“FHA”) and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, “HUD”). We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Optigo® Conventional Loan and Small Balance Loan (“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 conduit/commercial mortgage-backed securities ("CMBS") programs. We either sell the Private Label loans instantaneously or pool and securitize them and sell certificates in the securitizations to third party investors, while retaining the highest risk bottom tranche certificate of the securitization.
Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership (“ARLP”), for which we serve as the indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a REIT for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on its REIT-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 taxable REIT subsidiaries (“TRS”), which are part of our TRS consolidated group (the “TRS Consolidated Group”) and are subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.
Note 2 — Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), for interim financial statements and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared under GAAP have been condensed or omitted. In our opinion, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These financial statements should be read in conjunction with our financial statements and notes thereto included in our 2024 Annual Report.
Principles of 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, tightening of capital markets and reduced property values, both globally and to our business, makes any estimate or assumption at June 30, 2025 inherently less certain.
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 Issued Accounting Pronouncements
| Description | Effective Date | Effect on Financial Statements | ||||||||||||
| In May 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. The ASU is intended to enhance consistency in practice and improve the transparency of accounting for share-based payments made to customers. Key provisions of the ASU include an updated definition of a "performance condition" to include vesting terms based on a customer’s purchases or the purchases of the customer’s customers. The ASU also removes the existing accounting policy election that allowed entities to recognize forfeitures of customer awards as they occur. Instead, entities are now required to estimate expected forfeitures for awards with service conditions. Lastly, the ASU clarifies that the variable consideration constraint under ASC 606 does not apply to share-based payments made to customers. | First quarter of 2027, with early adoption permitted | We currently do not have any transactions that fall under the scope of this ASU. | ||||||||||||
| In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. This ASU addresses concerns about inconsistent accounting outcomes in business combinations involving VIEs. Under previous GAAP, the primary beneficiary of a VIE was automatically deemed the accounting acquirer in a business combination, regardless of transaction structure. The ASU revises this approach by requiring entities to assess specific criteria to determine the appropriate accounting acquirer when the following conditions are met: (1) the transaction is primarily effected through the exchange of equity interests, (2) the legal acquiree is a VIE, and (3) the legal acquiree qualifies as a business under ASC 805. The amendments are to be applied prospectively. | First quarter of 2027, with early adoption permitted | We currently do not have any transactions that fall under the scope of this ASU. | ||||||||||||
Significant Accounting Policies
See Item 8 – Financial Statements and Supplementary Data in our 2024 Annual Report for a description of our significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, 2024.
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
*Note 3 — Loans and Investments
Our Structured Business loan and investment portfolio consists of ($ in thousands):
| June 30, 2025 | 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) | $ | % | % | 11.1 | % | % | |||||||||||||||||||||||||||||||||||
| Mezzanine loans | % | % | 50.7 | % | % | ||||||||||||||||||||||||||||||||||||
| Preferred equity investments | % | % | 48.0 | % | % | ||||||||||||||||||||||||||||||||||||
| Construction - multifamily | < | % | 34.5 | % | % | ||||||||||||||||||||||||||||||||||||
| SFR permanent loans | < | % | 4.3 | % | % | ||||||||||||||||||||||||||||||||||||
| Total UPB | % | % | 12.7 | % | % | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | ( | ||||||||||||||||||||||||||||||||||||||||
| Unearned revenue | ( | ||||||||||||||||||||||||||||||||||||||||
| Loans and investments, net (6) | $ | ||||||||||||||||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Bridge loans (5) | $ | % | % | 11.6 | % | % | |||||||||||||||||||||||||||||||||||
| Mezzanine loans | % | % | 51.8 | % | % | ||||||||||||||||||||||||||||||||||||
| Preferred equity investments | % | % | 53.9 | % | % | ||||||||||||||||||||||||||||||||||||
| Construction - multifamily | < | % | 20.8 | % | % | ||||||||||||||||||||||||||||||||||||
| SFR permanent loans | < | % | 10.3 | % | % | ||||||||||||||||||||||||||||||||||||
| Total UPB | % | % | 13.1 | % | % | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | ( | ||||||||||||||||||||||||||||||||||||||||
| Unearned revenue | ( | ||||||||||||||||||||||||||||||||||||||||
| Loans and investments, net (6) | $ | ||||||||||||||||||||||||||||||||||||||||
________________________
(1)“Weighted Average Pay Rate” is a weighted average, based on the unpaid principal balance (“UPB”) of each loan in our portfolio, of the interest rate required to be paid 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 June 30, 2025 and December 31, 2024 was 20.6 and 22.7, 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 June 30, 2025 and December 31, 2024, bridge loans included 364 and 423 , respectively, of SFR loans with a total gross loan commitment of $4.45 billion and $4.18 billion, respectively, of which $2.53 billion and $1.99 billion, respectively, was funded.
(6)Excludes exit fee receivables of $44.3 million and $46.6 million at June 30, 2025 and December 31, 2024, 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 June 30, 2025, the UPB related to 70 loans with 5 different borrowers represented 11 % of total assets. At December 31, 2024, the UPB related to 83 loans with five different borrowers represented 10 % of total assets. During both the three and six months ended June 30, 2025 and the year ended December 31, 2024, no single loan or investment represented more than
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
10% of our total assets and no single investor group generated over 10% of our revenue. See Note 18 for details on our concentration of related party loans and investments.
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, 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 borrower to make both principal and interest payments according to the contractual terms of the current loan agreement or, we expect to recover our investment, including accrued interest, based on the current value of the collateral and/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 the 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.
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at June 30, 2025, and charge-offs recorded for the six months ended June 30, 2025 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 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Multifamily: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Pass/Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Multifamily | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Single-Family Rental: | Percentage of portfolio | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Pass/Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Single-Family Rental | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Land: | Percentage of portfolio | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Pass/Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Land | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Office: | Percentage of portfolio | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total Office | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Retail: | Percentage of portfolio | < | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Retail | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial: | Percentage of portfolio | < | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total Commercial | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Percentage of portfolio | < | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at 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 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass/Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Multifamily | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Single-Family Rental: | Percentage of portfolio | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass/Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Single-Family Rental | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Land: | Percentage of portfolio | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Land | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Office: | Percentage of portfolio | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Office | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail: | Percentage of portfolio | < | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Retail | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial: | Percentage of portfolio | < | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Commercial | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Percentage of portfolio | < | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic Concentration Risk
At June 30, 2025, underlying properties in Texas and Florida represented 23 % and 16 %, respectively, of the outstanding balance of our loan and investment portfolio. 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. No other states represented 10% or more of the total loan and investment portfolio.
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Allowance for Credit Losses
A summary of the changes in the allowance for credit losses is as follows (in thousands):
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Multifamily | Land | Single-Family Rental | Retail | Commercial | Office | Total | |||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs (1) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | |||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs (2) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | |||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
________________________
(1)Represents the allowance for credit losses on 2 multifamily bridge loans that were charged-off in connection with the foreclosure of the underlying collateral as real estate owned ("REO") assets at fair value.
The additional provision for credit losses during the three and six months ended June 30, 2025 was primarily attributable to specifically impaired multifamily loans, and to a lesser extent a weakening in 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. Estimates of current expected credit losses (“CECL”) for unfunded loan commitments are adjusted quarterly and correspond with the associated outstanding loans. At June 30, 2025 and December 31, 2024, we had outstanding unfunded commitments of $2.22 billion and $2.20 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 ("BTR") business.
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At June 30, 2025 and December 31, 2024, accrued interest receivable related to our loans totaling $176.3 million and $154.4 million, respectively, was excluded from the estimate of credit losses, is subject to our revenue recognition policy and is included in other assets on the consolidated balance sheets. During the three and six months ended June 30, 2025, we wrote-off $4.3 million and $7.6 million, respectively, of interest receivable that was previously accrued.
All of our structured loans and investments are secured by real estate assets or by interests in real estate assets, and, as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end. A summary of our specific reserve loans considered impaired by asset class is as follows ($ in thousands):
| June 30, 2025 | ||||||||||||||||||||||||||||||||
| Asset Class | UPB (1) | Carrying Value | Allowance for Credit Losses | Wtd. Avg. First Dollar LTV Ratio | Wtd. Avg. Last Dollar LTV Ratio | |||||||||||||||||||||||||||
| Multifamily | $ | $ | $ | % | % | |||||||||||||||||||||||||||
| Land | % | % | ||||||||||||||||||||||||||||||
| Retail | % | % | ||||||||||||||||||||||||||||||
| Commercial | % | % | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | % | % | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Multifamily | $ | $ | $ | % | % | |||||||||||||||||||||||||||
| Land | % | % | ||||||||||||||||||||||||||||||
| Retail | % | % | ||||||||||||||||||||||||||||||
| Commercial | % | % | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | % | % | |||||||||||||||||||||||||||
(1)Represents the UPB of 27
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 June 30, 2025, 19 loans with an aggregate net carrying value of $424.7 million, net of loan loss reserves of $36.4 million, were classified as non-performing and, at December 31, 2024, 26 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.
A summary of our non-performing loans by asset class is as follows (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||
| UPB | Carrying Value | UPB | Carrying Value | ||||||||||||||||||||
| Multifamily | $ | $ | $ | $ | |||||||||||||||||||
| Commercial | |||||||||||||||||||||||
| Retail | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
At both June 30, 2025 and December 31, 2024, we had no
Other Non-accrual Loans
In this challenging economic environment, we have been experiencing late and partial payments on certain loans in our structured portfolio. Therefore, 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).
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| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | |||||||||||||
Beginning balance ( | $ | $ | ||||||||||||
| Loans that progressed to greater than 60 days past due | ( | |||||||||||||
| Loans modified or paid off (1) | ( | ( | ||||||||||||
| Loans transferred to REO | ( | ( | ||||||||||||
| Additional loans that are now less than 60 days past due experiencing late and partial payments | ||||||||||||||
Ending balance ( | $ | $ | ||||||||||||
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |||||||||||||
Beginning balance ( | $ | $ | ||||||||||||
| Loans that progressed to greater than 60 days past due | ( | ( | ||||||||||||
| Loans modified or paid off (1) | ( | ( | ||||||||||||
| Additional loans that are now less than 60 days past due experiencing late and partial payments | ||||||||||||||
Ending balance ( | $ | $ | ||||||||||||
________________________
(1)The modifications included bringing the loans current by paying past due interest owed (see Loan Modifications section below).
We recorded interest income on non-performing and other non-accrual loans of $4.1 million and $9.9 million during the three and six months ended June 30, 2025, respectively, and $7.9 million and $16.6 million during the three and six months ended June 30, 2024, respectively.
In addition, we have six loans with a carrying value totaling $121.4 million at June 30, 2025, 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 9.95 %. 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 June 30, 2025 and December 31, 2024, we had a cumulative allowance for credit losses of $71.4
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 generally 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.
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The following table represents the UPB of loan modifications, as of the modification date, made to borrowers experiencing financial difficulty during the three months ended June 30, 2025 (in thousands):
| Asset Class | Payment Deferrals With/Without Term Extensions (1) | Rate Reductions With/Without Term Extensions (2) | Total (3)(4)(5) | |||||||||||||||||
| Multifamily | $ | $ | $ | |||||||||||||||||
(1)These loans were modified to a weighted average pay rate and deferred rate of 5.50 % and 2.78 %, respectively, at June 30, 2025. A portion of these loans with a total UPB of $116.5 million were also modified to extend the weighted average term by 19 months. These modifications also include loans with a total UPB of $38.1 million in which the pay rate increases from time-to-time throughout the loans maturities.
(2)These loans were modified to reduce the interest rate to a weighted average pay rate and deferred rate of 5.97 % and 0.56 %, respectively, and to extend the weighted average term by 23 months.
(3)The total UPB of the loan modifications made during the three months ended June 30, 2025 was $249.9 million at June 30, 2025 and represented 2.2 % of our total Structured Business loans and investments portfolio at June 30, 2025.
(4)At June 30, 2025, a modified loan with a UPB of $25.6 million has a specific reserve of $2.2 million.
(5)Includes loans with a total UPB of $136.1 million which were previously modified. Using the SOFR rate at June 30, 2025, these loans were modified from a weighted average pay rate and deferred rate of 6.47 % and 1.65 %, respectively, to a weighted average pay rate and deferred rate of 5.18 % and 2.28 %, respectively.
The following table represents the UPB of loan modifications, as of the modification date, made to borrowers experiencing financial difficulty during the six months ended June 30, 2025 (in thousands):
| Asset Class | Payment Deferrals With/Without Term Extensions (1) | Rate Reductions With/Without Term Extensions (2) | Other (3) | Total (4)(5)(6) | ||||||||||||||||||||||
| Multifamily | $ | $ | $ | $ | ||||||||||||||||||||||
| Single-Family Rental | ||||||||||||||||||||||||||
| Total UPB | $ | $ | $ | $ | ||||||||||||||||||||||
(1)These loans were modified to a weighted average pay rate and deferred rate of 5.23 % and 2.19 %, respectively, at June 30, 2025. A portion of these loans with a total UPB of $225.2 million were also modified to extend the weighted average term by 19.3 months. These modifications also include loans with a total UPB of $508.4 million in which the pay rate increases from time-to-time throughout the loans maturities.
(2)These loans were modified to reduce the interest rate to a weighted average pay rate and deferred rate of 5.97 % and 0.56 %, respectively, and to extend the weighted average term by 23 months.
(3)These loan modifications included amending certain terms, such as reallocating and/or replenishment of reserves, providing for a temporary and conditional forbearance of foreclosure and temporarily delaying past due interest payments.
(4)The total UPB of the loan modifications made during the six months ended June 30, 2025 was $1.20 billion at June 30, 2025 and represented 10.60 % of our total Structured Business loans and investments portfolio at June 30, 2025.
(5)At June 30, 2025, modified loans with a UPB of $51.1 million have specific reserves totaling $7.4 million.
(6)Includes loans with a total UPB of $520.1 million which were previously modified. Using the SOFR rate at June 30, 2025, these loans were modified from a weighted average pay rate and deferred rate of 6.71 % and 1.25 %, respectively, to a weighted average pay rate and deferred rate of 4.69 % and 3.10 %, respectively.
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The following table represents the UPB of loan modifications, as of the modification date, made to borrowers experiencing financial difficulty during the three months ended June 30, 2024 (in thousands):
| Asset Class | Payment Deferrals With/Without Term Extensions (1) | Term Extensions (2) | Other (4) | Total (5)(6) | ||||||||||||||||||||||||||||||||||
| Multifamily | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Single-Family Rental | ||||||||||||||||||||||||||||||||||||||
| Total UPB | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
(1)These loans were modified to a weighted average pay rate and deferred rate of 7.16 % and 2.15 %, respectively, at June 30, 2024. A portion of these loans with a total UPB of $328.3 million were also modified to extend the weighted average term by 13.1 months.
(2)These loans were modified to extend the weighted average term by 11.5 months.
(3)These loan modifications included amending certain terms, such as reallocating and/or replenishment of reserves.
(4)The total UPB of the loan modifications made during the three months ended June 30, 2024 was $732.3 million at June 30, 2024 and represented 6.2 % of our total Structured Business loans and investments portfolio at June 30, 2024.
(5)At June 30, 2024, modified loans with a total UPB of $84.6 million have specific reserves totaling $10.8 million.
The following table represents the UPB of loan modifications, as of the modification date, made to borrowers experiencing financial difficulty during the six months ended June 30, 2024 (in thousands):
| Asset Class | Payment Deferrals With/Without Term Extensions (1) | Term Extensions (2) | Rate Reduction Without Term Extension (3) | Other (4) | Total (5)(6) | |||||||||||||||||||||||||||
| Multifamily | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Single-Family Rental | ||||||||||||||||||||||||||||||||
| Total UPB | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1)These loans were modified to a weighted average pay rate and deferred rate of 7.01 % and 2.13 %, respectively, at June 30, 2024. A portion of these loans with a total UPB of $999.3 million were also modified to extend the weighted average term by 19.8 months.
(2)These loans were modified to extend the weighted average term by 10.0 months.
(3)This loan was modified to reduce the weighted average interest rate by 0.72 %.
(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 the six months ended June 30, 2024 was $2.47 billion at June 30, 2024 and represented 20.8 % of our total Structured Business loans and investments portfolio at June 30, 2024.
(6)At June 30, 2024, modified loans with a total UPB of $172.7 million have specific reserves totaling $27.8 million.
During the three and six months ended June 30, 2025, we recorded $1.9 million and $5.7 million, respectively, of deferred interest on the loans that we modified during 2025 and $8.3 million and $17.4 million, respectively, for loans previously modified. During the three and six months ended June 30, 2024, we recorded $7.3 million and $10.0 million, respectively, of deferred interest on the loans that we modified during 2024 and $0.8 million and $1.1 million, respectively, for loans previously modified. At June 30, 2025 and December 31, 2024, we have recorded deferred interest totaling $80.5 million and $61.3 million, respectively, on all modified loans to borrowers experiencing financial difficulty, which is included in other assets on the consolidated balance sheets.
At June 30, 2025 and December 31, 2024, we had future funding commitments on modified loans with borrowers experiencing financial difficulty of $28.7 million and $56.4 million, respectively, which are generally subject to performance covenants that must be met by the borrower to receive funding.
All loan modifications completed in the past 12 months were performing pursuant to their contractual terms at June 30, 2025, except for seven loans with a total UPB of $251.2 million, which includes five loans with a total UPB of $149.4 million that were modified to provide temporary rate relief through a pay and accrual feature. Since these loans are not performing pursuant to their modified terms, these loans are classified as non-accrual loans. Two of these loans with a UPB of $61.9 million have a specific loan loss reserve of $10.2
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million. The remaining five loans with a total UPB of $189.4 million have no specific reserves as the estimated fair value of the properties exceeded our carrying value at June 30, 2025.
There were no
Loan Resolutions
In June 2025, we exercised our right to foreclose on three properties in San Antonio, Texas that were the underlying collateral for a bridge loan with a UPB of $77.7 million, an interest rate of 5.25 % with a SOFR floor of 0.50 %, and a net carrying value of $66.6 million, which includes loan loss reserves of $3.5 million. At foreclosure, we recorded an additional loss of $5.9 million to the provision for credit losses on the consolidated statements of income and charged-off the $9.4 million loan loss reserve. We simultaneously sold the properties for $65.0 million to a new borrower and provided a $65.0 million bridge loan with an interest rate of SOFR plus 2.00 % for years one and two, and SOFR plus 3.00 % for year three, subject to SOFR floors of 4.25 %, 5.25 % and 6.25 % in years one, two and three, respectively. The new loan was deemed to be a significant financing component of the transaction and, as a result, we recorded a loss and corresponding liability of $0.8 million as an adjustment to the purchase price, which will be accreted into interest income over the life of the loan.
In April 2025, we exercised our right to foreclose on two properties in Austin, Texas that were the underlying collateral for a non-performing bridge loan with a UPB of $21.2 million, an interest rate of SOFR plus 4.00 % with a SOFR floor of 0.25 %, and a net carrying value of $21.7 million. At foreclosure, we recorded an additional loss of $1.0 million to the provision for credit losses on the consolidated statements of income. We sold the properties in June 2025 for $20.7 million to a new borrower and provided a $19.2 million bridge loan with an interest rate of SOFR plus 2.00 % in year one and SOFR plus 3.00 % in year two. The new loan was deemed to be a significant financing component of the transaction and, as a result, we recorded a loss and corresponding liability of $0.1 million as an adjustment to the purchase price, which will be accreted into interest income over the life of the loan.
In April 2025, we exercised our right to foreclose on two properties in Orange Park, Florida that were the underlying collateral for a non-performing bridge loan with a UPB of $17.0 million, an interest rate of SOFR plus 4.38 % with a SOFR floor of 2.46 % and a net carrying value of $15.7 million. At foreclosure, we recorded an additional loss of $0.3 million to the provision for credit losses on the consolidated statements of income. We sold the properties in June 2025 for $15.4 million to a new borrower and provided a $14.8 million bridge loan with an interest rate of SOFR plus 1.50 %. The new loan was deemed to be a significant financing component of the transaction and, as a result, we recorded a loss and corresponding liability of $0.6 million as an adjustment to the purchase price, which will be accreted into interest income over the life of the loan.
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 loans were 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 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 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
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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 June 30, 2025, 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 46 % noncontrolling 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.
See Note 9 for additional loan resolution details.
Interest Reserves
Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve as required by the contracts to cover debt service costs. At June 30, 2025 and December 31, 2024, we had total interest reserves of $256.7 million and $215.4 million, respectively, on 508 loans and 589 loans, respectively, with a total UPB of $8.34 billion and $8.65 billion, respectively.
Note 4 — Loans Held-for-Sale
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):
| June 30, 2025 | December 31, 2024 | ||||||||||
| Fannie Mae | $ | $ | |||||||||
| Private Label | |||||||||||
| Freddie Mac | |||||||||||
| SFR - Fixed Rate | |||||||||||
| FHA | |||||||||||
| Fair value of future MSR | |||||||||||
| Unrealized impairment recovery (loss) | ( | ||||||||||
| Unearned discount | ( | ( | |||||||||
| Loans held-for-sale, net | $ | $ | |||||||||
During the three and six months ended June 30, 2025, we sold $807.0 million and $1.54 billion, respectively, of loans held-for-sale. During the three and six months ended June 30, 2024, we sold $1.14 billion and $2.22 billion, respectively, of loans held-for-sale.
At June 30, 2025 and December 31, 2024, there were no no
Note 5 — Capitalized Mortgage Servicing Rights
Our capitalized mortgage servicing rights (“MSRs”) reflect commercial real estate MSRs derived primarily from loans sold in our Agency Business or acquired MSRs. The discount rates used to determine the present value of all our MSRs throughout the periods presented were between 8 % - 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 6.5 years and 6.9 years at June 30, 2025 and December 31, 2024, respectively.
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A summary of our capitalized MSR activity is as follows (in thousands):
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||
| Originated | Acquired | Total | Originated | Acquired | Total | ||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Additions | — | — | |||||||||||||||||||||||||||||||||
| Amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Write-downs and payoffs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Additions | — | — | |||||||||||||||||||||||||||||||||
| Amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Write-downs and payoffs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
We collected prepayment fees totaling $0.9 million and $1.9 million during the three and six months ended June 30, 2025, respectively, and $0.4 million and $0.8 million during the three and six months ended June 30, 2024, respectively, which are included as a component of servicing revenue, net on the consolidated statements of income. At June 30, 2025 and December 31, 2024, no MSRs were considered impaired.
The expected amortization of capitalized MSRs recorded at June 30, 2025 is as follows (in thousands):
| Year | Amortization | |||||||
| 2025 (six months ending 12/31/2025) | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
Based on scheduled maturities, actual amortization may vary from these estimates.
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Note 6 — Mortgage Servicing
Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands):
| June 30, 2025 | ||||||||||||||||||||||||||
| Product Concentrations | Geographic Concentrations | |||||||||||||||||||||||||
| Product | UPB (1) | % of Total | State | UPB % of Total | ||||||||||||||||||||||
| Fannie Mae | $ | % | New York | % | ||||||||||||||||||||||
| Freddie Mac | % | Texas | % | |||||||||||||||||||||||
| Private Label | % | North Carolina | % | |||||||||||||||||||||||
| FHA | % | California | % | |||||||||||||||||||||||
| SFR - Fixed Rate | % | Georgia | % | |||||||||||||||||||||||
| Bridge (2) | % | Florida | % | |||||||||||||||||||||||
| Total | $ | % | New Jersey | % | ||||||||||||||||||||||
| Other (3) | % | |||||||||||||||||||||||||
| Total | % | |||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Fannie Mae | $ | % | Texas | % | ||||||||||||||||||||||
| Freddie Mac | % | New York | % | |||||||||||||||||||||||
| Private Label | % | California | % | |||||||||||||||||||||||
| FHA | % | North Carolina | % | |||||||||||||||||||||||
| Bridge (2) | % | Georgia | % | |||||||||||||||||||||||
| SFR - Fixed Rate | % | Florida | % | |||||||||||||||||||||||
| Total | $ | % | New Jersey | % | ||||||||||||||||||||||
| Other (3) | % | |||||||||||||||||||||||||
| Total | % | |||||||||||||||||||||||||
(1)Excludes loans which we are not collecting a servicing fee.
(2)Represents four
(3)No 4
At June 30, 2025 and December 31, 2024, our weighted average servicing fee was 37.4 basis points and 37.8 basis points, respectively. At June 30, 2025 and December 31, 2024, we held total escrow balances (including unfunded collateralized loan obligation holdbacks) of approximately $1.41 billion and $1.45 billion, respectively, of which approximately $1.40 billion and $1.41 billion, respectively, is not included in our consolidated balance sheets. These escrows are maintained in separate accounts at several federally insured depository institutions, which may exceed FDIC insured limits. We earn interest income on the total escrow deposits, which is generally based on a market rate of interest negotiated with the financial institutions that hold the escrow deposits. Interest earned on total escrows, net of interest paid to the borrower, is included as a component of servicing revenue, net in the consolidated statements of income as noted in the following table.
The components of servicing revenue, net are as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Servicing fees | $ | $ | $ | $ | |||||||||||||||||||
| Interest earned on escrows | |||||||||||||||||||||||
| Prepayment fees | |||||||||||||||||||||||
| Write-offs and payoffs of MSRs | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of MSRs | ( | ( | ( | ( | |||||||||||||||||||
| Servicing revenue, net | $ | $ | $ | $ | |||||||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7 — Securities Held-to-Maturity
Agency Private Label Certificates (“APL certificates”). In connection with our Private Label securitizations, we retain the most subordinate class of the APL certificates in satisfaction of credit risk retention requirements. At June 30, 2025, we held 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 5.8 years. The weighted average effective interest rate was 8.84 63.6 million is estimated to mature in one to five years and $129.2 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 June 30, 2025, we held 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 12.6 years. The weighted average effective interest rate was 11.52 % and 11.76 % at June 30, 2025 and December 31, 2024, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $37.1 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 | |||||||||||||||||||||||||
| June 30, 2025 | |||||||||||||||||||||||||||||
| APL certificates | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| B Piece bonds | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| APL certificates | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| B Piece bonds | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||
| APL Certificates | B Piece Bonds | Total | APL Certificates | B Piece Bonds | Total | ||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Provision for credit loss expense/(reversal) | |||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Provision for credit loss expense/(reversal) | |||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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 are, 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 $3.4 million and $7.1 million during the three and six months ended June 30, 2025, respectively, and $4.6 million and $8.3 million during the three and six months ended June 30, 2024, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 June 30, 2025 | |||||||||||||||||||
| Equity Affiliates | June 30, 2025 | December 31, 2024 | ||||||||||||||||||
| Arbor Residential Investor LLC | $ | $ | $ | |||||||||||||||||
| AWC Real Estate Opportunity Partners I LP | ||||||||||||||||||||
| Fifth Wall Ventures | ||||||||||||||||||||
| AMAC Holdings III LLC | ||||||||||||||||||||
| ARSR DPREF I LLC | ||||||||||||||||||||
| Lightstone Value Plus REIT L.P. | ||||||||||||||||||||
| The Park at Via Terrossa | ||||||||||||||||||||
| Docsumo Pte. Ltd. | ||||||||||||||||||||
| JT Prime | ||||||||||||||||||||
| West Shore Café | ||||||||||||||||||||
| Lexford Portfolio | ||||||||||||||||||||
| East River Portfolio | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
Arbor Residential Investor LLC ("ARI"). We invested $9.6 million for a 50 % interest in ARI, with our former manager, Arbor Commercial Mortgage, LLC (“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 (initially 65 %) in a residential mortgage banking business. During the six months ended June 30, 2025, we recorded a loss of $1.4 0.8 million and income of $0.8 million, respectively, to income from equity affiliates in our consolidated statements of income. Additionally, during the three and six months ended June 30, 2025, we received distributions of $5.6 million and $6.1 million, respectively, and during both the three and six months ended June 30, 2024, we received distributions of $7.7
In April 2025, Wakefield entered into an agreement to sell its interest in the residential mortgage banking business for $117.3 million. Based on the terms of this agreement, $22.0 million was allocated to us, which is equivalent to the carrying value of our investment, and therefore do not expect to record a gain or loss on the transaction. The transaction closed once the entire sales price was paid, which was due in installments as follows: $15.0 million on or before April 1, 2025; $15.0 million on or before April 30, 2025; and the remaining $87.3 million on or before December 15, 2025. The first two installments were made in April, for which we received $5.6 million as our allocable share, and the final installment was made on July 31, 2025, for which we received $16.4 million as our allocable share.
AWC Real Estate Opportunity Partners I LP. In the first quarter of 2025, in accordance with the fund’s objectives, AWC brought in an additional capital partner who committed to a $3.0 million investment. The new partner further diluted our interest in the fund to a 46 % limited partnership interest, from 49 % at December 31, 2024. Certain investments made by AWC were in qualified properties that have outstanding bridge loans originated by us totaling $108.5 million and a $13.0 million Fannie Mae DUS loan we continue to service. During the three and six months ended June 30, 2025, we made contributions of $1.3 million and $3.7 million, respectively, and recorded a loss of $0.1 million and $0.2 million, respectively, related to this investment. During both the three and six months ended June 30, 2025, we received distributions of $1.0 2.1 million and $4.2 million for the three and six months ended June 30, 2025, respectively. During both the three and six months ended June 30, 2024, we received net capital distributions of $11.2 0.2 0.1 million and $8.5 million of additional contributions to the fund during the three and six months ended June 30, 2024, respectively.
Fifth Wall Ventures ("Fifth Wall"). During the three and six months ended June 30, 2025, we recorded income of $0.3 million and $0.8 million, respectively, and made contributions of $1.2 million and $1.9 million, respectively. During both the three and six months ended June 30, 2025, we received distributions of $1.4 0.1 million and $0.4 million, respectively, and made contributions of $0.2 million and $0.7 million, respectively.
AMAC Holdings III LLC (“AMAC III”). During the three and six months ended June 30, 2025, we recorded a loss of $1.0 million and $1.9 million, respectively, and made contributions of $0.9
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
and six months ended June 30, 2024, we recorded a loss of $0.7 million and $1.2 million, respectively, and during both the three and six months ended June 30, 2024, we made contributions of $2.6
Lexford Portfolio. During both the three and six months ended June 30, 2025, we received distributions from this investment and recognized income of $3.4 4.2
See Note 18 for details of certain investments described above.
Note 9 — Real Estate Owned
A summary of our REO assets is as follows (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Multifamily | Office | Land | Total | Multifamily | Office | Land | Total | ||||||||||||||||||||||||||||||||||||||||
| Land | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Building and intangible assets | |||||||||||||||||||||||||||||||||||||||||||||||
Less: Impairment loss | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Less: Accumulated depreciation and amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Real estate owned, net | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
At June 30, 2025, our REO assets were comprised of eleven multifamily properties, two office buildings and two land parcels. At December 31, 2024, our REO assets were comprised of four multifamily properties, two office buildings and two land parcels.
During the three and six months ended June 30, 2025, we foreclosed on three and ten , respectively, multifamily bridge loans with an aggregate net carrying value of $67.6 million and $260.3 million, respectively, (net of specific CECL reserves of $5.1 million and $9.1 million, respectively) and received ownership of the underlying collateral as REO assets. Upon foreclosure, during the three and six months ended June 30, 2025, we recognized a gain of $0.8 million and a loss of $1.0 million, respectively, which was recorded through (loss) gain on real estate on the consolidated statements of income.
During the three and six months ended June 30, 2025, we sold one and three , respectively, multifamily REO assets for $7.0 million and $84.0 million, respectively, and repaid the mortgage notes outstanding of $49.1 0.1 million and $1.0 million, respectively. Additionally, we provided new bridge loan financing to the new borrowers totaling $6.5 million and $83.5 million, respectively. The bridge loans bear interest as follows: One loan has a fixed rate of 4.75 % for the first year, 5.50 % for the second year and 6.00 % for the third year, another loan bears interest at a rate of SOFR plus 2.00 %, and the third loan bears interest at a rate of 7.32 %, subject to a floor of SOFR plus 3.00 %. Two of the new financings provided were deemed to be a significant financing component of the transactions and, as a result, for the six months ended June 30, 2025, we recorded a loss and corresponding liability $2.8 million, as an adjustment to the purchase price, which will be accreted into interest income over the life of the loans. The net losses of these transactions were recorded through (loss) gain on real estate on the consolidated statements of income.
See Note 3 for details of properties foreclosed and sold within the same reporting period.
At June 30, 2025 and December 31, 2024, we had mortgage notes payable totaling $184.6 million and $74.9 million, respectively, which are collateralized by our REO assets. Interest rates on the mortgage notes range from PRIME plus 1.35 % to SOFR plus 3.25 %, with maturities spanning from September 2025 to June 2027.
At June 30, 2025 and December 31, 2024, our multifamily REO properties had a weighted average occupancy rate of approximately 41 % and 77 %, respectively. At both June 30, 2025 and December 31, 2024, both our office buildings were vacant.
We recorded depreciation expense related to the REO assets of $4.8 million and $7.5 million for the three and six months ended June 30, 2025, respectively, and $0.6 million and $1.4 million for the three and six months ended June 30, 2024, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 10 — Debt Obligations
Credit and Repurchase Facilities
Borrowings under our credit and repurchase facilities are as follows ($ in thousands):
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Current Maturity | Extended Maturity | Debt Carrying Value (1) | Collateral Carrying Value | Wtd. Avg. Note Rate (2) | Debt Carrying Value (1) | Collateral Carrying Value | ||||||||||||||||||||||||||||||||||||||||||||
| Structured Business | ||||||||||||||||||||||||||||||||||||||||||||||||||
$ | Jul. 2025 (11) | Jul. 2026 (11) | $ | $ | % | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
$ | (10) | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Aug. 2025 | Aug. 2026 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | (6) | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Dec. 2026 | Dec. 2027 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Oct. 2025 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Mar. 2027 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Jan. 2027 | Jan. 2028 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Mar. 2026 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Sept. 2027 | (8) | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Oct. 2025 | Oct. 2026 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Mar. 2027 | Mar. 2028 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Oct. 2025 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Aug. 2025 to Jul. 2026 | Sept. 2026 to Aug. 2027 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Apr. 2026 | Apr. 2027 | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Apr. 2026 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase facility - securities (3)(5) | N/A | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Structured Business total (9) | $ | $ | % | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Agency Business | ||||||||||||||||||||||||||||||||||||||||||||||||||
$ | N/A | N/A | $ | $ | % | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
$ | Nov. 2025 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Mar. 2026 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Jun. 2026 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Jul. 2025 (11) | Jul. 2026 (11) | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Sept. 2025 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
$ | Oct. 2025 | N/A | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Agency Business total | $ | $ | % | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Consolidated total | $ | $ | % | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
________________________
(1)At June 30, 2025 and December 31, 2024, debt carrying value for the Structured Business was net of unamortized deferred finance costs of $8.1 million and $8.6 million, respectively, and for the Agency Business was net of unamortized deferred finance costs of $0.4 million and $0.2 million, respectively.
(2)At June 30, 2025 and December 31, 2024, all credit and repurchase facilities are variable rate loans.
(3)These facilities are subject to margin call provisions associated with changes in interest spreads.
(4)A portion of this facility was used to finance a fixed-rate SFR permanent loan reported through our Agency Business.
(5)At June 30, 2025 and December 31, 2024, 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 41.0 million.
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(6)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.
(7)$500.0 million of this facility is available for financing performing loans and $250.0 million is available for financing non-performing loans.
(8)We have the ability to extend the maturity of this facility in one-year increments, subject to lender approval.
(9)These amounts exclude outstanding mortgage notes payable on our REO assets with a debt carrying value of $184.6 million and $74.9 million at June 30, 2025 and December 31, 2024, respectively.
(10)This facility matures at the latest maturity date of all purchased assets, which is currently February 2028.
(11)In July 2025, this facility was amended to reduce the facility size to $1.50 billion from $2.00 billion and extend the maturity date to July 2027, with a one-year extension option.
(12)In July 2025, this facility was amended to temporarily increase the facility size to $1.00 billion from $500.0 million, effective through August 2025.
Structured Business
At June 30, 2025 and December 31, 2024, 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 7.11 % and 7.43 %, respectively. The leverage on our loan and investment portfolio financed through our credit and repurchase facilities, excluding the securities repurchase facility and the working capital facility, was 70 % and 67 % at June 30, 2025 and December 31, 2024, respectively.
In May 2025, we amended the interest rate on a $150.0 million repurchase facility to SOFR plus 2.50 %, with an all-in floor of 5.50 %, from SOFR plus 3.00 %, with an all-in floor of 5.50 %, contingent upon certain designated loans remaining in the facility through August 2025.
In March 2025, we entered into a $1.15 billion repurchase facility to finance the loans primarily held in our CLOs. This facility has a 24-month reinvestment period through March 2027. 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.
In January 2025, we amended a $200.0 million repurchase facility to increase the facility size to $400.0 million and extend the maturity to January 2027, with a one-year extension option.
Securitized Debt
We account for securitized debt transactions on our consolidated balance sheet as financing facilities. These transactions are considered VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade notes and guaranteed certificates issued to third parties are treated as secured financings and are non-recourse to us.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Borrowings and the corresponding collateral under our securitized debt transactions are as follows ($ in thousands):
| Debt | Collateral (3) | |||||||||||||||||||||||||||||||||||||
| Loans | Cash | |||||||||||||||||||||||||||||||||||||
| June 30, 2025 | Face Value | Carrying Value (1) | Wtd. Avg. Rate (2) | UPB | Carrying Value | Restricted Cash (4) | ||||||||||||||||||||||||||||||||
| BTR CLO 1 | $ | $ | % | $ | $ | $ | ||||||||||||||||||||||||||||||||
| CLO 18 (5) | % | |||||||||||||||||||||||||||||||||||||
| CLO 17 (5) | % | |||||||||||||||||||||||||||||||||||||
| CLO 16 (5) | % | |||||||||||||||||||||||||||||||||||||
| Total CLOs | % | |||||||||||||||||||||||||||||||||||||
| Q Series securitization | % | |||||||||||||||||||||||||||||||||||||
| Total securitized debt | $ | $ | % | $ | $ | $ | ||||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| CLO 19 | $ | $ | % | $ | $ | $ | ||||||||||||||||||||||||||||||||
| CLO 18 | % | |||||||||||||||||||||||||||||||||||||
| CLO 17 | % | |||||||||||||||||||||||||||||||||||||
| CLO 16 | % | |||||||||||||||||||||||||||||||||||||
| CLO 14 | % | |||||||||||||||||||||||||||||||||||||
| Total CLOs (5) | % | |||||||||||||||||||||||||||||||||||||
| Q Series securitization | % | |||||||||||||||||||||||||||||||||||||
| Total securitized debt | $ | $ | % | $ | $ | $ | ||||||||||||||||||||||||||||||||
________________________
(1)Debt carrying value is net of $12.6 million and $9.5 million of deferred financing fees at June 30, 2025 and December 31, 2024, respectively.
(2)At June 30, 2025 and December 31, 2024, the aggregate weighted average note rate for our collateralized loan obligations ("CLO"), including certain fees and costs, was 6.71 % and 6.59 %, respectively, and the Q Series securitization was 7.52 % and 7.46 %, respectively.
(3)At June 30, 2025 and December 31, 2024, 45 and 46 loans, respectively, with a total UPB of $1.88 billion and $1.60 billion, 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 $63.7 million and $43.4 million at June 30, 2025 and December 31, 2024, respectively.
(5)The replenishment period for the following CLOs has ended: CLO 14 - September 2023, CLO 16 – March 2024, CLO 19 – May 2024, CLO 17 – June 2024 and CLO 18 – August 2024.
BTR CLO 1. In May 2025, we completed BTR CLO 1, through a wholly owned subsidiary, issuing eleven tranches of CLO notes totaling $801.9 million. Of the total CLO notes issued, $682.6 million consisted of investment grade notes, $41.0 million of which were retained by us (including $31.8 million we financed), with the remainder issued to third party investors. The remaining $119.3 million were below investment grade notes and fully retained by us. As of the CLO closing date, the notes were secured by a portfolio of real estate related assets and cash with a face value of $583.6 million, with the real estate related assets primarily comprised of first-lien mortgage construction and bridge loans secured by build-to-rent properties contributed from our existing loan portfolio. The CLO has an approximate two-year replacement period, during which principal and sale proceeds from the underlying loans may be reinvested into qualifying replacement loan obligations, subject to conditions outlined in the indenture. The Securitization also includes a $200.0 million senior revolving note, which may be used to fund construction draws, acquire collateral at closing, or purchase replacement assets during the replacement period, of which $50.0 million had been drawn as of June 30, 2025. Thereafter, the outstanding debt balance will decrease as loans are repaid. Initially, the proceeds of the issuance also included $50.0 million for the purpose of acquiring additional loan obligations within 180 days from the CLO closing date, of which $36.2 million has been utilized to date, with the remaining amount expected to be fully utilized. Following the 180-day ramp up period and assuming the entire committed amount under the senior revolving note is utilized, the issuer will own loan obligations with a face value of $801.9 million, representing leverage of 80 %, or 84 % after
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
factoring in the financed portion of our retained investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 2.48 % plus term SOFR, with interest payable monthly.
CLO 14 and 19. In March 2025, we unwound CLO 14 and 19, redeeming the remaining outstanding notes totaling $1.08 billion, which were repaid from a new $1.15 billion repurchase facility. We expensed $2.3 million of deferred financing fees related to the unwind of these CLOs, into loss on extinguishment of debt on the consolidated statements of income.
Securitization Paydowns. During the six months ended June 30, 2025, outstanding notes totaling $507.0 million on our existing CLOs and $12.7 million on the Q Series securitization have been paid down.
Senior Unsecured Notes
A summary of our senior unsecured notes is as follows ($ in thousands):
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Unsecured Notes (3) | Issuance Date | Maturity | UPB | Carrying Value (1) | Wtd. Avg. Rate (2) | UPB | Carrying Value (1) | Wtd. Avg. Rate (2) | ||||||||||||||||||||||||||||||||||||||||||
| Oct. 2024 | Oct. 2027 | $ | $ | % | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||
| Mar. 2023 | Mar. 2026 | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Oct. 2022 | Oct. 2027 | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Dec. 2021 | Dec. 2028 | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Aug. 2021 | Sept. 2026 | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Apr. 2021 | Apr. 2026 | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Mar. 2020 | Mar. 2027 | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | % | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||
________________________
(1)At June 30, 2025 and December 31, 2024, the carrying value is net of deferred financing fees of $6.8 million and $8.9 million, respectively.
(2)At both June 30, 2025 and December 31, 2024, the aggregate weighted average note rate, including certain fees and costs, was 6.02
(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.
Subsequent Event. In July 2025, we issued $500.0 million aggregate principal amount of 7.875 % senior unsecured notes due July 2030 in a private offering. We are using a portion of the net proceeds from this offering to repay our remaining outstanding $287.5 million 7.50 % convertible notes due August 2025 and to add approximately $200.0 million of liquidity.
Convertible Senior Unsecured Notes
Our 7.50 % convertible senior unsecured notes are not redeemable by us prior to maturity (August 2025) 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 | |||||||||||||||||
| June 30, 2025 | $ | $ | $ | |||||||||||||||||
| December 31, 2024 | $ | $ | $ | |||||||||||||||||
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During the three months ended June 30, 2025, we incurred interest expense on the notes totaling $6.1 million, of which $5.4 million and $0.7 million related to the cash coupon and deferred financing fees, respectively. During the six months ended June 30, 2025, we incurred interest expense on the notes totaling $12.2 million, of which $10.8 million and $1.4 million related to the cash coupon and deferred financing fees, respectively. During the three months ended June 30, 2024, we incurred interest expense on the notes totaling $6.1 million, of which $5.4 million and $0.7 million related to the cash coupon and deferred financing fees, respectively. During the six months ended June 30, 2024, we incurred interest expense on the notes totaling $12.2 million, of which $10.8 million and $1.4 million related to the cash coupon and deferred financing fees, respectively. Including the amortization of the deferred financing fees, our weighted average total cost of the notes was 8.43 16.46 per share of common stock.
Junior Subordinated Notes
The carrying values of borrowings under our junior subordinated notes were $145.1 million and $144.7 million at June 30, 2025 and December 31, 2024, respectively, which is net of a deferred amount of $8.0 million and $8.3 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $1.3 million and $1.4 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 7.17 % and 7.18 % at June 30, 2025 and December 31, 2024, respectively. Including certain fees and costs, the weighted average note rate was 7.25 % and 7.26 % at June 30, 2025 and December 31, 2024, 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 June 30, 2025.
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 June 30, 2025, as well as on the most recent determination dates in July 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 non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time.
Our CLO compliance tests as of the most recent determination dates in July 2025 are as follows:
| Cash Flow Triggers | CLO 16 | CLO 17 | CLO 18 | BTR CLO 1 | ||||||||||||||||||||||||||||
| Overcollateralization (1) | ||||||||||||||||||||||||||||||||
| Current | % | % | % | % | ||||||||||||||||||||||||||||
| Limit | % | % | % | % | ||||||||||||||||||||||||||||
| Pass / Fail | Pass | Pass | Pass | Pass | ||||||||||||||||||||||||||||
| Interest Coverage (2) | ||||||||||||||||||||||||||||||||
| Current | % | % | % | % | ||||||||||||||||||||||||||||
| Limit | % | % | % | % | ||||||||||||||||||||||||||||
| Pass / Fail | 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.
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(2)The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.
Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows:
| Determination (1) | CLO 16 | CLO 17 | CLO 18 | BTR CLO 1 | ||||||||||||||||||||||||||||||||||
| July 2025 | % | % | % | % | ||||||||||||||||||||||||||||||||||
| April 2025 | % | % | % | N/A | ||||||||||||||||||||||||||||||||||
| January 2025 | % | % | % | N/A | ||||||||||||||||||||||||||||||||||
| October 2024 | % | % | % | N/A | ||||||||||||||||||||||||||||||||||
| July 2024 | % | % | % | N/A | ||||||||||||||||||||||||||||||||||
________________________
(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.
Note 11 — Allowance for Loss-Sharing Obligations
Our allowance for loss-sharing obligations related to the Fannie Mae DUS program is as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Provisions for loss sharing | |||||||||||||||||||||||
| Provisions reversal for loan repayments | ( | ( | ( | ( | |||||||||||||||||||
| Recoveries (charge-offs), net | ( | ( | |||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
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 June 30, 2025 and December 31, 2024, we had $35.0 million and $34.8 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 June 30, 2025 and December 31, 2024, we had outstanding advances of $1.3 million and $1.9 million, respectively, which were netted against the allowance for loss-sharing obligations.
At June 30, 2025 and December 31, 2024, our allowance for loss-sharing obligations, associated with expected losses under CECL, was $54.8 million and $48.3 million, respectively, and represented 0.24 % and 0.21 %, respectively, of our Fannie Mae servicing portfolio. During the three and six months ended June 30, 2025, we recorded an increase in CECL reserves of $4.0 million and $6.5 million, respectively. During the three and six months ended June 30, 2024, we recorded an increase in CECL reserves of $3.8 million and $4.9 million, respectively.
At June 30, 2025 and December 31, 2024, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $4.36 billion and $4.30 billion, respectively. The maximum quantifiable liability is not representative of the actual loss we
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would incur. We would be liable for this amount only if all of the loans we service for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.
Note 12 — Derivative Financial Instruments
We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and credit risk. We do not use these derivatives for speculative purposes, but are instead using them to manage our interest rate and credit risk exposure.
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 gain (loss) on derivative instruments, net in the consolidated statements of income. The estimated fair value of rate lock commitments also includes the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in the consolidated statements of income. During the three and six months ended June 30, 2025, we recorded net gains of $1.4 million and $6.1 million, respectively, from changes in the fair value of these derivatives and income from MSRs of $10.9 million and $19.1 million, respectively. During the three and six months ended June 30, 2024, we recorded net losses of $0.4 million and $0.3 million, respectively, from changes in the fair value of these derivatives and income from MSRs of $14.5 million and $24.7 million, respectively. See Note 13 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 June 30, 2025 and December 31, 2024, we had $1.5 million and $2.3 million, respectively, included in others assets, which was comprised of cash posted as collateral of $2.5 million and $2.0 million, respectively, and net liability and net asset positions of $1.0 million and $0.3 million, respectively, from the fair value of our treasury futures.
During the three months ended June 30, 2025, we recorded realized losses of $1.0 million and unrealized gains of $0.5 million to our Agency Business, related to our swaps. During the six months ended June 30, 2025, we recorded realized losses of $0.5 million and unrealized losses of $1.2 million to our Agency Business, related to our swaps. During the three months ended June 30, 2024, we recorded realized gains of $0.2 million and unrealized losses of $0.1 million to our Agency Business, related to our swaps. During the six months ended June 30, 2024, we recorded realized and unrealized gains of $0.1 million and $0.3 million, respectively, to our Agency Business, related to our swaps.
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A summary of our non-qualifying derivative financial instruments in our Agency Business is as follows ($ in thousands):
| June 30, 2025 | ||||||||||||||||||||||||||||||||
| Fair Value | ||||||||||||||||||||||||||||||||
| Derivative | Count | Notional Value | Balance Sheet Location | Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||
| Rate lock commitments | $ | Other assets/other liabilities | $ | $ | ( | |||||||||||||||||||||||||||
| Forward sale commitments | Other assets/other liabilities | ( | ||||||||||||||||||||||||||||||
| Treasury futures | ||||||||||||||||||||||||||||||||
| $ | $ | $ | ( | |||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Forward sale commitments | $ | Other assets/other liabilities | $ | $ | ( | |||||||||||||||||||||||||||
| Treasury futures | ||||||||||||||||||||||||||||||||
| $ | $ | $ | ( | |||||||||||||||||||||||||||||
Note 13 — Fair Value
Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions. The following table summarizes the principal amounts, carrying values and the estimated fair values of our financial instruments (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Principal / Notional Amount | Carrying Value | Estimated Fair Value | Principal / Notional Amount | Carrying Value | Estimated Fair Value | ||||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||||||||
| Loans and investments, net | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Loans held-for-sale, net | |||||||||||||||||||||||||||||||||||
| Capitalized mortgage servicing rights, net | n/a | n/a | |||||||||||||||||||||||||||||||||
| Securities held-to-maturity, net | |||||||||||||||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||
| Credit and repurchase facilities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Securitized debt | |||||||||||||||||||||||||||||||||||
| Senior unsecured notes | |||||||||||||||||||||||||||||||||||
| Convertible senior unsecured notes | |||||||||||||||||||||||||||||||||||
| Junior subordinated notes | |||||||||||||||||||||||||||||||||||
| Mortgage notes payable - real estate owned | |||||||||||||||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||||||||||||||
Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Determining which category an asset or liability falls within the hierarchy requires judgment and we evaluate our hierarchy disclosures each quarter. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows:
Level 1—Inputs are unadjusted and quoted prices exist in active markets for identical assets or liabilities, such as government, agency and equity securities.
Level 2—Inputs (other than quoted prices included in Level 1) are observable for the asset or liability through correlation with market data. Level 2 inputs may include quoted market prices for a similar asset or liability, interest rates and credit risk. Examples include non-government securities, certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments.
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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).
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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 June 30, 2025 (in thousands):
| Carrying Value | Fair Value | Fair Value Measurements Using Fair Value Hierarchy | |||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Derivative financial instruments | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Derivative financial instruments | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
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 June 30, 2025 (in thousands):
| Net Carrying Value | Fair Value | Fair Value Measurements Using Fair Value Hierarchy | |||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Impaired loans, net | |||||||||||||||||||||||||||||
| Loans held-for-investment (1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Loans held-for-sale (2) | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
________________________
(1)We had an allowance for credit losses of $144.6 million relating to 27 impaired loans with an aggregate carrying value, before loan loss reserves, of $596.9 million at June 30, 2025. The fair values of these impaired loans are based on the value of the underlying collateral.
(2)We have an impairment loss of $1.0 million related to 3 loans held-for-sale with an aggregate carrying value, before unrealized impairment losses, of $14.1 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.
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Quantitative information about Level 3 fair value measurements at June 30, 2025 is as follows ($ in thousands):
| Fair Value | Valuation Techniques | Significant Unobservable Inputs | |||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Impaired loans: | Weighted Average | Minimum / Maximum | |||||||||||||||||||||||||||
| Multifamily | $ | Discounted cash flows | Capitalization rate | ||||||||||||||||||||||||||
| Land | Discounted cash flows | Discount rate | |||||||||||||||||||||||||||
| Revenue growth rate | |||||||||||||||||||||||||||||
| Retail | Sales comparative | Price per acre | $ | $ | |||||||||||||||||||||||||
| Derivative financial instruments: | |||||||||||||||||||||||||||||
| Rate lock commitments | $ | Discounted cash flows | W/A discount rate | ||||||||||||||||||||||||||
The derivative financial instruments using Level 3 inputs are outstanding for short periods of time (generally less than 60 days). A roll-forward of Level 3 derivative instruments is as follows (in thousands):
| Fair Value Measurements Using Significant Unobservable Inputs | |||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Derivative assets and liabilities, net | |||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Settlements | ( | ( | ( | ( | |||||||||||||||||||
| Realized gains recorded in earnings | |||||||||||||||||||||||
| Unrealized gains recorded in earnings | |||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
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):
| June 30, 2025 | Notional/ Principal Amount | Fair Value of Servicing Rights | Unrealized Impairment Loss | Total Fair Value Adjustment | ||||||||||||||||||||||||||||
| Rate lock commitments | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Forward sale commitments | ||||||||||||||||||||||||||||||||
| Loans held-for-sale, net (1) | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||||||||
________________________
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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 June 30, 2025 (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 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Loans held-for-sale, net | |||||||||||||||||||||||||||||
| Capitalized mortgage servicing rights, net | |||||||||||||||||||||||||||||
| Securities held-to-maturity, net | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Credit and repurchase facilities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Securitized debt | |||||||||||||||||||||||||||||
| Senior unsecured notes | |||||||||||||||||||||||||||||
| Convertible senior unsecured notes | |||||||||||||||||||||||||||||
| Junior subordinated notes | |||||||||||||||||||||||||||||
| Mortgage notes payable - real estate owned | |||||||||||||||||||||||||||||
Note 14 — 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, the accuracy of the information being provided by us and the conformity of the loans to the terms and conditions required by the GSEs and HUD. 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 June 30, 2025, we were required to maintain at least $22.8 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement.
We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program and are required to secure this obligation by assigning restricted cash balances and/or a letter of credit to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level by a Fannie Mae assigned tier, which considers the loan balance, risk level of the loan, age of the loan and level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, 15 basis points for Tier 3 loans and 5 basis points for Tier 4 loans, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. A significant portion of our Fannie Mae DUS serviced loans for which we have risk sharing are Tier 2 loans. At June 30, 2025, the restricted liquidity requirement totaled $96.3 million and was satisfied with a $70.0 million letter of credit and cash issued to Fannie Mae.
At June 30, 2025, reserve requirements for the current Fannie Mae DUS loan portfolio will require us to fund $32.6 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 June 30, 2025, we met all of Fannie Mae’s quarterly capital requirements and our Fannie Mae adjusted net worth was in excess of the required net worth. We are not subject to capital requirements on a quarterly basis for Ginnie Mae and FHA, as requirements for these investors are only required on an annual basis.
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As an approved designated seller/servicer under Freddie Mac’s SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations required by this program. Under the SBL program, we are required to post collateral equal to $5.0 million, which is satisfied with a $5.0 million letter of credit.
We enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors. These commitments are outstanding for short periods of time (generally less than 60 days) and are described in more detail in Note 12 and Note 13.
Debt Obligations and Operating Leases. At June 30, 2025, 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 (six months ending December 31, 2025) | $ | $ | $ | |||||||||||||||||
| 2026 | ||||||||||||||||||||
| 2027 | ||||||||||||||||||||
| 2028 | ||||||||||||||||||||
| 2029 | ||||||||||||||||||||
| 2030 | ||||||||||||||||||||
| Thereafter | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
During the three and six months ended June 30, 2025, we recorded lease expense of $2.7 million and $5.4 million, respectively. During the three and six months ended June 30, 2024, we recorded lease expense of $2.8 million and $5.5 million, respectively.
Unfunded Commitments. In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $2.22 billion at June 30, 2025 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” and "Derivative Actions," 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 are 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.
On April 10, 2025, we served a motion to dismiss the case, which remains pending.
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.
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Derivative Actions
On February 26, 2025, a purported shareholder filed a verified shareholder derivative suit in the United States District Court for the District of Maryland, derivatively and on behalf of the Company, against certain officers and directors of the Board of Directors, asserting claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of Section 14(a) of the Exchange Act, and contribution under the Exchange Act, arising from substantially the same facts and events as alleged in the above-mentioned Securities Class Action. The complaint seeks unspecified damages, costs and expenses, as well as other relief. On March 17, 2025, another purported shareholder filed a substantially similar verified shareholder derivative complaint, and the derivative actions were consolidated as In re Arbor Realty Trust, Inc. Stockholder Derivative Litigation, No. 1:25-cv-00639. On April 28, 2025, the Court entered a joint stipulation and order to stay the action pending resolution of the motion to dismiss in the Securities Class Action. The consolidated case is in the early stages.
On April 18, 2025, another purported shareholder filed a substantially similar verified shareholder derivative complaint in the District Court for the Eastern District of New York. On May 20, 2025, the Court entered a joint stipulation and order to stay the action pending resolution of the motion to dismiss in the Securities Class Action. This case is also in the early stages.
On July 18, 2025, a purported shareholder filed a verified shareholder derivative complaint in the Circuit Court for the Baltimore City, Maryland, derivatively and on behalf of the Company, against certain officers and directors of the Board of Directors, asserting demand refusal and a claim for breach of fiduciary duty. This case is also in the early stages.
On July 29, 2025, two purported shareholders filed a verified shareholder derivative complaint in the United States District Court for the District of New York, derivatively and on behalf of the Company, against certain officers and directors of the Board of Directors, asserting demand refusal and claims for violation of Section 14(a) of the Exchange Act, breach of fiduciary duty and unjust enrichment. This case is also in the early stages.
We believe that the allegations in the lawsuits 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.
Due to Borrowers. Due to borrowers represents borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans. While retained, these balances earn interest in accordance with the specific loan terms they are associated with.
Note 15 — Variable Interest Entities
Our involvement with VIEs primarily affects our financial performance and cash flows through amounts recorded in interest income, interest expense, provision for loan losses and through activity associated with our derivative instruments.
Consolidated VIEs. We have determined that our operating partnership, ARLP, and our CLO and Q Series securitization entities (“Securitization Entities”) are VIEs, which we consolidate.
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.
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The assets and liabilities related to these consolidated Securitization Entities are as follows (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||
| Assets: | |||||||||||
| Restricted cash | $ | $ | |||||||||
| Loans and investments, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities: | |||||||||||
| Securitized debt | $ | $ | |||||||||
| Other liabilities | |||||||||||
| Total liabilities | $ | $ | |||||||||
Assets held by the Securitization Entities are restricted and can only be used to settle obligations of those entities. The liabilities of the Securitization Entities are non-recourse to us and can only be satisfied from each respective asset pool. See Note 10 for details. We are not obligated to provide, have not provided, and do not intend to provide financial support to any of the Securitization Entities.
Unconsolidated VIEs. We determined that we are not the primary beneficiary of 63 VIEs in which we have a variable interest at June 30, 2025 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity's economic performance or substantially all of the activities do not involve, or are not conducted on behalf of, the Company.
A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, at June 30, 2025 is as follows (in thousands):
| Type | Carrying Amount (1) | |||||||
| Loans | $ | |||||||
| APL certificates | ||||||||
| Equity investments | ||||||||
| B Piece bonds | ||||||||
| Agency interest only strips | ||||||||
| Total | $ | |||||||
________________________
(1)Represents the carrying amount of loans and investments before reserves. At June 30, 2025, $252.1 million of loans to VIEs had corresponding specific loan loss reserves of $90.7 million. The maximum loss exposure at June 30, 2025 would not exceed the carrying amount of our investment.
These unconsolidated VIEs have exposure to real estate debt of approximately $4.81 billion at June 30, 2025.
Note 16 — Equity
Common Stock. We have an equity distribution agreement with Citizens 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 the six months ended June 30, 2025, we sold 2,508,750 shares of our common stock at an average price of $12.31 per share for net proceeds of $30.9 million. At June 30, 2025, we had 26,829,542 shares available under the agreement.
We have 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 June 30, 2025, there was $138.6 million available for repurchase under this program.
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Noncontrolling Interest. Noncontrolling interest relates to the operating partnership units (“OP Units”) issued to satisfy a portion of the purchase price in connection with the acquisition of the agency platform of ACM in 2016. Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $0.01 per share and is entitled to one vote each on any matter submitted for stockholder approval. The OP Units are entitled to receive distributions if and when our Board of Directors authorizes and declares common stock distributions. The OP Units are also redeemable for cash, or at our option, for shares of our common stock on a one -for-one basis. At June 30, 2025, there were 16,173,761 OP Units outstanding, which represented 7.8 % of the voting power of our outstanding stock.
Distributions. Dividends declared (on a per share basis) during the six months ended June 30, 2025 are as follows:
| Common Stock | Preferred Stock | |||||||||||||||||||||||||||||||
| Dividend | ||||||||||||||||||||||||||||||||
| Declaration Date | Dividend | Declaration Date | Series D | Series E | Series F | |||||||||||||||||||||||||||
| February 19, 2025 | $ | March 28, 2025 | $ | $ | $ | |||||||||||||||||||||||||||
| April 30, 2025 | $ | June 27, 2025 | $ | $ | $ | |||||||||||||||||||||||||||
Common Stock – On July 30, 2025, the Board of Directors declared a cash dividend of $0.30 per share of common stock. The dividend is payable on August 29, 2025 to common stockholders of record as of the close of business on August 15, 2025.
Deferred Compensation. During 2025, we granted 629,028 shares of restricted common stock to certain employees and Board of Directors members under the Amended Omnibus Stock Incentive Plan with a total grant date fair value of $7.8 million, of which: (1) 224,237 shares with a grant date fair value of $2.8 million vested on the grant date in 2025; (2) 197,225 shares with a grant date fair value of $2.4 million will vest in 2026; (3) 197,412 shares with a grant date fair value of $2.4 million will vest in 2027; and (4) 10,154 shares with a grant date fair value of $0.1 million will vest in 2028.
During 2025, we granted our chief executive officer 170,674 shares of restricted common stock with a grant date fair value of $2.1 million that vest in full in the first quarter of 2028. We also granted our chief executive officer up to 682,699 shares of performance-based restricted stock units (“RSUs”) with a grant date fair value of $2.7 million that vest at the end of a four-year performance period based on the achievement of certain stockholder return objectives.
We also issued 47,725 fully-vested RSUs with a grant date fair value of $0.6 million to certain members of our Board of Directors, who have decided to defer the receipt of the common stock, into which the RSUs are converted, to a future date pursuant to a pre-established deferral election.
During 2025, we withheld 260,181 shares from the net settlement of restricted common stock by employees for payment of withholding taxes on shares that vested.
Earnings Per Share (“EPS”). Basic EPS is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period. Our common stock equivalents include the weighted average dilutive effect of RSUs, OP Units and convertible senior unsecured notes.
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A reconciliation of the numerator and denominator of our basic and diluted EPS computations is as follows ($ in thousands, except share and per share data):
| Three Months Ended June 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | |||||||||||||||||||||||
| Net income attributable to common stockholders (1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest (2) | — | — | ||||||||||||||||||||||||
| Interest expense on convertible notes (3) | — | — | ||||||||||||||||||||||||
| Net income attributable to common stockholders and noncontrolling interest | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Dilutive effect of OP Units (2) | — | — | ||||||||||||||||||||||||
| Dilutive effect of convertible notes (3) | — | — | ||||||||||||||||||||||||
| Dilutive effect of RSUs (4) | — | — | ||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Net income per common share (1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Net income attributable to common stockholders (1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest (2) | — | — | ||||||||||||||||||||||||
| Interest expense on convertible notes (3) | — | — | ||||||||||||||||||||||||
| Net income attributable to common stockholders and noncontrolling interest | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Dilutive effect of OP Units (2) | — | — | ||||||||||||||||||||||||
| Dilutive effect of convertible notes (3) | — | — | ||||||||||||||||||||||||
| Dilutive effect of RSUs (4) | — | — | ||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Net income per common share (1) | $ | $ | $ | $ | ||||||||||||||||||||||
________________________
(1)Net of preferred stock dividends.
(2)We consider OP Units to be common stock equivalents as the holders have voting rights, the right to distributions and the right to redeem the OP Units for the cash value of a corresponding number of shares of common stock or a corresponding number of shares of common stock, at our election.
(3)The three and six months ended June 30, 2025 excludes interest expense of $6.1 million and $12.2 million, respectively, and potentially dilutive shares of 17,471,534 and 17,543,663 , respectively, 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 4-year performance period based upon our achievement of total stockholder return objectives.
Note 17 — Income Taxes
As a REIT, we are generally not subject to U.S. federal income tax to the extent of our distributions to stockholders and as long as certain asset, income, distribution, ownership and administrative tests are met. To maintain our qualification as a REIT, we must annually distribute at least 90% of our REIT-taxable income to our stockholders and meet certain other requirements. We may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on our undistributed taxable income. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for distributions to our stockholders. We believe that all of the
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criteria to maintain our REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.
The Agency Business is operated through our TRS Consolidated Group and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.
In the three and six months ended June 30, 2025, we recorded a tax provision of $3.4 million and $7.0 million, respectively. In the three and six months ended June 30, 2024, we recorded a tax provision of $3.9 million and $7.5 million, respectively. The tax provision recorded in the three months ended June 30, 2025 consisted of a current tax provision of $5.0 million and a deferred tax benefit of $1.6 million. The tax provision recorded in the six months ended June 30, 2025 consisted of a current tax provision of $8.7 million and a deferred tax benefit of $1.7 million. The tax provision recorded in the three months ended June 30, 2024 consisted of a current tax provision of $6.8 million and a deferred tax benefit of $2.9 million. The tax provision recorded in the six months ended June 30, 2024 consisted of a current tax provision of $14.4 million and deferred tax benefit of $6.9 million. Current and deferred taxes are primarily recorded on the portion of earnings (losses) recognized by us with respect to our interest in the TRS’s. Deferred income tax assets and liabilities are calculated based on temporary differences between our U.S. GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities of the consolidated balance sheets.
Note 18 — Agreements and Transactions with Related Parties
Support Agreement and Employee Secondment Agreement. We have a support agreement and a secondment agreement with ACM and certain of its affiliates and certain affiliates of a relative of our chief executive officer (“Service Recipients”) where we provide support services and seconded employees to the Service Recipients. The Service Recipients reimburse us for the costs of performing such services and the cost of the seconded employees. During the three and six months ended June 30, 2025, we incurred $1.0 million and $1.9 million, respectively, and, during the three and six months ended June 30, 2024, we incurred $0.9 million and $1.8 million, respectively, of costs for services provided and employees seconded to the Service Recipients, all of which are reimbursable to us and included in due from related party on the consolidated balance sheets.
Other Related Party Transactions. Due from related party was $16.8 million and $12.8 million at June 30, 2025 and December 31, 2024, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of the quarter and amounts due from ACM for costs incurred in connection with the support and secondment agreements described above.
Due to related party was $3.4 million and $4.5 million at June 30, 2025 and December 31, 2024, respectively, and consisted of loan settlements, 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 the three and six months ended June 30, 2025, we reimbursed the aircraft owner $0.7 million and $0.9 million, respectively, and $0.3
In May 2025, we refinanced a $32.5 million bridge loan with a new $43.0 million bridge loan for an SFR BTR construction project. In 2020, we also made a $3.5 million preferred equity investment in the same project, of which $1.2 million was paid off in May 2025. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owned a 21.8 % equity interest in the borrowing entity that increased to 26.6 % in connection with the refinancing. Interest on the new loan decreased from SOFR plus 3.75 % with a SOFR floor of 0.75 % to SOFR plus 3.00 % with a SOFR floor of 3.25 % and matures in May 2026. The preferred equity investment has a 12.00 % fixed rate and was scheduled to mature in December 2023, which was extended to May 2026. In connection with the extension, the borrower paid deferred interest of $1.9 million. Interest income recorded from these loans was $1.0 million and $2.0 million for the three and six months ended June 30, 2025, respectively, and $1.1 million and $2.1 million for the three and six months ended June 30, 2024, respectively.
In May 2025, we refinanced a $30.5 million bridge loan with a new $36.2 million bridge loan, for an SFR BTR construction project. In 2020, we also made a $4.6 million preferred equity investment in the same project. ACM and an entity owned by an immediate family member of our chief executive officer also made equity investments in the project and owned a combined 18.9 % equity interest in the borrowing entity that increased to 33.7 % in connection with the refinancing. Interest on the new loan decreased from SOFR plus 4.25 % with a SOFR floor of 1.00 % to SOFR plus 3.00 % with a SOFR floor of 3.25 % and matures in November 2025. The preferred equity
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investment has a 12.00 % fixed rate and was scheduled to mature in April 2023, which was extended to November 2025. In connection with the extension, the borrower paid deferred interest of $1.3 million. Interest income recorded from the loans was $0.9 million and $1.9 million for the three and six months ended June 30, 2025, respectively, and $1.1 million and $2.3 million for the three and six months ended June 30, 2024, respectively.
In May 2025, we refinanced a $56.9 million bridge loan with a new $58.4 million bridge loan for an SFR BTR 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. Interest on the new loan decreased from SOFR plus 5.50 % with a SOFR floor of 3.25 % to SOFR plus 2.75 % with a SOFR floor of 3.50 % and matures in May 2027. Interest income recorded from the loans was $1.2 million and $2.6 million for the three and six months ended June 30, 2025, respectively, and $0.6 million and $1.0 million for the three and six months ended June 30, 2024, respectively.
In February 2025, we refinanced a $46.2 million bridge loan we purchased from ACM in 2022 with a new $52.6 million bridge loan ($12.8 million was funded at June 30, 2025) for an SFR BTR 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. Interest on the new loan decreased from SOFR plus 5.50 % to SOFR plus 4.75 % and matures in February 2027. Interest income recorded from the loans was $0.3 million and $0.6 million for the three and six months ended June 30, 2025, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2024, respectively.
In July 2024, we committed to fund a $62.4 million bridge loan ($12.2 million was funded at June 30, 2025) in an SFR BTR 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 $0.2 million and $0.3 million for the three and six months ended June 30, 2025, respectively.
In May 2024, we committed to fund a $42.5 million bridge loan ($13.1 million was funded at June 30, 2025) in an SFR BTR 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 $0.3 million and $0.4 million for the three and six months ended June 30, 2025, respectively, and less than $0.1
In 2022, we committed to fund a $67.1 million bridge loan ($46.4 million was funded at June 30, 2025) in an SFR BTR 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 was scheduled to mature in May 2025, which was extended to May 2026. Interest income recorded from this loan was $1.1 million and $2.1 million for the three and six months ended June 30, 2025, respectively, and $0.3 million and $0.4 million for the three and six months ended June 30, 2024, respectively.
In 2022, we committed to fund a $39.4 million bridge loan ($37.7 million was funded at June 30, 2025) in an SFR BTR 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 was scheduled to mature in March 2025, which was extended to March 2026. Interest income recorded from this loan was $0.8 million and $1.5 million for the three and six months ended June 30, 2025, respectively, and $0.4 million and $0.7 million for the three and six months ended June 30, 2024, 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 have 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.
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 $0.1 million and $0.2 million for the three and six months ended June 30, 2025, respectively, and less than $0.1 million and $0.2 million for the three and six months ended June 30, 2024, respectively.
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In 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, formed AMAC III, a multifamily-focused commercial real estate investment fund sponsored and managed by our chief executive officer and one of his immediate family members. We committed to a $30.0 million investment for an 18 % interest in AMAC III. During the three and six months ended June 30, 2025, we recorded a loss associated with this investment of $1.0 million and $1.9 million, respectively, and $0.7 million and $1.2 million for the three and six months ended June 30, 2024, respectively. During the six months ended June 30, 2025 we made contributions of $0.9 million. During both the three and six months ended June 30, 2024 we made contributions of $2.6 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 has an interest rate of SOFR plus 3.50 %, and was scheduled to mature in February 2025. In February 2025, we modified this loan to extend the maturity to February 2028 in exchange for a $2.0 million paydown that was made in the first quarter of 2025. Interest income recorded from the bridge loan was $0.7 million and $1.3 million for the three and six months ended June 30, 2025, respectively, and $0.8 million and $1.6 million for the three and six months ended June 30, 2024, respectively.
In 2019, we converted an existing bridge loan into a $2.0 million mezzanine loan with a fixed interest rate of 10.00 %. 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. The loan was scheduled to mature in May 2025, which was extended to February 2029. Interest income recorded from this loan was less than $0.1 million and $0.1 million for the three and six months ended June 30, 2025, respectively, and less than $0.1 million and $0.1 million for the three and six months ended June 30, 2024, respectively.
In 2018, we originated a $21.7 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75 % in the borrowing entity. The loan has an interest rate of SOFR plus 4.75 % with a SOFR floor of 0.25 %, and was scheduled to mature in February 2025, which was modified to extend the maturity to February 2027 in exchange for $3.0 million of additional collateral and a $2.5 million paydown to be made in February 2026. In 2024, we recorded a $5.5 million specific reserve on this loan. Interest income recorded from this loan was $0.5 million and $1.0 million for the three and six months ended June 30, 2025, respectively, and $0.6 million and $1.1 million, for the three and six months ended June 30, 2024, respectively.
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
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. We recorded a loss of $1.4 million related to this investment for the six months ended June 30, 2025, and we recorded a loss of $0.8 million and income of $0.8 million related to this investment for the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2025, we received distributions of $5.6 million and $6.1 million, and during both the three and six months ended June 30, 2024, we received distributions of $7.7 117.3 million. Based on the terms of this agreement, $22.0 million was allocated to us, which is equivalent to the carrying value of our investment, and therefore do not expect to record a gain or loss on the transaction. The transaction closed once the entire sales price was paid, which was due in installments as follows: $15.0 million on or before April 1, 2025; $15.0 million on or before April 30, 2025; and the remaining $87.3 million on or before December 15, 2025. The first two installments were made in April, for which we received $5.6 million as our allocable share, and the final installment was made on July 31, 2025, for which we received $16.4 million as our allocable share.
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. 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 $3.4 4.2
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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 June 30, 2025, this debt had an aggregate outstanding balance of approximately $400.0 million and is scheduled to mature through 2029.
Several of our executives, including our chief financial officer, corporate secretary and our chairman, chief executive officer and president, hold similar positions for ACM. Our chief executive officer and his affiliated entities (“the Kaufman Entities”) together beneficially own approximately 35 % of the outstanding membership interests of ACM and certain of our employees and directors also hold an ownership interest in ACM. Furthermore, one of our directors serves as the trustee and co-trustee of two of the Kaufman Entities that hold membership interests in ACM. At June 30, 2025, ACM holds 2,535,870 shares of our common stock and 10,483,930 OP Units, which represents 6.2 % of the voting power of our outstanding stock. Our Board of Directors approved a resolution under our charter allowing our chief executive officer and ACM, (which our chief executive officer has a controlling equity interest in), to own more than the 5 % ownership interest limit of our common stock as stated in our amended charter.
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Note 19 — Segment Information
As described in Note 1, we operate through two business segments – our Structured Business and our Agency Business. The summarized statements of income and balance sheet data, as well as certain other data, by segment are included in the following tables ($ 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.
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||
| Structured Business | Agency Business | Other (1) | Consolidated | ||||||||||||||||||||
| Interest income | $ | $ | $ | — | $ | ||||||||||||||||||
| Interest expense | — | ||||||||||||||||||||||
| Net interest income | — | ||||||||||||||||||||||
| Other revenue: | |||||||||||||||||||||||
| Gain on sales, including fee-based services, net | — | ||||||||||||||||||||||
| Mortgage servicing rights | — | ||||||||||||||||||||||
| Servicing revenue | — | ||||||||||||||||||||||
| Amortization of MSRs | ( | — | ( | ||||||||||||||||||||
| Property operating income | — | ||||||||||||||||||||||
| Gain on derivative instruments, net | — | ||||||||||||||||||||||
| Other income, net | — | ||||||||||||||||||||||
| Total other revenue | — | ||||||||||||||||||||||
| Other expenses: | |||||||||||||||||||||||
| Employee compensation and benefits | — | ||||||||||||||||||||||
| Commissions | — | ||||||||||||||||||||||
| Selling and administrative | — | ||||||||||||||||||||||
| Property operating expenses | — | ||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||
| Provision for loss sharing | — | ||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | — | ||||||||||||||||||||||
| Total other expenses | — | ||||||||||||||||||||||
| Income before loss on real estate, income from equity affiliates and income taxes | — | ||||||||||||||||||||||
| Loss on real estate | ( | — | ( | ||||||||||||||||||||
| Income from equity affiliates | — | ||||||||||||||||||||||
| Provision for income taxes | ( | ( | — | ( | |||||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Preferred stock dividends | — | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | $ | $ | ( | $ | ||||||||||||||||||
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| Three Months Ended June 30, 2024 | |||||||||||||||||||||||
| Structured Business | Agency Business | Other (1) | Consolidated | ||||||||||||||||||||
| Interest income | $ | $ | $ | — | $ | ||||||||||||||||||
| Interest expense | — | ||||||||||||||||||||||
| Net interest income | — | ||||||||||||||||||||||
| Other revenue: | |||||||||||||||||||||||
| Gain on sales, including fee-based services, net | — | ||||||||||||||||||||||
| Mortgage servicing rights | — | ||||||||||||||||||||||
| Servicing revenue | — | ||||||||||||||||||||||
| Amortization of MSRs | ( | — | ( | ||||||||||||||||||||
| Property operating income | — | ||||||||||||||||||||||
| Loss on derivative instruments, net | ( | — | ( | ||||||||||||||||||||
| Other income, net | — | ||||||||||||||||||||||
| Total other revenue | — | ||||||||||||||||||||||
| Other expenses: | |||||||||||||||||||||||
| Employee compensation and benefits | — | ||||||||||||||||||||||
| Commissions | — | ||||||||||||||||||||||
| Selling and administrative | — | ||||||||||||||||||||||
| Property operating expenses | — | ||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||
| Provision for loss sharing (net of recoveries) | — | ||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | — | ||||||||||||||||||||||
| Total other expenses | — | ||||||||||||||||||||||
| Income before extinguishment of debt, gain on real estate, income from equity affiliates and income taxes | — | ||||||||||||||||||||||
| Loss on extinguishment of debt | ( | — | ( | ||||||||||||||||||||
| Gain on real estate | — | ||||||||||||||||||||||
| Income from equity affiliates | — | ||||||||||||||||||||||
| Benefit from (provision for) income taxes | ( | — | ( | ||||||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Preferred stock dividends | — | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | $ | $ | ( | $ | ||||||||||||||||||
________________________
(1) Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.
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| Six Months Ended June 30, 2025 | |||||||||||||||||||||||
| Structured Business | Agency Business | Other (1) | Consolidated | ||||||||||||||||||||
| Interest income | $ | $ | $ | — | $ | ||||||||||||||||||
| Interest expense | — | ||||||||||||||||||||||
| Net interest income | — | ||||||||||||||||||||||
| Other revenue: | |||||||||||||||||||||||
| Gain on sales, including fee-based services, net | — | ||||||||||||||||||||||
| Mortgage servicing rights | — | ||||||||||||||||||||||
| Servicing revenue | — | ||||||||||||||||||||||
| Amortization of MSRs | ( | — | ( | ||||||||||||||||||||
| Property operating income | — | ||||||||||||||||||||||
| Gain on derivative instruments, net | — | ||||||||||||||||||||||
| Other income, net | — | ||||||||||||||||||||||
| Total other revenue | — | ||||||||||||||||||||||
| Other expenses: | |||||||||||||||||||||||
| Employee compensation and benefits | — | ||||||||||||||||||||||
| Commissions | — | ||||||||||||||||||||||
| Selling and administrative | — | ||||||||||||||||||||||
| Property operating expenses | — | ||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||
| Provision for loss sharing | — | ||||||||||||||||||||||
| Provision for loan losses (net of recoveries) | — | ||||||||||||||||||||||
| Total other expenses | — | ||||||||||||||||||||||
| Income before extinguishment of debt, loss on real estate, income from equity affiliates and income taxes | — | ||||||||||||||||||||||
| Loss on extinguishment of debt | ( | — | ( | ||||||||||||||||||||
| Loss on real estate | ( | — | ( | ||||||||||||||||||||
| Income from equity affiliates | — | ||||||||||||||||||||||
| Provision for income taxes | ( | ( | — | ( | |||||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Preferred stock dividends | — | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | $ | $ | ( | $ | ||||||||||||||||||
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| Six Months Ended June 30, 2024 | |||||||||||||||||||||||
| Structured Business | Agency Business | Other (1) | Consolidated | ||||||||||||||||||||
| Interest income | $ | $ | $ | — | $ | ||||||||||||||||||
| Interest expense | — | ||||||||||||||||||||||
| Net interest income | — | ||||||||||||||||||||||
| Other revenue: | |||||||||||||||||||||||
| Gain on sales, including fee-based services, net | — | ||||||||||||||||||||||
| Mortgage servicing rights | — | ||||||||||||||||||||||
| Servicing revenue | — | ||||||||||||||||||||||
| Amortization of MSRs | ( | — | ( | ||||||||||||||||||||
| Property operating income | — | ||||||||||||||||||||||
| Loss on derivative instruments, net | ( | — | ( | ||||||||||||||||||||
| Other income, net | — | ||||||||||||||||||||||
| Total other revenue | — | ||||||||||||||||||||||
| Other expenses: | |||||||||||||||||||||||
| Employee compensation and benefits | — | ||||||||||||||||||||||
| Commissions | — | ||||||||||||||||||||||
| Selling and administrative | — | ||||||||||||||||||||||
| Property operating expenses | — | ||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||
| Provision for loss sharing (net of recoveries) | — | ||||||||||||||||||||||
| Provision for credit losses (net of recoveries) | — | ||||||||||||||||||||||
| Total other expenses | — | ||||||||||||||||||||||
| Income before extinguishment of debt, gain on real estate, income from equity affiliates and income taxes | — | ||||||||||||||||||||||
| Loss on extinguishment of debt | ( | — | ( | ||||||||||||||||||||
| Gain on real estate | — | ||||||||||||||||||||||
| Income from equity affiliates | — | ||||||||||||||||||||||
| Benefit from (provision for) income taxes | ( | — | ( | ||||||||||||||||||||
| Net income | — | ||||||||||||||||||||||
| Preferred stock dividends | — | ||||||||||||||||||||||
| Net income attributable to noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | $ | $ | ( | $ | ||||||||||||||||||
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| June 30, 2025 | |||||||||||||||||
| Structured Business | Agency Business | Consolidated | |||||||||||||||
| Assets: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Restricted cash | |||||||||||||||||
| Loans and investments, net | |||||||||||||||||
| Loans held-for-sale, net | |||||||||||||||||
| Capitalized mortgage servicing rights, net | |||||||||||||||||
| Securities held-to-maturity, net | |||||||||||||||||
| Investments in equity affiliates | |||||||||||||||||
| Real estate owned, net | |||||||||||||||||
| Goodwill and other intangible assets | |||||||||||||||||
| Other assets and due from related party | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
| Liabilities: | |||||||||||||||||
| Debt obligations | $ | $ | $ | ||||||||||||||
| Allowance for loss-sharing obligations | |||||||||||||||||
| Other liabilities and due to related parties | |||||||||||||||||
| Total liabilities | $ | $ | $ | ||||||||||||||
| December 31, 2024 | |||||||||||||||||
| Assets: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Restricted cash | |||||||||||||||||
| Loans and investments, net | |||||||||||||||||
| Loans held-for-sale, net | |||||||||||||||||
| Capitalized mortgage servicing rights, net | |||||||||||||||||
| Securities held-to-maturity, net | |||||||||||||||||
| Investments in equity affiliates | |||||||||||||||||
| Real estate owned, net | |||||||||||||||||
| Goodwill and other intangible assets | |||||||||||||||||
| Other assets and due from related party | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
| Liabilities: | |||||||||||||||||
| Debt obligations | $ | $ | $ | ||||||||||||||
| Allowance for loss-sharing obligations | |||||||||||||||||
| Other liabilities and due to related parties | |||||||||||||||||
| Total liabilities | $ | $ | $ | ||||||||||||||
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| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||
| Origination Data: | |||||||||||||||||||||||||||||
| Structured Business | |||||||||||||||||||||||||||||
| Bridge: | |||||||||||||||||||||||||||||
| Multifamily | $ | $ | $ | $ | |||||||||||||||||||||||||
| SFR | |||||||||||||||||||||||||||||
| Land | |||||||||||||||||||||||||||||
| Mezzanine / Preferred Equity | |||||||||||||||||||||||||||||
| Construction - Multifamily | |||||||||||||||||||||||||||||
| Total New Loan Originations | $ | $ | $ | $ | |||||||||||||||||||||||||
| Number of Loans Originated | |||||||||||||||||||||||||||||
| Commitments: | |||||||||||||||||||||||||||||
| SFR | $ | $ | $ | $ | |||||||||||||||||||||||||
| Construction - Multifamily | |||||||||||||||||||||||||||||
| Total Commitments | $ | $ | $ | $ | |||||||||||||||||||||||||
| Loan Runoff | $ | $ | $ | $ | |||||||||||||||||||||||||
| Agency Business | |||||||||||||||||||||||||||||
| Origination Volumes by Investor: | |||||||||||||||||||||||||||||
| Fannie Mae | $ | $ | $ | $ | |||||||||||||||||||||||||
| Freddie Mac | |||||||||||||||||||||||||||||
| Private Label | |||||||||||||||||||||||||||||
| FHA | |||||||||||||||||||||||||||||
| SFR - Fixed Rate | |||||||||||||||||||||||||||||
| Total New Loan Originations | $ | $ | $ | $ | |||||||||||||||||||||||||
| Total Loan Commitment Volume | $ | $ | $ | $ | |||||||||||||||||||||||||
| Agency Business Loan Sales Data: | |||||||||||||||||||||||||||||
| Fannie Mae | $ | $ | $ | $ | |||||||||||||||||||||||||
| Freddie Mac | |||||||||||||||||||||||||||||
| Private Label | |||||||||||||||||||||||||||||
| FHA | |||||||||||||||||||||||||||||
| SFR - Fixed Rate | |||||||||||||||||||||||||||||
| Total Loan Sales | $ | $ | $ | $ | |||||||||||||||||||||||||
| Sales Margin (fee-based services as a % of loan sales) | % | % | % | % | |||||||||||||||||||||||||
| MSR Rate (MSR income as a % of loan commitments) (1) | % | % | % | % | |||||||||||||||||||||||||
________________________
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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
| June 30, 2025 | ||||||||||||||||||||
| Key Servicing Metrics for Agency Business: | Servicing Portfolio UPB | Wtd. Avg. Servicing Fee Rate (basis points) | Wtd. Avg. Life of Portfolio (years) | |||||||||||||||||
| Fannie Mae | $ | |||||||||||||||||||
| Freddie Mac | ||||||||||||||||||||
| Private Label | ||||||||||||||||||||
| FHA | ||||||||||||||||||||
| SFR - Fixed Rate | ||||||||||||||||||||
| Bridge | ||||||||||||||||||||
| Total | $ | |||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Fannie Mae | $ | |||||||||||||||||||
| Freddie Mac | ||||||||||||||||||||
| Private Label | ||||||||||||||||||||
| FHA | ||||||||||||||||||||
| Bridge | ||||||||||||||||||||
| SFR - Fixed Rate | ||||||||||||||||||||
| Total | $ | |||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with the unaudited consolidated interim financial statements, and related notes and the section entitled “Forward-Looking Statements” included herein.
Overview
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, 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.
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.
Our operating performance is primarily driven by the following factors:
Net interest income earned on our investments. Net interest income represents the amount by which the interest income earned on our assets exceeds the interest expense incurred on our borrowings. If the yield on our assets increases or the cost of borrowings decreases, this will have a positive impact on earnings. However, if the yield earned on our assets decreases or the cost of borrowings increases, this will have a negative impact on earnings. Net interest income is also directly impacted by the size and performance of our asset portfolio. We recognize the bulk of our net interest income from our Structured Business. Additionally, we recognize net interest income from loans originated through our Agency Business, which are generally sold within 60 days of origination.
Fees and other revenues recognized from originating, selling and servicing mortgage loans through the GSE and HUD programs. Revenue recognized from the origination and sale of mortgage loans consists of gains on sale of loans (net of any direct loan origination costs incurred), commitment fees, broker fees, loan assumption fees and loan origination fees. These gains and fees are collectively referred to as gain on sales, including fee-based services, net. We record income from MSRs at the time of commitment to the borrower, which represents the fair value of the expected net future cash flows associated with the rights to service mortgage loans that we originate, with the recognition of a corresponding asset upon sale. We also record servicing revenue which consists of fees received for servicing mortgage loans, net of amortization on the MSR assets recorded. Although we have long-established relationships with the GSE and HUD agencies, our operating performance would be negatively impacted if our business relationships with these agencies deteriorate. Additionally, we also recognize revenue from originating, selling and servicing our Private Label loans.
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.
Income earned from our structured transactions. Our structured transactions are primarily comprised of investments in equity affiliates, which represent unconsolidated joint venture investments formed to acquire, develop and/or sell real estate-related assets. Operating results from these investments can be difficult to predict and can vary significantly period-to-period. When interest rates rise, the income from these investments can be significantly and negatively impacted. In addition, we periodically receive distributions from our equity investments. It is difficult to forecast the timing of such payments, which can be substantial in any given quarter. We account for structured transactions within our Structured Business.
Credit quality of our loans and investments, including our servicing portfolio. Effective portfolio management is essential to maximize the performance and value of our loan and investment and servicing portfolios. Maintaining the credit quality of the loans in our portfolios is of critical importance. Loans that do not perform in accordance with their terms may have a negative impact on earnings and liquidity.
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Significant Developments During the Second Quarter of 2025
Financing and Capital Markets Activity
•Closed our first build-to-rent collateralized securitization vehicle totaling $801.9 million, of which $682.6 million consisted of investment grade notes. We retained $41.0 million of the investment grade notes, along with the below investment grade notes totaling $119.3 million.
Structured Business Activity
•Balance sheet portfolio of $11.61 billion (up 1%), as loan originations of $716.5 million outpaced loan runoff totaling $519.7 million;
•We modified 8 loans with a total UPB of $251.9 million. Six of these loans with a total UPB of $144.9 million were modified to provide temporary rate relief through a pay and accrual feature (see Note 3 for details);
•We foreclosed on 6 loans with a total UPB of $188.2 million, 3 of which we took back the underlying collateral as REO assets totaling $72.3 million and 3 were sold totaling $115.9 million. In addition, we sold an existing $7.1 million REO asset; and
•In April 2025, Wakefield entered into an agreement to sell its interest in a residential mortgage banking business (an equity investment we refer to as ARI), as described in Note 8.
Agency Business Activity. Servicing portfolio of $33.76 billion (up $277.7 million); Agency originations of $857.1 million, including $88.5 million of new Agency loans that were recaptured from our structured Business runoff.
Subsequent Event. In July 2025, we issued $500.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2030 through a private offering. The proceeds are being used to repay the remaining outstanding 7.50% convertible notes due August 2025 and to add ~$200 million of liquidity.
Current Market Conditions, Risks and Recent Trends
During 2024, the Federal Reserve lowered the federal funds rate three times totaling a 100-basis point reduction, which marked the first rate cuts since 2020. Although short-term rates are predicted to continue to decline with additional rate cuts of up to 50 basis points in the second half of 2025, we currently remain in a high-interest rate environment, which could persist longer than anticipated if certain key economic indicators fail to align with the Federal Reserve’s expectations. Although short-term interest rates have declined, long-term interest rates have increased significantly and remain highly volatile since the announcement of the current administrator’s imposition of increased tariffs and macroeconomic uncertainty. Since September 2024, the 5-year and 10-year interest rates have increased substantially, with the 10-year rate moving from a low of approximately 3.60% in September 2024 to a high of approximately 4.80% in January 2025 and has recently fluctuated between 4.25% and 4.50%. Analysts currently hold mixed expectations regarding the future trajectory of long-term rates for the remainder of 2025 due to the uncertainty regarding long-term inflation, fiscal policy, increased federal spending and larger deficits as a result of the recent enactment of the One Big Beautiful Bill Act (“OBBBA”), as described below.
As a result of the significant volatility in rates and the unpredictable impact of the tariff negotiations and the OBBBA, it is very difficult to predict where short and long-term rates will settle for the remainder of the year.
This elevated and unpredictable rate environment has resulted in, and may continue to result in, increased payment delinquencies and defaults, increased loan modifications and foreclosures and declining real estate values of certain asset classes, all of which have impacted, and may continue to impact, our future results of operations, financial condition, business prospects and ability to make distributions to our stockholders. Additionally, this high-interest rate environment has created, and may continue to create, increased headwinds for commercial real estate which has led to decreased origination volumes, especially in our GSE/Agency business in 2025, negatively impacting the ability for borrowers to refinance our balance sheet loans with fixed rate agency products. 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 further material adverse effect on our future results of operations, financial condition, liquidity and 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 continue to perform under the current loan terms.
In general, a rising or high-interest rate environment positively impacts 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 sizeable portion of our debt consists of fixed-rate instruments (such as 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 also 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
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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.
The above mentioned short-term interest rate reductions have resulted, 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, see “Quantitative and Qualitative Disclosures about Market Risk” below.
The elevated and volatile interest rates, along with geopolitical uncertainty, has caused some disruptions in certain segments of the financial services, real estate, and credit markets, leading to tighter liquidity conditions. Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to continue to operate and strengthen our business.
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. Additionally, although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and, therefore, we believe we bear minimal credit risk.
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.
On July 4, 2025, the OBBBA was enacted into law. This comprehensive legislation introduces wide-ranging changes to federal tax policy, entitlement programs, immigration enforcement and infrastructure investment. The OBBBA includes potential changes to broader corporate tax provisions that may affect certain aspects of our business operations and tax exposure over the course of the next few years. Additionally, various indirect components of the legislation, such as modifications to entitlement funding, increased federal spending and shifts in fiscal and regulatory priorities, may influence the capital markets, interest rate environment and demand for commercial real estate finance. We are reviewing the potential implications of the new law, including interpretive guidance related to corporate taxation, and as a result of the complexity of the legislation and the evolving nature of its implementation, it is difficult to predict the effects of this legislation on our business, financial condition, results of operations or the real estate markets in general.
Changes in Financial Condition
Assets — Comparison of balances at June 30, 2025 to December 31, 2024:
Our Structured loan and investment portfolio balance was $11.61 billion and $11.30 billion at June 30, 2025 and December 31, 2024, respectively. This increase was primarily due to loan originations exceeding loan runoff by $522.0 million (see below for details), partially offset by loans we foreclosed on and received ownership of the underlying collateral as REO assets.
The portfolio had a weighted average current interest pay rate of 7.03% and 6.90% at June 30, 2025 and December 31, 2024, respectively. Including certain fees earned and costs, the weighted average current interest rate was 7.86% and 7.80% at June 30, 2025 and December 31, 2024, respectively. Our debt that finances our Structured loan and investment portfolio totaled $9.61 billion and $9.46 billion at June 30, 2025 and December 31, 2024, respectively, with a weighted average funding cost of 6.52% and 6.55%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.88% at both June 30, 2025 and December 31, 2024.
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Activity from our Structured Business portfolio is comprised of the following ($ in thousands):
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | |||||||||||||
| Loans originated | $ | 716,544 | $ | 1,463,665 | ||||||||||
| Number of loans | 19 | 39 | ||||||||||||
| Weighted average interest rate | 8.75 | % | 8.69 | % | ||||||||||
| Loan runoff | $ | 519,709 | $ | 941,650 | ||||||||||
| Number of loans | 41 | 69 | ||||||||||||
| Weighted average interest rate | 8.63 | % | 8.59 | % | ||||||||||
| Loans modified | $ | 251,905 | $ | 1,201,735 | ||||||||||
| Number of loans | 8 | 29 | ||||||||||||
| Loans extended | $ | 1,231,786 | $ | 2,501,187 | ||||||||||
| Number of loans | 77 | 140 | ||||||||||||
Loans held-for-sale from the Agency Business decreased $74.3 million, primarily from loan sales exceeding originations by $74.9 million as noted in the following table. Activity from our Agency Business portfolio is comprised of the following (in thousands):
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | ||||||||||||||||||||||
| Loan Originations | Loan Sales | Loan Originations | Loan Sales | ||||||||||||||||||||
| Fannie Mae | $ | 683,206 | $ | 657,305 | $ | 1,041,017 | $ | 1,013,021 | |||||||||||||||
| Freddie Mac | 150,339 | 114,464 | 328,359 | 412,949 | |||||||||||||||||||
| Private Label | — | — | 44,925 | — | |||||||||||||||||||
| FHA | — | 18,366 | 16,041 | 85,908 | |||||||||||||||||||
| SFR - Fixed Rate | 23,552 | 16,885 | 32,663 | 25,996 | |||||||||||||||||||
| Total | $ | 857,097 | $ | 807,020 | $ | 1,463,005 | $ | 1,537,874 | |||||||||||||||
Investments is equity affiliates decreased $4.5 million, primarily due to distributions totaling $8.5 million received from our investments in a residential mortgage banking business, AWC and Fifth Wall and losses totaling $3.3 million from the residential mortgage business and AMAC III investments, partially offset by contributions totaling $6.5 million made for our investments in AWC, Fifth Wall and AMAC III.
Real estate owned increased $188.6 million, primarily due to the foreclosure of ten multifamily bridge loans, through which we took back the underlying collateral, partially offset by the sale of three multifamily properties.
Liabilities – Comparison of balances at June 30, 2025 to December 31, 2024:
Credit and repurchase facilities increased $1.16 billion, primarily due to refinancing loans from the unwind of two CLOs with our new $1.15 billion repurchase facility and loan originations exceeding runoff in our Structured Business, partially offset by transferring loans into BTR CLO 1.
Securitized debt decreased $1.11 billion, primarily due to the unwind of CLO 14 and CLO 19 totaling $1.08 billion and paydowns on our existing securitizations of $519.7 million, partially offset by the issuance of BTR CLO 1 where we issued $491.4 million of notes to third-party investors.
Mortgage notes payable — real estate owned increased $109.7 million, primarily due to the addition of mortgage notes payable totaling $158.9 million on new REO assets and financing received on an existing REO asset, partially offset by the payoff of $49.1 million of mortgage notes payable associated with the sale of REO assets.
Other liabilities decreased $28.6 million, primarily due to payments of accrued incentive compensation and commissions during the first half of 2025, related to 2024 performance, a decrease in accrued interest payable as a result of the unwind of CLOs and paydowns on remaining securitizations and lower current tax liabilities.
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Equity
See Note 16 for details of our issuances of common stock, dividends declared and deferred compensation transactions.
Agency Servicing Portfolio
The following table sets forth the characteristics of our loan servicing portfolio collateralizing our mortgage servicing rights and servicing revenue ($ in thousands):
| June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product | Portfolio UPB | Loan Count | Wtd. Avg. Age of Portfolio (years) | Wtd. Avg. Life of Portfolio (years) | Interest Rate Type | Wtd. Avg. Note Rate | Annualized Prepayments as a % of Portfolio (1) | Delinquencies as a % of Portfolio (2) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed | Adjustable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fannie Mae | $ | 22,999,772 | 2,660 | 4.1 | 5.9 | 97 | % | 3 | % | 4.64 | % | 3.39 | % | 2.09 | % | |||||||||||||||||||||||||||||||||||||||||
| Freddie Mac | 6,100,091 | 1,135 | 3.5 | 6.5 | 87 | % | 13 | % | 4.96 | % | 5.01 | % | 3.93 | % | ||||||||||||||||||||||||||||||||||||||||||
| Private Label | 2,599,971 | 161 | 3.9 | 5.0 | 100 | % | — | 4.15 | % | — | 0.43 | % | ||||||||||||||||||||||||||||||||||||||||||||
| FHA | 1,497,551 | 104 | 4.0 | 19.9 | 100 | % | — | 3.83 | % | 2.29 | % | — | ||||||||||||||||||||||||||||||||||||||||||||
| SFR - Fixed Rate | 287,065 | 51 | 3.0 | 4.2 | 98 | % | 2 | % | 5.56 | % | 4.47 | % | 1.57 | % | ||||||||||||||||||||||||||||||||||||||||||
| Bridge | 278,116 | 3 | 2.5 | 2.6 | 85 | % | 15 | % | 6.37 | % | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 33,762,566 | 4,114 | 4.0 | 6.5 | 95 | % | 5 | % | 4.64 | % | 3.35 | % | 2.18 | % | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fannie Mae | $ | 22,730,056 | 2,644 | 3.9 | 6.4 | 96 | % | 4 | % | 4.60 | % | 2.19 | % | 1.27 | % | |||||||||||||||||||||||||||||||||||||||||
| Freddie Mac | 6,077,020 | 1,159 | 3.3 | 6.8 | 86 | % | 14 | % | 4.91 | % | 5.78 | % | 3.63 | % | ||||||||||||||||||||||||||||||||||||||||||
| Private Label | 2,605,980 | 161 | 3.4 | 5.5 | 100 | % | — | 4.15 | % | — | 0.43 | % | ||||||||||||||||||||||||||||||||||||||||||||
| FHA | 1,506,948 | 106 | 3.6 | 19.2 | 100 | % | — | 3.79 | % | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Bridge | 278,494 | 3 | 2.0 | 3.0 | 85 | % | 15 | % | 6.41 | % | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| SFR - Fixed Rate | 271,859 | 52 | 2.8 | 4.4 | 100 | % | — | 5.47 | % | 9.02 | % | 1.66 | % | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 33,470,357 | 4,125 | 3.7 | 6.9 | 95 | % | 5 | % | 4.60 | % | 2.61 | % | 1.57 | % | |||||||||||||||||||||||||||||||||||||||||
(1)Prepayments reflect loans repaid prior to six months from the loan maturity. The majority of our loan servicing portfolio has a prepayment protection term and therefore, we may collect a prepayment fee which is included as a component of servicing revenue, net. See Note 5 for details.
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At June 30, 2025 and December 31, 2024, delinquent loans totaled $735.0 million and $524.5 million, respectively. At June 30, 2025, there was one loan totaling $24.4 million in bankruptcy and eighteen loans totaling $95.3 million have been foreclosed. At December 31, 2024, there were two loans totaling $4.8 million in bankruptcy and six loans totaling $28.2 million were foreclosed.
Our Agency Business servicing portfolio represents commercial real estate loans, which are generally transferred or sold within 60 days from the date the loan is funded. Primarily all loans in our servicing portfolio are collateralized by multifamily properties. In addition, we are generally required to share in the risk of any losses associated with loans sold under the Fannie Mae DUS program, see Note 11.
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Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024
The following table provides our consolidated operating results ($ in thousands):
| Three Months Ended June 30, | Increase / (Decrease) | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | |||||||||||||||||||||||
| Interest income | $ | 240,303 | $ | 297,188 | $ | (56,885) | (19) | % | ||||||||||||||||||
| Interest expense | 171,578 | 209,227 | (37,649) | (18) | % | |||||||||||||||||||||
| Net interest income | 68,725 | 87,961 | (19,236) | (22) | % | |||||||||||||||||||||
| Other revenue: | ||||||||||||||||||||||||||
| Gain on sales, including fee-based services, net | 13,658 | 17,448 | (3,790) | (22) | % | |||||||||||||||||||||
| Mortgage servicing rights | 10,930 | 14,534 | (3,604) | (25) | % | |||||||||||||||||||||
| Servicing revenue, net | 27,437 | 29,910 | (2,473) | (8) | % | |||||||||||||||||||||
| Property operating income | 5,452 | 1,444 | 4,008 | nm | ||||||||||||||||||||||
| Gain (loss) on derivative instruments, net | 219 | (275) | 494 | nm | ||||||||||||||||||||||
| Other income, net | 3,989 | 2,081 | 1,908 | 92 | % | |||||||||||||||||||||
| Total other revenue | 61,685 | 65,142 | (3,457) | (5) | % | |||||||||||||||||||||
| Other expenses: | ||||||||||||||||||||||||||
| Employee compensation and benefits | 41,181 | 42,836 | (1,655) | (4) | % | |||||||||||||||||||||
| Selling and administrative | 14,859 | 12,823 | 2,036 | 16 | % | |||||||||||||||||||||
| Property operating expenses | 6,802 | 1,584 | 5,218 | nm | ||||||||||||||||||||||
| Depreciation and amortization | 5,848 | 2,423 | 3,425 | 141 | % | |||||||||||||||||||||
| Provision for loss sharing (net of recoveries) | 4,215 | 4,333 | (118) | (3) | % | |||||||||||||||||||||
| Provision for credit losses (net of recoveries) | 19,004 | 29,564 | (10,560) | (36) | % | |||||||||||||||||||||
| Total other expenses | 91,909 | 93,563 | (1,654) | (2) | % | |||||||||||||||||||||
| Income before extinguishment of debt, (loss) gain on real estate, income from equity affiliates and income taxes | 38,501 | 59,540 | (21,039) | (35) | % | |||||||||||||||||||||
| Loss on extinguishment of debt | — | (412) | 412 | nm | ||||||||||||||||||||||
| (Loss) gain on real estate | (1,448) | 3,813 | (5,261) | nm | ||||||||||||||||||||||
| Income from equity affiliates | 2,654 | 2,793 | (139) | (5) | % | |||||||||||||||||||||
| Provision for income taxes | (3,398) | (3,901) | 503 | (13) | ||||||||||||||||||||||
| Net income | 36,309 | 61,833 | (25,524) | (41) | % | |||||||||||||||||||||
| Preferred stock dividends | 10,342 | 10,342 | — | — | % | |||||||||||||||||||||
| Net income attributable to noncontrolling interest | 2,015 | 4,094 | (2,079) | (51) | % | |||||||||||||||||||||
| Net income attributable to common stockholders | $ | 23,952 | $ | 47,397 | $ | (23,445) | (49) | % | ||||||||||||||||||
________________________
nm — not meaningful
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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):
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Average Carrying Value (1) | Interest Income / Expense | W/A Yield / Financing Cost (2) | Average Carrying Value (1) | Interest Income / Expense | W/A Yield / Financing Cost (2) | ||||||||||||||||||||||||||||||
| Structured Business interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Bridge loans | $ | 11,061,695 | $ | 216,637 | 7.86 | % | $ | 11,764,635 | $ | 263,356 | 8.98 | % | |||||||||||||||||||||||
| Mezzanine | 256,527 | 6,276 | 9.81 | % | 264,014 | 6,736 | 10.23 | % | |||||||||||||||||||||||||||
| Preferred equity investments | 150,047 | 3,657 | 9.78 | % | 117,035 | 2,138 | 7.33 | % | |||||||||||||||||||||||||||
| Other | 60,595 | 1,858 | 12.30 | % | 5,326 | 137 | 10.32 | % | |||||||||||||||||||||||||||
| Core interest-earning assets | 11,528,864 | 228,428 | 7.95 | % | 12,151,010 | 272,367 | 8.99 | % | |||||||||||||||||||||||||||
| Cash equivalents | 189,090 | 1,552 | 3.29 | % | 795,376 | 9,710 | 4.90 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | $ | 11,717,954 | $ | 229,980 | 7.87 | % | $ | 12,946,386 | $ | 282,077 | 8.74 | % | |||||||||||||||||||||||
| Structured Business interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Credit and repurchase facilities | $ | 4,499,752 | $ | 83,459 | 7.44 | % | $ | 2,683,532 | $ | 56,518 | 8.45 | % | |||||||||||||||||||||||
| CLO | 3,296,933 | 53,793 | 6.54 | % | 6,242,504 | 115,545 | 7.42 | % | |||||||||||||||||||||||||||
| Unsecured debt | 1,532,500 | 24,954 | 6.53 | % | 1,542,500 | 23,941 | 6.23 | % | |||||||||||||||||||||||||||
| Q Series securitization | 37,950 | 693 | 7.32 | % | 183,448 | 3,711 | 8.11 | % | |||||||||||||||||||||||||||
| Trust preferred | 154,336 | 2,959 | 7.69 | % | 154,336 | 3,347 | 8.70 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 9,521,471 | 165,858 | 6.99 | % | $ | 10,806,320 | 203,062 | 7.54 | % | |||||||||||||||||||||||||
| Net interest income | $ | 64,122 | $ | 79,015 | |||||||||||||||||||||||||||||||
________________________
(1)Based on UPB for loans, amortized cost for securities and principal amount of debt.
(2)Weighted average yield calculated based on annualized interest income or expense divided by average carrying value.
Net Interest Income
The decrease in interest income was mainly due to a $52.1 million decrease from our Structured Business. The decline was primarily due to a decrease in the average yield on core interest-earning assets and a decrease in the average balance of our core interest-earning assets, as loan runoff exceeded loan originations in 2024. The decrease in the average yield was mainly from a decrease in SOFR and a reduction in back interest earned on delinquent and modified loans, as well as an increase in new delinquencies. To a lesser extent, the decline also reflects a decrease in interest earned on our cash balances, as a result of lower average balances and a decrease in SOFR.
The decrease in interest expense was mainly due to a $37.2 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, and a decrease in the average cost of interest-bearing liabilities, mainly from a decrease in SOFR.
Agency Business Revenue
The decrease in gain on sales, including fee-based services, net was primarily due to a 29% decrease in loan sales volume ($328.3 million), partially offset by a 10% increase in the sales margin from 1.54% to 1.69%. The increase in the sales margin was mainly due to the portfolio mix in 2025 that produced higher margins.
The decrease in income from MSRs was primarily due to a 22% decrease in loan commitment volume ($246.9 million).
The decrease in servicing revenue, net was primarily due to a decrease in earnings on escrow balances from lower average balances and a decrease in the applicable interest rate.
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Other Income (Loss)
The increases in property operating income and expenses were due to the addition of several new REO assets. This is also the reason for the increase in depreciation and amortization.
The increase in other income, net was primarily due to increases in the fair values of our Private Label loans and loan fees from our Agency Business.
Other Expenses
The decrease in employee compensation and benefits expense was primarily due to decreases in commissions and incentive compensation from lower GSE/Agency loan sales volume and bonus allocation targets.
The increase in selling and administrative expenses was primarily due to increases in legal and professional fees.
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 and a decrease in specifically impaired loans, net of recoveries.
(Loss) Gain on Real Estate
The loss on real estate in 2025 is substantially comprised of losses on below market debt totaling $1.5 million related to financing on the sale of several REO assets. The $3.8 million gain on real estate in 2024 represents the gain recognized on the sale of an REO asset.
Income from Equity Affiliates
Income from equity affiliates in 2025 primarily reflects a $3.4 million distribution received from our Lexford joint venture, partially offset by a $1.0 million loss from our AMAC III investment; while income in 2024 primarily reflects a $4.2 million distribution received from Lexford, partially offset by losses from our investments in a residential mortgage banking business and AMAC III totaling $1.5 million.
Provision for Income Taxes
In the three months ended June 30, 2025, we recorded a tax provision of $3.4 million, which consisted of a current tax provision of $5.0 million and a deferred tax benefit of $1.6 million. In the three months ended June 30, 2024, we recorded a tax provision of $3.9 million, which consisted of a current tax provision of $6.8 million and a deferred tax benefit of $2.9 million.
Net Income Attributable to Noncontrolling Interest
The noncontrolling interest relates to the outstanding OP Units (see Note 16). There were 16,173,761 and 16,293,589 OP Units outstanding at June 30, 2025 and 2024, respectively, which represented 7.8% and 8.0% of our outstanding stock at June 30, 2025 and 2024, respectively.
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Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024
The following table provides our consolidated operating results ($ in thousands):
| Six Months Ended June 30, | Increase / (Decrease) | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | |||||||||||||||||||||||
| Interest income | $ | 480,997 | $ | 618,480 | $ | (137,483) | (22) | % | ||||||||||||||||||
| Interest expense | 336,829 | 426,903 | (90,074) | (21) | % | |||||||||||||||||||||
| Net interest income | 144,168 | 191,577 | (47,409) | (25) | % | |||||||||||||||||||||
| Other revenue: | ||||||||||||||||||||||||||
| Gain on sales, including fee-based services, net | 26,439 | 34,114 | (7,675) | (22) | % | |||||||||||||||||||||
| Mortgage servicing rights | 19,061 | 24,733 | (5,672) | (23) | % | |||||||||||||||||||||
| Servicing revenue, net | 53,040 | 61,436 | (8,396) | (14) | % | |||||||||||||||||||||
| Property operating income | 9,839 | 3,014 | 6,825 | nm | % | |||||||||||||||||||||
| Gain (loss) on derivative instruments, net | 3,619 | (5,533) | 9,152 | nm | % | |||||||||||||||||||||
| Other income, net | 8,407 | 4,414 | 3,993 | 90 | % | |||||||||||||||||||||
| Total other revenue | 120,405 | 122,178 | (1,773) | (1) | % | |||||||||||||||||||||
| Other expenses: | ||||||||||||||||||||||||||
| Employee compensation and benefits | 87,217 | 90,529 | (3,312) | (4) | % | |||||||||||||||||||||
| Selling and administrative | 31,171 | 26,756 | 4,415 | 17 | % | |||||||||||||||||||||
| Property operating expenses | 10,276 | 3,262 | 7,014 | nm | % | |||||||||||||||||||||
| Depreciation and amortization | 9,592 | 4,994 | 4,598 | 92 | % | |||||||||||||||||||||
| Provision for loss sharing (net of recoveries) | 6,002 | 4,607 | 1,395 | 30 | % | |||||||||||||||||||||
| Provision for credit losses (net of recoveries) | 28,079 | 48,682 | (20,603) | (42) | % | |||||||||||||||||||||
| Total other expenses | 172,337 | 178,830 | (6,493) | (4) | % | |||||||||||||||||||||
| Income before extinguishment of debt, (loss) gain on real estate, income from equity affiliates and income taxes | 92,236 | 134,925 | (42,689) | (32) | % | |||||||||||||||||||||
| Loss on extinguishment of debt | (2,319) | (412) | (1,907) | nm | % | |||||||||||||||||||||
| (Loss) gain on real estate | (4,258) | 3,813 | (8,071) | nm | % | |||||||||||||||||||||
| Income from equity affiliates | 1,020 | 4,211 | (3,191) | (76) | % | |||||||||||||||||||||
| Provision for income taxes | (6,989) | (7,493) | 504 | (7) | % | |||||||||||||||||||||
| Net income | 79,690 | 135,044 | (55,354) | (41) | % | |||||||||||||||||||||
| Preferred stock dividends | 20,684 | 20,684 | — | — | % | |||||||||||||||||||||
| Net income attributable to noncontrolling interest | 4,617 | 9,090 | (4,473) | (49) | % | |||||||||||||||||||||
| Net income attributable to common stockholders | $ | 54,389 | $ | 105,270 | $ | (50,881) | (48) | % | ||||||||||||||||||
________________________
nm — not meaningful
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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):
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Average Carrying Value (1) | Interest Income / Expense | W/A Yield / Financing Cost (2) | Average Carrying Value (1) | Interest Income / Expense | W/A Yield / Financing Cost (2) | ||||||||||||||||||||||||||||||
| Structured Business interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Bridge loans | $ | 11,019,472 | $ | 435,647 | 7.97 | % | $ | 11,964,674 | $ | 549,473 | 9.21 | % | |||||||||||||||||||||||
| Mezzanine | 256,809 | 12,463 | 9.79 | % | 256,998 | 13,613 | 10.62 | % | |||||||||||||||||||||||||||
| Preferred equity investments | 149,449 | 7,325 | 9.88 | % | 106,972 | 3,738 | 7.01 | % | |||||||||||||||||||||||||||
| Other | 36,031 | 2,075 | 11.61 | % | 5,919 | 303 | 10.27 | % | |||||||||||||||||||||||||||
| Core interest-earning assets | 11,461,761 | 457,510 | 8.05 | % | 12,334,563 | 567,127 | 9.22 | % | |||||||||||||||||||||||||||
| Cash equivalents | 149,931 | 2,557 | 3.44 | % | 910,016 | 22,838 | 5.03 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | $ | 11,611,692 | $ | 460,067 | 7.99 | % | $ | 13,244,579 | $ | 589,965 | 8.93 | % | |||||||||||||||||||||||
| Structured Business interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Credit and repurchase facilities | $ | 3,955,280 | $ | 147,798 | 7.54 | % | $ | 2,724,226 | $ | 114,492 | 8.43 | % | |||||||||||||||||||||||
| CLO | 3,788,566 | 122,273 | 6.51 | % | 6,430,933 | 237,407 | 7.40 | % | |||||||||||||||||||||||||||
| Unsecured debt | 1,532,500 | 49,908 | 6.57 | % | 1,587,500 | 49,269 | 6.22 | % | |||||||||||||||||||||||||||
| Q Series securitization | 39,803 | 1,561 | 7.91 | % | 193,096 | 7,802 | 8.10 | % | |||||||||||||||||||||||||||
| Trust preferred | 154,336 | 5,897 | 7.71 | % | 154,336 | 6,691 | 8.69 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 9,470,485 | 327,437 | 6.97 | % | $ | 11,090,091 | 415,661 | 7.52 | % | |||||||||||||||||||||||||
| Net interest income | $ | 132,630 | $ | 174,304 | |||||||||||||||||||||||||||||||
________________________
(1)Based on UPB for loans, amortized cost for securities and principal amount of debt.
(2)Weighted average yield calculated based on annualized interest income or expense divided by average carrying value.
Net Interest Income
The decrease in interest income was mainly due to a $129.9 million decrease from our Structured Business. The decline was primarily due to a decrease in the average yield on core interest-earning assets and a decrease in the average balance of our core interest-earning assets, as loan runoff exceeded loan originations in 2024. The decrease in the average yield was mainly from a decrease in SOFR and a reduction in back interest earned on delinquent and modified loans, as well as an increase in new delinquencies. To a lesser extent, the decline also reflects a decrease in interest earned on our cash balances, as a result of lower average balances and a decrease in SOFR.
The decrease in interest expense was mainly due to a $88.2 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, and a decrease in the average cost of interest-bearing liabilities, mainly from a decrease in SOFR.
Agency Business Revenue
The decrease in gain on sales, including fee-based services, net was primarily due to a 31% decrease in loan sales volume ($682.8 million), partially offset by a 12% increase in the sales margin from 1.54% to 1.72%. The increase in the sales margin was mainly due to the portfolio mix in 2025 that produced higher margins.
The decrease in income from MSRs was primarily due to a 26% decrease in loan commitment volume ($535.8 million), partially offset by a 4% increase in the MSR rate from 1.22% to 1.27%.
The decrease in servicing revenue, net was primarily due to a decrease in earnings on escrow balances from lower average balances and a decrease in the applicable interest rate.
Other Income (Loss)
The increases in property operating income and expenses were due to the addition of several new REO assets. This is also the reason for the increase in depreciation and amortization.
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The gains and losses on derivative instruments in 2025 and 2024 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.
The increase in other income, net was primarily due to increases in the fair values of our Private Label loans and loan fees from our Agency Business.
Other Expenses
The decrease in employee compensation and benefits expense was primarily due to decreases in commissions and incentive compensation from lower GSE/Agency loan sales volume and bonus allocation targets.
The increase in selling and administrative expenses was primarily due to increases in legal and professional fees.
The increase in the provision for loss sharing (net of recoveries) reflects an increase in general reserves as a result of portfolio growth.
The decrease in the provision for credit losses (net of recoveries) primarily reflects a decrease is specifically impaired loans.
Loss on Extinguishment of Debt
The loss on extinguishment of debt in both 2025 and 2024 reflects deferred financing fees recognized in connection with the unwind of CLOs.
(Loss) Gain on Real Estate
The loss on real estate in 2025 is comprised of $4.3 million in loss on below market debt related to financing on the sale of several existing REO assets and a $1.8 million loss on the foreclosure of loans we took back as REO assets, partially offset by a $1.9 million gain on the REO sales. The $3.8 million gain on real estate in 2024 represents the gain recognized on the sale of an REO asset.
Income from Equity Affiliates
Income from equity affiliates in 2025 primarily reflects a $3.4 million distribution received from our Lexford joint venture and income of $0.8 million from our Fifth Wall investment, partially offset by losses from our investments in a residential mortgage banking business and AMAC III totaling $3.3 million. Income from equity affiliates in 2024 primarily reflects a $4.2 million distribution received from Lexford and $0.8 million in income from our investment in a residential mortgage banking business, partially offset by a $1.2 million loss from our AMAC III investment.
Provision for Income Taxes
In the six months ended June 30, 2025, we recorded a tax provision of $7.0 million, which consisted of a current tax provision of $8.7 million and a deferred tax benefit of $1.7 million. In the six months ended June 30, 2024, we recorded a tax provision of $7.5 million, which consisted of a current tax provision of $14.4 million and a deferred tax benefit of $6.9 million.
Net Income Attributable to Noncontrolling Interest
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 June 30, 2025 and 2024, respectively, which represented 7.8% and 8.0% of our outstanding stock at June 30, 2025 and 2024, respectively.
Liquidity and Capital Resources
Sources of Liquidity. Liquidity is a measure of our ability to meet our potential cash requirements, including ongoing commitments to repay borrowings, satisfaction of collateral requirements under the Fannie Mae DUS risk-sharing agreement and, as an approved designated seller/servicer of Freddie Mac’s SBL program, operational liquidity requirements of the GSE agencies, fund new loans and investments, fund operating costs and distributions to our stockholders, as well as other general business needs. Our primary sources of funds for liquidity consist of proceeds from equity and debt offerings, proceeds from CLOs and securitizations, debt facilities and cash flows from operations. We closely monitor our liquidity position and believe our existing sources of funds and access to additional liquidity will be adequate to meet our liquidity needs.
The elevated and volatile interest rates, along with geopolitical uncertainty, has caused some disruptions in certain segments of the financial services, real estate, and credit markets, leading to tighter liquidity conditions. 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.
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As described in Note 10, certain of our repurchase facilities include margin call provisions associated with changes in interest spreads which are designed to limit the lenders credit exposure. If we experience significant decreases in the value of the properties serving as collateral under these repurchase agreements, which is set by the lenders based on current market conditions, the lenders have the right to require us to repay all, or a portion, of the funds advanced, or provide additional collateral. While we expect to extend or renew all of our facilities as they mature, we cannot provide assurance that they will be extended or renewed on as favorable terms.
We had $9.61 billion in total structured debt outstanding at June 30, 2025. Of this total, $5.21 billion, or 54%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes. The remaining $4.40 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with. At June 30, 2025, we had $1.93 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads.
At July 29, 2025, 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 $33.76 billion agency servicing portfolio at June 30, 2025, which is mostly prepayment protected and generates approximately $126 million per year in recurring gross cash flow.
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.
Cash Flows. Cash flows provided by operating activities totaled $210.6 million during the six months ended June 30, 2025 and consisted primarily of net income (adjusted for the increase in CECL reserves of $34.1 million) of $113.8 million and net cash inflows of $70.6 million from loan sales exceeding loan originations in our Agency Business.
Cash flows used in investing activities totaled $522.1 million during the six months ended June 30, 2025. Loan and investment activity (originations and payoffs/paydowns) comprise the majority of our investing activities. Loan originations from our Structured Business totaling $1.48 billion, net of payoffs and paydowns of $962.0 million, resulted in net cash outflows of $522.4 million.
Cash flows used in financing activities totaled $2.0 million during the six months ended June 30, 2025 and consisted primarily of $1.11 billion of net securitized debt activity (payoffs and paydowns exceeded proceeds) and $172.4 million of distributions to our stockholders and OP Unit holders, partially offset by net cash inflows of $1.16 billion from debt facility activities (financed loan originations were greater than facility paydowns) and net cash inflows of $109.7 million from mortgage notes payable activities (proceeds exceeded payoffs and paydowns).
Agency Business Requirements. The 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, purchase and loss obligations and compliance with reporting requirements. Our adjusted net worth and operational liquidity exceeded the agencies’ requirements at June 30, 2025. Our restricted liquidity and purchase and loss obligations were satisfied with letters of credit totaling $75.0 million and cash. See Note 14 for details about our performance regarding these requirements.
We also enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors. These commitments are outstanding for short periods of time (generally less than 60 days) and are described in Note 12.
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Debt Facilities. We maintain various forms of short-term and long-term financing arrangements. Borrowings underlying these arrangements are primarily secured by a significant amount of our loans and investments and substantially all our loans held-for-sale. The following is a summary of our debt facilities ($ in thousands):
| Debt Instruments | June 30, 2025 | |||||||||||||||||||||||||
| Commitment | UPB (1) | Available | Maturity Dates (2) | |||||||||||||||||||||||
| Structured Business | ||||||||||||||||||||||||||
| Credit and repurchase facilities | $ | 8,685,724 | $ | 4,400,260 | $ | 4,285,464 | 2025 - 2028 | |||||||||||||||||||
| Securitized debt (3) | 3,523,470 | 3,523,470 | — | 2025 - 2028 | ||||||||||||||||||||||
| Senior unsecured notes | 1,245,000 | 1,245,000 | — | 2026 - 2028 | ||||||||||||||||||||||
| Convertible senior unsecured notes | 287,500 | 287,500 | — | 2025 | ||||||||||||||||||||||
| Junior subordinated notes | 154,336 | 154,336 | — | 2034 - 2037 | ||||||||||||||||||||||
| Mortgage notes payable - real estate owned | 184,618 | 184,618 | — | 2025 - 2026 | ||||||||||||||||||||||
| Structured Business total | 14,080,648 | 9,795,184 | 4,285,464 | |||||||||||||||||||||||
| Agency Business | ||||||||||||||||||||||||||
| Credit and repurchase facilities (4) | 1,800,000 | 329,860 | 1,470,140 | 2025 - 2026 | ||||||||||||||||||||||
| Consolidated total | $ | 15,880,648 | $ | 10,125,044 | $ | 5,755,604 | ||||||||||||||||||||
________________________
(1)Excludes the impact of deferred financing costs.
(2)See Note 14 for a breakdown of debt maturities by year. These maturity dates exclude extension options.
(3)Maturity dates represent the weighted average remaining maturity based on the underlying collateral at June 30, 2025.
(4)The $750 million As Soon as Pooled ® Plus (“ASAP”) agreement we have with Fannie Mae has no expiration date.
We utilize our credit and repurchase facilities primarily to finance our loan originations on a short-term basis prior to loan securitizations, including through CLOs. The timing, size and frequency of our securitizations impact the balances of these borrowings and produce some fluctuations. The following table provides additional information regarding the balances of our borrowings (in thousands):
| Quarter Ended | Quarterly Average UPB | End of Period UPB | Maximum UPB at Any Month End | |||||||||||||||||
| June 30, 2025 | $ | 4,846,239 | $ | 4,730,120 | $ | 4,922,270 | ||||||||||||||
| March 31, 2025 | 3,609,646 | 4,791,967 | 4,803,572 | |||||||||||||||||
| December 31, 2024 | 3,412,416 | 3,607,907 | 3,793,231 | |||||||||||||||||
| September 30, 2024 | 3,082,185 | 3,264,033 | 3,299,414 | |||||||||||||||||
| June 30, 2024 | 3,078,714 | 3,167,067 | 3,280,998 | |||||||||||||||||
Our debt facilities, including their restrictive covenants, are described in Note 10.
Off-Balance Sheet Arrangements. At June 30, 2025, we had no off-balance sheet arrangements.
Inflation. During 2024, the Federal Reserve lowered the federal funds rate three times totaling a 100-basis point reduction, which marked the first rate cuts since 2020. Although short-term rates are predicted to continue to decline with additional rate cuts of up to 50 basis points in the second half of 2025, we currently remain in a high-interest rate environment, which could persist longer than anticipated if certain key economic indicators fail to align with the Federal Reserve’s expectations. Although short-term interest rates have declined, long-term interest rates have increased significantly and remain highly volatile since the announcement of the current administrator’s imposition of increased tariffs and macroeconomic uncertainty. Since September 2024, the 5-year and 10-year interest rates have increased substantially, with the 10-year rate moving from a low of approximately 3.60% in September 2024 to a high of approximately 4.80% in January 2025 and has recently fluctuated between 4.25% and 4.50%. Analysts currently hold mixed expectations regarding the future trajectory of long-term rates for the remainder of 2025 due to the uncertainty regarding long-term inflation, fiscal policy, increased federal spending and larger deficits as a result of the recent enactment of the OBBBA. As a result of the significant volatility in rates and the unpredictable impact of the tariff negotiations and the OBBBA, it is very difficult to predict where short and long-term rates will settle for the remainder of the year.
This elevated and unpredictable rate environment has resulted in, and may continue to result in, increased payment delinquencies and defaults, increased loan modifications and foreclosures and declining real estate values of certain asset classes, all of which have impacted, and may continue to impact, our future results of operations, financial condition, business prospects and ability to make distributions to our stockholders. Additionally, this high-interest rate environment has created, and may continue to create, increased headwinds for commercial real estate which has led to decreased origination volumes, especially in our GSE/Agency business in 2025,
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negatively impacting the ability for borrowers to refinance our balance sheet loans with fixed rate agency products. 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 further material adverse effect on our future results of operations, financial condition, liquidity and ability to make distributions to our stockholders.
For additional details, see “Current Market Conditions, Risks and Recent Trends” above and “Quantitative and Qualitative Disclosures about Market Risk” below.
Contractual Obligations. During the six months ended June 30, 2025, the following significant changes were made to our contractual obligations disclosed in our 2024 Annual Report:
•Entered into a new repurchase facility totaling $1.15 billion;
•Unwound CLO 14 and 19 repaying $1.08 billion of outstanding notes;
•Closed a collateralized securitization vehicle (BTR CLO 1) totaling $801.9 million of notes issued, of which notes totaling $160.3 million were retained by us;
•Paid down outstanding notes on existing securitizations totaling $519.7 million; and
•Modified an existing debt facility resulting in an increase in the committed amount by $200.0 million.
In July 2025, we issued $500.0 million aggregate principal amount of 7.875% senior unsecured notes due July 2030 in a private offering. We are using a portion of the net proceeds from this offering to repay our remaining outstanding 7.50% convertible notes due August 2025.
In July 2025, we amended a repurchase facility to temporarily increase the facility size by $500.0 million, effective through August 2025. We also amended a joint repurchase facility reducing the facility size by $500.0 million and extended the maturity date to July 2027, with a one-year extension option.
Refer to Note 14 for a description of our debt maturities by year and unfunded commitments at June 30, 2025.
Derivative Financial Instruments
We enter into derivative financial instruments in the normal course of business to manage the potential loss exposure caused by fluctuations of interest rates. See Note 12 for details.
Critical Accounting Policies
Refer to Note 2 of the Notes to Consolidated Financial Statements in our 2024 Annual Report for a discussion of our critical accounting policies. During the six months ended June 30, 2025, there were no material changes to these policies.
Non-GAAP Financial Measures
Distributable Earnings. We are presenting distributable earnings because we believe it is an important supplemental measure of our operating performance and is useful to investors, analysts and other parties in the evaluation of REITs and their ability to provide dividends to stockholders. Dividends are one of the principal reasons investors invest in REITs. To maintain REIT status, REITs are required to distribute at least 90% of their REIT-taxable income. We consider distributable earnings in determining our quarterly dividend and believe that, over time, distributable earnings is a useful indicator of our dividends per share.
We define distributable earnings as net income (loss) attributable to common stockholders computed in accordance with GAAP, adjusted for accounting items such as depreciation and amortization (adjusted for unconsolidated joint ventures), non-cash stock-based compensation expense, income from MSRs, amortization and write-offs of MSRs, gains/losses on derivative instruments primarily associated with Private Label loans not yet sold and securitized, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below), and gains/losses on the receipt of real estate from the settlement of loans (prior to the sale of the real estate). We also add back one-time charges such as acquisition costs and one-time gains/losses on the early extinguishment of debt and redemption of preferred stock.
We reduce distributable earnings for realized losses in the period we determine that a loan is deemed nonrecoverable in whole or in part. Loans are deemed nonrecoverable upon the earlier of: (1) when the loan receivable is settled (i.e., when the loan is repaid, or in the case of foreclosure, when the underlying asset is sold); or (2) when we determine that it is nearly certain that all amounts due will not be collected. The realized loss amount is equal to the difference between the cash received, or expected to be received, and the book value of the asset.
Distributable earnings is not intended to be an indication of our cash flows from operating activities (determined in accordance with GAAP) or a measure of our liquidity, nor is it entirely indicative of funding our cash needs, including our ability to make cash
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distributions. Our calculation of distributable earnings may be different from the calculations used by other companies and, therefore, comparability may be limited.
Distributable earnings are as follows ($ in thousands, except share and per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income attributable to common stockholders | $ | 23,952 | $ | 47,397 | $ | 54,389 | $ | 105,270 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Net income attributable to noncontrolling interest | 2,015 | 4,094 | 4,617 | 9,090 | |||||||||||||||||||
| Income from mortgage servicing rights | (10,930) | (14,534) | (19,061) | (24,733) | |||||||||||||||||||
| Deferred tax benefit | (1,603) | (2,944) | (1,741) | (6,896) | |||||||||||||||||||
| Amortization and write-offs of MSRs | 19,825 | 19,518 | 40,689 | 37,936 | |||||||||||||||||||
| Depreciation and amortization | 6,582 | 3,044 | 11,149 | 6,239 | |||||||||||||||||||
| Loss on extinguishment of debt | — | 412 | 2,319 | 412 | |||||||||||||||||||
| Provision for credit losses, net | 8,435 | 31,457 | 9,192 | 46,260 | |||||||||||||||||||
| (Gain) loss on derivative instruments, net | (674) | 371 | (5,371) | 5,894 | |||||||||||||||||||
| Loss on real estate | 1,857 | — | 4,667 | — | |||||||||||||||||||
| Stock-based compensation | 2,610 | 2,750 | 8,545 | 8,772 | |||||||||||||||||||
| Distributable earnings (1) | $ | 52,069 | $ | 91,565 | $ | 109,394 | $ | 188,244 | |||||||||||||||
| Diluted weighted average shares outstanding - GAAP (1) | 209,003,002 | 205,487,711 | 207,938,574 | 205,499,619 | |||||||||||||||||||
| Less: Convertible notes dilution (2) | — | — | — | — | |||||||||||||||||||
| Diluted weighted average shares outstanding - distributable earnings (1) | 209,003,002 | 205,487,711 | 207,938,574 | 205,499,619 | |||||||||||||||||||
| Diluted distributable earnings per share (1) | $ | 0.25 | $ | 0.45 | $ | 0.53 | $ | 0.92 | |||||||||||||||
________________________
(1)Amounts are attributable to common stockholders and OP Unit holders. The OP Units are redeemable for cash, or at our option for shares of our common stock on a one-for-one basis.
(2)The diluted weighted average shares outstanding are adjusted to exclude the potential shares issuable upon conversion and settlement of our convertible senior notes principal balance. No adjustment was necessary for all periods presented, as their effect was anti-dilutive and not reflected in the GAAP diluted weighted average shares outstanding.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We disclosed a quantitative and qualitative analysis regarding market risk in Item 7A of our 2024 Annual Report. That information is supplemented by the information included above in Item 2 of this report. Other than the developments described thereunder, there have been no material changes in our exposure to market risk since December 31, 2024.
The following table projects the potential impact on interest (in thousands) for a 12-month period, assuming a hypothetical instantaneous increase or decrease of 50 basis points and a decrease of 100 basis points in corresponding interest rates. Since it is unlikely that interest
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rates will significantly increase in the near future as a result of the current high interest rate environment, we have excluded the impact of a 100 basis point increase in corresponding interest rates.
| Assets (Liabilities) Subject to Interest Rate Sensitivity (1) | 50 Basis Point Increase | 50 Basis Point Decrease | 100 Basis Point Decrease | ||||||||||||||||||||
| Interest income from loans and investments | $ | 11,609,235 | $ | 49,058 | $ | (46,585) | $ | (89,615) | |||||||||||||||
| Interest expense from debt obligations | (9,795,184) | 41,452 | (40,854) | (81,402) | |||||||||||||||||||
| Impact to net interest income from loans and investments | 7,606 | (5,731) | (8,213) | ||||||||||||||||||||
| Interest income from cash, restricted cash and escrow balances (2) | 1,743,422 | 8,717 | (8,717) | (17,434) | |||||||||||||||||||
| Total impact from hypothetical changes in interest rates | $ | 16,323 | $ | (14,448) | $ | (25,647) | |||||||||||||||||
________________________
(1)Represents the UPB of our structured loan portfolio, the principal balance of our debt and the account balances of our cash, restricted cash and escrows at June 30, 2025.
(2)Our cash, restricted cash and escrows are currently earning interest at a weighted average blended rate of approximately 4.0%, or approximately $70 million annually. Interest income earned on our cash and restricted cash is included as a component of interest income and interest income earned on escrows is included as a component of servicing revenue, net in the consolidated statements of income. The interest earned on our cash, restricted cash and escrows is based on an average daily balance and may be different from the end of period balance.
We entered into treasury futures to hedge our exposure to changes in interest rates inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and 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 are tied to the 5-year and 10-year treasury rates and hedge our exposure to Private Label loans, until the time they are securitized, and changes in the fair value of our held-for-sale Agency Business SFR – fixed rate loans. A 50 basis point and a 100 basis point increase to the 5-year and 10-year treasury rates on our treasury futures held at June 30, 2025 would have resulted in a gain of $0.7 million and $2.3 million, respectively, in the six months ended June 30, 2025, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $2.7 million and $4.4 million, respectively.
Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD. Our loans held-for-sale to these agencies are not currently exposed to interest rate risk during the loan commitment, closing and delivery process. The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is generally effectuated within 60 days of closing. The coupon rate for the loan is set after we establish the interest rate with the investor.
In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates. A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $13.7 million at June 30, 2025, while a 100 basis point decrease would increase the fair value by $14.4 million.
Item 4. Controls and Procedures
Management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures at June 30, 2025. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at June 30, 2025.
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to certain legal proceedings is set forth in Note 14 and is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes to the risk factors set forth in Item 1A of our 2024 Annual Report.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We have 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. At June 30, 2025, there was $138.6 million available for repurchase under this program. The program may be discontinued or modified at any time.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table sets forth all purchases made by or on behalf of us or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during the three months ended June 30, 2025 ($ in thousands, except share and per share data):
| Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program | ||||||||||||||||||||||
| April 1 - 30, 2025 | — | $ | — | — | $ | — | ||||||||||||||||||||
| May 1 - 31, 2025 | 220,000 | 9.21 | — | — | ||||||||||||||||||||||
| June 1 - 30, 2025 | 13,821 | 9.45 | — | — | ||||||||||||||||||||||
| Total | 233,821 | $ | 9.23 | |||||||||||||||||||||||
(1) These shares were purchased by affiliated purchasers of ours and we have not repurchased any shares under our share repurchase program during the three months ended June 30, 2025.
Item 5. Other Information
During the period covered by this report, no Arbor director or officer adopted terminated
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Item 6. Exhibits
| Incorporated by Reference | ||||||||||||||||||||||||||
| Exhibit # | Description | Form | Exhibit # | Filing Date | ||||||||||||||||||||||
| 3.1 | Articles of Incorporation of Arbor Realty Trust, Inc. | S-11 | 3.1 | 11/13/03 | ||||||||||||||||||||||
| 3.2 | Articles of Amendment to Articles of Incorporation of Arbor Realty Trust, Inc. | 10-Q | 3.2 | 08/07/07 | ||||||||||||||||||||||
| 3.3 | Amended and Restated Bylaws of Arbor Realty Trust, Inc. | 8-K | 3.1 | 12/01/20 | ||||||||||||||||||||||
| 4.1 | Indenture, dated as of July 9, 2025, between Arbor Realty Trust, Inc. and UMB Bank, NA, as trustee | 8-K | 4.1 | 07/09/25 | ||||||||||||||||||||||
| 4.2 | Form of 7.875% Senior Notes due 2030 (included in Exhibit 4.1 hereto) | 8-K | 4.2 | 07/09/25 | ||||||||||||||||||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 | |||||||||||||||||||||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 | |||||||||||||||||||||||||
| 32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||||||||
| 101 | Financial statements from the Quarterly Report on Form 10-Q of Arbor Realty Trust, Inc. for the quarter ended June 30, 2025, filed on August 1, 2025, formatted in Inline Extensible Business Reporting Language (“XBRL”): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Changes in Equity, (4) the Consolidated Statements of Cash Flows and (5) the Notes to Consolidated Financial Statements. | |||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||
In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of our long-term debt are not filed herewith. Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ARBOR REALTY TRUST, INC. | ||||||||
Date: August 1, 2025 | By: | /s/ Ivan Kaufman | ||||||
| Ivan Kaufman | ||||||||
| Chief Executive Officer | ||||||||
Date: August 1, 2025 | By: | /s/ Paul Elenio | ||||||
| Paul Elenio | ||||||||
| Chief Financial Officer | ||||||||
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FAQ
How much did BrightSpring Health Services (BTSG) grow revenue in Q2 2025?
Revenue rose 29% year-over-year to $3.15 billion, driven mainly by Medicare D and commercial pharmacy volumes.
What is the status of the Community Living business sale?
A definitive agreement to sell for $835 million cash was signed 17 Jan 2025; closing is targeted for late 2025, pending approvals.
How much debt does BTSG have after the quarter?
Long-term debt is $2.48 billion, down from $2.56 billion at December 31 2024.
What were BTSG's Q2 2025 earnings per share?
Basic EPS was $0.14 (continuing ops $0.05, discontinued ops $0.09); diluted EPS was $0.13.
How did operating cash flow change year-to-date?
Operating cash flow improved to $150.7 million inflow from a $94.1 million outflow in the prior-year period.
Why did BrightSpring lose its 'controlled company' status?
Walgreens fully divested and KKR reduced its stake via a June 2025 secondary offering, so no shareholder now controls >50% voting power.
Arbor Realty Trust Inc
NYSE:ABR
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REIT - Mortgage
Real Estate Investment Trusts
United States
UNIONDALE