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Table of Contents

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 March 31, 2020

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

    

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard, Suite 900
Uniondale, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbols

    

Name of each exchange on which registered

Common Stock, par value 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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 March 31, 2020

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

    

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard, Suite 900
Uniondale, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbols

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ABR

New York Stock Exchange

Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share

ABR-PA

New York Stock Exchange

Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share

ABR-PB

New York Stock Exchange

Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share

ABR-PC

New York Stock Exchange

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 No

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 No

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.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock, $0.01 par value per share: 110,251,395 outstanding as of May 1, 2020.

ABR

New York Stock Exchange

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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 March 31, 2020

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

    

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard, Suite 900
Uniondale, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbols

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ABR

New York Stock Exchange

Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share

ABR-PA

New York Stock Exchange

Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share

ABR-PB

New York Stock Exchange

Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share

ABR-PC

New York Stock Exchange

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 No

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 No

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.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock, $0.01 par value per share: 110,251,395 outstanding as of May 1, 2020.

ABR-PA

New York Stock Exchange

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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 March 31, 2020

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

    

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard, Suite 900
Uniondale, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbols

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ABR

New York Stock Exchange

Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share

ABR-PA

New York Stock Exchange

Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share

ABR-PB

New York Stock Exchange

Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share

ABR-PC

New York Stock Exchange

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 No

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 No

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.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock, $0.01 par value per share: 110,251,395 outstanding as of May 1, 2020.

ABR-PB

New York Stock Exchange

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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 March 31, 2020

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

    

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard, Suite 900
Uniondale, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbols

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ABR

New York Stock Exchange

Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share

ABR-PA

New York Stock Exchange

Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share

ABR-PB

New York Stock Exchange

Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share

ABR-PC

New York Stock Exchange

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 No

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 No

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.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock, $0.01 par value per share: 110,251,395 outstanding as of May 1, 2020.

ABR-PC

New York Stock Exchange

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 No

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 No

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.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 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Table of Contents

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 March 31, 2020

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

    

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard, Suite 900
Uniondale, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbols

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ABR

New York Stock Exchange

Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share

ABR-PA

New York Stock Exchange

Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share

ABR-PB

New York Stock Exchange

Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share

ABR-PC

New York Stock Exchange

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 No

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 No

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.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock, $0.01 par value per share: 110,251,395 outstanding as of May 1, 2020.

110,251,395 outstanding as of May 1, 2020.

Table of Contents

INDEX

PART I. FINANCIAL INFORMATION

    

Item 1. Financial Statements (Unaudited)

2

Consolidated Balance Sheets

2

Consolidated Statements of Operations

3

Consolidated Statements of Changes in Equity

4

Consolidated Statements of Cash Flows

5

Notes to Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

51

Item 3. Quantitative and Qualitative Disclosures about Market Risk

63

Item 4. Controls and Procedures

64

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

64

Item 1A. Risk Factors

65

Item 6. Exhibits

67

Signatures

68

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 made by us in this report.

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,” “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 operations and future prospects include, but are not limited to, changes in economic conditions generally, and the real estate market specifically, in particular, due to the uncertainties created by the COVID-19 pandemic; the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition; 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; 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.

Additional information regarding these and other risks and uncertainties we face is contained in our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on February 14, 2020 and in our other reports and filings with the SEC.

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.

i

Table of Contents

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)

    

March 31, 

    

December 31, 

2020

2019

(Unaudited)

Assets:

Cash and cash equivalents

$

222,330

$

299,687

Restricted cash

 

304,067

 

210,875

Loans and investments, net (allowance for credit losses of $142,252 and $71,069, respectively)

4,638,004

4,189,960

Loans held-for-sale, net

991,696

861,360

Capitalized mortgage servicing rights, net

288,954

286,420

Securities held-to-maturity, net (allowance for credit losses of $992 and $0, respectively)

84,406

88,699

Investments in equity affiliates

 

44,701

 

41,800

Real estate owned, net

 

13,270

 

13,220

Due from related party

 

13,821

 

10,651

Goodwill and other intangible assets

109,371

110,700

Other assets

 

224,030

 

125,788

Total assets

$

6,934,650

$

6,239,160

Liabilities and Equity:

Credit facilities and repurchase agreements

$

1,846,473

$

1,678,288

Collateralized loan obligations

 

2,513,096

 

2,130,121

Debt fund

68,717

68,629

Senior unsecured notes

 

591,854

 

319,799

Convertible senior unsecured notes, net

264,689

284,152

Junior subordinated notes to subsidiary trust issuing preferred securities

 

141,128

 

140,949

Due to related party

 

3,103

 

13,100

Due to borrowers

 

81,447

 

79,148

Allowance for loss-sharing obligations

70,752

34,648

Other liabilities

 

127,341

 

134,299

Total liabilities

 

5,708,600

 

4,883,133

Commitments and contingencies (Note 14)

 

 

Equity:

Arbor Realty Trust, Inc. stockholders' equity:

Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized; special voting preferred shares; 20,369,265 and 20,484,094 shares issued and outstanding, respectively; 8.25% Series A, $38,788 aggregate liquidation preference; 1,551,500 shares issued and outstanding; 7.75% Series B, $31,500 aggregate liquidation preference; 1,260,000 shares issued and outstanding; 8.50% Series C, $22,500 aggregate liquidation preference; 900,000 shares issued and outstanding

 

89,500

 

89,501

Common stock, $0.01 par value: 500,000,000 shares authorized; 110,608,903 and 109,706,214 shares issued and outstanding, respectively

 

1,106

 

1,097

Additional paid-in capital

 

1,163,161

 

1,154,932

Accumulated deficit

 

(177,589)

 

(60,920)

Total Arbor Realty Trust, Inc. stockholders' equity

1,076,178

1,184,610

Noncontrolling interest

149,872

171,417

Total equity

 

1,226,050

 

1,356,027

Total liabilities and equity

$

6,934,650

$

6,239,160

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. As of March 31, 2020 and December 31, 2019, assets of our consolidated VIEs totaled $3,233,013 and $2,784,756, respectively, and the liabilities of our consolidated VIEs totaled $2,585,588 and $2,209,599, respectively. See Note 15 for discussion of our VIEs.

See Notes to Consolidated Financial Statements.

2

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

($ in thousands, except share and per share data)

Three Months Ended March 31, 

    

2020

    

2019

Interest income

$

88,526

$

71,277

Interest expense

 

49,982

 

41,865

Net interest income

 

38,544

 

29,412

Other revenue:

Gain on sales, including fee-based services, net

14,305

16,389

Mortgage servicing rights

21,934

14,232

Servicing revenue, net

13,302

13,552

Property operating income

2,192

2,803

Loss on derivative instruments, net

(50,731)

(2,465)

Other income, net

 

1,303

 

337

Total other revenue

 

2,305

 

44,848

Other expenses:

Employee compensation and benefits

34,252

31,764

Selling and administrative

11,052

9,761

Property operating expenses

2,443

2,396

Depreciation and amortization

1,947

1,912

Provision for loss sharing (net of recoveries)

21,537

454

Provision for credit losses (net of recoveries)

54,382

Total other expenses

 

125,613

 

46,287

(Loss) income before extinguishment of debt, income from equity affiliates and income taxes

 

(84,764)

 

27,973

Loss on extinguishment of debt

(1,954)

(128)

Income from equity affiliates

3,992

2,151

Benefit from income taxes

14,370

10

Net (loss) income

 

(68,356)

 

30,006

Preferred stock dividends

 

1,888

 

1,888

Net (loss) income attributable to noncontrolling interest

(10,934)

5,468

Net (loss) income attributable to common stockholders

$

(59,310)

$

22,650

Basic (loss) earnings per common share

$

(0.54)

$

0.27

Diluted (loss) earnings per common share

$

(0.54)

$

0.26

Weighted average shares outstanding:

Basic

110,792,412

 

85,151,878

Diluted

131,217,199

 

107,869,511

Dividends declared per common share

$

0.30

$

0.27

See Notes to Consolidated Financial Statements.

3

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in thousands, except shares)

Three Months Ended March 31, 2020

Total Arbor

Common

Realty Trust, Inc.

Preferred

Preferred 

Common

Stock Par

Additional Paid-

Accumulated

Stockholders'

Noncontrolling

    

Stock Shares

    

Stock Value

    

Stock Shares

    

Value

    

in Capital

    

Deficit

    

Equity

    

Interest

    

Total Equity

Balance - January 1, 2020

 

24,195,594

$

89,501

 

109,706,214

$

1,097

$

1,154,932

$

(60,920)

$

1,184,610

$

171,417

$

1,356,027

Cummulative-effect adjustment (Note 2)

(24,106)

(24,106)

(4,501)

(28,607)

Balance - January 1, 2020 (as adjusted for the adoption of ASU 2016-13)

24,195,594

$

89,501

109,706,214

$

1,097

$

1,154,932

$

(85,026)

$

1,160,504

$

166,916

$

1,327,420

Issuance of common stock

 

 

1,350,000

14

19,410

19,424

19,424

Repurchase of common stock

(1,249,777)

(13)

(11,278)

(11,291)

(11,291)

Net settlement on vesting of restricted stock

 

 

65,419

1

(1,631)

(1,630)

(1,630)

Issuance of common stock from convertible debt

 

 

 

360,860

 

3

 

(186)

 

 

(183)

 

 

(183)

Stock-based compensation

 

 

 

381,315

 

4

 

3,513

 

 

3,517

 

 

3,517

Forfeiture of unvested restricted stock

(5,128)

Distributions - common stock

 

 

 

 

 

 

(33,249)

 

(33,249)

 

 

(33,249)

Distributions - preferred stock

 

 

 

 

 

 

(1,888)

 

(1,888)

 

 

(1,888)

Distributions - preferred stock of private REIT

 

 

 

 

 

 

(4)

 

(4)

 

 

(4)

Distributions - noncontrolling interest

 

 

 

 

 

 

 

 

(6,110)

 

(6,110)

Redemption of operating partnership units

(114,829)

(1)

(1,599)

(1,600)

(1,600)

Net loss

 

 

 

 

 

 

(57,422)

 

(57,422)

 

(10,934)

 

(68,356)

Balance – March 31, 2020

 

24,080,765

$

89,500

 

110,608,903

$

1,106

$

1,163,161

$

(177,589)

$

1,076,178

$

149,872

$

1,226,050

Three Months Ended March 31, 2019

Total Arbor

Common

Realty Trust, Inc.

Preferred

Preferred 

Common

Stock Par

Additional Paid-

Accumulated

Stockholders'

Noncontrolling

    

Stock Shares

    

Stock Value

    

Stock Shares

    

Value

    

in Capital

    

Deficit

    

Equity

    

Interest

    

Total Equity

Balance – January 1, 2019

    

24,365,084

    

$

89,502

    

83,987,707

    

$

840

    

$

879,029

    

$

(74,133)

    

$

895,238

    

$

170,328

    

$

1,065,566

Issuance of common stock upon vesting of restricted stock units

203,492

2

(2,904)

(2,902)

(2,902)

Net settlement on vesting of restricted stock

 

 

 

(45,953)

 

 

(585)

 

 

(585)

 

 

(585)

Issuance of common stock from convertible debt

 

 

 

210,466

 

2

 

2,505

 

 

2,507

 

 

2,507

Extinguishment of convertible senior unsecured notes

 

 

 

 

 

(1,331)

 

 

(1,331)

 

 

(1,331)

Stock-based compensation

 

 

 

440,174

 

4

 

3,752

 

 

3,756

 

 

3,756

Issuance of common stock from special dividend

 

 

 

901,432

 

9

 

10,070

 

 

10,079

 

 

10,079

Issuance of operating partnership units and special voting preferred stock from special dividend

 

221,666

 

2

 

 

 

 

 

2

 

2,476

 

2,478

Distributions - common stock

 

 

 

 

 

 

(23,101)

 

(23,101)

 

 

(23,101)

Distributions - preferred stock

 

 

 

 

 

 

(1,888)

 

(1,888)

 

 

(1,888)

Distributions - preferred stock of private REIT

 

 

 

 

 

 

(5)

 

(5)

 

 

(5)

Distributions - noncontrolling interest

 

 

 

 

 

 

 

 

(5,566)

 

(5,566)

Redemption of operating partnership units

 

(387,706)

 

(3)

 

258,677

 

3

 

2,935

 

 

2,935

 

(4,566)

 

(1,631)

Net income

 

 

 

 

 

 

24,538

 

24,538

 

5,468

 

30,006

Balance – March 31, 2019

 

24,199,044

$

89,501

 

85,955,995

$

860

$

893,471

$

(74,589)

$

909,243

$

168,140

$

1,077,383

See Notes to Consolidated Financial Statements.

4

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

Three Months Ended March 31, 

    

2020

    

2019

Operating activities:

Net (loss) income

$

(68,356)

$

30,006

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization

 

1,947

 

1,912

Stock-based compensation

 

3,517

 

3,756

Amortization and accretion of interest and fees, net

 

1,633

 

653

Amortization of capitalized mortgage servicing rights

11,822

12,282

Originations of loans held-for-sale

(1,088,699)

(746,315)

Proceeds from sales of loans held-for-sale, net of gain on sale

957,060

996,341

Mortgage servicing rights

(21,934)

(14,232)

Write-off of capitalized mortgage servicing rights from payoffs

5,920

4,458

Provision for loss sharing (net of recoveries)

21,537

454

Provision for credit losses (net of recoveries)

54,382

Net recoveries (charge-offs) for loss sharing obligations

160

(234)

Deferred taxbenefit

(19,904)

(4,168)

Income from equity affiliates

 

(3,992)

 

(2,151)

Loss on extinguishment of debt

1,954

128

Changes in operating assets and liabilities

(90,282)

(14,501)

Net cash (used in) provided by operating activities

(233,235)

268,389

Investing Activities:

Loans and investments funded, originated and purchased, net

 

(815,501)

 

(403,756)

Payoffs and paydowns of loans and investments

 

298,701

 

280,819

Deferred fees

 

4,857

 

2,014

Investments in real estate, net

 

(230)

 

(202)

Contributions to equity affiliates

 

(60)

 

(6,030)

Purchase of securities held-to-maturity, net

(10,000)

Payoffs and paydowns of securities held-to-maturity

3,313

1,521

Due to borrowers and reserves

(1,834)

(2,763)

Net cash used in investing activities

(510,754)

(138,397)

Financing activities:

Proceeds from repurchase agreements and credit facilities

 

2,229,200

 

1,625,430

Paydowns and payoffs of repurchase agreements and credit facilities

 

(2,058,588)

 

(1,728,631)

Proceeds from issuance of collateralized loan obligations

668,000

Payoffs and paydowns of collateralized loan obligations

(282,874)

Proceeds from issuance of common stock

 

19,424

 

Settlements of convertible senior unsecured notes

(21,516)

(3,019)

Proceeds from issuance of senior unsecured notes

275,000

90,000

Redemption of operating partnership units

(1,600)

(1,631)

Payments of withholding taxes on net settlement of vested stock

(1,630)

(3,487)

Repurchase of common stock

(11,291)

Distributions paid on common stock

 

(33,249)

 

(23,101)

Distributions paid on noncontrolling interest

(6,110)

(5,566)

Distributions paid on preferred stock

(1,888)

(1,888)

Distributions paid on preferred stock of private REIT

 

(4)

 

(5)

Payment of deferred financing costs

 

(13,050)

 

(2,393)

Net cash provided by (used in) financing activities

759,824

(54,291)

Net increase in cash, cash equivalents and restricted cash

15,835

75,701

Cash, cash equivalents and restricted cash at beginning of period

 

510,562

 

340,669

Cash, cash equivalents and restricted cash at end of period

$

526,397

$

416,370

See Notes to Consolidated Financial Statements.

5

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)

(in thousands)

Three Months Ended March 31, 

    

2020

    

2019

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents at beginning of period

$

299,687

$

160,063

Restricted cash at beginning of period

210,875

180,606

Cash, cash equivalents and restricted cash at beginning of period

$

510,562

$

340,669

Cash and cash equivalents at end of period

$

222,330

$

124,505

Restricted cash at end of period

304,067

291,865

Cash, cash equivalents and restricted cash at end of period

$

526,397

$

416,370

Supplemental cash flow information:

Cash used to pay interest

$

42,666

$

39,180

Cash used to pay taxes

1,681

2,008

Supplemental schedule of non-cash investing and financing activities:

Cummulative-effect adjustment (Note 2)

$

28,607

$

Distributions accrued on 8.25% Series A preferred stock

267

267

Distributions accrued on 7.75% Series B preferred stock

203

203

Distributions accrued on 8.50% Series C preferred stock

159

159

Issuance of common stock from convertible debt

4,595

2,507

Special dividend - common stock issued

10,079

Special dividend - special voting preferred stock and operating partnership units issued

2,478

Fair value of conversion feature of convertible senior unsecured notes

(183)

1,175

Settlements of convertible senior unsecured notes

(4,778)

(1,331)

See Notes to Consolidated Financial Statements.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Note 1 — Description of Business

Arbor Realty Trust, Inc. (“we,” “us,” or “our”) is a Maryland corporation formed in 2003. 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 and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity. We may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the government-sponsored enterprises, or "GSEs"), the Government National Mortgage Association ("Ginnie Mae"), Federal Housing Authority ("FHA") and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, "HUD"). We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae Delegated Underwriting and Servicing ("DUS") lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan ("SBL") lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and sell finance products through conduit/commercial mortgage-backed securities ("CMBS") programs and during the second half of 2019, we began to originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label" loans. We intend to pool and securitize the Private Label loans and sell certain securities in the securitizations to third-party investors, while retaining the highest risk bottom tranche bond referred to as the "B Piece."

Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership ("ARLP"), for which we serve as the general partner, and ARLP's subsidiaries. We are organized to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on that portion of its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of taxable income is distributed and provided that certain other requirements are met. Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through taxable REIT subsidiaries ("TRS"), which is part of our TRS consolidated group (the "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. See Note 17 for details.

Note 2 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

These 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 2019 Annual Report.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Principles of Consolidation

These consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other joint ventures in which we own a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary. Entities in which we have a significant influence are accounted for under the equity method. Our VIEs are described in Note 15. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home" orders, to close financial markets and to restrict operations of non-essential businesses. Such actions are creating significant disruptions in global supply chains, and adversely impacting many industries. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown. The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear, making any estimate or assumption as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

Credit Losses

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which utilizes a current expected credit loss methodology (“CECL”) for the recognition of credit losses for our structured loans and investments, held-to-maturity debt securities and our loss-sharing obligations related to the Fannie Mae DUS program, at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected credit losses. This methodology replaces the multiple existing impairment methods in GAAP and generally requires that a loss be incurred before it is recognized. We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting periods prior to January 1, 2020 have been unadjusted and reported in accordance with previously applicable GAAP. In connection with the adoption of ASU 2016-13, we recorded a $28.6 million increase to accumulated deficit,which is net of a deferred tax asset of $3.6 million as of January 1, 2020.

The following table illustrates the impact of adopting ASU 2016-13 (in thousands):

January 1, 2020

    

As Reported

    

    

    

    

 

Under

 

As Reported

 

Impact of

 

ASU 2016-13

 

Pre-Adoption

 

Adoption

Assets:

 

  

 

  

 

  

Allowance for credit losses:

 

  

 

  

 

  

Structured loans and investments (1)

$

88,363

$

71,069

$

17,294

Held-to-maturity debt securities

 

501

501

Deferred taxassets

27,307

23,713

3,594

Liabilities:

 

  

 

  

 

  

Allowance for loss-sharing obligations

 

16,847

 

2,441

 

14,406

(1)See Note 3 for details by asset class.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Other Accounting Pronouncements Adopted

Description

    

Adoption Date

    

Effect on Financial Statements

In November 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends the guidance for determining whether a decision-making fee is a variable interest and requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP).

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with changes between hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. Early adoption is permitted upon issuance of the update.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. This ASU eliminates step two from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value with the carrying amount of goodwill.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

Description

    

Effective Date

    

Effect on Financial Statements

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022.

We have not adopted any of the optional expedients or exceptions through March 31, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

Significant Accounting Policies

See Item 8 – Financial Statements and Supplementary Data in our 2019 Annual Report for a description of our significant accounting policies. Upon the adoption of ASU 2016-13 on January 1, 2020, we adjusted certain significant accounting policies, as follows:

Allowance for Credit Losses. We estimate allowances for credit losses on our structured loans and investments (including unfunded loan commitments), loss-sharing obligations related to the Fannie Mae DUS program and our held-to-maturity debt securities under CECL. This method is based on expected credit losses for the life of the investment as of each balance sheet date. Our estimation of credit losses utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future. We have licensed a third party model to assist with the measurement of expected credit losses, which utilizes incurred losses inherent in the portfolio. The loss factors are determined through the generation of probability of defaults (PD) and loss

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

given defaults (LGD) for similar loans with similar credit. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect our expected credit losses.

Our method for calculating the estimate of expected credit loss takes into account historical experience and current conditions for similar loans and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on our assessment of the most likely scenario of assumptions and plausible outcomes for the US economy, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect our loss experience. We regularly evaluate the reasonable and supportable forecast period to determine if a change is needed.

Beyond our reasonable and supportable forecast period, we generally revert to historical loss information over the remaining loan/asset period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. We may make adjustments to historical loss information for differences in risk that may not reflect the characteristics of our current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. We generally expect to use an average historical loss for reversion, utilizing an immediate or straight line method for the remaining life of the investments.

We also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as necessary. Our qualitative analysis includes a review of data that may directly impact our estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e. refinance, sale, bankruptcy) which allows us to more accurately and reasonably determine the amount of the expected loss for these investments. We also evaluate the contractual life of our assets to determine if changes are needed for contractual extension options, renewals, modifications and prepayments.

To the extent possible, we estimate our allowance for credit losses using a pooling approach for homogeneous assets with similar risk characteristics with the goal of enhancing the precision of their estimate. If particular assets no longer display risk characteristics that are similar to those of the pool, we may decide to revise our pools or perform an individual assessment of expected credit losses. If it is determined that a foreclosure is probable, or we expect repayment through the operation or sale of the collateral and the borrower is experiencing financial difficulty, we calculate expected credit losses based on the fair value of the collateral as of the reporting date.

During the loan review process, if we determine that it is probable that we will be unable to collect all amounts due for both principal and interest according to the contractual terms of a loan, we consider that loan impaired. We evaluate the capitalization and market discount rates, as well as the borrower's operating income and cash flows, in estimating the value of the underlying collateral when determining if a loan is impaired. We may also obtain a third party appraisal, which may value the collateral through an "as-is" or "stabilized value" methodology. Such appraisals may be used as an additional source of valuation information only and no adjustments are made to appraisals. If upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, we record a specific allowance for credit losses with a corresponding charge to the provision for credit losses, and remove the impaired loan from the CECL analysis described above.

If the loan modification constitutes a concession whereas we do not receive ample consideration in return for the modification, and the borrower is experiencing financial difficulties and cannot repay the loan under the current terms, then the modification is considered by us to be a troubled debt restructuring. We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current. The allowance for credit losses on a troubled debt restructuring is measured using the same method as all other loans held for investment.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Charge-offs to the allowance for credit losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale; when a modification or restructuring takes place in which we grant a concession to a borrower or agree to a discount in full or partial satisfaction of the loan; when we take ownership and control of the underlying collateral in full satisfaction of the loan; when loans are reclassified as other investments; or when significant collection efforts have ceased and it is highly likely that a loss has been realized.

Loss on restructured loans is recorded when we have granted a concession to the borrower in the form of principal forgiveness related to the payoff or the substitution or addition of a new debtor for the original borrower or when we incur costs on behalf of the borrower related to the modification, payoff or the substitution or addition of a new debtor for the original borrower. When a loan is restructured, we record our investment at net realizable value, taking into account the cost of all concessions at the date of restructuring. In addition, a gain or loss may be recorded upon the sale of a loan to a third party in the consolidated statements of operations in the period in which the loan was sold.

Note 3 — Loans and Investments

Our Structured Business loan and investment portfolio consists of ($ in thousands):

    

    

    

    

    

Wtd. Avg.

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

March 31, 2020

Total

Count

Pay Rate (1)

Maturity

LTV Ratio (2)

LTV Ratio (3)

Bridge loans (4)

$

4,342,335

90

%  

234

 

5.50

%  

18.4

 

1

%  

77

%

Preferred equity investments

 

201,509

 

4

%  

11

 

8.30

%  

59.2

 

70

%  

88

%

Mezzanine loans

175,389

4

%  

27

7.85

%  

48.4

24

%  

75

%

Other (5)

 

81,311

 

2

%  

20

 

5.14

%  

76.1

 

0

%  

69

%

 

4,800,544

 

100

%  

292

 

5.70

%  

22.2

 

4

%  

77

%

Allowance for credit losses

(142,252)

Unearned revenue

 

(20,288)

Loans and investments, net

$

4,638,004

    

    

    

Wtd. Avg.

    

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

    

December 31, 2019

    

Total

    

Count

    

Pay Rate (1)

    

Maturity

    

LTV Ratio (2)

    

LTV Ratio (3)

Bridge loans (4)

$

3,836,832

 

90

%  

217

 

5.77

%  

18.0

 

0

%  

75

%

Preferred equity investments

 

181,058

 

4

%  

10

 

7.62

%  

68.8

 

69

%  

89

%

Mezzanine loans

191,575

4

%  

24

9.70

%  

36.7

22

%  

73

%

Other (5)

70,146

2

%  

21

2.88

%  

84.8

0

%  

70

%

 

4,279,611

 

100

%  

272

 

5.98

%  

22.1

 

4

%  

76

%

Allowance for credit losses

 

(71,069)

Unearned revenue

 

(18,582)

Loans and investments, net

$

4,189,960

(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 that is required to be paid monthly as stated in the individual loan agreements. Certain loans and investments that require an additional rate of interest “Accrual Rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

(2)The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.
(3)The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.
(4)As of March 31, 2020 and December 31, 2019, bridge loans included 10 and 11, respectively, single-family rental loans with an aggregate UPB of $54.4 million and $66.7 million, respectively, of which $24.0 million and $30.0 million, respectively, was funded.
(5)As of March 31, 2020 and December 31, 2019, other included 19 and 12, respectively, single-family rental permanent loans with an aggregate UPB of $74.9 million and $41.6 million, respectively, and 1 and 9, respectively, purchased loans with an aggregate UPB of $6.4 million and $28.6 million, respectively.

Concentration of Credit Risk

We are subject to concentration risk in that, at March 31, 2020, the UPB related to 25 loans with five different borrowers represented 13% of total assets. At December 31, 2019, the UPB related to 24 loans with five different borrowers represented 13% of total assets. During both the three months ended March 31, 2020 and the year ended December 31, 2019, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue. See Note 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, and funded cash reserves. Other factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan. This metric provides a helpful snapshot of portfolio quality and credit risk. All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider “high risk” and that possess deteriorating credit quality.

Generally speaking, given our typical loan profile, risk ratings of pass, pass/watch and special mention suggest that we expect the loan to make both principal and interest payments according to the contractual terms of the loan agreement. A risk rating of substandard indicates we anticipate the loan may require a modification of some kind. A risk rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal. Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk rating matrix.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class is as follows ($ in thousands):

    

    

    

Wtd. Avg.

    

Wtd. Avg.

 

UPB by Origination Year

First Dollar

Last Dollar

March 31,2020

2020

2019

2018

2017

2016

Prior

Total

LTV Ratio

LTV Ratio

Multifamily:

 

 

Risk Rating:

 

 

Pass

$

425,994

$

758,705

$

75,000

$

32,500

$

$

350

$

1,292,549

 

Pass/Watch

 

195,114

903,609

188,500

22,100

17,685

1,327,008

 

Special Mention

49,173

616,097

150,459

288,800

1,104,529

Substandard

23,500

10,594

41,494

86,020

8,250

28,800

198,658

Doubtful

 

 

Total Multifamily

$

693,781

$

2,289,005

$

455,453

$

429,420

$

8,250

$

46,835

$

3,922,744

4

%  

76

%

Land:

Percentage of portfolio

82

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

Special Mention

71,019

19,523

19,975

110,517

Substandard

127,928

127,928

Doubtful

Total Land

$

71,019

$

19,523

$

$

19,975

$

$

127,928

$

238,445

0

%  

90

%

Healthcare:

Percentage of portfolio

5

%  

Risk Rating:

 

Pass

$

$

21,350

$

10,000

$

$

$

$

31,350

 

Pass/Watch

51,069

66,500

41,650

159,219

Special Mention

8,500

8,500

Substandard

Doubtful

4,625

4,625

Total Healthcare

$

$

80,919

$

76,500

$

46,275

$

$

$

203,694

0

%  

78

%

Office:

Percentage of portfolio

4

%  

Risk Rating:

Pass

$

$

$

5,000

$

$

$

$

5,000

Pass/Watch

Special Mention

43,151

9,961

53,112

Substandard

41,000

34,000

75,000

Doubtful

880

880

Total Office

$

$

$

46,000

$

77,151

$

$

10,841

$

133,992

3

%  

69

%

Single Family Rental:

Percentage of portfolio

3

%  

Risk Rating:

Pass

$

8,575

$

34,490

$

$

$

$

$

43,065

Pass/Watch

17,570

30,853

48,423

Special Mention

7,287

161

7,448

Substandard

Doubtful

Total Single Family Rental

$

33,432

$

65,504

$

$

$

$

$

98,936

0

%  

70

%

Hotel:

Percentage of portfolio

2

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

Special Mention

Substandard

91,000

91,000

Doubtful

Total Hotel

$

$

91,000

$

$

$

$

$

91,000

32

%  

100

%

Other:

Percentage of portfolio

2

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

3,574

3,574

Special Mention

51,300

10,006

61,306

Substandard

41,600

3,553

45,153

Doubtful

1,700

1,700

Total Other

$

$

$

92,900

$

13,580

$

$

5,253

$

111,733

4

%  

77

%

Percentage of portfolio

2

%  

Grand Total

$

798,232

$

2,545,951

$

670,853

$

586,401

$

8,250

$

190,857

$

4,800,544

4

%  

77

%

Geographic Concentration Risk

As of March 31, 2020, 16% and 12% of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively. As of December 31, 2019, 18% and 12% of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively. 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)

March 31, 2020

Allowance for Credit Losses

A summary of the changes in the allowance for credit losses is as follows (in thousands):

Three Months Ended March 31, 2020

    

Land

Multifamily

Retail

Hotel

Office

Healthcare

Other

    

Total

Allowance for credit losses:

Beginning balance, prior to adoption of CECL

$

67,869

$

$

$

$

1,500

$

$

1,700

$

71,069

Impact of adopting CECL - January 1, 2020

77

15,688

333

29

287

64

816

17,294

Provision for credit losses (net of recoveries)

 

10,473

16,585

 

10,983

 

7,500

 

4,310

 

3,870

 

168

 

53,889

Ending balance

$

78,419

$

32,273

$

11,316

$

7,529

$

6,097

$

3,934

$

2,684

$

142,252

Three Months Ended March 31, 2019

Allowance for credit losses

$

67,869

$

$

$

$

1,500

$

$

1,700

$

71,069

The increase in the provision for credit losses during the three months ended March 31, 2020 of $53.9 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $17.3 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic. Our estimate of allowance for credit losses on our structured loans and investments including related unfunded loan commitments during the first quarter of 2020 was based on a reasonable and supportable forecast period that was adjusted for the expectations that the markets in which we operate will experience a decline in economic conditions, increases in unemployment rates and other market driven factors largely the result of the COVID-19 pandemic that will likely impact loan delinquencies, modifications and potential risk of loss. For the periods beyond the reasonable and supportable forecast, we reverted to our historical loss rate, which was adjusted to address for factors that are not present in our existing portfolio. During the quarter, we also made adjustments for loans that were anticipated to extend based on available extension options and timing of their maturities in relation to the current economic conditions.

The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments. Our CECL allowance for unfunded loan commitments are adjusted quarterly and correspond with the associated outstanding loans. As of March 31, 2020, we had outstanding unfunded commitments of $183.8 million that we are obligated to fund as borrowers meet certain requirements.

As of March 31, 2020, accrued interest receivable related to our loans totaling $37.7 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

All of our structured loans and investments are collateral dependent, and as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end. A summary of our specific loans considered impaired by asset class is as follows (in thousands):

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

March 31, 2020

Wtd. Avg. First

Wtd. Avg. Last

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

    

UPB (1)

    

 Value

    

Credit Losses

    

Ratio

    

Ratio

    

Land

$

134,215

$

126,800

$

77,869

0

%

97

%

Hotel

 

50,000

 

49,663

 

7,500

 

59

%

 

100

%

Retail

 

33,520

 

31,921

 

11,292

 

3

%

 

100

%

Healthcare

 

4,625

 

4,845

 

3,845

 

0

%

 

100

%

Office

 

2,211

2,211

 

1,500

 

0

%

 

76

%

Commercial

 

1,700

 

1,700

 

1,700

 

63

%

 

63

%

Total

$

226,271

$

217,140

$

103,706

14

%

98

%

    

December 31, 2019

   

    

    

    

    

Wtd. Avg. First

    

Wtd. Avg. Last

    

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

UPB (1)

Value

Credit Losses

Ratio

Ratio

Land

    

$

134,215

    

$

126,800

    

$

67,869

    

0

%

97

%

Office

 

2,226

 

2,226

 

1,500

 

0

%

 

78

%

Commercial

1,700

1,700

1,700

63

%

63

%

Total

$

138,141

$

130,726

$

71,069

1

%

96

%

(1)Represents the UPB of nine and five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at March 31, 2020 and December 31, 2019, respectively.

There were no loans for which the fair value of the collateral securing the loan was less than the carrying value of the loan for which we had not recorded a provision for credit loss as of March 31, 2020 and December 31, 2019.

At March 31, 2020, four loans with an aggregate net carrying value of $1.8 million, net of related loan loss reserves of $6.5 million, were classified as non-performing and, at December 31, 2019, three loans with an aggregate net carrying value of $1.8 million, net of related loan loss reserves of $1.7 million, were classified as non-performing. Income from non-performing loans is generally recognized on a cash basis when it is received. Full income recognition will resume when the loan becomes contractually current and performance has recommenced.

A summary of our non-performing loans by asset class is as follows (in thousands):

March 31, 2020

December 31, 2019

Less Than 

Greater  Than

Less Than 

Greater  Than

90 Days

90 Days

90 Days

90 Days

     

UPB

     

Past Due

     

Past Due

     

UPB

     

Past Due

     

Past Due

Healthcare

$

4,625

$

$

4,625

$

$

$

Commercial

1,700

1,700

1,700

1,700

Retail

920

920

1,000

1,000

Office

880

880

880

880

Total

$

8,125

$

$

8,125

$

3,580

$

$

3,580

In addition, we have six loans with a carrying value totaling $120.3 million at March 31, 2020, that are collateralized by a land development project. These loans were scheduled to mature in March 2020 and were extended to September 2020. The loans do not carry a current pay rate of interest, however, five of the loans with a carrying value totaling $111.0 million entitle us to a weighted average accrual rate of interest of 8.38%. 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 March 31, 2020 and December 31, 2019, we had a cumulative allowance for credit losses of $71.4 million and $61.4 million, respectively, related to these loans. The loans are subject to certain risks associated with a development project including, but not limited to, availability of construction financing, increases in projected

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

construction costs, demand for the development's outputs upon completion of the project, and litigation risk. Additionally, these loans were not classified as non-performing as the borrower is in compliance with all of the terms and conditions of the loans.

At both March 31, 2020 and December 31, 2019, we had no loans contractually past due 90 days or more that are still accruing interest. During both the three months ended March 31, 2020 and 2019, interest income recognized on nonaccrual loans was de minimis.

There were no loan modifications, refinancing's and/or extensions during both the three months ended March 31, 2020 and 2019 that were considered troubled debt restructurings.

Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. At March 31, 2020 and December 31, 2019, we had total interest reserves of $51.1 million and $37.0 million, respectively, on 141 loans and 131 loans, respectively, with an aggregate UPB of $2.64 billion and $2.43 billion, respectively.

Note 4 — Loans Held-for-Sale, Net

Loans held-for-sale, net consists of the following (in thousands):

     

March 31, 2020

     

December 31, 2019

Private Label

$

683,526

$

401,207

Fannie Mae

236,459

408,534

Freddie Mac

 

56,311

36,303

FHA

2,440

1,082

 

978,736

847,126

Fair value of future MSR

15,254

16,519

Unearned discount

 

(2,294)

(2,285)

Loans held-for-sale, net

$

991,696

$

861,360

Our GSE loans held-for-sale are typically sold within 60 days of loan origination, while our Private Label loans are generally expected to be sold and securitized within 180 days of loan origination. During the three months ended March 31, 2020 and 2019, we sold $957.1 million and $1.10 billion, respectively, of loans held-for-sale and recorded gain on sales of $13.2 million and $15.1 million, respectively. At March 31, 2020 and December 31, 2019, there were no loans held-for-sale that were 90 days or more past due, and there were no loans held-for-sale that were placed on a non-accrual status.

Note 5 — Capitalized Mortgage Servicing Rights

Our capitalized mortgage servicing rights (“MSRs”) reflect commercial real estate MSRs derived from loans sold in our Agency Business or acquired MSRs. The discount rates used to determine the present value of our MSRs throughout the periods presented for all MSRs were between 8% - 15% (representing a weighted average discount rate of 13%) based on our best estimate of market discount rates. The weighted average estimated life remaining of our MSRs was 8.1 years and 8.0 years at March 31, 2020 and December 31, 2019, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

A summary of our capitalized MSR activity is as follows (in thousands):

Three Months Ended March 31, 2020

     

Acquired

     

Originated

     

Total

Balance at beginning of period

$

64,519

$

221,901

$

286,420

Additions

20,275

20,275

Amortization

(4,206)

(7,615)

(11,821)

Write-downs and payoffs

(1,736)

(4,184)

(5,920)

Balance at end of period

$

58,577

$

230,377

$

288,954

     

Three Months Ended March 31, 2019

Balance at beginning of period

$

97,084

$

176,686

$

273,770

Additions

20,609

20,609

Amortization

(5,915)

(6,367)

(12,282)

Write-downs and payoffs

(3,140)

(1,318)

(4,458)

Balance at end of period

$

88,029

$

189,610

$

277,639

We collected prepayment fees totaling $5.1 million and $4.9 million during the three months ended March 31, 2020 and 2019, respectively. Prepayment fees are included as a component of servicing revenue, net on the consolidated statements of operations. As of March 31, 2020 and December 31, 2019, we had no valuation allowance recorded on any of our MSRs.

The expected amortization of capitalized MSRs recorded as of March 31, 2020 is as follows (in thousands):

Year

     

Amortization

2020 (nine months ending 12/31/2020)

$

34,716

2021

 

43,228

2022

 

38,728

2023

 

34,495

2024

 

30,481

2025

27,573

Thereafter

 

79,733

Total

$

288,954

Actual amortization may vary from these estimates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Note 6 — Mortgage Servicing

Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands):

March 31, 2020

Product Concentrations

Geographic Concentrations

UPB 

    

    

Percent of

    

    

Percentage

 

Product

UPB (1)

Total

State

of Total

Fannie Mae

$

14,946,922

74

%  

Texas

18

%

Freddie Mac

4,570,521

 

23

%  

North Carolina

9

%

FHA

679,685

 

3

%  

New York

9

%

Total

$

20,197,128

100

%  

California

8

%

Georgia

6

%

Florida

6

%

Other (2)

44

%

Total

100

%

December 31, 2019

Fannie Mae

    

$

14,832,844

    

74

%  

Texas

    

19

%

Freddie Mac

4,534,714

23

%  

North Carolina

9

%

FHA

691,519

3

%  

New York

9

%

Total

$

20,059,077

100

%  

California

9

%

Florida

6

%

Georgia

6

%

Other (2)

42

%

Total

100

%

(1)Excludes loans which we are not collecting a servicing fee.
(2)No other individual state represented 4% or more of the total.

At March 31, 2020 and December 31, 2019, our weighted average servicing fee was 43.6 basis points and 43.8 basis points, respectively. At March 31, 2020 and December 31, 2019, we held total escrow balances of $957.1 million and $947.1 million, respectively, which is not reflected in our consolidated balance sheets. Of the total escrow balances, we held $545.6 million and $562.1 million at March 31, 2020 and December 31, 2019, respectively, related to loans we are servicing within our Agency Business. 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, 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, was $3.1 million and $4.0 million during the three months ended March 31, 2020 and 2019, respectively, and is a component of servicing revenue, net in the consolidated statements of operations.

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March 31, 2020

Note 7 — Securities Held-to-Maturity

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 option to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. As of March 31, 2020, we retained 49%, or $106.2 million initial face value, of seven B Piece bonds, which were purchased at a discount for $74.7 million, and sold the remaining 51% to a third-party at par. 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 5.6 years. The weighted average effective interest rate was 10.91% and 10.85% at March 31, 2020 and December 31, 2019, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $13.5 million is estimated to mature within one year, $38.7 million is estimated to mature after one year through five years, $19.6 million is estimated to mature after five years through ten years and $14.7 million is estimated to mature after ten years.

Structured Single -Family Rental Bonds (“SFR bonds”). As of March 31, 2020, we held $20.0 million initial face value of Class A2 securitized SFR bonds at par, which are collateralized by a pool of single-family rental properties. These securities have a three-year maturity, bear interest at a weighted average fixed interest rate of 4.58% and have an estimated weighted average remaining maturity of 0.5 years. Approximately $18.2 million is estimated to mature within one year and $1.8 million is estimated to mature after one year through five years.

A summary of our securities held-to-maturity is as follows (in thousands):

Net Carrying

Unrealized 

Estimated 

Allowance for

    

Face Value

    

Value

    

(Loss)/Gain

    

Fair Value

    

Credit Losses

March 31, 2020

B Piece bonds

$

86,484

$

64,406

$

(2,143)

$

62,263

$

992

SFR bonds

20,000

20,000

(376)

19,624

Total

$

106,484

$

84,406

$

(2,519)

$

81,887

$

992

December 31, 2019

B Piece bonds

$

91,028

$

68,699

$

2,965

$

71,664

$

SFR bonds

20,000

20,000

74

20,074

Total

$

111,028

$

88,699

$

3,039

$

91,738

$

A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):

Three Months Ended March 31, 2020

B Piece Bonds

SFR Bonds

Total

Beginning balance, prior to adoption of CECL

$

$

$

Impact of adopting CECL - January 1, 2020

 

501

 

 

501

Provision for credit loss expense

 

491

 

 

491

Ending balance

$

992

$

$

992

The allowance for credit losses on our held-to-maturity securities was estimated on a collective basis by major security type and was based on a reasonable and supportable forecast period and a historical loss reversion for similar securities. The issuers continue to make timely principal and interest payments and we continue to accrue interest on all our bonds. As of March 31, 2020, no other-than-temporary impairment was recorded on our held-to-maturity securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

During the three months ended March 31, 2020 and 2019, we recorded interest income (including the amortization of discount) of $2.3 million and $2.1 million, respectively, related to these investments. As of March 31, 2020, accrued interest receivable related to these bonds totaling $0.1 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

Note 8 — Investments in Equity Affiliates

We account for all investments in equity affiliates under the equity method. A summary of our investments in equity affiliates is as follows (in thousands):

UPB of Loans to

Investments in Equity Affiliates at

Equity Affiliates at

Equity Affiliates

    

March 31, 2020

    

December 31, 2019

    

March 31, 2020

Arbor Residential Investor LLC

$

29,452

$

26,520

$

AMAC Holdings III LLC

10,471

10,520

15,600

North Vermont Avenue

2,458

2,440

Lightstone Value Plus REIT L.P

1,895

1,895

JT Prime

 

425

 

425

 

West Shore Café

1,688

Lexford Portfolio

1,390

East River Portfolio

 

 

 

Total

$

44,701

$

41,800

$

18,678

Arbor Residential Investor LLC (“ARI”). During the three months ended March 31, 2020 and 2019, we recorded income of $2.9 million and $0.8 million, respectively, to income from equity affiliates in our consolidated statements of operations.

Lexford Portfolio. During the three months ended March 31, 2020 and 2019, we received distributions of $1.1 million and $1.3 million, respectively, from this equity investment, which was recognized as income.

See Note 18 for details of certain investments described above.

Note 9 — Real Estate Owned

Our real estate assets at both March 31, 2020 and December 31, 2019 were comprised of a hotel property and an office building.

March 31, 2020

December 31, 2019

    

Hotel

    

Office

    

    

Hotel

    

Office

    

(in thousands)

Property

Building

Total

Property

Building

Total

Land

$

3,294

$

4,509

$

7,803

$

3,294

$

4,509

$

7,803

Building and intangible assets

 

31,771

2,010

33,781

 

31,541

 

2,010

 

33,551

Less: Impairment loss

(14,307)

(2,500)

(16,807)

(14,307)

(2,500)

(16,807)

Less: Accumulated depreciation and amortization

 

(10,460)

(1,047)

(11,507)

 

(10,320)

 

(1,007)

 

(11,327)

Real estate owned, net

$

10,298

$

2,972

$

13,270

$

10,208

$

3,012

$

13,220

During the three months ended March 31, 2020 and 2019, our hotel property had a weighted average occupancy rate of 41% and 53%, respectively, a weighted average daily rate of $154 and $130, respectively, and weighted average revenue per available room of $64 and $69, respectively. The operation of a hotel property is seasonal with the majority of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

revenues earned in the first two quarters of the calendar year. As a result of the COVID-19 pandemic, our hotel property has temporarily ceased operations beginning in April 2020.

Our office building was fully occupied by a single tenant until April 2017 when the lease expired. The building is currently vacant.

Our real estate owned assets had restricted cash balances due to escrow requirements totaling $0.4 million and $0.5 million at March 31, 2020 and December 31, 2019, respectively.

Note 10 — Debt Obligations

Credit Facilities and Repurchase Agreements

Borrowings under our credit facilities and repurchase agreements are as follows ($ in thousands):

March 31, 2020

December 31, 2019

Debt

Collateral

Debt

Collateral

 

Current

Extended

Carrying

Carrying

Wtd. Avg.

Carrying

Carrying

Wtd. Avg.

  

Maturity

  

Maturity

  

Note Rate

  

Value (1)

  

Value

  

Note Rate

  

Value (1)

  

Value

  

Note Rate

 

Structured Business

$500 million joint repurchase facility

Mar. 2022

N/A

L +

1.75

%  

to

3.50

%  

$

300,476

$

481,126

3.22

%

$

224,658

$

339,378

4.06

$400 million repurchase facility

Dec. 2020

Mar. 2023

L +

1.95

%  

 

214,647

 

289,961

2.98

%

 

218,418

 

291,292

3.76

$200 million repurchase facility

Feb. 2021

(2)

L +

2.40

%  

48,893

55,682

3.44

%

40,530

48,086

4.22

$150 million credit facility (3)

May 2020

May 2023

L +

1.75

%  

to

2.50

%

25,560

31,790

2.78

%

4,570

7,000

3.56

$128.7 million loan specific credit facilities

May 2020 to May 2022

June 2021 to Dec. 2021

L +

2.10

%  

to

2.50

%  

 

128,370

 

184,212

3.35

%

 

128,274

 

184,116

4.13

$100 million repurchase facility

June 2020

June 2021

L +

1.75

%  

to

1.95

%  

 

50,247

 

66,486

2.78

 

45,843

 

63,800

3.56

$75 million credit facility

June 2020

June 2023

L +

1.75

%  

$50 million credit facility

April 2020

April 2022

L +

2.00

%  

 

 

 

14,933

 

17,650

3.81

$50 million credit facility

Oct. 2022

Oct. 2023

L +

2.50

%  

15,202

22,817

3.54

%

12,191

16,499

4.32

$50 million credit facility

Sept. 2020

Sept. 2021

L +

2.50

%  

to

3.25

%  

5,264

6,600

3.54

%

5,254

6,600

4.32

$25 million credit facility

June 2022

June 2023

L +

2.25

%  

19,659

30,900

3.29

%

19,651

28,572

4.07

$25 million working capital facility

Aug. 2020

N/A

L +

2.25

%  

25,000

3.29

%

$2.8 million master security agreements

Dec. 2022

N/A

2.97

%  

to

4.60

%  

2,761

4.10

%

3,267

4.08

%

Repurchase facilities - securities (4)

N/A

N/A

L +

1.20

%

to

2.75

%

219,655

3.10

%

217,105

3.90

%

Structured Business total

$

1,055,734

$

1,169,574

3.15

%

$

934,694

$

1,002,993

3.94

Agency Business

$750 million ASAP agreement (5)

N/A

N/A

L +

1.05

%  

$

81,451

$

81,451

2.04

%

$

148,725

$

148,725

2.81

$600 million joint repurchase facility

Mar. 2021

Mar. 2022

L +

1.50

%  

to

2.00

%

497,692

655,716

2.56

299,824

300,446

3.26

$300 million repurchase facility

Oct. 2020

N/A

L +

1.15

%  

104,261

104,291

2.14

%

187,698

187,742

2.91

$150 million credit facility

Mar. 2021

N/A

L +

1.15

%  

71,474

71,667

2.14

%

89,657

89,673

2.91

$150 million credit facility

July 2020

N/A

L +

1.15

%  

35,861

35,912

2.14

%

17,690

17,792

2.91

$100 million credit facility

June 2020

N/A

L +

1.15

%  

Agency Business total

$

790,739

$

949,037

2.39

%

$

743,594

$

744,378

3.03

Consolidated total

$

1,846,473

$

2,118,611

2.83

%

$

1,678,288

$

1,747,371

3.54

(1)The debt carrying value for the Structured Business at March 31, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $3.9 million and $2.1 million, respectively. The debt carrying value for the Agency Business at March 31, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $1.4 million and $0.2 million, respectively.

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March 31, 2020

(2)This repurchase facility includes six-month extension options into perpetuity.
(3)In February 2020, the committed amount under the facility was temporarily increased $75.0 million to $150.0 million, which expires on May 29, 2020.
(4)These repurchase facilities are subject to margin call provisions associated with changes in interest spreads. As of March 31, 2020 and December 31, 2019, these facilities were collateralized by our CLO bonds retained and consolidated by us with a principal balance of $275.7 million and $234.9 million, respectively, B Piece bonds held-to-maturity with a carrying value of $64.4 million and $68.7 million, respectively, and SFR bonds with a carrying value of $20.0 million at both March 31, 2020 and December 31, 2019. At March 31, 2020, we had posted $54.7 million of cash collateral related to margin calls, which was used to reduce the UPB of the facilities in April 2020. We further reduced this debt in April 2020 to approximately $40.0 million through a debt restructuring and the use of proceeds from our senior notes issued in April 2020.
(5)The note rate under this agreement is subject to a LIBOR Floor of 35 basis points.

Generally, our credit facilities and repurchase agreements have extension options that are at the discretion of the banking institutions in which we have long standing relationships with. These facilities typically renew annually and also include a "wind-down" feature.

Joint Repurchase Facility. During the three months ended March 31, 2020, we amended our joint repurchase facility shared between the Structured Business and the Agency Business to increase the total committed amount by $400.0 million to $1.10 billion, of which $600.0 million matures in March 2021 and $500.0 million matures in March 2022, with each maturity eligible for a one-year extension option. The amended facility includes an $800.0 million sublimit for Private Label loans, which reduces to $500.0 million in March 2021 unless that portion of the facility is extended through March 2022.

Structured Business

At March 31, 2020 and December 31, 2019, the weighted average interest rate for the credit facilities and repurchase agreements of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 3.55% and 4.39%, respectively. The leverage on our loan and investment portfolio financed through our credit facilities and repurchase agreements, excluding the securities repurchase facilities, working capital facility and the master security agreements used to finance leasehold and capital expenditure improvements at our corporate office, was 69% and 71% at March 31, 2020 and December 31, 2019, respectively.

In March 2020, we amended a $300.0 million repurchase agreement, increasing the committed amount to $400.0 million.

Agency Business

In March 2020, we amended our $500.0 million repurchase facility reducing the committed amount to $300.0 million.

Collateralized Loan Obligations (“CLOs”)

We account for CLO transactions on our consolidated balance sheet as financing facilities. Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Borrowings and the corresponding collateral under our CLOs are as follows ($ in thousands):

Collateral (3)

Debt

Loans

Cash

    

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

March 31, 2020

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO XIII

$

668,000

$

662,918

2.44

%  

$

665,381

$

662,287

$

100,777

CLO XII

534,193

529,748

2.52

%  

613,317

610,760

CLO XI

533,000

528,981

2.47

%  

640,272

637,633

2,208

CLO X

441,000

437,652

2.48

%  

535,613

533,588

3,656

CLO IX

 

356,400

 

353,797

2.39

%  

 

410,558

 

409,403

 

60,854

Total CLOs

$

2,532,593

$

2,513,096

2.46

%  

$

2,865,141

$

2,853,671

$

167,495

Collateral (3)

Debt

Loans

Cash

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

December 31, 2019

    

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO XII

$

534,193

$

529,448

3.30

%  

$

596,366

$

593,652

$

17,800

CLO XI

533,000

528,690

3.25

%  

624,443

621,508

15,550

CLO X

 

441,000

 

437,391

3.26

%  

 

509,887

 

507,854

 

37,287

CLO IX

356,400

353,473

3.17

%  

407,696

406,463

47,230

CLO VIII

282,874

281,119

3.12

%  

359,186

357,914

544

Total CLOs

$

2,147,467

$

2,130,121

3.23

%  

$

2,497,578

$

2,487,391

$

118,411

(1)Debt carrying value is net of $19.5 million and $17.3 million of deferred financing fees at March 31, 2020 and December 31, 2019, respectively.
(2)At March 31, 2020 and December 31, 2019, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 2.87% and 3.63%, respectively.
(3)As of March 31, 2020 and December 31, 2019, there was no collateral at risk of default or deemed to be a “credit risk” as defined by the CLO indenture.
(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 $89.1 million and $58.6 million at March 31, 2020 and December 31, 2019, respectively.

CLO XIII. In March 2020, we completed CLO XIII, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $738.0 million. Of the total CLO notes issued, $668.0 million were investment grade notes issued to third party investors and $70.0 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $640.5 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a three-year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $159.5 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date (a majority of which was subsequently utilized ) which will result in the issuer owning loan obligations with a face value of $800.0 million, representing leverage of 84%. We retained a residual interest in the portfolio with a notional amount of $132.0 million, including the $70.0 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.41% plus one-month LIBOR and interest payments on the notes are payable monthly.

CLO VIII. In March 2020, we completed the unwind of CLO VIII, redeeming $282.9 million of outstanding notes, which were repaid primarily from the refinancing of the remaining assets primarily within CLO XIII, as well as with cash held

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

by CLO VIII, and expensed $1.5 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of operations.

Luxembourg Debt Fund

Our Luxembourg commercial real estate debt fund (“Debt Fund”) was a VIE for which we were the primary beneficiary and was consolidated in our financial statements. As previously planned, in April 2020 we completed the unwind of the Debt Fund and redeemed all the outstanding notes with a portion of the proceeds from our senior unsecured notes issued in March 2020 described below.

Borrowings and the corresponding collateral under our Debt Fund were as follows ($ in thousands):

Collateral (3)

Debt

Loans

Cash

Face

Carrying

Wtd. Avg.

Carrying

Restricted

Period

    

Value

    

Value (1)

    

Rate (2)

    

UPB

    

 Value

    

Cash (4)

March 31, 2020

$

70,000

$

68,717

5.21

%  

$

57,795

$

57,586

$

42,205

December 31, 2019

    

$

70,000

    

$

68,629

    

5.99

%  

$

70,755

    

$

68,629

    

$

29,245

(1)Debt carrying value is net of $1.3 million and $1.4 million of deferred financing fees at March 31, 2020 and December 31, 2019, respectively.
(2)At March 31, 2020 and December 31, 2019, the aggregate weighted average note rate, including certain fees and costs, was 6.52% and 7.17%, respectively.
(3)At both March 31, 2020 and December 31, 2019, there was no collateral at risk of default or deemed to be a “credit risk.”
(4)Represents restricted cash held for reinvestment. Excludes restricted cash related to interest payments, delayed fundings and expenses.

Senior Unsecured Notes

In March 2020, we issued $275.0 million aggregate principal amount of 4.50% senior unsecured notes due in March 2027 (the "4.50% Notes") in a private placement. We received proceeds of $271.8 million from the issuance, after deducting the underwriting discount and other offering expenses. We used a significant portion of the net proceeds to repay secured indebtedness. The 4.50% Notes are unsecured and can be redeemed by us at any time prior to December 15, 2026, 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 4.50% Notes on or after December 15, 2026, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in March and September starting in September 2020. At March 31, 2020, the debt carrying value of the 4.50% Notes was $271.8 million, net of $3.2 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 4.69%.

In October 2019, we issued $110.0 million aggregate principal amount of 4.75% senior unsecured notes due in October 2024 (the "4.75% Notes") in a private placement. We received proceeds of $108.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 4.75% Notes are unsecured and can be redeemed by us at any time prior to October 15, 2024, 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 4.75% Notes on or after October 15, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October starting in April 2020. At both March 31, 2020 and December 31, 2019, the debt carrying value of the

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March 31, 2020

4.75% Notes was $108.4 million, net of $1.6 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 5.23%.

In March 2019, we issued $90.0 million aggregate principal amount of 5.75% senior unsecured notes due in April 2024 (the "5.75% Notes") in a private placement. We received proceeds of $88.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 5.75% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2024, 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 5.75% Notes on or after April 1, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October. At March 31, 2020 and December 31, 2019, the debt carrying value of the 5.75% Notes were $88.5 million and $88.4 million, respectively, net of $1.5 million and $1.6 million, respectively, of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 6.18% at both March 31, 2020 and December 31, 2019.

In March 2018, we issued $100.0 million aggregate principal amount of 5.625% senior unsecured notes due in May 2023 (the "Initial Notes") in a private placement, and, in May 2018, we issued an additional $25.0 million (the "Reopened Notes" and, together with the Initial Notes, the "5.625% Notes,") which brought the aggregate outstanding principal amount to $125.0 million. The Reopened Notes are fully fungible with, and rank equally in right of payment with the Initial Notes. We received total proceeds of $122.3 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds from the Initial Notes to fully redeem our 7.375% Notes totaling $97.9 million and the net proceeds from the Reopened Notes to make investments and for general corporate purposes. The 5.625% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2023, 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 5.625% Notes on or after April 1, 2023, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in May and November. At March 31, 2020 and December 31, 2019, the debt carrying value of the 5.625% Notes were $123.2 million and $123.1 million, respectively, net of $1.8 million and $1.9 million, respectively, of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 6.08% at both March 31, 2020 and December 31, 2019.

Subsequent Event

In April 2020, we issued $40.5 million aggregate principal amount of 8.00% senior unsecured notes due in 2023 in a private offering, generating net proceeds of $39.8 million. A significant portion of the net proceeds were used to repay secured indebtedness that financed our securities with margin call exposure.

Convertible Senior Unsecured Notes

In 2019, we issued $264.0 million in aggregate principal amount of 4.75% convertible senior notes (the “4.75% Convertible Notes”) through a private placement offering, which includes the exercised purchaser’s total over-allotment option of $34.0 million. The 4.75% Convertible Notes pay interest semiannually in arrears and are scheduled to mature in November 2022, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rate and the conversion rate at December 31, 2019 was 56.1695 shares of common stock per $1,000 of principal representing a conversion price of $17.80 per share of common stock. We received proceeds totaling $256.5 million, net of the underwriter’s discount and fees, which is being amortized through interest expense over the life of such notes. We used the net proceeds from the issuance primarily for the exchange of $228.7 million of our 5.25% convertible notes for a combination of $233.1 million in cash (which includes accrued interest) and 4,478,315 shares of our common stock. The remaining net proceeds were used for general corporate purposes. During 2019, we recorded a loss on extinguishment of debt of $7.3 million in connection with this exchange, which included an inducement charge of $1.1

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March 31, 2020

million. As of March 31, 2020, the 4.75% Convertible Notes had conversion rates of 56.1695 shares, common stock per $1,000 of principal, which represented a conversion price of $17.80 per share of common stock.

In 2018, we completed a similar exchange where we used the net proceeds from two separate private placements of our 5.25% convertible senior notes (the "5.25% Convertible Notes") to initially exchange portions of our 5.375% convertible senior notes (the "5.375% Convertible Notes") and 6.50% convertible senior notes (the "6.50% Convertible Notes").

At March 31, 2020, there were $0.5 million, $14.7 million and $0.2 million aggregate principal amount remaining of our 5.25% Convertible Notes issued on July 3, 2018, 5.25% Convertible Notes issued on July 20, 2018 and 5.375% Convertible Notes, respectively. The initial conversion rates of the 5.25% Convertible Notes issued on July 3, 2018, 5.25% Convertible Notes issued on July 20, 2018 and 5.375% Convertible Notes were 86.9943 shares, 77.8331 shares and 107.7122 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.50 per share, $12.85 per share and $9.28 per share of common stock, respectively. At March 31, 2020, the 5.25% Convertible Notes issued on July 3, 2018, 5.25% Convertible Notes issued on July 20, 2018 and 5.375% Convertible Notes had conversion rates of 89.6066 shares, 80.1703 shares and 115.5849 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.16 per share, $12.47 per share and $8.65 per share of common stock, respectively. The 5.25% Convertible Notes and 5.375% Convertible Notes pay interest semiannually in arrears and have scheduled maturity dates in July 2021 and November 2020, respectively, unless earlier converted or repurchased by the holders pursuant to their terms.

Our convertible senior unsecured notes are not redeemable by us prior to their maturities and are convertible by the holder into, at our election, cash, shares of our common stock, or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may require us to repurchase all, or any portion, of their notes for cash equal to 100% of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the agreements. We intend to settle the principal balance of our convertible debt in cash and have not assumed share settlement of the principal balance for purposes of computing earnings per share (“EPS”). At the time of issuance, there was no precedent or policy that would indicate that we would settle the principal in shares or the conversion spread in cash.

Accounting guidance requires that convertible debt instruments with cash settlement features, including partial cash settlement, account for the liability component and equity component (conversion feature) of the instrument separately. The initial value of the liability component reflects the present value of the discounted cash flows using the nonconvertible debt borrowing rate at the time of the issuance. The debt discount represents the difference between the proceeds received from the issuance and the initial carrying value of the liability component, which is accreted back to the notes principal amount through interest expense over the term of the notes, which was 2.51 years and 2.67 years at March 31, 2020 and December 31, 2019, respectively, on a weighted average basis.

The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes were as follows (in thousands):

Liability

Equity

 Component

 Component

Unamortized Debt 

Unamortized Deferred 

Net Carrying 

Net Carrying 

Period

    

UPB

    

Discount

    

Financing Fees

    

Value

    

Value

March 31, 2020

$

279,398

$

8,045

$

6,664

$

264,689

$

9,962

December 31, 2019

$

300,914

$

9,235

$

7,527

$

284,152

$

9,962

During the three months ended March 31, 2020, we incurred interest expense on the notes totaling $5.2 million, of which $3.4 million, $0.9 million and $0.9 million related to the cash coupon, the debt discount and amortization of the deferred

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March 31, 2020

financing fees, respectively. During the three months ended March 31, 2019, we incurred total interest expense on the notes of $5.2 million, of which $3.5 million, $0.9 million and $0.8 million related to the cash coupon, the debt discount and amortization of the deferred financing fees, respectively. Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 6.75% and 6.80% at March 31, 2020 and December 31, 2019, respectively.

Junior Subordinated Notes

The carrying values of borrowings under our junior subordinated notes were $141.1 million and $140.9 million at March 31, 2020 and December 31, 2019, respectively, which is net of a deferred amount of $11.3 million and $11.4 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $1.9 million and $2.0 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a floating rate based on LIBOR. The weighted average note rate was 4.28% and 4.75% at March 31, 2020 and December 31, 2019, respectively. Including certain fees and costs, the weighted average note rate was 4.37% and 4.83% at March 31, 2020 and December 31, 2019, respectively.

Debt Covenants

Credit Facilities, Repurchase Agreements and Unsecured Debt. The credit facilities, repurchase agreements and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at March 31, 2020.

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 as of March 31, 2020, as well as on the most recent determination dates in April 2020. 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 (i) cash on hand, (ii) income from any CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) 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.

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March 31, 2020

Our CLO compliance tests as of the most recent determination dates in April 2020 are as follows:

Cash Flow Triggers

    

CLO IX

    

CLO X

     

CLO XI

CLO XII

CLO XIII

Overcollateralization (1)

Current

 

134.68

%  

126.98

%

121.95

%

118.87

%

119.76

%

Limit

 

133.68

%  

125.98

%

120.95

%

117.87

%

118.76

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

Interest Coverage (2)

Current

 

361.00

%  

372.24

%

338.30

%

289.89

%

228.91

%

Limit

 

120.00

%  

120.00

%

120.00

%

120.00

%

120.00

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

(1)The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle.
(2)The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows:

Determination (1)

    

CLO  IX

    

CLO X

CLO XI

CLO XII

     

CLO XIII

April 2020

134.68

%

126.98

%

121.95

%

118.87

%

119.76

%

January 2020

134.68

%

126.98

%

121.95

%

118.87

%

October 2019

134.68

%

126.98

%

121.95

%

July 2019

134.68

%  

126.98

%  

121.95

%  

April 2019

134.69

%  

126.98

%  

(1)The table above represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented.

The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other.

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March 31, 2020

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 March 31, 

    

2020

    

2019

Beginning balance

$

34,648

$

34,298

Impact of adopting CECL - January 1, 2020

14,406

Provisions for loss sharing

21,896

879

Provisions reversal for loan repayments

(358)

(425)

Recoveries (charge-offs), net

 

160

(234)

Ending balance

$

70,752

$

34,518

When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan. A liability is recognized for the fair value of the guarantee obligation undertaken for the non-contingent aspect of the guarantee and is removed only upon either the expiration or settlement of the guarantee. At March 31, 2020 and 2019, guarantee obligations of $32.4 million and $31.5 million, respectively, were included in the allowance for loss-sharing obligations.

In addition to and separately from the fair value of the guarantee, we estimate our allowance for loss-sharing under CECL over the contractual period in which we are exposed to credit risk. The current expected loss related to loss-sharing was based on a collective pooling basis with similar risk characteristics, a reasonable and supportable forecast and a reversion period based on our average historical losses through the remaining contractual term of the portfolio. The increase in the provision for credit losses during the three months ended March 31, 2020 of $21.9 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $14.4 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic.

When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation. The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses. At March 31, 2020 and December 31, 2019, we had outstanding advances of $0.4 million and $0.5 million, respectively, which were netted against the allowance for loss-sharing obligations.

At March 31, 2020, our allowance for loss-sharing obligations, associated with expected losses under CECL was $38.4 million and represented 0.26% of the Fannie Mae servicing portfolio.

At March 31, 2020 and December 31, 2019, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $2.76 billion and $2.73 billion, respectively. The maximum quantifiable liability is not representative of the actual loss we would incur. We would be liable for this amount only if all of the loans we service for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.

Note 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. We do not use these derivatives for speculative purposes, but are instead using them to manage our exposure to interest rate risk.

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March 31, 2020

Agency Rate Lock and Forward Sale Commitments. We enter into contractual commitments to originate and sell mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrower "rate locks" a specified interest rate within time frames established by us. All potential borrowers are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers under the GSE programs, we enter into a forward sale commitment with the investor simultaneously with the rate lock commitment with the borrower. The forward sale contract locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale commitment.

These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of other income, net in the consolidated statements of operations. 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 operations. During the three months ended March 31, 2020 and 2019, we recorded a net gain of $8.2 million and a net loss of $2.5 million, respectively, from changes in the fair value of these derivatives in loss on derivative instruments, net and $21.9 million and $14.2 million, respectively, of income from MSRs. See Note 13 for details.

Interest Rate Swap Futures. We enter into over-the-counter interest rate swap futures (“Swap Futures”) to hedge our exposure to changes in interest rates inherent in (1) our Structured Business SFR loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization. The Swap Futures do not meet the criteria for hedge accounting, typically have a three-month maturity and are tied to the five-year and ten-year swap rates. Our Swap Futures are cleared by a central clearing house and variation margin payments, made in cash, are treated as a legal settlement of the derivative itself as opposed to a pledge of collateral.

During the three months ended March 31, 2020, we recorded realized losses of $2.6 million and unrealized losses of $0.4 million to our Structured Business and realized losses of $46.0 million and unrealized losses of $9.8 million to our Agency Business related to our Swap Futures. The realized and unrealized gains and losses are recorded in loss on derivative instruments, net on our consolidated statements of operations.

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March 31, 2020

A summary of our non-qualifying derivative financial instruments is as follows ($ in thousands):

March 31, 2020

Fair Value

Notional

Balance Sheet

Derivative

Derivative

Derivative

    

Count

    

Value

    

Location

    

Assets

    

Liabilities

 

Agency Business

Rate Lock Commitments

10

$

99,893

Other Assets/Other Liabilities

$

2,069

$

(4,808)

Forward Sale Commitments

59

395,103

Other Assets/Other Liabilities

10,614

(305)

Swap Futures

6,307

630,700

$

1,125,696

$

12,683

$

(5,113)

Structured Business

Swap Futures

345

$

34,500

    

December 31, 2019

Agency Business

    

Rate Lock Commitments

5

$

37,657

Other Assets/Other Liabilities

$

1,066

$

(202)

Forward Sale Commitments

79

483,576

Other Assets/Other Liabilities

369

(2,895)

Swap Futures

3,274

327,400

$

848,633

$

1,435

$

(3,097)

Structured Business

Swap Futures

271

$

27,100

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March 31, 2020

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):

March 31, 2020

December 31, 2019

Principal /

Carrying

Estimated

Principal /

Carrying

Estimated

    

Notional Amount

    

Value

    

Fair Value

    

Notional Amount

    

Value

    

Fair Value

Financial assets:

Loans and investments, net

$

4,800,544

$

4,638,004

$

4,679,039

$

4,279,611

$

4,189,960

$

4,228,071

Loans held-for-sale, net

978,736

991,696

1,001,224

847,126

861,360

876,975

Capitalized mortgage servicing rights, net

n/a

288,954

320,052

n/a

286,420

328,995

Securities held-to-maturity, net

106,484

84,406

81,887

111,028

88,699

91,738

Derivative financial instruments

341,180

 

12,683

 

12,683

173,532

 

1,435

 

1,435

Financial liabilities:

Credit and repurchase facilities

$

1,851,758

$

1,846,473

$

1,848,149

$

1,681,146

$

1,678,288

$

1,677,658

Collateralized loan obligations

2,532,593

 

2,513,096

 

2,260,964

2,147,467

 

2,130,121

 

2,147,944

Debt fund

70,000

 

68,717

 

70,115

70,000

68,629

70,138

Senior unsecured notes

600,000

 

591,854

 

514,100

325,000

 

319,799

 

331,225

Convertible senior unsecured notes, net

279,398

264,689

246,200

300,914

284,152

310,778

Junior subordinated notes

154,336

 

141,128

 

98,143

154,336

 

140,949

 

97,668

Derivative financial instruments

153,816

 

5,113

 

5,113

347,701

 

3,097

 

3,097

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. 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.

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.

Determining which category an asset or liability falls within the hierarchy requires judgment and we evaluate our hierarchy disclosures each quarter.

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March 31, 2020

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Loans and investments, net. Fair values of loans and investments that are not impaired are estimated using inputs based on direct capitalization rate and discounted cash flow methodologies using discount rates, which, in our opinion, best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality (Level 3). Fair values of impaired loans and investments are estimated using inputs that require significant judgments, which include assumptions regarding discount rates, capitalization rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plans and other factors (Level 3).

Loans held-for-sale, net. Consists of originated loans that are generally expected to be transferred or sold within 60 days to 180 days of loan funding, and are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics (Level 2). Fair value includes the fair value allocated to the associated future MSRs and is calculated pursuant to the valuation techniques described below for capitalized mortgage servicing rights, net (Level 3).

Capitalized mortgage servicing rights, net. Fair values are estimated using inputs based on discounted future net cash flow methodology (Level 3). The fair value of MSRs carried at amortized cost are estimated using a process that involves the use of independent third-party valuation experts, supported by commercially available discounted cash flow models and analysis of current market data. The key inputs used in estimating fair value include the contractually specified servicing fees, prepayment speed of the underlying loans, discount rate, annual per loan cost to service loans, delinquency rates, late charges and other economic factors.

Securities held-to-maturity, net. Fair values are approximated using inputs based on current market quotes received from financial sources that trade such securities and are based on prevailing market data and, in some cases, are derived from third-party proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions (Level 3).

Derivative financial instruments. The fair values of rate lock and forward sale commitments are estimated using valuation techniques, which include internally-developed models developed based on changes in the U.S. Treasury rate and other observable market data (Level 2). The fair value of rate lock commitments includes the fair value of the expected net cash flows associated with the servicing of the loans, see capitalized mortgage servicing rights, net above for details on the applicable valuation technique (Level 3). We also consider the impact of counterparty non-performance risk when measuring the fair value of these derivatives. Given the credit quality of our counterparties, the short duration of interest rate lock commitments and forward sale contracts, and our historical experience, the risk of nonperformance by our counterparties is not significant.

Credit facilities and repurchase agreements. Fair values for credit facilities and repurchase agreements 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 facilities and repurchase agreement for the Agency Business bear interest at rates that are similar to those available in the market currently and the fair values are estimated using Level 2 inputs. For these facilities, the fair values approximate their carrying values.

Collateralized loan obligations, Debt Fund 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).

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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, net. Fair values are estimated based on current market quotes received from inactive markets (Level 2).

We measure certain financial assets and financial liabilities at fair value on a recurring basis. The fair values of these financial assets and liabilities were determined using the following input levels as of March 31, 2020 (in thousands):

Fair Value Measurements Using Fair

Carrying

Value  Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Derivative financial instruments

$

12,683

$

12,683

$

$

10,614

$

2,069

Financial liabilities:

Derivative financial instruments

$

5,113

$

5,113

$

$

5,113

$

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 as of March 31, 2020 (in thousands):

Fair Value Measurements Using Fair

Net Carrying

Value Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Impaired loans, net (1)

$

113,434

$

113,434

$

$

$

113,434

(1)We had an allowance for loan losses of $103.7 million relating to nine impaired loans with an aggregate carrying value, before loan loss reserves, of $217.1 million at March 31, 2020.

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 loan 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 we will be unable to collect all amounts due for both principal and interest 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 loan losses. 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. The table above and below includes all impaired loans, regardless of the period in which the impairment was recognized.

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March 31, 2020

Quantitative information about Level 3 fair value measurements at March 31, 2020 were as follows ($ in thousands):

Valuation

    

    

Fair Value

    

Techniques

    

Significant Unobservable Inputs

 

Financial assets:

Impaired loans:

Land

$

48,931

Discounted cash flows

 

Discount rate

21.50

%

 

Revenue growth rate

3.00

%

Hotel

42,163

 

Discounted cash flows /

 

Discount rate

11.50

%

direct capitalization

 

Capitalization rate

3.10

%

 

Revenue growth rate

25.00

%

Retail

20,629

Discounted cash flows

Discount rate

10.04

%

Capitalization rate

9.25

%

Revenue growth rate

1.55

%

Healthcare

1,000

Discounted cash flows

Capitalization rate

14.30

%

Office

711

Discounted cash flows

 

Discount rate

11.00

%

 

Capitalization rate

9.00

%

 

Revenue growth rate

2.50

%

Derivative financial instruments:

Rate lock commitments

2,069

Discounted cash flows

W/A discount rate

9.62

%

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 were as follows (in thousands):

Fair Value Measurements Using Significant Unobservable Inputs

Three Months Ended March 31, 

    

2020

    

2019

Derivative assets and liabilities, net

Balance at beginning of period

$

1,066

$

324

Settlements

(11,717)

(14,157)

Realized gains recorded in earnings

10,651

13,833

Unrealized gains recorded in earnings

2,069

400

Balance at end of period

$

2,069

$

400

The components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale were as follows (in thousands):

Notional/

Fair Value of

Interest Rate

Total Fair Value

March 31, 2020

    

Principal Amount

    

Servicing Rights

    

Movement Effect

    

Adjustment

Rate lock commitments

$

99,893

$

3,987

$

(4,808)

$

(821)

Forward sale commitments

395,103

4,808

4,808

Loans held-for-sale, net (1)

978,735

15,254

15,254

Total

$

19,241

$

$

19,241

(1)Loans held-for-sale, net are recorded at the lower of cost or market on an aggregate basis and includes fair value adjustments related to estimated cash flows from MSRs.

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We measure certain assets and liabilities for which fair value is only disclosed. The fair value of these assets and liabilities are determined using the following input levels as of March 31, 2020 (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

$

4,638,004

$

4,679,039

$

$

$

4,679,039

Loans held-for-sale, net

991,696

1,001,224

985,970

15,254

Capitalized mortgage servicing rights, net

288,954

320,052

320,052

Securities held-to-maturity, net

84,406

81,887

81,887

Financial liabilities:

Credit and repurchase facilities

$

1,846,473

$

1,848,149

$

$

790,739

$

1,057,410

Collateralized loan obligations

 

2,513,096

 

2,260,964

 

 

 

2,260,964

Debt fund

68,717

70,115

70,115

Senior unsecured notes

 

591,854

 

514,100

 

514,100

 

 

Convertible senior unsecured notes, net

264,689

246,200

246,200

Junior subordinated notes

 

141,128

 

98,143

 

 

 

98,143

Note 14 — Commitments and Contingencies

Impact of COVID-19. The magnitude and duration of COVID-19 and its impact on our business and on our borrowers is uncertain and will mostly depend on future events, which cannot be predicted. As this pandemic continues and if economic conditions worsen, it may have long-term impacts on our financial position, results of operations and cash flows. See Note 2 and Item 1A. Risk Factors for further discussion of COVID-19.

Agency Business Commitments. Our Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements. Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements.

As of March 31, 2020, we were required to maintain at least $14.8 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. As of March 31, 2020, we met the restricted liquidity requirement with a $45.0 million letter of credit and $2.6 million of cash collateral.

As of March 31, 2020, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $37.1 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

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March 31, 2020

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. As of March 31, 2020, 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 or FHA, as such requirements for these investors are only required on an annual basis.

As an approved designated seller/servicer under Freddie Mac's SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations required by this program. Under the SBL program, we are required to post collateral equal to $5.0 million, which is satisfied with a $5.0 million letter of credit.

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. As of March 31, 2020, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands):

    

    

Minimum Annual

    

    

Debt

    

Operating Lease

    

Year

    

Obligations

    

Payments

    

Total

2020 (nine months ending December 31, 2020)

$

820,368

$

3,984

$

824,352

2021

 

409,457

 

3,124

 

412,581

2022

 

2,366,841

 

2,775

 

2,369,616

2023

 

781,235

 

2,052

 

783,287

2024

 

378,013

 

1,459

 

379,472

2025

 

 

1,503

 

1,503

Thereafter

 

732,171

 

1,802

 

733,973

Total

$

5,488,085

$

16,699

$

5,504,784

During the three months ended March 31, 2020 and 2019, we recorded lease expense of $1.6 million and $1.5 million, respectively.

Unfunded Commitments. In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $183.8 million as of March 31, 2020 that we are obligated to fund as borrowers meet certain requirements. Specific requirements include, but are not limited to, property renovations, building construction and conversions based on criteria met by the borrower in accordance with the loan agreements.

Litigation. We are currently neither subject to any material litigation nor, to the best of our knowledge, threatened by any material litigation other than the following:

In June 2011, three related lawsuits were filed by the Extended Stay Litigation Trust (the “Trust”), a post-bankruptcy litigation trust alleged to have standing to pursue claims that previously had been held by Extended Stay, Inc. and the Homestead Village L.L.C. family of companies (together “ESI”) (formerly Chapter 11 debtors, together the "Debtors") that have emerged from bankruptcy. Two of the lawsuits were filed in the U.S. Bankruptcy Court for the Southern District of New York, and the third in the Supreme Court of the State of New York, New York County. There were 73 defendants in the three lawsuits, including 55 corporate and partnership entities and 18 individuals. A subsidiary of ours

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March 31, 2020

and certain other entities that are affiliates of ours are included as defendants. The New York State Court action has been removed to the Bankruptcy Court. Our affiliates filed a motion to dismiss the three lawsuits.

The lawsuits all allege, as a factual basis and background certain facts surrounding the June 2007 leveraged buyout of ESI from affiliates of Blackstone Capital. Our subsidiary, Arbor ESH II, LLC, had a $115.0 million investment in the Series A1 Preferred Units of a holding company of Extended Stay, Inc. The New York State Court action and one of the two federal court actions name as defendants, Arbor ESH II, LLC, Arbor Commercial Mortgage, LLC ("ACM ") and ABT-ESI LLC, an entity in which we have a membership interest, among the broad group of defendants. These two actions were commenced by substantially identical complaints. The defendants are alleged in these complaints, among other things, to have breached fiduciary and contractual duties by causing or allowing the Debtors to pay illegal dividends or other improper distributions of value at a time when the Debtors were insolvent. These two complaints also allege that the defendants aided and abetted, induced, or participated in breaches of fiduciary duty, waste, and unjust enrichment (“Fiduciary Duty Claims”) and name a director of ours, and a former general counsel of ACM, each of whom had served on the Board of Directors of ESI for a period of time. We are defending these two defendants and paying the costs of such defense. On the basis of the foregoing allegations, the Trust has asserted claims under a number of common law theories, seeking the return of assets transferred by the Debtors prior to the Debtors' bankruptcy filing.

In the third action, filed in Bankruptcy Court, the same plaintiff, the Trust, has named ACM and ABT-ESI LLC, together with a number of other defendants and asserts claims, including constructive and fraudulent conveyance claims under state and federal statutes, as well as a claim under the Federal Debt Collection Procedure Act.

In June 2013, the Trust filed a motion to amend the lawsuits, to, among other things, (i) consolidate the lawsuits into one lawsuit, (ii) remove 47 defendants, none of whom are related to us, from the lawsuits so that there are 26 remaining defendants, including 16 corporate and partnership entities and 10 individuals, and (iii) reduce the counts within the lawsuits from over 100 down to 17. The remaining counts in the amended complaint against our affiliates are principally state law claims for breach of fiduciary duties, waste, unlawful dividends and unjust enrichment, and claims under the Bankruptcy Code for avoidance and recovery actions, among others. The bankruptcy court granted the motion and the amended complaint has been filed. The amended complaint seeks approximately $139.0 million in the aggregate, plus interest from the date of the alleged unlawful transfers, from director designees, portions of which are also sought from our affiliates as well as from unaffiliated defendants. We have moved to dismiss the referenced actions and intend to vigorously defend against the claims asserted therein. During a status conference held in March 2014, the Court heard oral argument on the motion to dismiss and adjourned the case pending a ruling. Subsequent to that hearing, a new judge was assigned to the case and, in November 2016, the new judge entered an order directing the parties to file supplemental briefs addressing new cases decided since the last round of briefing. Oral arguments regarding the motion to dismiss were heard at a hearing held in January 2017. The Court reserved decision at that hearing. The next hearing on the case has been adjourned to May 19, 2020.

We have not made a loss accrual for this litigation because we believe that it is not probable that a loss has been incurred and an amount cannot be reasonably estimated.

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.

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Consolidated VIEs. We have determined that our operating partnership, ARLP, and our CLO and Debt Fund entities, which we consolidate, are VIEs. ARLP is already consolidated in our financial statements, therefore, the identification of this entity as a VIE had no impact on our consolidated financial statements.

Our CLO and Debt Fund consolidated entities invest in real estate and real estate-related securities and are financed by the issuance of debt securities. We, or one of our affiliates, are named collateral manager, servicer, and special servicer for all collateral assets held in CLOs, which we believe gives us the power to direct the most significant economic activities of those entities. We also have exposure to losses to the extent of our equity interests and also have 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 by the CLOs and Debt Fund to third parties. Our operating results and cash flows include the gross amounts related to CLO and Debt Fund assets and liabilities as opposed to our net economic interests in those entities.

The assets and liabilities related to these consolidated CLOs and Debt Fund are as follows (in thousands):

    

March 31, 2020

    

December 31, 2019

Assets:

Restricted cash

$

301,045

$

208,467

Loans and investments, net

2,911,257

2,557,909

Other assets

20,711

18,380

Total assets

$

3,233,013

$

2,784,756

 

 

Liabilities:

Collateralized loan obligations

$

2,513,096

$

2,130,121

Debt fund

68,717

68,629

Due to related party

231

6,734

Other liabilities

 

3,544

 

4,115

Total liabilities

$

2,585,588

$

2,209,599

Assets held by the CLOs and Debt Fund are restricted and can only be used to settle obligations of the CLOs and Debt Fund, respectively. The liabilities of the CLOs and Debt Fund 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 consolidated CLOs or Debt Fund.

Unconsolidated VIEs. We determined that we are not the primary beneficiary of 28 VIEs in which we have a variable interest as of March 31, 2020 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance.

A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, as of March 31, 2020 is as follows (in thousands):

Type

    

Carrying Amount (1)

Loans

$

341,010

B Piece and SFR bonds

85,398

Equity investments

12,930

Agency interest only strips

2,424

Total

$

441,762

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March 31, 2020

(1)Represents the carrying amount of loans and investments before reserves. At March 31, 2020, $129.0 million of loans to VIEs had corresponding loan loss reserves of $79.4 million. The maximum loss exposure as of March 31, 2020 would not exceed the carrying amount of our investment.

These unconsolidated VIEs have exposure to real estate debt of approximately $4.21 billion at March 31, 2020.

Note 16 — Equity

Preferred Stock. The Series A, B and C preferred stock outstanding are redeemable by us.

Common Stock.

We have an “At-The-Market” equity offering sales agreement with JMP Securities LLC (“JMP”) which entitles us to issue and sell up to 7,500,000 shares of our common stock 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 three months ended March 31, 2020, we sold 1,350,000 shares for net proceeds of $19.4 million. As of March 31, 2020, we had approximately 3,000,000 shares available under this agreement.

In March 2020, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $100.0 million of our outstanding common stock. The repurchase of our common stock may be made from time to time in the open market, in privately negotiated transactions or in compliance with a Rule 10b5-1 plan based on our stock price, general market conditions, applicable legal requirements and other factors. The program may be discontinued or modified at any time. As of April 30, 2020, we repurchased 993,106 shares of our common stock under this program at a total cost of $3.9 million and an average cost of $3.98 per share.

During the three months ended March 31, 2020, we issued 319,259 and 41,601 shares in connection with the settlements of our 5.25% and 5.375% Convertible Notes, respectively. In February 2020, we also used a portion of the net proceeds from our public offering in December 2019 to purchase an aggregate of 747,500 shares of our common stock and OP Units from our chief executive officer and ACM at the same price the underwriters paid to purchase the shares.

As of March 31, 2020, we had $118.2 million available under our $500.0 million shelf registration statement that was declared effective by the SEC in June 2018.

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 (the "Acquisition"). Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $0.01 per share and is entitled to one vote each on any matter submitted for stockholder approval. The OP Units are entitled to receive distributions if and when our Board of Directors authorizes and declares common stock distributions. The OP Units are also redeemable for cash, or at our option, for shares of our common stock on a one-for-one basis.

At March 31, 2020, there were 20,369,265 OP Units outstanding, which represented 15.6% of the voting power of our outstanding stock.

Distributions. Dividends declared (on a per share basis) during the three months ended March 31, 2020 were as follows:

Common Stock

Preferred Stock

Dividend (1)

Declaration Date

    

Dividend

    

Declaration Date

    

Series A

    

Series B

    

Series C

February 13, 2020

$

0.30

January 31, 2020

$

0.515625

$

0.484375

$

0.53125

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March 31, 2020

(1)The dividend declared on January 31, 2020 was for December 1, 2019 through February 29, 2020.

Common Stock – On May 6, 2020, the Board of Directors declared a cash dividend of $0.30 per share of common stock. The dividend is payable on July 15, 2020 to common stockholders of record as of the close of business on June 30, 2020.

Preferred Stock – On May 1, 2020, the Board of Directors declared a cash dividend of $0.515625 per share of 8.25% Series A preferred stock; a cash dividend of $0.484375 per share of 7.75% Series B preferred stock; and a cash dividend of $0.53125 per share of 8.50% Series C preferred stock. These amounts reflect dividends from March 1, 2020 through May 31, 2020 and are payable on June 1, 2020 to preferred stockholders of record on May 15, 2020.

Deferred Compensation. In March 2020, we issued 298,991 shares of restricted common stock to employees under the 2017 Amended Omnibus Stock Incentive Plan (the “2017 Plan”) with a total grant date fair value of $3.2 million. Substantially all of these shares have one third vest as of the grant date and one third vesting on each of the first and second anniversaries of the grant date. In March 2020, we issued 36,396 shares of fully vested common stock to the independent members of the Board of Directors under the 2017 Plan with a grant date fair value of $0.4 million.

In March 2020, we issued 45,928 shares of restricted common stock to our chief executive officer under his 2017 annual incentive agreement with a grant date fair value of $0.5 million. One quarter of the shares vested as of the grant date and one quarter will vest on each of the first, second and third anniversaries of the grant date. Our chief executive officer was also granted up to 275,569 performance-based restricted stock units with a grant date fair value of $0.1 million that vest at the end of a four-year performance period based on our achievement of certain total stockholder return objectives. During the first quarter of 2020, 421,348 shares of previously granted performance-based restricted stock units fully vested, which were net settled for 215,014 common shares.

During the first quarter of 2020, 143,096 shares were withheld by us from the net settlement of restricted common stock by employees for payment of withholding taxes.

Earnings Per Share. Basic EPS is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period using the treasury stock method. Our common stock equivalents include the weighted average dilutive effect of performance-based restricted stock units granted to our chief executive officer, OP Units and convertible senior unsecured notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

A reconciliation of the numerator and denominator of our basic and diluted EPS computations ($ in thousands, except share and per share data) is as follows:

irad

Three Months Ended March 31,

2020

2019

    

Basic

    

Diluted

    

Basic

    

Diluted

Net (loss) income attributable to common stockholders (1)

$

(59,310)

$

(59,310)

$

22,650

$

22,650

Net (loss) income attributable to noncontrolling interest (2)

(10,934)

5,468

Net (loss) income attributable to common stockholders and noncontrolling interest

$

(59,310)

$

(70,244)

$

22,650

$

28,118

Weighted average shares outstanding

 

110,792,412

 

110,792,412

 

85,151,878

 

85,151,878

Dilutive effect of OP Units (2)

20,424,787

20,554,434

Dilutive effect of restricted stock units (3)

 

 

 

 

1,376,514

Dilutive effect of convertible notes (4)

786,685

Weighted average shares outstanding

 

110,792,412

 

131,217,199

 

85,151,878

 

107,869,511

Net (loss) income per common share (1)

$

(0.54)

$

(0.54)

$

0.27

$

0.26

(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)Mr. Kaufman is granted restricted stock units annually, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives.
(4)The convertible senior unsecured notes impact diluted earnings per share if the average price of our common stock exceeds the conversion price, as calculated in accordance with the terms of the indenture, of which was antidilutive for March 31, 2020.

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 criteria to maintain our REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.

The Agency Business is operated through our TRS Consolidated Group and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.

In the three months ended March 31, 2020 and 2019, we recorded a tax benefit of $14.4 million and less than $0.1 million, respectively. The tax benefit recorded in the three months ended March 31, 2020 consisted of a deferred tax benefit of $19.9 million and a current tax provision of $5.5 million. The tax benefit recorded in the three months ended March 31, 2019 consisted of a deferred tax benefit of $4.2 million and a current tax provision of $4.2 million.

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March 31, 2020

Current and deferred taxes are primarily recorded on the portion of earnings (losses) recognized by us with respect to our interest in the TRS’s. Deferred income tax assets and liabilities are calculated based on temporary differences between our U.S. GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets.

Note 18 — Agreements and Transactions with Related Parties

Shared Services Agreement.We have a shared services agreement with ACM where we provide limited support services to ACM and they reimburse us for the costs of performing such services. During the three months ended March 31, 2020 and 2019, we incurred $0.7 million and $0.9 million, respectively, of costs for services provided to ACM, which are included in due from related party on the consolidated balance sheets.

Other Related Party Transactions. Due from related party was $13.8 million and $10.7 million at March 31, 2020 and December 31, 2019, 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 shared services agreement described above.

Due to related party was $3.1 million and $13.1 million at March 31, 2020 and December 31, 2019, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions.

In certain instances our business requires our executives to charter privately-owned aircraft in furtherance of our business. In October 2019, we entered into an aircraft time sharing agreement with an entity controlled by our chief executive officer that owns 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 months ended March 31, 2020, we reimbursed the aircraft owner $0.3 million for the flights chartered by our executives pursuant the agreement.

In the first quarter of 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, formed AMAC Holdings III LLC ("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 (of which $10.9 million was funded as of March 31, 2020) for an 18% interest in AMAC III.

In July 2019, AMAC III originated a $7.0 million mezzanine loan to a borrower with which we have an outstanding $34.0 million bridge loan. In connection with the AMAC III mezzanine loan, we entered into an inter-creditor agreement with AMAC III. In addition, we originated a $15.6 million Private Label loan in December 2019 to a borrower which is 100% owned by AMAC III, which bears interest at a fixed rate of 3.735% and matures in January 2030. We recorded income of less than $0.1 million in the three months ended March 31, 2020 related to this investment. Interest income recorded from our bridge and Private Label loans totaled $0.9 million for the three months ended March 31, 2020.

In 2018, we originated a $61.2 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 10% of the borrowing entity. The loan has an interest rate of LIBOR plus 4.50% with a LIBOR floor of 2.00% and matures in October 2021. In the fourth quarter of 2019, the related party investors liquidated their equity investment. Interest income recorded from this loan totaled $0.3 million for the three months ended March 31, 2019.

In 2018, we originated a $37.5 million bridge loan, which was used to purchase several multifamily properties. In January 2019, an entity owned, in part, by an immediate family member of our chief executive officer, purchased a 23.9% interest in the borrowing entity. The loan has an interest rate of LIBOR plus 4.25% with a LIBOR floor of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

2.375% and matures in October 2020. Interest income recorded from this loan totaled $0.6 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively.

In 2018, we acquired a $19.5 million bridge loan originated by ACM. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 85% of the borrowing entity. The loan has an interest rate of LIBOR plus 4.0% with a LIBOR floor of 2.125% and matures in July 2021. Interest income recorded from this loan totaled $0.3 million for both the three months ended March 31, 2020 and 2019.

In 2018, we originated a $17.7 million bridge loan to an entity owned, in part, by an immediate family member of our chief executive officer, who owns a 10.8% interest in the borrowing entity. The loan was used to purchase several undeveloped parcels of land. The loan had a fixed interest rate of 10% and was scheduled to mature in February 2020. In September 2019, the borrower made a partial paydown of principal totaling $4.7 million and the remaining balance was paid off in January 2020. Interest income recorded from this loan totaled $0.1 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.

In 2018, we originated a $21.7 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% in the borrowing entity. The loan has an interest rate of LIBOR plus 4.75% with a LIBOR floor of 1.25% and matures in June 2021. Interest income recorded from this loan totaled $0.4 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively.

In 2018, we acquired a $9.4 million bridge loan originated by ACM, of which $8.9 million was funded as of March 31, 2020. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% of the borrowing entity. The loan has an interest rate of LIBOR plus 5.0% with a LIBOR floor of 1.25% and matures in January 2021. Interest income recorded from this loan totaled $0.1 million for both the three months ended March 31, 2020 and 2019.

In 2017, we acquired a $32.8 million bridge loan originated by ACM. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 90% of the borrowing entity. The loan had an interest rate of LIBOR plus 5.0% with a LIBOR floor of 1.13% and was scheduled to mature in June 2020. In October 2019, the borrower repaid this loan in full. Interest income recorded from this loan totaled $0.6 million for the three months ended March 31, 2019.

In 2017, we originated two bridge loans totaling $28.0 million on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45% of the borrowing entity. The loans had an interest rate of LIBOR plus 5.25% with LIBOR floors ranging from 1.24% to 1.54% and were scheduled to mature in the fourth quarter of 2020. The borrower refinanced these loans with a $31.1 million bridge loan we originated in November 2019 with an interest rate of LIBOR plus 4.0%, a LIBOR floor of 1.80% and a maturity date in October 2021. Interest income recorded from these loans totaled $0.5 million and $0.6 million for the three months ended March 31, 2020 and 2019, 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 million for both the three months ended March 31, 2020 and 2019.

In 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33% managing member, purchased a multifamily apartment complex which assumed an existing $8.3 million Fannie Mae loan that we service.

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March 31, 2020

Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6% interest at March 31, 2020. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 20% of the original UPB. Upon the sale, we received a 1% loan assumption fee which was governed by existing loan agreements that were in place when the loan was originated in 2015, prior to such purchase. Servicing revenue recorded from this loan was less than $0.1 million for both the three months ended March 31, 2020 and 2019.

In 2016, we originated $48.0 million of bridge loans on six multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns interests ranging from 10.5% to 12.0% in the borrowing entities. The loans had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and were scheduled to mature in September 2019. In 2017, a $6.8 million loan on one property paid off in full and in 2018 four additional loans totaling $28.3 million paid off in full. In January 2019, $10.9 million of the $12.9 million remaining bridge loan paid off, with the $2.0 million remaining UPB converting to a mezzanine loan with a fixed interest rate of 10.0% and a January 2024 maturity. Interest income recorded from the remaining mezzanine loan totaled $0.1 million for both the three months ended March 31, 2020 and 2019.

In 2016, we originated a $12.7 million bridge loan and a $5.2 million preferred equity investment 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. The bridge loan has an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and the preferred equity investment has a fixed interest rate of 10%. The bridge loan and the preferred equity investment paid off in full in May 2019. In March 2020, we originated a $14.8 million Private Label loan and a $3.4 million mezzanine loan to the properties. The Private Label loan bears interest at a fixed rate of 3.10% and the mezzanine loan bears interest at a fixed rate of 9.00% and both loans mature in April 2030. Interest income recorded from these loans totaled less than $0.1 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively.

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. As a result of this transaction, we had an initial indirect interest of 22.5% in this entity. We recorded income from these investments of $2.9 million and $0.8 million in the three months ended March 31, 2020 and 2019, respectively. In connection with a litigation settlement related to this investment, we provided a guaranty of up to 50% of any amounts payable in connection with the settlement. ACM has also provided us with a guaranty to pay up to 50% of any amounts we may pay under this guaranty. The final payment was made under this settlement in January 2020 and we have no additional exposure.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

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 June 2018, the owners of Lexford restructured part of its debt and we originated twelve 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 June 2018, had interest rates of LIBOR plus 4.0% and were scheduled to mature in June 2021. During 2019, the borrower made payoffs and partial paydowns of principal totaling $250.0 million. In March 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. Interest income recorded from these loans totaled $0.2 million and $4.5 million during the three months ended March 31, 2020 and 2019, respectively. Further, as part of this June 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 $1.1 million and $1.3 million during the three months ended March 31, 2020 and 2019, respectively, which were recorded as income from equity affiliates. Separate from the loans we originated in June 2018, we provide limited ("bad boy") guarantees for certain other debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard "bad" acts such as fraud or a material misrepresentation by Lexford or us. At March 31, 2020, this debt had an aggregate outstanding balance of $616.5 million and is scheduled to mature between 2020 and 2029.

Several of our executives, including our chief financial officer, general counsel and our chairman, chief executive officer and president, hold similar positions for ACM. Our chief executive officer and his affiliated entities (“the Kaufman Entities”) together beneficially own approximately 31% 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. Upon the closing of the Acquisition in 2016, we issued OP Units, each paired with one share of our special voting preferred shares. At March 31, 2020, ACM holds 3,898,554 shares of our common stock and 14,669,101 OP Units, which represents 14.2% 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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Note 19 — Segment Information

The summarized statements of operations and balance sheet data, as well as certain other data, by segment are included in the following tables ($ in thousands). Specifically identifiable costs are recorded directly to each business segment. For items not specifically identifiable, costs have been allocated between the business segments using the most meaningful allocation methodologies, which was predominately direct labor costs (i.e., time spent working on each business segment). Such costs include, but are not limited to, compensation and employee related costs, selling and administrative expenses and stock-based compensation.

Three Months Ended March 31, 2020

Structured

Agency

Other /

    

Business

    

 Business

    

Eliminations (1)

    

Consolidated

Interest income

$

78,477

$

10,049

$

$

88,526

Interest expense

43,399

6,583

49,982

Net interest income

35,078

3,466

38,544

Other revenue:

Gain on sales, including fee-based services, net

14,305

14,305

Mortgage servicing rights

21,934

21,934

Servicing revenue

25,124

25,124

Amortization of MSRs

(11,822)

(11,822)

Property operating income

2,192

2,192

Loss on derivative instruments, net

(3,000)

(47,731)

(50,731)

Other income, net

1,303

1,303

Total other revenue

495

1,810

2,305

Other expenses:

Employee compensation and benefits

10,846

23,406

34,252

Selling and administrative

4,450

6,602

    

11,052

Property operating expenses

2,443

2,443

Depreciation and amortization

620

1,327

1,947

Provision for loss sharing (net of recoveries)

21,537

21,537

Provision for credit losses (net of recoveries)

53,890

492

54,382

Total other expenses

72,249

53,364

125,613

Loss before extinguishment of debt, income from equity affiliates and income taxes

(36,676)

(48,088)

(84,764)

Loss on extinguishment of debt

(1,954)

(1,954)

Income from equity affiliates

3,992

3,992

(Provision for) benefit from income taxes

(83)

14,453

14,370

Net loss

(34,721)

(33,635)

(68,356)

Preferred stock dividends

1,888

1,888

Net loss attributable to noncontrolling interest

(10,934)

(10,934)

Net loss attributable to common stockholders

$

(36,609)

$

(33,635)

$

10,934

$

(59,310)

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Three Months Ended March 31, 2019

Structured

Agency

Other /

    

Business

    

Business

    

Eliminations (1)

    

Consolidated

Interest income

$

65,809

$

5,468

$

$

71,277

Interest expense

38,257

3,608

41,865

Net interest income

27,552

1,860

29,412

Other revenue:

Gain on sales, including fee-based services, net

16,389

16,389

Mortgage servicing rights

14,232

14,232

Servicing revenue

25,834

25,834

Amortization of MSRs

(12,282)

(12,282)

Property operating income

2,803

2,803

Loss on derivative instruments, net

(2,465)

(2,465)

Other income, net

337

337

Total other revenue

3,140

41,708

44,848

Other expenses:

Employee compensation and benefits

8,464

23,300

31,764

Selling and administrative

4,421

5,340

9,761

Property operating expenses

2,396

2,396

Depreciation and amortization

512

1,400

1,912

Provision for loss sharing (net of recoveries)

454

454

Total other expenses

15,793

30,494

46,287

Income before extinguishment of debt, income from equity affiliates and income taxes

14,899

13,074

27,973

Loss on extinguishment of debt

(128)

(128)

Income from equity affiliates

2,151

2,151

Benefit from income taxes

10

10

Net income

16,922

13,084

30,006

Preferred stock dividends

1,888

1,888

Net income attributable to noncontrolling interest

5,468

5,468

Net income attributable to common stockholders

$

15,034

$

13,084

$

(5,468)

$

22,650

(1)Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

March 31, 2020

    

Structured Business

    

Agency Business

    

Consolidated

Assets:

Cash and cash equivalents

$

106,879

$

115,451

$

222,330

Restricted cash

301,468

2,599

304,067

Loans and investments, net

4,638,004

4,638,004

Loans held-for-sale, net

991,696

991,696

Capitalized mortgage servicing rights, net

288,954

288,954

Securities held-to-maturity, net

20,000

64,406

84,406

Investments in equity affiliates

44,701

44,701

Goodwill and other intangible assets

12,500

96,871

109,371

Other assets

174,409

76,712

251,121

Total assets

$

5,297,961

$

1,636,689

$

6,934,650

Liabilities:

Debt obligations

$

4,635,218

$

790,739

$

5,425,957

Allowance for loss-sharing obligations

70,752

70,752

Other liabilities

155,383

56,508

211,891

Total liabilities

$

4,790,601

$

917,999

$

5,708,600

December 31, 2019

Assets:

Cash and cash equivalents

$

264,468

$

35,219

$

299,687

Restricted cash

 

208,926

 

1,949

 

210,875

Loans and investments, net

 

4,189,960

 

 

4,189,960

Loans held-for-sale, net

861,360

861,360

Capitalized mortgage servicing rights, net

286,420

286,420

Securities held-to-maturity, net

20,000

68,699

88,699

Investments in equity affiliates

 

41,800

 

 

41,800

Goodwill and other intangible assets

12,500

98,200

110,700

Other assets

 

118,175

 

31,484

 

149,659

Total assets

$

4,855,829

$

1,383,331

$

6,239,160

 

 

 

Liabilities:

 

 

 

Debt obligations

$

3,878,343

$

743,595

$

4,621,938

Allowance for loss-sharing obligations

34,648

34,648

Other liabilities

 

171,004

 

55,543

 

226,547

Total liabilities

$

4,049,347

$

833,786

$

4,883,133

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2020

Three Months Ended March 31, 

    

2020

    

2019

Origination Data:

Structured Business

New loan originations

$

856,229

$

416,295

Loan payoffs / paydowns

275,292

279,471

Agency Business

Origination Volumes by Investor:

Fannie Mae

$

581,973

$

546,886

Private Label

282,345

Freddie Mac

199,711

192,492

FHA

17,944

1,110

CMBS/Conduit

105,425

Total

$

1,081,973

$

845,913

Total loan commitment volume

$

1,267,219

$

846,963

Loan Sales Data:

Agency Business

Fannie Mae

$

754,044

$

746,937

Freddie Mac

179,703

223,773

FHA

23,313

25,631

CMBS/Conduit

105,425

Total

$

957,060

$

1,101,766

Sales margin (fee-based services as a % of loan sales)

1.49

%  

1.49%

MSR rate (MSR income as a % of loan commitments)

1.73

%  

1.68%

March 31, 2020

Wtd. Avg. Servicing

Wtd. Avg. Life of

UPB of Servicing

Fee Rate

Servicing Portfolio

Key Servicing Metrics for Agency Business:

    

Portfolio

    

(basis points)

    

(in years)

Fannie Mae

$

14,946,922

49.3

8.0

Freddie Mac

4,570,521

29.4

10.6

FHA

679,685

15.2

19.1

Total

$

20,197,128

43.6

8.9

    

December 31, 2019

Fannie Mae

    

$

14,832,844

   

49.3

   

7.8

Freddie Mac

4,534,714

30.0

10.6

FHA

691,519

15.4

18.7

Total

$

20,059,077

43.8

8.8

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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, single-family rental and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity.  We may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD. We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and sell finance products through CMBS programs and during the second half of 2019, we began to originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label" loans. We intend to pool and securitize the Private Label loans and sell certain securities in the securitizations to third-party investors, while retaining the highest risk bottom tranche bond referred to as the "B Piece."

We conduct our operations to qualify as a REIT. 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 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 or 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.

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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. If interest rates were to rise, it is likely that income from these investments would be significantly impacted, particularly from our investment in a residential mortgage banking business, since rising interest rates generally decrease the demand for residential real estate loans and the number of loan originations. 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.

COVID-19 Impact. During the first quarter of 2020, the global outbreak of COVID-19 has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home" orders, to close financial markets and to restrict operations of non-essential businesses. Such actions are creating significant disruptions in global supply chains, and adversely impacting many industries. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown. The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear and present risk with respect to our financial condition, results of operations, liquidity, and ability to pay distributions. We expect the effects of the COVID-19 pandemic to negatively impact our financial performance and operating results for the remainder of 2020.

Significant Developments During the First Quarter of 2020

Capital Markets Activity. We raised approximately $295.0 million of capital through the issuance of 4.50% senior unsecured debt and sales of our common stock through an “At-The-Market” equity offering sales agreement. We used a significant portion of the net proceeds from these capital raises to redeem secured indebtedness, make investments related to our business and for general corporate purposes.

Financing Activity.

We closed our thirteenth collateralized securitization vehicle (CLO XIII) totaling $800.0 million of real estate related assets and cash, of which $668.0 million of investment grade notes were issued to third party investors and $70.0 million of below investment-grade notes and a $62.0 million equity interest in the portfolio were retained by us;
We completed the unwind of CLO VIII, redeeming $282.9 million of outstanding notes which were repaid primarily from refinancing the remaining assets within our existing financing facilities (including CLO XIII), as well as with cash held by CLO VIII;
We were required to post $54.7 million of cash collateral in connection with margin calls on our securities repurchase facilities, which were used to reduce the UPB of those facilities in April 2020; and
We increased the capacity of the credit facilities and repurchase agreements in our Structured Business by more than $375.0 million by increasing the capacity of existing facilities.

Share Repurchases. In March 2020, we implemented a share repurchase program authorizing the repurchase of up to $100.0 million of our outstanding common stock. As of April 30, 2020, we repurchased 993,106 shares of our common stock under this program at a total cost of $3.9 million and an average cost of $3.98 per share.

Adoption of CECL. We recorded a $75.9 million credit loss provision in connection with the adoption of CECL. See Note 2 for details.

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Agency Business Activity.

Loan originations and sales totaled $1.08 billion and $957.1 million, respectively;
Our fee-based servicing portfolio grew 1% to $20.20 billion; and
We recorded losses on derivative instruments totaling $47.7 million, primarily related to our Swap Futures held to hedge interest rate exposure on our Private Label loans until they are securitized.

Structured Business Activity.  Our Structured loan and investment portfolio grew 12% to $4.80 billion on loan originations totaling $856.2 million, partially offset by loan runoff of $275.3 million.

Dividend. We declared a cash dividend on common stock of $0.30 per share, which is payable on July 15, 2020 to common stockholders of record on June 30, 2020.

Subsequent Events. In April 2020, we issued $40.5 million aggregate principal amount of 8.00% senior unsecured notes due in 2023 in a private offering, generating net proceeds of $39.8 million. A significant portion of the net proceeds were used to repay secured indebtedness that financed our securities with margin call exposure. In addition, as previously planned, we also completed the unwind of the $70.0 million Debt Fund and redeemed all the outstanding notes with a portion of the proceeds from our senior unsecured notes issued in March 2020.

Current Market Conditions, Risks and Recent Trends

As discussed throughout this quarterly report on Form 10-Q, the COVID-19 pandemic has impacted the global economy in an unprecedented way, swiftly halting activity across many industries, and causing significant disruption and liquidity constraints in many market segments, including the financial services, real estate and credit markets. The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic remain unclear. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown. Adverse economic conditions could result in declining real estate values, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which could significantly impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.

Prior to the current market dislocation, we were very active in the capital markets during the first quarter of 2020, closing a new $800.0 million CLO and issuing $275.0 million of senior notes. As a result of the market dislocation, our Board of Directors authorized a $100.0 million stock repurchase program. In addition, many commercial mortgage REITs have suffered from reduced available liquidity and, despite a reduction in available liquidity, we closed a $40.5 million private placement debt offering in April 2020.

Our Agency Business requires limited capital to grow, as originations are financed through warehouse facilities for generally up to 60 days before the loans are sold, therefore this lack of liquidity has not and should not, impact our ability to grow this business. On the other side, our Structured Business is more reliant on the capital markets to grow, and therefore, we expect growth in this business to be limited until liquidity is more readily available.

In our Structured Business, 82% of our portfolio is in multifamily assets with most of these loans containing interest reserves and/or replenishment obligations by our borrowers.

In our Agency Business, we have received requests for forbearances related to April 2020 payments totaling approximately 0.5% of our $14.95 billion Fannie Mae DUS portfolio and 4.0% of our $4.57 billion Freddie Mac portfolio. With respect to our outlook for May and June 2020 payments, we think there will be additional economic stress, which we will closely monitor and manage.

The federal government, Fannie Mae and Freddie Mac have made certain forbearance and non-eviction programs available to borrowers and tenants should they need to counteract any short-term pressure on their properties from COVID-19 and its impact on the economy. For borrowers, in order to qualify for a forbearance, they need to demonstrate they have been adversely affected by the pandemic and their ability to make their loan payments has been

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impacted. All loan and rent payments that are suspended remain the obligations of the borrowers and tenants and we are offering tenants of our borrowers impacted by the COVID-19 pandemic financial assistance through a $2.0 million rental assistance program that we launched in April 2020.

Interest rates have trended downward over the past several quarters and are currently at relatively low levels. While lower interest rates generally have a positive impact on origination volume as borrowers look to refinance loans to take advantage of lower rates, our net interest income may be negatively impacted as higher yielding loans are paid off and replaced with lower yielding loans. We are somewhat insulated from decreasing interest rates, since a large portion of our structured loan portfolio has LIBOR floors, which could increase our net interest income in the future if rates continue to decline.

We are a national originator with Fannie Mae and Freddie Mac, and the GSEs remain the most significant providers of capital to the multifamily market. In September 2019, the Federal Housing Finance Agency's ("FHFA") announced a revised cap structure to its previously released GSE 2019 Scorecard. The loan origination caps for both Fannie Mae and Freddie Mac were adjusted to $100 billion for each enterprise for a combined total of $200 billion ("2019/2020 Caps") and will run for a five-quarter period through the end of 2020. The new caps also mandate that 37.5% be directed towards mission driven business or affordable housing. The 2019/2020 Caps apply to all multifamily business and has no exclusions. 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. Therefore, a decline in our GSE originations could negatively impact our financial results. We are unsure whether the FHFA will impose stricter limitations on GSE multifamily production volume in the future.

Changes in Financial Condition

Assets — Comparison of balances at March 31, 2020 to December 31, 2019:

Our Structured loan and investment portfolio balance was $4.80 billion and $4.29 billion at March 31, 2020 and December 31, 2019, respectively.  This increase was primarily due to loan originations exceeding loan payoffs and paydowns by $580.9 million. See below for details.

Our portfolio had a weighted average current interest pay rate of 5.70% and 5.98% at March 31, 2020 and December 31, 2019, respectively. Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 6.35% and 6.68% at March 31, 2020 and December 31, 2019, respectively. Advances on our financing facilities totaled $4.70 billion and $3.93 billion at March 31, 2020 and December 31, 2019, respectively, with a weighted average funding cost of 3.19% and 3.82%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 3.68% and 4.35% at March 31, 2020 and December 31, 2019, respectively.

Activity from our Structured Business portfolio was comprised of the following ($ in thousands):

    

Three Months Ended

    

March 31, 2020

Loans originated

$

856,229

Number of loans

 

47

Weighted average interest rate

 

5.67

%  

Loan paid-off / paid-down

$

275,292

Number of loans

 

21

Weighted average interest rate

 

7.18

%  

Loans extended(1)

$

373,214

Number of loans

 

18

(1)The majority of our loan extensions did not include rate concessions and were completed under the normal course of business prior to the COVID-19 pandemic.

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Loans held-for-sale from the Agency Business increased $130.3 million, primarily related to $282.3 million of Private Label loan originations, partially offset by Fannie Mae loan sales exceeding originations by $172.1 million as noted in the following table (in thousands). Our GSE loans are generally sold within 60 days, while our Private Label loans are generally expected to be sold and securitized within 180 days from the loan origination date.

Three Months Ended

March 31, 2020

Loan

    

Originations

    

Loan Sales

Fannie Mae

$

581,973

$

754,044

Private Label

282,345

Freddie Mac

 

199,711

 

179,703

FHA

 

17,944

 

23,313

Total

$

1,081,973

$

957,060

Other assets increased $98.2 million, primarily due to $54.7 million of cash collateral we posted related to margin calls on our secured debt, a $23.5 million increase to deferred tax assets and a $22.2 million increase in derivative assets associated with the changes in fair value of our forward sales commitments and cash posted in connection with our Swap Futures.

Liabilities – Comparison of balances at March 31, 2020 to December 31, 2019:

Credit facilities and repurchase agreements increased $168.2 million, primarily due to funding of new structured loan activity and the financing of CLO bonds in connection with the completion of CLO XIII.

Collateralized loan obligations increased $383.0 million, primarily due to the issuance of a new CLO, where we issued $668.0 million of notes to third party investors, partially offset by the unwind of a CLO totaling $282.9 million.

Senior unsecured notes increased $272.1 million due to our issuance of $275.0 million of our 4.50% Notes.

Allowance for loss-sharing obligations increased $36.1 million, primarily due to the adoption of ASU 2016-13, which required us to record credit losses based on the CECL methodology. See Note 2 for details.

Equity

During the three months ended March 31, 2020, we sold 1,350,000 shares of our common stock through our “At-The-Market” agreement, raising net proceeds of $19.4 million. We also issued 360,860 million shares of our common stock in connection with settlements of our convertible notes. In February 2020, we used a portion of the net proceeds from our public offering in December 2019 to purchase an aggregate of 747,500 shares of our common stock and OP Units from our chief executive officer and ACM. In addition, through April 30, 2020, we repurchased 993,106 shares of our common stock under our share repurchase program.

Distributions – Dividends declared (on a per share basis) for the three months ended March 31, 2020 were as follows:

Common Stock

    

Preferred Stock

Dividend (1)

Declaration Date

    

Dividend

    

Declaration Date

    

Series A

    

Series B

    

Series C

February 13, 2020

$

0.30

January 31, 2020

$

0.515625

$

0.484375

$

0.53125

(1)The dividend declared on January 31, 2020 was for December 1, 2019 through February 29, 2020.

Common Stock — On May 6, 2020, the Board of Directors declared a cash dividend of $0.30 per share of common stock. The dividend is payable on July 15, 2020 to common stockholders of record as of the close of business on June 30, 2020.

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Preferred Stock — On May 1, 2020, the Board of Directors declared a cash dividend of $0.515625 per share of 8.25% Series A preferred stock; a cash dividend of $0.484375 per share of 7.75% Series B preferred stock; and a cash dividend of $0.53125 per share of 8.50% Series C preferred stock. These amounts reflect dividends from March 1, 2020 through May 31, 2020 and are payable on June 1, 2020 to preferred stockholders of record on May 15, 2020.

Deferred Compensation

We issued 344,919 shares of restricted stock to our employees, including our chief executive officer, 36,396 shares to the independent members of the Board of Directors and up to 275,569 shares of performance-based restricted stock units to our chief executive officer during the three months ended March 31, 2020. See Note 16 for details.

In addition, we also withheld 143,096 shares of restricted common stock from employees to net settle and pay their respective withholding taxes in connection with awards that vested.

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):

    

March 31, 2020

 

Wtd. Avg.

Wtd. Avg.

Annualized

 

Servicing

Age of

Portfolio

Prepayments

Delinquencies

 

Portfolio

Loan

Portfolio

Maturity

Interest Rate Type

Wtd. Avg.

as a Percentage

as a Percentage

 

Product

    

UPB

    

Count

    

(in years)

    

(in years)

    

Fixed

    

Adjustable

    

Note Rate

    

of Portfolio (1)

    

of Portfolio (2)

 

Fannie Mae

$

14,946,922

 

2,376

 

3.1

 

8.6

 

96

%  

4

%  

4.49

%  

10.24

%  

0.22

%

Freddie Mac

 

4,570,521

 

1,443

 

2.3

 

12.4

 

97

%  

3

%  

4.20

%  

11.26

%  

0.58

%

FHA

 

679,685

 

89

 

3.7

 

32.0

 

100

%  

0

%  

3.74

%  

20.15

%  

0.00

%

Total

$

20,197,128

 

3,908

 

2.9

 

10.3

 

96

%  

4

%  

4.40

%  

10.81

%  

0.30

%

   

December 31, 2019

 

Fannie Mae

   

$

14,832,844

   

2,349

   

3.0

   

8.6

   

95

5

%  

4.52

%  

11.37

%  

0.23

%

Freddie Mac

 

4,534,714

 

1,475

 

2.2

 

12.6

 

96

4

%  

4.23

%  

11.37

%  

0.57

%

FHA

 

691,519

 

92

 

3.6

 

32.1

 

100

0

%  

3.71

%  

3.98

%  

0.00

%

Total

$

20,059,077

 

3,916

 

2.9

 

10.3

 

95

5

%  

4.43

%  

11.12

%  

0.30

%

(1)Prepayments reflect loans repaid prior to nine months from the loan’s 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.
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. As of March 31, 2020 and December 31, 2019, delinquent loans totaled $60.0 million and $59.2 million, respectively, of which $33.3 million and $33.5 million, respectively, were in the foreclosure process. In addition, at December 31, 2019, loans collateralizing our servicing portfolio totaling $3.2 million were in bankruptcy.

Our servicing portfolio represents commercial real estate loans originated in our Agency Business, which are generally transferred or sold within 60 days from the date the loan is funded. Primarily all of the 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 March 31, 2020 and 2019

The following table provides our consolidated operating results ($ in thousands):

Three Months Ended March 31,

Increase / (Decrease)

 

    

2020

    

2019

    

Amount

    

Percent

Interest income

$

88,526

$

71,277

$

17,249

 

24

%

Interest expense

 

49,982

 

41,865

 

8,117

 

19

%

Net interest income

 

38,544

 

29,412

 

9,132

 

31

%

Other revenue:

 

 

  

 

  

 

  

Gain on sales, including fee-based services, net

 

14,305

 

16,389

 

(2,084)

 

(13)

%

Mortgage servicing rights

 

21,934

 

14,232

 

7,702

 

54

%

Servicing revenue, net

 

13,302

 

13,552

 

(250)

 

(2)

%

Property operating income

 

2,192

 

2,803

 

(611)

 

(22)

%

Loss on derivative instruments, net

(50,731)

(2,465)

(48,266)

nm

Other income, net

 

1,303

 

337

 

966

 

nm

Total other revenue

 

2,305

 

44,848

 

(42,543)

 

(95)

%

Other expenses:

 

  

 

  

 

  

 

  

Employee compensation and benefits

 

34,252

 

31,764

 

2,488

 

8

%

Selling and administrative

 

11,052

 

9,761

 

1,291

 

13

%

Property operating expenses

 

2,443

 

2,396

 

47

 

2

%

Depreciation and amortization

 

1,947

 

1,912

 

35

 

2

%

Provision for loss sharing (net of recoveries)

 

21,537

 

454

 

21,083

 

nm

Provision for credit losses (net of recoveries)

 

54,382

 

 

54,382

 

nm

Total other expenses

 

125,613

 

46,287

 

79,326

 

171

%

(Loss) income before extinguishment of debt, income from equity affiliates and income taxes

 

(84,764)

 

27,973

 

(112,737)

 

nm

Loss on extinguishment of debt

 

(1,954)

 

(128)

 

(1,826)

 

nm

Income from equity affiliates

 

3,992

 

2,151

 

1,841

 

86

%

Benefit from income taxes

14,370

10

14,360

nm

Net (loss) income

 

(68,356)

 

30,006

 

(98,362)

 

nm

Preferred stock dividends

 

1,888

 

1,888

 

 

Net (loss) income attributable to noncontrolling interest

 

(10,934)

 

5,468

 

(16,402)

 

nm

Net (loss) income attributable to common stockholders

$

(59,310)

$

22,650

$

(81,960)

 

nm

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 March 31,

 

2020

2019

 

Average

Interest

W/A Yield /

Average

Interest

W/A Yield /

 

Carrying

Income /

Financing

Carrying

Income /

Financing

 

    

Value (1)

    

Expense

    

Cost (2)

    

Value (1)

    

Expense

    

Cost (2)

 

Structured Business interest-earning assets:

 

  

 

  

 

  

 

  

 

  

 

  

Bridge loans

$

4,114,038

$

64,462

 

6.30

%  

$

3,027,916

$

55,747

 

7.47

%

Preferred equity investments

 

201,974

 

5,876

 

11.70

%  

 

131,536

 

3,830

 

11.81

%

Mezzanine / junior participation loans

 

176,528

 

4,849

 

11.05

%  

 

181,639

 

5,048

 

11.27

%

Other

86,173

1,866

11.32

%  

Core interest-earning assets

 

4,578,713

 

77,053

 

6.77

%  

 

3,341,091

 

64,625

 

7.37

%

Cash equivalents

 

443,026

 

1,424

 

1.29

%  

 

273,923

 

1,184

 

1.75

%

Total interest-earning assets

$

5,021,739

$

78,477

 

6.29

%  

$

3,615,014

$

65,809

 

6.99

%

Structured Business interest-bearing liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

CLO

$

2,251,885

$

18,497

 

3.30

%  

$

1,609,524

$

18,471

 

4.65

%

Warehouse lines

 

1,074,622

 

11,102

 

4.16

%  

 

722,893

 

9,179

 

5.15

%

Unsecured debt

 

697,605

 

10,687

 

6.16

%  

 

402,199

 

7,117

 

7.18

%

Trust preferred

 

154,336

 

1,834

 

4.78

%  

 

154,336

 

2,143

 

5.63

%

Debt fund

 

70,000

 

1,279

 

7.35

%  

 

70,000

 

1,347

 

7.80

%

Total interest-bearing liabilities

$

4,248,448

 

43,399

 

4.11

%  

$

2,958,952

 

38,257

 

4.93

%

Net interest income

$

35,078

 

  

 

  

$

27,552

 

  

(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 increase in interest income was due to increases of $12.7 million, or 19%, from our Structured Business and $4.6 million, or 84%, from our Agency Business. The increase from our Structured Business was primarily due to a 37% increase in our average core interest-earning assets, as a result of loan originations exceeding loan runoff, partially offset by an 8% decrease in the average yield on core interest-earning assets. The decrease in the average yield was largely due to lower rates on originations, as compared to loan runoff, and a decrease in the average LIBOR rate. The increase from our Agency Business was primarily due to an increase in the average loans held-for-sale, which is primarily due to Private Label loan originations that have not yet been securitized.

The increase in interest expense was due to increases of $5.1 million, or 13%, from our Structured Business and $3.0 million, or 82%, from our Agency Business. The increase from our Structured Business was primarily due to a 44% increase in the average balance of our interest-bearing liabilities, due to growth in our loan portfolio and the issuance of an additional CLO and unsecured debt, partially offset by a 17% decrease in the average cost of our interest-bearing liabilities. The decrease in the average cost was primarily due to lower rates on recently issued debt and a decrease in the average LIBOR rate. The increase from our Agency Business was primarily due to an increase in the average debt balance used to finance the increase in loans held-for-sale.

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Agency Business Revenue

The decrease in gain on sales, including fee-based services, net was primarily due to a 13% decrease ($144.7 million) in loan sales volume.

The increase in income from MSRs was primarily due to a 50% increase ($420.3 million) in loan commitment volume.

Loss on Derivative Instruments, Net

The increase in loss on derivative instruments was primarily due to increases of $45.3 million from our Agency Business and $3.0 million from our Structured Business, which were primarily due to losses recognized on our Swap Futures held in connection with our Private Label and SFR loans, respectively. See Note 12 for details.

Other Expenses

The increase in employee compensation and benefits expense was primarily due to an increase of $2.4 million, or 28%, from our Structured Business, which was mainly due to an increase in headcount associated with portfolio growth.

The increase in selling and administrative expense was primarily due to an increase of $1.3 million, or 24%, from our Agency Business, which was mainly due to increases in professional fees and technology costs.

The increases in our provision for loss sharing and provision for credit losses were primarily due to additional reserves of $75.9 million recorded in connection with the adoption of ASU 2016-13. See Note 2 for details.

Loss on Extinguishment of Debt

The increase in loss on extinguishment of debt was primarily due to $1.5 million of deferred financing fees recognized in connection with the unwind of CLO VIII.

Income from Equity Affiliates

Income from equity affiliates in the first quarter of 2020 primarily reflects income from our investment in a residential mortgage banking business of $2.9 million and distributions from an equity investment totaling $1.1 million. Income from equity affiliates in the first quarter of 2019 primarily reflects distributions from an equity investment totaling $1.3 million and $0.8 million of income from our investment in a residential mortgage banking business.

Benefit from Income Taxes

In the three months ended March 31, 2020 and 2019, we recorded a tax benefit of $14.4 million and less than $0.1 million, respectively. The tax benefit recorded in the three months ended March 31, 2020 consisted of a deferred tax benefit of $19.9 million and a current tax provision of $5.5 million. The tax benefit recorded in the three months ended March 31, 2019 consisted of a deferred tax benefit of $4.2 million and a current tax provision of $4.2 million.

Net Income Attributable to Noncontrolling Interest

The noncontrolling interest relates to the outstanding OP Units issued as part of the Acquisition. There were 20,369,265 OP Units and 20,487,544 OP Units outstanding as of March 31, 2020 and 2019, respectively, which represented 15.6% and 19.2% of our outstanding stock at March 31, 2020 and 2019, respectively.

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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.

We are monitoring the COVID-19 pandemic and its impact on our financing sources, borrowers and their tenants, and the economy as a whole. The magnitude and duration of the pandemic, and its impact on our operations and liquidity, are uncertain and continue to evolve. To the extent that our financing sources, borrower’s and their tenants continue to be impacted by the pandemic, 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.

We have approximately $4.70 billion in total structured debt outstanding at March 31, 2020. Of this total, approximately $3.57 billion, or 76%, does not contain mark-to-market provisions and is comprised of non-recourse CLO vehicles, senior unsecured debt and junior subordinated notes, the majority of which have maturity dates in 2022, or later. The remaining $1.06 billion of debt is in warehouse and repurchase facilities with several different banks that we have long-standing relationships with and substantially all of which have maturity extension options. While we expect to extend or renew all of our facilities as they mature, given the current market environment, we believe that the extension terms may be less favorable than the terms of our current facilities.

In addition to our ability to extend our warehouse and repurchase facilities, we have approximately $350.0 million in cash and available liquidity as well as other liquidity sources, including our $20.20 billion agency servicing portfolio, which is mostly prepayment protected and generates approximately $90.0 million a year in recurring cash flow.

During the first quarter of 2020, we had $350.0 million of securities financed with $235.0 million of debt that was subject to margin calls related to changes in interest spreads. We have significantly reduced this exposure to currently about $40.0 million through margin call payments, restructuring a portion of the debt and paying down a portion of the debt with the majority of our senior notes issued in April 2020.

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 requirements.

Cash Flows. Cash flows used in operating activities totaled $233.2 million during the three months ended March 31, 2020 and consisted primarily of net cash outflows of $131.6 million as a result of loan originations exceeding loan sales in our Agency Business, a net loss of $68.4 million and $54.7 million of cash collateral posted in connection with margin calls on our secured debt.

Cash flows used in investing activities totaled $510.8 million during the three months ended March 31, 2020. Loan and investment activity (originations and payoffs/paydowns) comprise the bulk of our investing activities. Loan originations from our Structured Business totaling $815.5 million, net of payoffs and paydowns of $298.7 million, resulted in net cash outflows of $516.8 million.

Cash flows provided by financing activities totaled $759.8 million during the three months ended March 31, 2020, and consisted primarily of net proceeds of $385.1 million from CLO activity, $275.0 million received from the issuance of senior unsecured notes and net cash inflows of $170.6 million from debt facility activities (funded loan originations were

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greater than facility paydowns). These cash inflows were partially offset by $41.3 million of distributions to our stockholders and OP Unit holders.

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 as of March 31, 2020. Our restricted liquidity and purchase and loss obligations were satisfied with letters of credit totaling $50.0 million and $2.6 million of cash collateral. 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.

Debt Instruments. 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 of our loans held-for-sale. The following is a summary of our debt facilities ($ in thousands):

March 31, 2020

Maturity

Debt Instruments

    

Commitment (1)

    

UPB (2)

    

Available 

    

Dates(3)

Structured Business

 

  

 

  

 

  

 

  

Credit facilities and repurchase agreements

$

1,976,093

$

1,059,651

$

916,442

 

2020 - 2022

Collateralized loan obligations (4)

 

2,532,593

 

2,532,593

 

 

2020 - 2025

Debt fund (4)

 

70,000

 

70,000

 

 

2020 - 2023

Senior unsecured notes

 

600,000

 

600,000

 

 

2023 - 2027

Convertible senior unsecured notes

 

279,398

 

279,398

 

 

2020 - 2022

Junior subordinated notes

 

154,336

 

154,336

 

 

2034 - 2037

Structured Business total

 

5,612,420

 

4,695,978

 

916,442

 

  

Agency Business

 

  

 

  

 

  

 

  

Credit facilities (5)

 

2,050,000

 

792,107

 

1,257,893

 

2020 - 2021

Consolidated total

$

7,662,420

$

5,488,085

$

2,174,335

 

  

(1)Includes temporary increases to committed amounts which have not expired as of March 31, 2020.
(2)Excludes the impact of deferred financing costs.
(3)See Note 14 for a breakdown of debt maturities by year.
(4)Maturity dates represent the weighted average remaining maturity based on the underlying collateral as of March 31, 2020.
(5)The ASAP agreement we have with Fannie Mae has no expiration date.

The debt facilities, including their restrictive covenants, are described in Note 10.

Contractual Obligations. During the three months ended March 31, 2020, the following significant changes were made to our contractual obligations disclosed in our 2019 Annual Report; (1) closed CLO XIII issuing $668.0 million of investment grade notes to third party investors; (2) unwound CLO VIII redeeming $282.9 million of outstanding notes; (3) issued $275.0 million of our 4.50% Notes; and (4) modified existing credit facilities. In addition, as previously planned, in April 2020 we completed the unwind of the Debt Fund and redeemed all the outstanding notes with a portion of the proceeds from our senior unsecured notes issued in March 2020.

See Note 10 for details and refer to Note 14 for a description of our debt maturities by year and unfunded commitments as of March 31, 2020.

Off-Balance Sheet Arrangements. At March 31, 2020, we had no off-balance sheet arrangements.

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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

Please refer to Note 2 of the Notes to Consolidated Financial Statements in our 2019 Annual Report for a discussion of our critical accounting policies. During the three months ended March 31, 2020, there were no material changes to these policies, except for the credit loss policy established in connection with the adoption of ASU 2016-13. See Note 2 for details.

Non-GAAP Financial Measures

Core Earnings. Beginning in the first quarter of 2020, we are presenting core earnings as our non-GAAP financial measure in replacement of adjusted funds from operations (“AFFO”). Core earnings is comparable to our previous AFFO metric, revised to exclude provisions for credit losses (including CECL) related to our structured loan portfolio, securities held-to-maturity and loss-sharing obligations related to the Fannie Mae program. We are presenting core earnings because we believe it is an important supplemental measure of our operating performance and is frequently used by peers, analysts, investors and other parties in the evaluation of REITs. Prior period amounts presented below have been conformed to reflect this change.

We define core 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 and losses on derivative instruments primarily associated with Private Label loans that have not yet been sold and securitized, the cumulative gains or losses on derivative instruments associated with Private Label loans that were sold during the periods presented, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax (benefit) provision, provisions for credit losses (including CECL) and the amortization of the convertible senior notes conversion option. We also add back one-time charges such as acquisition costs and one-time gains or losses on the early extinguishment of debt.

Core 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 distributions. Our calculation of core earnings may be different from the calculations used by other companies and, therefore, comparability may be limited.

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Core earnings is as follows ($ in thousands, except share and per share data):

Three Months Ended March 31, 

    

2020

    

2019

Net (loss) income attributable to common stockholders

$

(59,310)

$

22,650

Adjustments:

 

 

  

Net (loss) income attributable to noncontrolling interest

 

(10,934)

 

5,468

Income from mortgage servicing rights

 

(21,934)

 

(14,232)

Deferred taxbenefit

 

(19,904)

 

(4,168)

Amortization and write-offs of MSRs

 

17,741

 

16,739

Depreciation and amortization

 

2,958

 

2,865

Loss on extinguishment of debt

1,954

128

Provision for credit losses

75,919

454

Loss on derivative instruments, net

 

50,731

 

2,465

Stock-based compensation

 

3,517

 

3,756

Core earnings (1)

$

40,738

$

36,125

Diluted core earnings per share (1)

$

0.31

$

0.33

Diluted weighted average shares outstanding (1)

 

131,217,199

 

107,869,511

(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.

Item 3.         Quantitative and Qualitative Disclosures About Market Risk

We disclosed a quantitative and qualitative analysis regarding market risk in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2019 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 quantitative and qualitative exposure to market risk since December 31, 2019. The following table projects the potential impact on interest income and interest expense for a 12-month period, assuming an instantaneous increase or decrease of both 25 and 50 basis points in LIBOR (in thousands):

    

Assets (Liabilities)

    

25 Basis

    

25 Basis

    

50 Basis

    

50 Basis

Subject to Interest

Point

Point

Point

Point

Rate Sensitivity (1)

Increase

Decrease

Increase

Decrease

Interest income from loans and investments

$

4,800,544

$

699

$

(512)

$

2,443

$

(954)

Interest expense from debt obligations

 

(4,695,978)

 

9,535

 

(9,535)

 

19,069

 

(19,069)

Total net interest income

$

(8,836)

$

9,023

$

(16,626)

$

18,115

(1)Represents the UPB of our loan portfolio and the principal balance of our debt.

Based on our structured loans and investments and corresponding debt as of March 31, 2020, increases in LIBOR of 0.25% and 0.50% would decrease our annual net interest income as a result of LIBOR floors on a portion of our loan portfolio that are above LIBOR as of March 31, 2020, which would limit the effect of an increase on interest income. Conversely, these LIBOR floors would reduce the impact on interest income from decreases in LIBOR, which would result in increases to net interest income.

We also receive interest on cash, restricted cash and escrow balances. While the interest rates on these balances are not indexed to LIBOR, they are negotiated periodically with each corresponding bank based on certain benchmark rates. Based on our balances as of March 31, 2020, a 25 basis point and a 50 basis point increase in rates would result in an

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increase in our annual interest received of $3.7 million and $7.4 million, respectively. Conversely, a 25 basis point and a 50 basis point decrease in rate would result in a decrease of our annual interest received by the same amounts.

We enter into Swap Futures to hedge our exposure to changes in interest rates inherent in (1) our Structured Business SFR loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization. Our Swap Futures are tied to the five-year and ten-year swap rates and hedge our exposure to changes in the fair value of our Structured Business SFR loans and held-for-sale Agency Business Private Label loans until the time they are securitized. A 25 basis point and a 50 basis point increase to the five-year and ten-year swap rates would have resulted in a gain of $17.0 million and $33.5 million, respectively, in the three months ended March 31, 2020, while a 25 basis point and a 50 basis point decrease in the rates would have resulted in a loss of $17.4 million and $35.3 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 $10.4 million as of March 31, 2020, while a 100 basis point decrease would increase the fair value by $11.0 million.

The COVID-19 pandemic has impacted the global economy in an unprecedented way, swiftly halting activity across many industries, and causing significant disruption and liquidity constraints in many market segments, including the commercial real estate markets, causing requests from tenants for rent deferral or abatement and delays in construction and development projects currently planned or underway. These negative conditions may persist into the future and impair our borrowers' ability to pay principal and interest due to us under our loan agreements. We maintain a robust asset management relationship with our borrowers and are utilizing these relationships to address any potential impacts of the COVID-19 pandemic on our loans.

To date, we have not closed any significant loan modifications that have resulted in interest rate concessions and are encouraged by conversations with our borrowers and their initial response to the pandemic's impacts on their properties. Our senior management team has over 30 years of industry experience with a track record of navigating and operating through all market cycles.

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 March 31, 2020. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2020.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2020 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

We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us other than the litigation described in Note 14.  We have not made a loss accrual for any litigation because we believe that it is not probable that a loss has been incurred and an amount cannot be reasonably estimated.

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Item 1A.       Risk Factors

There have been no material changes to the risk factors set forth in Item 1A of our 2019 Annual Report, except as follows:

The novel coronavirus pandemic, the measures intended to prevent its spread and those government actions intended to mitigate its economic impact have had, and may continue to have, adverse effects, some of which may be material, on our business, results of operations and financial condition.

The COVID-19 pandemic is causing significant disruptions to the U.S. and global economies and has contributed to volatility and negative pressure in equity, credit and mortgage markets. The outbreak has led the federal and state governments to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. The impact of the pandemic and measures to prevent its spread and limit the economic impact of the pandemic have negatively impacted us and could further negatively impact our business, perhaps in a material manner.

More particularly, among the consequences of the COVID-19 pandemic that have had, and may continue to have in the future, adverse impacts on our business are:

-We may experience declines in the value of our assets, including our loan and securities portfolios

-Declines in the value of our assets may result in margin calls and other mandatory prepayments under the credit facilities we use to finance those assets

-In the current environment, forced sales of the securities and other assets that secure our repurchase and other financing arrangements may be on terms less favorable to us than might otherwise be available under more normal conditions, which could result in losses

-Disruption in the financial markets may have an adverse effect on our ability to obtain financing on terms and conditions that are favorable to us, or our ability to obtain financing at all

-Continued disruptions in the credit markets may negatively impact our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations

-To the extent current conditions persist or worsen, there may be a materially negative effect on our results of operations, and, in turn, on cash available for distribution to our stockholders, on the value of our assets and on the market price of our common stock.

In response to the pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will provide billions of dollars of relief to individuals, businesses of all sizes, state and local governments, and other public facilities suffering the impact of the pandemic. The Cares Act includes mortgage loan forbearance and modification programs to qualifying borrowers who have difficulty making their loan payments. In addition, the Federal Reserve has announced its commitment to purchase U.S. Treasury securities, asset backed securities, municipal bonds and other assets, in addition to making loans to and purchasing bonds from private companies.

Among the possible impacts of this legislation and regulatory action are:

-Over the near and intermediate term, the economic impacts of the pandemic may negatively impact the financial stability of our mortgage loan borrowers and the properties underlying the loans, due in part to the effects of mortgage loan forbearance and modification programs and suspensions of landlords' ability to enforce evictions

-Weakness in the economy may result in us receiving fewer requests for new loans, which may adversely affect our results of operations

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-Under applicable Fannie Mae policies and guidelines, we are required to make principal and interest advances on the loans we service for Fannie Mae and are responsible for bearing the burden of funding these advances for extended periods of time before receiving reimbursement from Fannie Mae, which may adversely affect our liquidity and financial condition

-If we are unable to find a financing source for these servicing advance obligations, or if we can obtain financing, but the cost and terms of any such financing are less advantageous that we have received in the past, that could have material adverse consequences on our liquidity and financial condition

-There can be no assurance as to how, in the long term, these actions and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations, financial condition and cash flows may continue to be adversely affected, perhaps materially.

The COVID-19 pandemic may impact the health of our employee base, and in order to operate during the pandemic, we have implemented a work-from-home policy to protect our employees and have transitioned our employees to work remotely.

The possible adverse effects of the pandemic on our workforce are:

-The COVID-19 pandemic may also adversely impact the continued availability of our personnel, including our executive officers, and our ability to recruit, attract and retain skilled personnel

-Operationally, although we have initiated a work-from-home policy, if significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions or other restrictions implemented in connection with COVID-19, the adverse impact on our business could be material.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also have the effect of heightening many of the other risks described in the ''Risk Factors'' section of our 2019 Annual Report. There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and as a result, the ultimate impact of the outbreak on our operations and financial results is highly uncertain and subject to change.

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Item 6.         Exhibits

Exhibit #

    

Description

 

3.1

Articles of Incorporation of Arbor Realty Trust, Inc. *

3.2

Amended and Restated Bylaws of Arbor Realty Trust, Inc. **

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.

101.1

Financial statements from the Quarterly Report on Form 10-Q of Arbor Realty Trust, Inc. for the quarter ended March 31, 2020, filed on May 8, 2020, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

*    Incorporated by reference to Registration Statement on Form S-11 (No. 333-110472), as amended, filed November 13, 2003.

**  Incorporated by reference to Exhibit 99.2 of Form 8-K filed December 11, 2007.

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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: May 8, 2020

By:

/s/ Ivan Kaufman

 

Ivan Kaufman

 

Chief Executive Officer

 

 

Date: May 8, 2020

By:

/s/ Paul Elenio

 

Paul Elenio

 

Chief Financial Officer

68

abr_Ex31_1

EXHIBIT 31.1

 

Certification of Chief Executive Officer

 

I, Ivan Kaufman, certify that:

 

1.            I have reviewed this quarterly report on Form 10-Q of Arbor Realty Trust, Inc.;

 

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.            The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)            Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)            Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)           Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.            The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a)            All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

Date: May 8, 2020

    

By:

/s/ Ivan Kaufman

 

 

 

Ivan Kaufman

 

 

 

Chief Executive Officer

 

abr_Ex31_2

EXHIBIT 31.2

 

Certification of Chief Financial Officer

 

I, Paul Elenio, certify that:

 

1.            I have reviewed this quarterly report on Form 10-Q of Arbor Realty Trust, Inc.;

 

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.            The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)            Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)            Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)           Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.            The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a)            All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

Date: May 8, 2020

    

By:

/s/ Paul Elenio

 

 

 

Paul Elenio

 

 

 

Chief Financial Officer

 

abr_Ex32

EXHIBIT 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

 

In connection with the Quarterly Report on Form 10-Q of Arbor Realty Trust, Inc. (the “Company”) for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

 

1.            The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

 

 

 

Date: May 8, 2020

    

By:

/s/ Ivan Kaufman

 

 

 

Ivan Kaufman

 

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

Date: May 8, 2020

    

By:

/s/ Paul Elenio

 

 

 

Paul Elenio

 

 

 

Chief Financial Officer

 

This certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

A signed original of this certification required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

v3.20.1
Securities Held-to-Maturity (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
item
Dec. 31, 2019
USD ($)
Held-to-Maturity    
Face Value $ 106,484 $ 111,028
Net Carrying value 84,406 88,699
Unrealized Gain   3,039
Unrealized Loss (2,519)  
Estimated Fair Value 81,887 91,738
Allowance for Credit Losses 992 0
B Piece bonds    
Held-to-Maturity    
Face Value 86,484 91,028
Net Carrying value 64,406 68,699
Unrealized Gain   2,965
Unrealized Loss (2,143)  
Estimated Fair Value 62,263 $ 71,664
Allowance for Credit Losses 992  
Seven B Piece Bonds | Held-to-Maturity    
Held-to-Maturity    
Face Value $ 106,200  
Bonds retained percentage 49.00%  
Number of B Piece bonds | item 7  
Discounted value of bonds purchased $ 74,700  
Remaining of B Piece bond sold to the third party at par 51.00%  
Agency B Piece Bonds | Held-to-Maturity    
Held-to-Maturity    
Weighted average variable interest rate (as a percent) 3.74%  
Estimated weighted average remaining maturity period 5 years 7 months 6 days  
Weighted average effective interest rate (as a percent) 10.91% 10.85%
Held-to-maturity securities, estimated fiscal year    
Within one year $ 13,500  
After one year through five years 38,700  
After five years through ten years 19,600  
After ten years 14,700  
SFR bonds    
Held-to-Maturity    
Face Value 20,000 $ 20,000
Net Carrying value 20,000 20,000
Unrealized Gain   74
Unrealized Loss (376)  
Estimated Fair Value $ 19,624 $ 20,074
SFR bonds | Held-to-Maturity    
Held-to-Maturity    
Estimated weighted average remaining maturity period 6 months  
Initial face value of bonds purchased $ 20,000  
Securities maturity term 3 years  
Weighted average fixed interest rate 4.58%  
Held-to-maturity securities, estimated fiscal year    
Within one year $ 18,200  
After one year through five years $ 1,800  
v3.20.1
Loans and Investments - Nonaccrual Status Aging (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
loan
Mar. 31, 2019
loan
Dec. 31, 2019
USD ($)
loan
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Total $ 4,638,004   $ 4,189,960
Troubled debt restructurings, number | loan 0 0  
Interest Reserves      
Interest reserve held $ 51,100   $ 37,000
Number of loans covered under interest reserve | loan 141   131
Aggregate UPB covered under interest reserve $ 2,640,000   $ 2,430,000
Greater than 89 Days Past Due      
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Past Due 0   0
Loans past due 90 days or more still accruing interest $ 0   $ 0
v3.20.1
Equity (Details)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Apr. 29, 2020
$ / shares
Feb. 13, 2019
$ / shares
Feb. 01, 2019
$ / shares
Feb. 29, 2020
shares
Mar. 31, 2020
USD ($)
Vote
$ / shares
shares
Mar. 31, 2019
USD ($)
$ / shares
Dec. 31, 2019
$ / shares
Oct. 25, 2019
shares
Aug. 31, 2019
shares
Dec. 31, 2018
Jul. 20, 2018
Jul. 03, 2018
Jun. 30, 2018
USD ($)
Common stock                          
Proceeds from issuance of shares under public offering | $         $ 19,424                
Number of shares purchased       747,500                  
Repurchase of common stock | $         $ 11,291                
Noncontrolling Interest                          
Preferred stock, par value (in dollars per share) | $ / shares         $ 0.01   $ 0.01            
OP Units redeemed by cash | $         $ 1,600 $ 1,631              
Number of shares purchased       747,500                  
Distributions                          
Cash dividend declared (in dollars per share) | $ / shares         $ 0.30 $ 0.27              
Employee compensation and benefits                          
Deferred Compensation                          
Share-based compensation expense | $         $ 143,096,000                
Restricted common stock | Certain employees of ours                          
Deferred Compensation                          
Number of fully vested shares issued         298,991                
Total grant date fair value | $         $ 3,200                
Restricted common stock | Chief executive officer                          
Deferred Compensation                          
Number of fully vested shares issued         45,928                
Total grant date fair value | $         $ 500                
Vesting percentage         25.00%                
Restricted common stock | Chief executive officer | First Anniversaries                          
Deferred Compensation                          
Vesting percentage         25.00%                
Restricted common stock | Chief executive officer | Second Anniversaries                          
Deferred Compensation                          
Vesting percentage         25.00%                
Restricted common stock | Chief executive officer | Third Anniversaries                          
Deferred Compensation                          
Vesting percentage         25.00%                
Restricted common stock | Employees                          
Deferred Compensation                          
Vesting percentage         33.00%                
Restricted common stock | Employees | March 2020                          
Deferred Compensation                          
Vesting percentage         33.00%                
Performance-based restricted stock                          
Deferred Compensation                          
Restricted stock with fully vested of date (in shares)         421,348                
Restricted stock with fully vested net settled of date (in shares)         215,014                
Performance-based restricted stock | Chief executive officer                          
Deferred Compensation                          
Granted of restricted stock units that vest at the end of four-year performance period (in shares)         275,569                
Vesting period (in years)         4 years 4 years              
Total grant date fair value | $         $ 100                
8.25% Series A preferred stock                          
Preferred Stock                          
Return on the preferred shares issued to third parties by its subsidiary REIT (as a percent)         8.25% 8.25% 8.25%            
7.75% Series B preferred stock                          
Preferred Stock                          
Return on the preferred shares issued to third parties by its subsidiary REIT (as a percent)         7.75% 7.75% 7.75%            
8.50% Series C preferred stock                          
Preferred Stock                          
Return on the preferred shares issued to third parties by its subsidiary REIT (as a percent)         8.50% 8.50% 8.50%            
Common Stock                          
Common stock                          
Number of common stock sold (in shares)         1,350,000                
Value of common stock available under shelf registration statement | $         $ 118,200                
Aggregate amount of debt securities, common stock, preferred stock, depositary shares and warrants filed under shelf registration statement | $                         $ 500,000
Number of shares purchased         1,249,777                
Repurchase of common stock | $         $ 13                
Noncontrolling Interest                          
Number of shares purchased         1,249,777                
Distributions                          
Cash dividend declared (in dollars per share) | $ / shares $ 0.30 $ 0.30                      
Common Stock | Board of Directors                          
Common stock                          
Number of common stock sold (in shares)         100,000,000.0                
Common Stock | Non-management members of the Board of Directors                          
Deferred Compensation                          
Number of fully vested shares issued         36,396                
Total grant date fair value | $         $ 400                
Preferred Stock | 8.25% Series A preferred stock                          
Distributions                          
Cash dividend declared on redeemable preferred stock (in dollars per share) | $ / shares $ 0.515625   $ 0.515625                    
Preferred Stock                          
Return on the preferred shares issued to third parties by its subsidiary REIT (as a percent) 8.25%                        
Preferred Stock | 7.75% Series B preferred stock                          
Distributions                          
Cash dividend declared on redeemable preferred stock (in dollars per share) | $ / shares $ 0.484375   0.484375                    
Preferred Stock                          
Return on the preferred shares issued to third parties by its subsidiary REIT (as a percent) 7.75%                        
Preferred Stock | 8.50% Series C preferred stock                          
Distributions                          
Cash dividend declared on redeemable preferred stock (in dollars per share) | $ / shares $ 0.53125   $ 0.53125                    
Preferred Stock                          
Return on the preferred shares issued to third parties by its subsidiary REIT (as a percent) 8.50%                        
Operating Partnership Units                          
Noncontrolling Interest                          
Conversion ratio for operating partnership units to common stock shares         1                
Operating Partnership Units | Special voting preferred shares                          
Noncontrolling Interest                          
Number of preferred stock shares paired with each OP units         1                
Preferred stock, par value (in dollars per share) | $ / shares         $ 0.01                
Number of vote per share of Special Voting Preferred Shares | Vote         1                
OP units outstanding (in shares)         20,369,265                
Voting power of outstanding stock (as a percent)         15.60%                
5.25% Convertible Notes                          
Common stock                          
Shares issued in connection with exchange of convertible debt notes (in shares)         319,259                
Interest rate (as a percent)         5.25%   5.25%     5.25% 5.25% 5.25%  
5.375% Convertible Notes                          
Common stock                          
Shares issued in connection with exchange of convertible debt notes (in shares)         41,601                
Interest rate (as a percent)         5.375%         5.375%      
6.50% Convertible Notes                          
Common stock                          
Interest rate (as a percent)                   6.50%      
Share repurchase | Common Stock                          
Common stock                          
Number of shares purchased         993,106                
Repurchase of common stock | $         $ 3,900                
Noncontrolling Interest                          
Number of shares purchased         993,106                
At-The-Market | Common Stock                          
Common stock                          
Number of shares available under an "At-The-Market" equity offering with JMP Securities LLC         3,000,000     3.98 7,500,000        
Number of common stock sold (in shares)         1,350,000                
Proceeds from issuance of shares under public offering | $         $ 19,400                
v3.20.1
Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Federal income tax rate (as a percent) 90.00%  
Benefit for income taxes $ 14,370 $ 10
Deferred tax benefit 19,904 4,168
Current tax provision 5,500  
Maximum    
Benefit for income taxes $ 14,400 100
Preferred equity interest financing agreement | ACM / Our "Former Manager"    
Repayment of debt   $ 4,200
v3.20.1
Fair Value, Measurement on Recurring and Nonrecurring Basis (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
item
Dec. 31, 2019
USD ($)
Mar. 31, 2019
USD ($)
Financial assets:      
Impaired loans, net $ 217,140 $ 130,726  
Allowance for impaired loan losses 103,706 71,069  
Loans and Leases Receivable, Allowance 142,252 71,069 $ 71,069
Non-financial assets:      
Real Estate Investment Property, Net $ 13,270 13,220  
Nine impaired loans      
Financial assets:      
Number of impaired loans | item 9    
Loans and Leases Receivable, Allowance $ 103,700    
Real Estate Owned      
Non-financial assets:      
Real Estate Investment Property, Net 13,270 13,220  
Carrying Value      
Financial assets:      
Derivative financial instruments 12,683 1,435  
Financial liabilities:      
Derivative financial instruments 5,113 3,097  
Carrying Value | Nine impaired loans      
Financial assets:      
Aggregate carrying value of impaired loans before loan loss reserves 217,100    
Fair Value      
Financial assets:      
Derivative financial instruments 12,683 1,435  
Financial liabilities:      
Derivative financial instruments 5,113 $ 3,097  
Recurring basis | Carrying Value      
Financial assets:      
Derivative financial instruments 12,683    
Financial liabilities:      
Derivative financial instruments 5,113    
Recurring basis | Fair Value      
Financial assets:      
Derivative financial instruments 12,683    
Financial liabilities:      
Derivative financial instruments 5,113    
Nonrecurring basis | Carrying Value      
Financial assets:      
Impaired loans, net 113,434    
Nonrecurring basis | Fair Value      
Financial assets:      
Impaired loans, net 113,434    
Level 2 | Recurring basis      
Financial assets:      
Derivative financial instruments 10,614    
Financial liabilities:      
Derivative financial instruments 5,113    
Level 3 | Recurring basis      
Financial assets:      
Derivative financial instruments 2,069    
Level 3 | Nonrecurring basis      
Financial assets:      
Impaired loans, net $ 113,434    
v3.20.1
Fair Value, Financial Assets and Liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financial assets:    
Total $ 4,638,004 $ 4,189,960
Loans held-for-sale, net 978,736 847,126
Securities held-to-maturity, net (allowance for credit losses of $992 and $0, respectively) 84,406 88,699
Financial liabilities:    
Credit and repurchase facilities, Carrying value 1,846,473 1,678,288
Collateralized loan obligations 2,513,096 2,130,121
Debt fund 68,717 68,629
Senior unsecured notes 591,854 319,799
Convertible senior unsecured notes, net 264,689 284,152
Junior subordinated notes 141,128 140,949
Level 1    
Financial liabilities:    
Senior unsecured notes 514,100  
Level 2    
Financial assets:    
Loans held-for-sale, net 985,970  
Financial liabilities:    
Credit and repurchase facilities, Carrying value 790,739  
Convertible senior unsecured notes, net 246,200  
Level 3    
Financial assets:    
Total 4,679,039  
Loans held-for-sale, net 15,254  
Capitalized mortgage servicing rights, net 320,052  
Securities held-to-maturity, net (allowance for credit losses of $992 and $0, respectively) 81,887  
Financial liabilities:    
Credit and repurchase facilities, Carrying value 1,057,410  
Collateralized loan obligations 2,260,964  
Debt fund 70,115  
Junior subordinated notes 98,143  
Carrying Value    
Financial assets:    
Total 4,638,004 4,189,960
Loans held-for-sale, net 991,696 861,360
Capitalized mortgage servicing rights, net 288,954  
Securities held-to-maturity, net (allowance for credit losses of $992 and $0, respectively) 84,406 88,699
Financial liabilities:    
Credit and repurchase facilities, Carrying value 1,846,473 1,678,288
Collateralized loan obligations 2,513,096 2,130,121
Debt fund 68,717 68,629
Senior unsecured notes 591,854 319,799
Convertible senior unsecured notes, net 264,689 284,152
Junior subordinated notes 141,128 140,949
Fair Value    
Financial assets:    
Total 4,679,039 4,228,071
Loans held-for-sale, net 1,001,224 876,975
Capitalized mortgage servicing rights, net 320,052  
Securities held-to-maturity, net (allowance for credit losses of $992 and $0, respectively) 81,887 91,738
Financial liabilities:    
Credit and repurchase facilities, Carrying value 1,848,149 1,677,658
Collateralized loan obligations 2,260,964 2,147,944
Debt fund 70,115 70,138
Senior unsecured notes 514,100 331,225
Convertible senior unsecured notes, net 246,200 310,778
Junior subordinated notes $ 98,143 $ 97,668
v3.20.1
Segment Information - Balance Sheet (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Assets:        
Cash and cash equivalents $ 222,330 $ 299,687 $ 124,505 $ 160,063
Restricted cash 304,067 210,875 $ 291,865 $ 180,606
Loans and investments, net (allowance for credit losses of $142,252 and $71,069, respectively) 4,638,004 4,189,960    
Loans held-for-sale, net 991,696 861,360    
Capitalized mortgage servicing rights, net 288,954 286,420    
Held-to-maturity debt securities 84,406 88,699    
Investments in equity affiliates 44,701 41,800    
Goodwill and other intangible assets 109,371 110,700    
Other assets 251,121 149,659    
Total assets 6,934,650 6,239,160    
Liabilities:        
Debt obligations 5,425,957 4,621,938    
Allowance for loss-sharing obligations 70,752 34,648    
Other liabilities 211,891 226,547    
Total liabilities 5,708,600 4,883,133    
Structured Business | Operating segments        
Assets:        
Cash and cash equivalents 106,879 264,468    
Restricted cash 301,468 208,926    
Loans and investments, net (allowance for credit losses of $142,252 and $71,069, respectively) 4,638,004 4,189,960    
Held-to-maturity debt securities 20,000 20,000    
Investments in equity affiliates 44,701 41,800    
Goodwill and other intangible assets 12,500 12,500    
Other assets 174,409 118,175    
Total assets 5,297,961 4,855,829    
Liabilities:        
Debt obligations 4,635,218 3,878,343    
Other liabilities 155,383 171,004    
Total liabilities 4,790,601 4,049,347    
Agency Business | Operating segments        
Assets:        
Cash and cash equivalents 115,451 35,219    
Restricted cash 2,599 1,949    
Loans held-for-sale, net 991,696 861,360    
Capitalized mortgage servicing rights, net 288,954 286,420    
Held-to-maturity debt securities 64,406 68,699    
Goodwill and other intangible assets 96,871 98,200    
Other assets 76,712 31,484    
Total assets 1,636,689 1,383,331    
Liabilities:        
Debt obligations 790,739 743,595    
Allowance for loss-sharing obligations 70,752 34,648    
Other liabilities 56,508 55,543    
Total liabilities $ 917,999 $ 833,786    
v3.20.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets:    
Cash and cash equivalents $ 222,330 $ 299,687
Restricted cash 304,067 210,875
Loans and investments, net (allowance for credit losses of $142,252 and $71,069, respectively) 4,638,004 4,189,960
Loans held-for-sale, net 991,696 861,360
Capitalized mortgage servicing rights, net 288,954 286,420
Securities held-to-maturity, net (allowance for credit losses of $992 and $0, respectively) 84,406 88,699
Investments in equity affiliates 44,701 41,800
Real estate owned, net 13,270 13,220
Due from related party 13,821 10,651
Goodwill and other intangible assets 109,371 110,700
Other assets 224,030 125,788
Total assets 6,934,650 6,239,160
Liabilities and Equity:    
Credit facilities and repurchase agreements 1,846,473 1,678,288
Collateralized loan obligations 2,513,096 2,130,121
Debt fund 68,717 68,629
Senior unsecured notes 591,854 319,799
Convertible senior unsecured notes, net 264,689 284,152
Junior subordinated notes to subsidiary trust issuing preferred securities 141,128 140,949
Due to related party 3,103 13,100
Due to borrowers 81,447 79,148
Allowance for loss-sharing obligations 70,752 34,648
Other liabilities 127,341 134,299
Total liabilities 5,708,600 4,883,133
Commitments and contingencies (Note 14)
Arbor Realty Trust, Inc. stockholders' equity:    
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized; special voting preferred shares; 20,369,265 and 20,484,094 shares issued and outstanding, respectively; 8.25% Series A, $38,788 aggregate liquidation preference; 1,551,500 shares issued and outstanding; 7.75% Series B, $31,500 aggregate liquidation preference; 1,260,000 shares issued and outstanding; 8.50% Series C, $22,500 aggregate liquidation preference; 900,000 shares issued and outstanding 89,500 89,501
Common stock, $0.01 par value: 500,000,000 shares authorized; 110,608,903 and 109,706,214 shares issued and outstanding, respectively 1,106 1,097
Additional paid-in capital 1,163,161 1,154,932
Accumulated deficit (177,589) (60,920)
Total Arbor Realty Trust, Inc. stockholders' equity 1,076,178 1,184,610
Noncontrolling interest 149,872 171,417
Total equity 1,226,050 1,356,027
Total liabilities and equity $ 6,934,650 $ 6,239,160
v3.20.1
Securities Held-to-Maturity
3 Months Ended
Mar. 31, 2020
Securities Held-to-Maturity  
Securities Held-to-Maturity

Note 7 — Securities Held-to-Maturity

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 option to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. As of March 31, 2020, we retained 49%, or $106.2 million initial face value, of seven B Piece bonds, which were purchased at a discount for $74.7 million, and sold the remaining 51% to a third-party at par. 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 5.6 years. The weighted average effective interest rate was 10.91% and 10.85% at March 31, 2020 and December 31, 2019, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $13.5 million is estimated to mature within one year, $38.7 million is estimated to mature after one year through five years, $19.6 million is estimated to mature after five years through ten years and $14.7 million is estimated to mature after ten years.

Structured Single -Family Rental Bonds (“SFR bonds”). As of March 31, 2020, we held $20.0 million initial face value of Class A2 securitized SFR bonds at par, which are collateralized by a pool of single-family rental properties. These securities have a three-year maturity, bear interest at a weighted average fixed interest rate of 4.58% and have an estimated weighted average remaining maturity of 0.5 years. Approximately $18.2 million is estimated to mature within one year and $1.8 million is estimated to mature after one year through five years.

A summary of our securities held-to-maturity is as follows (in thousands):

Net Carrying

Unrealized 

Estimated 

Allowance for

    

Face Value

    

Value

    

(Loss)/Gain

    

Fair Value

    

Credit Losses

March 31, 2020

B Piece bonds

$

86,484

$

64,406

$

(2,143)

$

62,263

$

992

SFR bonds

20,000

20,000

(376)

19,624

Total

$

106,484

$

84,406

$

(2,519)

$

81,887

$

992

December 31, 2019

B Piece bonds

$

91,028

$

68,699

$

2,965

$

71,664

$

SFR bonds

20,000

20,000

74

20,074

Total

$

111,028

$

88,699

$

3,039

$

91,738

$

A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):

Three Months Ended March 31, 2020

B Piece Bonds

SFR Bonds

Total

Beginning balance, prior to adoption of CECL

$

$

$

Impact of adopting CECL - January 1, 2020

 

501

 

 

501

Provision for credit loss expense

 

491

 

 

491

Ending balance

$

992

$

$

992

The allowance for credit losses on our held-to-maturity securities was estimated on a collective basis by major security type and was based on a reasonable and supportable forecast period and a historical loss reversion for similar securities. The issuers continue to make timely principal and interest payments and we continue to accrue interest on all our bonds. As of March 31, 2020, no other-than-temporary impairment was recorded on our held-to-maturity securities.

During the three months ended March 31, 2020 and 2019, we recorded interest income (including the amortization of discount) of $2.3 million and $2.1 million, respectively, related to these investments. As of March 31, 2020, accrued interest receivable related to these bonds totaling $0.1 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

v3.20.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Operating activities:      
Net (loss) income $ (68,356) $ 30,006  
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:      
Depreciation and amortization 1,947 1,912  
Stock-based compensation 3,517 3,756  
Amortization and accretion of interest and fees, net 1,633 653  
Amortization of capitalized mortgage servicing rights 11,822 12,282  
Originations of loans held-for-sale (1,088,699) (746,315)  
Proceeds from sales of loans held-for-sale, net of gain on sale 957,060 996,341  
Mortgage servicing rights (21,934) (14,232)  
Write-off of capitalized mortgage servicing rights from payoffs 5,920 4,458  
Provision for loss sharing (net of recoveries) 21,537 454  
Provision for credit losses (net of recoveries) 54,382    
Net recoveries (charge-offs) for loss sharing obligations 160 (234)  
Deferred tax benefit (19,904) (4,168)  
Income from equity affiliates (3,992) (2,151)  
Loss on extinguishment of debt 1,954 128  
Changes in operating assets and liabilities (90,282) (14,501)  
Net cash (used in) provided by operating activities (233,235) 268,389  
Investing Activities:      
Loans and investments funded, originated and purchased, net (815,501) (403,756)  
Payoffs and paydowns of loans and investments 298,701 280,819  
Deferred fees 4,857 2,014  
Investments in real estate, net (230) (202)  
Contributions to equity affiliates (60) (6,030)  
Purchases of securities held-to-maturity, net   (10,000)  
Payoffs and paydowns of securities held-to-maturity 3,313 1,521  
Due to borrowers and reserves (1,834) (2,763)  
Net cash used in investing activities (510,754) (138,397)  
Financing activities:      
Proceeds from repurchase agreements and credit facilities 2,229,200 1,625,430  
Paydowns and payoffs of repurchase agreements and credit facilities (2,058,588) (1,728,631)  
Proceeds from issuance of collateralized loan obligations 668,000    
Payoffs and paydowns of collateralized loan obligations (282,874)    
Proceeds from issuance of common stock 19,424    
Settlements of convertible senior unsecured notes (21,516) (3,019)  
Proceeds from issuance of senior unsecured notes 275,000 90,000  
Redemption of operating partnership units (1,600) (1,631)  
Payments of withholding taxes on net settlement of vested stock (1,630) (3,487)  
Repurchase of common stock (11,291)    
Distributions paid on common stock (33,249) (23,101)  
Distributions paid on noncontrolling interest (6,110) (5,566)  
Distributions paid on preferred stock (1,888) (1,888)  
Distributions paid on preferred stock of private REIT (4) (5)  
Payment of deferred financing costs (13,050) (2,393)  
Net cash provided by (used in) financing activities 759,824 (54,291)  
Net increase in cash, cash equivalents and restricted cash 15,835 75,701  
Cash, cash equivalents and restricted cash at beginning of period 510,562 340,669 $ 340,669
Cash, cash equivalents and restricted cash at end of period 526,397 416,370 510,562
Reconciliation of cash, cash equivalents and restricted cash:      
Cash and cash equivalents at beginning of period 299,687 160,063 160,063
Restricted cash at beginning of period 210,875 180,606 180,606
Cash, cash equivalents and restricted cash at beginning of period 510,562 340,669 340,669
Cash and cash equivalents at end of period 222,330 124,505 299,687
Restricted cash at end of period 304,067 291,865 210,875
Cash, cash equivalents and restricted cash at end of period 526,397 416,370 510,562
Supplemental cash flow information:      
Cash used to pay interest 42,666 39,180  
Cash used to pay taxes 1,681 2,008  
Supplemental schedule of non-cash investing and financing activities:      
Cumulative-effect adjustment (Note 2) (28,607)   $ 28,607
Issuance of common stock from convertible debt 4,595 2,507  
Special dividend - common stock issued   10,079  
Special dividend - special voting preferred stock and operating partnership units issued   2,478  
Fair value of conversion feature of convertible senior unsecured notes (183) 1,175  
Settlements of convertible senior unsecured notes (4,778) (1,331)  
8.25% Series A preferred stock      
Supplemental schedule of non-cash investing and financing activities:      
Distributions accrued on preferred stock 267 267  
7.75% Series B preferred stock      
Supplemental schedule of non-cash investing and financing activities:      
Distributions accrued on preferred stock 203 203  
8.50% Series C preferred stock      
Supplemental schedule of non-cash investing and financing activities:      
Distributions accrued on preferred stock $ 159 $ 159  
v3.20.1
Loans and Investments
3 Months Ended
Mar. 31, 2020
Loans and Investments  
Loans and Investments

Note 3 — Loans and Investments

Our Structured Business loan and investment portfolio consists of ($ in thousands):

    

    

    

    

    

Wtd. Avg.

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

March 31, 2020

Total

Count

Pay Rate (1)

Maturity

LTV Ratio (2)

LTV Ratio (3)

Bridge loans (4)

$

4,342,335

90

%  

234

 

5.50

%  

18.4

 

1

%  

77

%

Preferred equity investments

 

201,509

 

4

%  

11

 

8.30

%  

59.2

 

70

%  

88

%

Mezzanine loans

175,389

4

%  

27

7.85

%  

48.4

24

%  

75

%

Other (5)

 

81,311

 

2

%  

20

 

5.14

%  

76.1

 

0

%  

69

%

 

4,800,544

 

100

%  

292

 

5.70

%  

22.2

 

4

%  

77

%

Allowance for credit losses

(142,252)

Unearned revenue

 

(20,288)

Loans and investments, net

$

4,638,004

    

    

    

Wtd. Avg.

    

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

    

December 31, 2019

    

Total

    

Count

    

Pay Rate (1)

    

Maturity

    

LTV Ratio (2)

    

LTV Ratio (3)

Bridge loans (4)

$

3,836,832

 

90

%  

217

 

5.77

%  

18.0

 

0

%  

75

%

Preferred equity investments

 

181,058

 

4

%  

10

 

7.62

%  

68.8

 

69

%  

89

%

Mezzanine loans

191,575

4

%  

24

9.70

%  

36.7

22

%  

73

%

Other (5)

70,146

2

%  

21

2.88

%  

84.8

0

%  

70

%

 

4,279,611

 

100

%  

272

 

5.98

%  

22.1

 

4

%  

76

%

Allowance for credit losses

 

(71,069)

Unearned revenue

 

(18,582)

Loans and investments, net

$

4,189,960

(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 that is required to be paid monthly as stated in the individual loan agreements. Certain loans and investments that require an additional rate of interest “Accrual Rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table.
(2)The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.
(3)The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.
(4)As of March 31, 2020 and December 31, 2019, bridge loans included 10 and 11, respectively, single-family rental loans with an aggregate UPB of $54.4 million and $66.7 million, respectively, of which $24.0 million and $30.0 million, respectively, was funded.
(5)As of March 31, 2020 and December 31, 2019, other included 19 and 12, respectively, single-family rental permanent loans with an aggregate UPB of $74.9 million and $41.6 million, respectively, and 1 and 9, respectively, purchased loans with an aggregate UPB of $6.4 million and $28.6 million, respectively.

Concentration of Credit Risk

We are subject to concentration risk in that, at March 31, 2020, the UPB related to 25 loans with five different borrowers represented 13% of total assets. At December 31, 2019, the UPB related to 24 loans with five different borrowers represented 13% of total assets. During both the three months ended March 31, 2020 and the year ended December 31, 2019, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue. See Note 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, and funded cash reserves. Other factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan. This metric provides a helpful snapshot of portfolio quality and credit risk. All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider “high risk” and that possess deteriorating credit quality.

Generally speaking, given our typical loan profile, risk ratings of pass, pass/watch and special mention suggest that we expect the loan to make both principal and interest payments according to the contractual terms of the loan agreement. A risk rating of substandard indicates we anticipate the loan may require a modification of some kind. A risk rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal. Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk rating matrix.

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class is as follows ($ in thousands):

    

    

    

Wtd. Avg.

    

Wtd. Avg.

 

UPB by Origination Year

First Dollar

Last Dollar

March 31,2020

2020

2019

2018

2017

2016

Prior

Total

LTV Ratio

LTV Ratio

Multifamily:

 

 

Risk Rating:

 

 

Pass

$

425,994

$

758,705

$

75,000

$

32,500

$

$

350

$

1,292,549

 

Pass/Watch

 

195,114

903,609

188,500

22,100

17,685

1,327,008

 

Special Mention

49,173

616,097

150,459

288,800

1,104,529

Substandard

23,500

10,594

41,494

86,020

8,250

28,800

198,658

Doubtful

 

 

Total Multifamily

$

693,781

$

2,289,005

$

455,453

$

429,420

$

8,250

$

46,835

$

3,922,744

4

%  

76

%

Land:

Percentage of portfolio

82

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

Special Mention

71,019

19,523

19,975

110,517

Substandard

127,928

127,928

Doubtful

Total Land

$

71,019

$

19,523

$

$

19,975

$

$

127,928

$

238,445

0

%  

90

%

Healthcare:

Percentage of portfolio

5

%  

Risk Rating:

 

Pass

$

$

21,350

$

10,000

$

$

$

$

31,350

 

Pass/Watch

51,069

66,500

41,650

159,219

Special Mention

8,500

8,500

Substandard

Doubtful

4,625

4,625

Total Healthcare

$

$

80,919

$

76,500

$

46,275

$

$

$

203,694

0

%  

78

%

Office:

Percentage of portfolio

4

%  

Risk Rating:

Pass

$

$

$

5,000

$

$

$

$

5,000

Pass/Watch

Special Mention

43,151

9,961

53,112

Substandard

41,000

34,000

75,000

Doubtful

880

880

Total Office

$

$

$

46,000

$

77,151

$

$

10,841

$

133,992

3

%  

69

%

Single Family Rental:

Percentage of portfolio

3

%  

Risk Rating:

Pass

$

8,575

$

34,490

$

$

$

$

$

43,065

Pass/Watch

17,570

30,853

48,423

Special Mention

7,287

161

7,448

Substandard

Doubtful

Total Single Family Rental

$

33,432

$

65,504

$

$

$

$

$

98,936

0

%  

70

%

Hotel:

Percentage of portfolio

2

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

Special Mention

Substandard

91,000

91,000

Doubtful

Total Hotel

$

$

91,000

$

$

$

$

$

91,000

32

%  

100

%

Other:

Percentage of portfolio

2

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

3,574

3,574

Special Mention

51,300

10,006

61,306

Substandard

41,600

3,553

45,153

Doubtful

1,700

1,700

Total Other

$

$

$

92,900

$

13,580

$

$

5,253

$

111,733

4

%  

77

%

Percentage of portfolio

2

%  

Grand Total

$

798,232

$

2,545,951

$

670,853

$

586,401

$

8,250

$

190,857

$

4,800,544

4

%  

77

%

Geographic Concentration Risk

As of March 31, 2020, 16% and 12% of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively. As of December 31, 2019, 18% and 12% of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively. No other states represented 10% or more of the total loan and investment portfolio.

Allowance for Credit Losses

A summary of the changes in the allowance for credit losses is as follows (in thousands):

Three Months Ended March 31, 2020

    

Land

Multifamily

Retail

Hotel

Office

Healthcare

Other

    

Total

Allowance for credit losses:

Beginning balance, prior to adoption of CECL

$

67,869

$

$

$

$

1,500

$

$

1,700

$

71,069

Impact of adopting CECL - January 1, 2020

77

15,688

333

29

287

64

816

17,294

Provision for credit losses (net of recoveries)

 

10,473

16,585

 

10,983

 

7,500

 

4,310

 

3,870

 

168

 

53,889

Ending balance

$

78,419

$

32,273

$

11,316

$

7,529

$

6,097

$

3,934

$

2,684

$

142,252

Three Months Ended March 31, 2019

Allowance for credit losses

$

67,869

$

$

$

$

1,500

$

$

1,700

$

71,069

The increase in the provision for credit losses during the three months ended March 31, 2020 of $53.9 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $17.3 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic. Our estimate of allowance for credit losses on our structured loans and investments including related unfunded loan commitments during the first quarter of 2020 was based on a reasonable and supportable forecast period that was adjusted for the expectations that the markets in which we operate will experience a decline in economic conditions, increases in unemployment rates and other market driven factors largely the result of the COVID-19 pandemic that will likely impact loan delinquencies, modifications and potential risk of loss. For the periods beyond the reasonable and supportable forecast, we reverted to our historical loss rate, which was adjusted to address for factors that are not present in our existing portfolio. During the quarter, we also made adjustments for loans that were anticipated to extend based on available extension options and timing of their maturities in relation to the current economic conditions.

The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments. Our CECL allowance for unfunded loan commitments are adjusted quarterly and correspond with the associated outstanding loans. As of March 31, 2020, we had outstanding unfunded commitments of $183.8 million that we are obligated to fund as borrowers meet certain requirements.

As of March 31, 2020, accrued interest receivable related to our loans totaling $37.7 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

All of our structured loans and investments are collateral dependent, and as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end. A summary of our specific loans considered impaired by asset class is as follows (in thousands):

March 31, 2020

Wtd. Avg. First

Wtd. Avg. Last

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

    

UPB (1)

    

 Value

    

Credit Losses

    

Ratio

    

Ratio

    

Land

$

134,215

$

126,800

$

77,869

0

%

97

%

Hotel

 

50,000

 

49,663

 

7,500

 

59

%

 

100

%

Retail

 

33,520

 

31,921

 

11,292

 

3

%

 

100

%

Healthcare

 

4,625

 

4,845

 

3,845

 

0

%

 

100

%

Office

 

2,211

2,211

 

1,500

 

0

%

 

76

%

Commercial

 

1,700

 

1,700

 

1,700

 

63

%

 

63

%

Total

$

226,271

$

217,140

$

103,706

14

%

98

%

    

December 31, 2019

   

    

    

    

    

Wtd. Avg. First

    

Wtd. Avg. Last

    

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

UPB (1)

Value

Credit Losses

Ratio

Ratio

Land

    

$

134,215

    

$

126,800

    

$

67,869

    

0

%

97

%

Office

 

2,226

 

2,226

 

1,500

 

0

%

 

78

%

Commercial

1,700

1,700

1,700

63

%

63

%

Total

$

138,141

$

130,726

$

71,069

1

%

96

%

(1)Represents the UPB of nine and five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at March 31, 2020 and December 31, 2019, respectively.

There were no loans for which the fair value of the collateral securing the loan was less than the carrying value of the loan for which we had not recorded a provision for credit loss as of March 31, 2020 and December 31, 2019.

At March 31, 2020, four loans with an aggregate net carrying value of $1.8 million, net of related loan loss reserves of $6.5 million, were classified as non-performing and, at December 31, 2019, three loans with an aggregate net carrying value of $1.8 million, net of related loan loss reserves of $1.7 million, were classified as non-performing. Income from non-performing loans is generally recognized on a cash basis when it is received. Full income recognition will resume when the loan becomes contractually current and performance has recommenced.

A summary of our non-performing loans by asset class is as follows (in thousands):

March 31, 2020

December 31, 2019

Less Than 

Greater  Than

Less Than 

Greater  Than

90 Days

90 Days

90 Days

90 Days

     

UPB

     

Past Due

     

Past Due

     

UPB

     

Past Due

     

Past Due

Healthcare

$

4,625

$

$

4,625

$

$

$

Commercial

1,700

1,700

1,700

1,700

Retail

920

920

1,000

1,000

Office

880

880

880

880

Total

$

8,125

$

$

8,125

$

3,580

$

$

3,580

In addition, we have six loans with a carrying value totaling $120.3 million at March 31, 2020, that are collateralized by a land development project. These loans were scheduled to mature in March 2020 and were extended to September 2020. The loans do not carry a current pay rate of interest, however, five of the loans with a carrying value totaling $111.0 million entitle us to a weighted average accrual rate of interest of 8.38%. 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 March 31, 2020 and December 31, 2019, we had a cumulative allowance for credit losses of $71.4 million and $61.4 million, respectively, related to these loans. The loans are subject to certain risks associated with a development project including, but not limited to, availability of construction financing, increases in projected

construction costs, demand for the development's outputs upon completion of the project, and litigation risk. Additionally, these loans were not classified as non-performing as the borrower is in compliance with all of the terms and conditions of the loans.

At both March 31, 2020 and December 31, 2019, we had no loans contractually past due 90 days or more that are still accruing interest. During both the three months ended March 31, 2020 and 2019, interest income recognized on nonaccrual loans was de minimis.

There were no loan modifications, refinancing's and/or extensions during both the three months ended March 31, 2020 and 2019 that were considered troubled debt restructurings.

Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. At March 31, 2020 and December 31, 2019, we had total interest reserves of $51.1 million and $37.0 million, respectively, on 141 loans and 131 loans, respectively, with an aggregate UPB of $2.64 billion and $2.43 billion, respectively.

v3.20.1
Allowance for Loss-Sharing Obligations
3 Months Ended
Mar. 31, 2020
Allowance for Loss-Sharing Obligations  
Allowance for Loss-Sharing Obligations

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 March 31, 

    

2020

    

2019

Beginning balance

$

34,648

$

34,298

Impact of adopting CECL - January 1, 2020

14,406

Provisions for loss sharing

21,896

879

Provisions reversal for loan repayments

(358)

(425)

Recoveries (charge-offs), net

 

160

(234)

Ending balance

$

70,752

$

34,518

When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan. A liability is recognized for the fair value of the guarantee obligation undertaken for the non-contingent aspect of the guarantee and is removed only upon either the expiration or settlement of the guarantee. At March 31, 2020 and 2019, guarantee obligations of $32.4 million and $31.5 million, respectively, were included in the allowance for loss-sharing obligations.

In addition to and separately from the fair value of the guarantee, we estimate our allowance for loss-sharing under CECL over the contractual period in which we are exposed to credit risk. The current expected loss related to loss-sharing was based on a collective pooling basis with similar risk characteristics, a reasonable and supportable forecast and a reversion period based on our average historical losses through the remaining contractual term of the portfolio. The increase in the provision for credit losses during the three months ended March 31, 2020 of $21.9 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $14.4 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic.

When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation. The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses. At March 31, 2020 and December 31, 2019, we had outstanding advances of $0.4 million and $0.5 million, respectively, which were netted against the allowance for loss-sharing obligations.

At March 31, 2020, our allowance for loss-sharing obligations, associated with expected losses under CECL was $38.4 million and represented 0.26% of the Fannie Mae servicing portfolio.

At March 31, 2020 and December 31, 2019, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $2.76 billion and $2.73 billion, respectively. The maximum quantifiable liability is not representative of the actual loss we would incur. We would be liable for this amount only if all of the loans we service for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.

v3.20.1
Securities Held-to-Maturity (Tables)
3 Months Ended
Mar. 31, 2020
Securities Held-to-Maturity  
Summary of securities held-to-maturity

Net Carrying

Unrealized 

Estimated 

Allowance for

    

Face Value

    

Value

    

(Loss)/Gain

    

Fair Value

    

Credit Losses

March 31, 2020

B Piece bonds

$

86,484

$

64,406

$

(2,143)

$

62,263

$

992

SFR bonds

20,000

20,000

(376)

19,624

Total

$

106,484

$

84,406

$

(2,519)

$

81,887

$

992

December 31, 2019

B Piece bonds

$

91,028

$

68,699

$

2,965

$

71,664

$

SFR bonds

20,000

20,000

74

20,074

Total

$

111,028

$

88,699

$

3,039

$

91,738

$

Summary of the changes in the allowance for credit losses

A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):

Three Months Ended March 31, 2020

B Piece Bonds

SFR Bonds

Total

Beginning balance, prior to adoption of CECL

$

$

$

Impact of adopting CECL - January 1, 2020

 

501

 

 

501

Provision for credit loss expense

 

491

 

 

491

Ending balance

$

992

$

$

992

v3.20.1
Allowance for Loss-Sharing Obligations (Tables)
3 Months Ended
Mar. 31, 2020
Allowance for Loss-Sharing Obligations  
Schedule of allowance for loss-sharing obligations related to Fannie Mae DUS program

Our allowance for loss-sharing obligations related to the Fannie Mae DUS program is as follows (in thousands):

Three Months Ended March 31, 

    

2020

    

2019

Beginning balance

$

34,648

$

34,298

Impact of adopting CECL - January 1, 2020

14,406

Provisions for loss sharing

21,896

879

Provisions reversal for loan repayments

(358)

(425)

Recoveries (charge-offs), net

 

160

(234)

Ending balance

$

70,752

$

34,518

v3.20.1
Segment Information
3 Months Ended
Mar. 31, 2020
Segment Information  
Segment Information

Note 19 — Segment Information

The summarized statements of operations and balance sheet data, as well as certain other data, by segment are included in the following tables ($ in thousands). Specifically identifiable costs are recorded directly to each business segment. For items not specifically identifiable, costs have been allocated between the business segments using the most meaningful allocation methodologies, which was predominately direct labor costs (i.e., time spent working on each business segment). Such costs include, but are not limited to, compensation and employee related costs, selling and administrative expenses and stock-based compensation.

Three Months Ended March 31, 2020

Structured

Agency

Other /

    

Business

    

 Business

    

Eliminations (1)

    

Consolidated

Interest income

$

78,477

$

10,049

$

$

88,526

Interest expense

43,399

6,583

49,982

Net interest income

35,078

3,466

38,544

Other revenue:

Gain on sales, including fee-based services, net

14,305

14,305

Mortgage servicing rights

21,934

21,934

Servicing revenue

25,124

25,124

Amortization of MSRs

(11,822)

(11,822)

Property operating income

2,192

2,192

Loss on derivative instruments, net

(3,000)

(47,731)

(50,731)

Other income, net

1,303

1,303

Total other revenue

495

1,810

2,305

Other expenses:

Employee compensation and benefits

10,846

23,406

34,252

Selling and administrative

4,450

6,602

    

11,052

Property operating expenses

2,443

2,443

Depreciation and amortization

620

1,327

1,947

Provision for loss sharing (net of recoveries)

21,537

21,537

Provision for credit losses (net of recoveries)

53,890

492

54,382

Total other expenses

72,249

53,364

125,613

Loss before extinguishment of debt, income from equity affiliates and income taxes

(36,676)

(48,088)

(84,764)

Loss on extinguishment of debt

(1,954)

(1,954)

Income from equity affiliates

3,992

3,992

(Provision for) benefit from income taxes

(83)

14,453

14,370

Net loss

(34,721)

(33,635)

(68,356)

Preferred stock dividends

1,888

1,888

Net loss attributable to noncontrolling interest

(10,934)

(10,934)

Net loss attributable to common stockholders

$

(36,609)

$

(33,635)

$

10,934

$

(59,310)

Three Months Ended March 31, 2019

Structured

Agency

Other /

    

Business

    

Business

    

Eliminations (1)

    

Consolidated

Interest income

$

65,809

$

5,468

$

$

71,277

Interest expense

38,257

3,608

41,865

Net interest income

27,552

1,860

29,412

Other revenue:

Gain on sales, including fee-based services, net

16,389

16,389

Mortgage servicing rights

14,232

14,232

Servicing revenue

25,834

25,834

Amortization of MSRs

(12,282)

(12,282)

Property operating income

2,803

2,803

Loss on derivative instruments, net

(2,465)

(2,465)

Other income, net

337

337

Total other revenue

3,140

41,708

44,848

Other expenses:

Employee compensation and benefits

8,464

23,300

31,764

Selling and administrative

4,421

5,340

9,761

Property operating expenses

2,396

2,396

Depreciation and amortization

512

1,400

1,912

Provision for loss sharing (net of recoveries)

454

454

Total other expenses

15,793

30,494

46,287

Income before extinguishment of debt, income from equity affiliates and income taxes

14,899

13,074

27,973

Loss on extinguishment of debt

(128)

(128)

Income from equity affiliates

2,151

2,151

Benefit from income taxes

10

10

Net income

16,922

13,084

30,006

Preferred stock dividends

1,888

1,888

Net income attributable to noncontrolling interest

5,468

5,468

Net income attributable to common stockholders

$

15,034

$

13,084

$

(5,468)

$

22,650

(1)Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

March 31, 2020

    

Structured Business

    

Agency Business

    

Consolidated

Assets:

Cash and cash equivalents

$

106,879

$

115,451

$

222,330

Restricted cash

301,468

2,599

304,067

Loans and investments, net

4,638,004

4,638,004

Loans held-for-sale, net

991,696

991,696

Capitalized mortgage servicing rights, net

288,954

288,954

Securities held-to-maturity, net

20,000

64,406

84,406

Investments in equity affiliates

44,701

44,701

Goodwill and other intangible assets

12,500

96,871

109,371

Other assets

174,409

76,712

251,121

Total assets

$

5,297,961

$

1,636,689

$

6,934,650

Liabilities:

Debt obligations

$

4,635,218

$

790,739

$

5,425,957

Allowance for loss-sharing obligations

70,752

70,752

Other liabilities

155,383

56,508

211,891

Total liabilities

$

4,790,601

$

917,999

$

5,708,600

December 31, 2019

Assets:

Cash and cash equivalents

$

264,468

$

35,219

$

299,687

Restricted cash

 

208,926

 

1,949

 

210,875

Loans and investments, net

 

4,189,960

 

 

4,189,960

Loans held-for-sale, net

861,360

861,360

Capitalized mortgage servicing rights, net

286,420

286,420

Securities held-to-maturity, net

20,000

68,699

88,699

Investments in equity affiliates

 

41,800

 

 

41,800

Goodwill and other intangible assets

12,500

98,200

110,700

Other assets

 

118,175

 

31,484

 

149,659

Total assets

$

4,855,829

$

1,383,331

$

6,239,160

 

 

 

Liabilities:

 

 

 

Debt obligations

$

3,878,343

$

743,595

$

4,621,938

Allowance for loss-sharing obligations

34,648

34,648

Other liabilities

 

171,004

 

55,543

 

226,547

Total liabilities

$

4,049,347

$

833,786

$

4,883,133

Three Months Ended March 31, 

    

2020

    

2019

Origination Data:

Structured Business

New loan originations

$

856,229

$

416,295

Loan payoffs / paydowns

275,292

279,471

Agency Business

Origination Volumes by Investor:

Fannie Mae

$

581,973

$

546,886

Private Label

282,345

Freddie Mac

199,711

192,492

FHA

17,944

1,110

CMBS/Conduit

105,425

Total

$

1,081,973

$

845,913

Total loan commitment volume

$

1,267,219

$

846,963

Loan Sales Data:

Agency Business

Fannie Mae

$

754,044

$

746,937

Freddie Mac

179,703

223,773

FHA

23,313

25,631

CMBS/Conduit

105,425

Total

$

957,060

$

1,101,766

Sales margin (fee-based services as a % of loan sales)

1.49

%  

1.49%

MSR rate (MSR income as a % of loan commitments)

1.73

%  

1.68%

March 31, 2020

Wtd. Avg. Servicing

Wtd. Avg. Life of

UPB of Servicing

Fee Rate

Servicing Portfolio

Key Servicing Metrics for Agency Business:

    

Portfolio

    

(basis points)

    

(in years)

Fannie Mae

$

14,946,922

49.3

8.0

Freddie Mac

4,570,521

29.4

10.6

FHA

679,685

15.2

19.1

Total

$

20,197,128

43.6

8.9

    

December 31, 2019

Fannie Mae

    

$

14,832,844

   

49.3

   

7.8

Freddie Mac

4,534,714

30.0

10.6

FHA

691,519

15.4

18.7

Total

$

20,059,077

43.8

8.8

v3.20.1
Variable Interest Entities
3 Months Ended
Mar. 31, 2020
Variable Interest Entities  
Variable Interest Entities

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 Debt Fund entities, which we consolidate, are VIEs. ARLP is already consolidated in our financial statements, therefore, the identification of this entity as a VIE had no impact on our consolidated financial statements.

Our CLO and Debt Fund consolidated entities invest in real estate and real estate-related securities and are financed by the issuance of debt securities. We, or one of our affiliates, are named collateral manager, servicer, and special servicer for all collateral assets held in CLOs, which we believe gives us the power to direct the most significant economic activities of those entities. We also have exposure to losses to the extent of our equity interests and also have 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 by the CLOs and Debt Fund to third parties. Our operating results and cash flows include the gross amounts related to CLO and Debt Fund assets and liabilities as opposed to our net economic interests in those entities.

The assets and liabilities related to these consolidated CLOs and Debt Fund are as follows (in thousands):

    

March 31, 2020

    

December 31, 2019

Assets:

Restricted cash

$

301,045

$

208,467

Loans and investments, net

2,911,257

2,557,909

Other assets

20,711

18,380

Total assets

$

3,233,013

$

2,784,756

 

 

Liabilities:

Collateralized loan obligations

$

2,513,096

$

2,130,121

Debt fund

68,717

68,629

Due to related party

231

6,734

Other liabilities

 

3,544

 

4,115

Total liabilities

$

2,585,588

$

2,209,599

Assets held by the CLOs and Debt Fund are restricted and can only be used to settle obligations of the CLOs and Debt Fund, respectively. The liabilities of the CLOs and Debt Fund 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 consolidated CLOs or Debt Fund.

Unconsolidated VIEs. We determined that we are not the primary beneficiary of 28 VIEs in which we have a variable interest as of March 31, 2020 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance.

A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, as of March 31, 2020 is as follows (in thousands):

Type

    

Carrying Amount (1)

Loans

$

341,010

B Piece and SFR bonds

85,398

Equity investments

12,930

Agency interest only strips

2,424

Total

$

441,762

(1)Represents the carrying amount of loans and investments before reserves. At March 31, 2020, $129.0 million of loans to VIEs had corresponding loan loss reserves of $79.4 million. The maximum loss exposure as of March 31, 2020 would not exceed the carrying amount of our investment.

These unconsolidated VIEs have exposure to real estate debt of approximately $4.21 billion at March 31, 2020.

v3.20.1
Segment Information (Tables)
3 Months Ended
Mar. 31, 2020
Segment Information  
Schedule of statement of income and balance sheet by segment

Three Months Ended March 31, 2020

Structured

Agency

Other /

    

Business

    

 Business

    

Eliminations (1)

    

Consolidated

Interest income

$

78,477

$

10,049

$

$

88,526

Interest expense

43,399

6,583

49,982

Net interest income

35,078

3,466

38,544

Other revenue:

Gain on sales, including fee-based services, net

14,305

14,305

Mortgage servicing rights

21,934

21,934

Servicing revenue

25,124

25,124

Amortization of MSRs

(11,822)

(11,822)

Property operating income

2,192

2,192

Loss on derivative instruments, net

(3,000)

(47,731)

(50,731)

Other income, net

1,303

1,303

Total other revenue

495

1,810

2,305

Other expenses:

Employee compensation and benefits

10,846

23,406

34,252

Selling and administrative

4,450

6,602

    

11,052

Property operating expenses

2,443

2,443

Depreciation and amortization

620

1,327

1,947

Provision for loss sharing (net of recoveries)

21,537

21,537

Provision for credit losses (net of recoveries)

53,890

492

54,382

Total other expenses

72,249

53,364

125,613

Loss before extinguishment of debt, income from equity affiliates and income taxes

(36,676)

(48,088)

(84,764)

Loss on extinguishment of debt

(1,954)

(1,954)

Income from equity affiliates

3,992

3,992

(Provision for) benefit from income taxes

(83)

14,453

14,370

Net loss

(34,721)

(33,635)

(68,356)

Preferred stock dividends

1,888

1,888

Net loss attributable to noncontrolling interest

(10,934)

(10,934)

Net loss attributable to common stockholders

$

(36,609)

$

(33,635)

$

10,934

$

(59,310)

Three Months Ended March 31, 2019

Structured

Agency

Other /

    

Business

    

Business

    

Eliminations (1)

    

Consolidated

Interest income

$

65,809

$

5,468

$

$

71,277

Interest expense

38,257

3,608

41,865

Net interest income

27,552

1,860

29,412

Other revenue:

Gain on sales, including fee-based services, net

16,389

16,389

Mortgage servicing rights

14,232

14,232

Servicing revenue

25,834

25,834

Amortization of MSRs

(12,282)

(12,282)

Property operating income

2,803

2,803

Loss on derivative instruments, net

(2,465)

(2,465)

Other income, net

337

337

Total other revenue

3,140

41,708

44,848

Other expenses:

Employee compensation and benefits

8,464

23,300

31,764

Selling and administrative

4,421

5,340

9,761

Property operating expenses

2,396

2,396

Depreciation and amortization

512

1,400

1,912

Provision for loss sharing (net of recoveries)

454

454

Total other expenses

15,793

30,494

46,287

Income before extinguishment of debt, income from equity affiliates and income taxes

14,899

13,074

27,973

Loss on extinguishment of debt

(128)

(128)

Income from equity affiliates

2,151

2,151

Benefit from income taxes

10

10

Net income

16,922

13,084

30,006

Preferred stock dividends

1,888

1,888

Net income attributable to noncontrolling interest

5,468

5,468

Net income attributable to common stockholders

$

15,034

$

13,084

$

(5,468)

$

22,650

(1)Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

March 31, 2020

    

Structured Business

    

Agency Business

    

Consolidated

Assets:

Cash and cash equivalents

$

106,879

$

115,451

$

222,330

Restricted cash

301,468

2,599

304,067

Loans and investments, net

4,638,004

4,638,004

Loans held-for-sale, net

991,696

991,696

Capitalized mortgage servicing rights, net

288,954

288,954

Securities held-to-maturity, net

20,000

64,406

84,406

Investments in equity affiliates

44,701

44,701

Goodwill and other intangible assets

12,500

96,871

109,371

Other assets

174,409

76,712

251,121

Total assets

$

5,297,961

$

1,636,689

$

6,934,650

Liabilities:

Debt obligations

$

4,635,218

$

790,739

$

5,425,957

Allowance for loss-sharing obligations

70,752

70,752

Other liabilities

155,383

56,508

211,891

Total liabilities

$

4,790,601

$

917,999

$

5,708,600

December 31, 2019

Assets:

Cash and cash equivalents

$

264,468

$

35,219

$

299,687

Restricted cash

 

208,926

 

1,949

 

210,875

Loans and investments, net

 

4,189,960

 

 

4,189,960

Loans held-for-sale, net

861,360

861,360

Capitalized mortgage servicing rights, net

286,420

286,420

Securities held-to-maturity, net

20,000

68,699

88,699

Investments in equity affiliates

 

41,800

 

 

41,800

Goodwill and other intangible assets

12,500

98,200

110,700

Other assets

 

118,175

 

31,484

 

149,659

Total assets

$

4,855,829

$

1,383,331

$

6,239,160

 

 

 

Liabilities:

 

 

 

Debt obligations

$

3,878,343

$

743,595

$

4,621,938

Allowance for loss-sharing obligations

34,648

34,648

Other liabilities

 

171,004

 

55,543

 

226,547

Total liabilities

$

4,049,347

$

833,786

$

4,883,133

Schedule of origination data and loan sales data

Three Months Ended March 31, 

    

2020

    

2019

Origination Data:

Structured Business

New loan originations

$

856,229

$

416,295

Loan payoffs / paydowns

275,292

279,471

Agency Business

Origination Volumes by Investor:

Fannie Mae

$

581,973

$

546,886

Private Label

282,345

Freddie Mac

199,711

192,492

FHA

17,944

1,110

CMBS/Conduit

105,425

Total

$

1,081,973

$

845,913

Total loan commitment volume

$

1,267,219

$

846,963

Loan Sales Data:

Agency Business

Fannie Mae

$

754,044

$

746,937

Freddie Mac

179,703

223,773

FHA

23,313

25,631

CMBS/Conduit

105,425

Total

$

957,060

$

1,101,766

Sales margin (fee-based services as a % of loan sales)

1.49

%  

1.49%

MSR rate (MSR income as a % of loan commitments)

1.73

%  

1.68%

Schedule of key servicing metrics for Agency Business

March 31, 2020

Wtd. Avg. Servicing

Wtd. Avg. Life of

UPB of Servicing

Fee Rate

Servicing Portfolio

Key Servicing Metrics for Agency Business:

    

Portfolio

    

(basis points)

    

(in years)

Fannie Mae

$

14,946,922

49.3

8.0

Freddie Mac

4,570,521

29.4

10.6

FHA

679,685

15.2

19.1

Total

$

20,197,128

43.6

8.9

    

December 31, 2019

Fannie Mae

    

$

14,832,844

   

49.3

   

7.8

Freddie Mac

4,534,714

30.0

10.6

FHA

691,519

15.4

18.7

Total

$

20,059,077

43.8

8.8

v3.20.1
Loans and Investments - Risk Ratings and LTV Ratios (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Loans and Investments    
Percentage of Portfolio 100.00% 100.00%
Wtd. Avg. First Dollar LTV Ratio (as percent) 4.00% 4.00%
Wtd. Avg. Last Dollar LTV Ratio (as percent) 77.00% 76.00%
Credit risk concentration    
Loans and Investments    
Origination Year 2020 $ 798,232  
Origination Year 2019 2,545,951  
Origination Year 2018 670,853  
Origination Year 2017 586,401  
Origination Year 2016 8,250  
Origination Year Prior 190,857  
Amortized cost basis $ 4,800,544  
Wtd. Avg. First Dollar LTV Ratio (as percent) 4.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 77.00%  
Credit risk concentration | Loans and investments portfolio | New York    
Loans and Investments    
Concentration risk, percentage 16.00% 18.00%
Credit risk concentration | Loans and investments portfolio | Texas    
Loans and Investments    
Concentration risk, percentage 12.00% 12.00%
Credit risk concentration | Multifamily    
Loans and Investments    
Origination Year 2020 $ 693,781  
Origination Year 2019 2,289,005  
Origination Year 2018 455,453  
Origination Year 2017 429,420  
Origination Year 2016 8,250  
Origination Year Prior 46,835  
Amortized cost basis $ 3,922,744  
Percentage of Portfolio 82.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 4.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 76.00%  
Credit risk concentration | Multifamily | Pass    
Loans and Investments    
Origination Year 2020 $ 425,994  
Origination Year 2019 758,705  
Origination Year 2018 75,000  
Origination Year 2017 32,500  
Origination Year Prior 350  
Amortized cost basis 1,292,549  
Credit risk concentration | Multifamily | Pass/watch    
Loans and Investments    
Origination Year 2020 195,114  
Origination Year 2019 903,609  
Origination Year 2018 188,500  
Origination Year 2017 22,100  
Origination Year Prior 17,685  
Amortized cost basis 1,327,008  
Credit risk concentration | Multifamily | Special mention    
Loans and Investments    
Origination Year 2020 49,173  
Origination Year 2019 616,097  
Origination Year 2018 150,459  
Origination Year 2017 288,800  
Amortized cost basis 1,104,529  
Credit risk concentration | Multifamily | Substandard    
Loans and Investments    
Origination Year 2020 23,500  
Origination Year 2019 10,594  
Origination Year 2018 41,494  
Origination Year 2017 86,020  
Origination Year 2016 8,250  
Origination Year Prior 28,800  
Amortized cost basis 198,658  
Credit risk concentration | Land    
Loans and Investments    
Origination Year 2020 71,019  
Origination Year 2019 19,523  
Origination Year 2017 19,975  
Origination Year Prior 127,928  
Amortized cost basis $ 238,445  
Percentage of Portfolio 5.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 0.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 90.00%  
Credit risk concentration | Land | Special mention    
Loans and Investments    
Origination Year 2020 $ 71,019  
Origination Year 2019 19,523  
Origination Year 2017 19,975  
Amortized cost basis 110,517  
Credit risk concentration | Land | Substandard    
Loans and Investments    
Origination Year Prior 127,928  
Amortized cost basis 127,928  
Credit risk concentration | Healthcare    
Loans and Investments    
Origination Year 2019 80,919  
Origination Year 2018 76,500  
Origination Year 2017 46,275  
Amortized cost basis $ 203,694  
Percentage of Portfolio 4.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 0.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 78.00%  
Credit risk concentration | Healthcare | Pass    
Loans and Investments    
Origination Year 2019 $ 21,350  
Origination Year 2018 10,000  
Amortized cost basis 31,350  
Credit risk concentration | Healthcare | Pass/watch    
Loans and Investments    
Origination Year 2019 51,069  
Origination Year 2018 66,500  
Origination Year 2017 41,650  
Amortized cost basis 159,219  
Credit risk concentration | Healthcare | Special mention    
Loans and Investments    
Origination Year 2019 8,500  
Amortized cost basis 8,500  
Credit risk concentration | Healthcare | Doubtful    
Loans and Investments    
Origination Year 2017 4,625  
Amortized cost basis 4,625  
Credit risk concentration | Office    
Loans and Investments    
Origination Year 2018 46,000  
Origination Year 2017 77,151  
Origination Year Prior 10,841  
Amortized cost basis $ 133,992  
Percentage of Portfolio 3.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 3.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 69.00%  
Credit risk concentration | Office | Pass    
Loans and Investments    
Origination Year 2018 $ 5,000  
Amortized cost basis 5,000  
Credit risk concentration | Office | Special mention    
Loans and Investments    
Origination Year 2017 43,151  
Origination Year Prior 9,961  
Amortized cost basis 53,112  
Credit risk concentration | Office | Substandard    
Loans and Investments    
Origination Year 2018 41,000  
Origination Year 2017 34,000  
Amortized cost basis 75,000  
Credit risk concentration | Office | Doubtful    
Loans and Investments    
Origination Year Prior 880  
Amortized cost basis 880  
Credit risk concentration | Single-Family Rental    
Loans and Investments    
Origination Year 2020 33,432  
Origination Year 2019 65,504  
Amortized cost basis $ 98,936  
Percentage of Portfolio 2.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 0.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 70.00%  
Credit risk concentration | Single-Family Rental | Pass    
Loans and Investments    
Origination Year 2020 $ 8,575  
Origination Year 2019 34,490  
Amortized cost basis 43,065  
Credit risk concentration | Single-Family Rental | Pass/watch    
Loans and Investments    
Origination Year 2020 17,570  
Origination Year 2019 30,853  
Amortized cost basis 48,423  
Credit risk concentration | Single-Family Rental | Special mention    
Loans and Investments    
Origination Year 2020 7,287  
Origination Year 2019 161  
Amortized cost basis 7,448  
Credit risk concentration | Hotel    
Loans and Investments    
Origination Year 2019 91,000  
Amortized cost basis $ 91,000  
Percentage of Portfolio 2.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 32.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 100.00%  
Credit risk concentration | Hotel | Substandard    
Loans and Investments    
Origination Year 2019 $ 91,000  
Amortized cost basis 91,000  
Credit risk concentration | Other    
Loans and Investments    
Origination Year 2018 92,900  
Origination Year 2017 13,580  
Origination Year Prior 5,253  
Amortized cost basis $ 111,733  
Percentage of Portfolio 2.00%  
Wtd. Avg. First Dollar LTV Ratio (as percent) 4.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 77.00%  
Credit risk concentration | Other | Pass/watch    
Loans and Investments    
Origination Year 2017 $ 3,574  
Amortized cost basis 3,574  
Credit risk concentration | Other | Special mention    
Loans and Investments    
Origination Year 2018 51,300  
Origination Year 2017 10,006  
Amortized cost basis 61,306  
Credit risk concentration | Other | Substandard    
Loans and Investments    
Origination Year 2018 41,600  
Origination Year Prior 3,553  
Amortized cost basis 45,153  
Credit risk concentration | Other | Doubtful    
Loans and Investments    
Origination Year Prior 1,700  
Amortized cost basis $ 1,700  
v3.20.1
Debt Obligations, Senior Unsecured Notes (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Apr. 30, 2020
Mar. 31, 2020
Oct. 31, 2019
Mar. 31, 2019
May 31, 2018
Mar. 31, 2018
Mar. 31, 2020
Dec. 31, 2018
Dec. 31, 2019
Debt Obligations                  
Proceeds from issued debt     $ 108,200            
Senior notes carrying value   $ 591,854         $ 591,854   $ 319,799
Senior Unsecured Notes                  
Debt Obligations                  
Principal amount   $ 600,000 $ 110,000       $ 600,000   $ 325,000
Interest rate (as a percent)   4.50% 4.75%       4.50%   4.75%
Proceeds from issued debt   $ 271,800              
Redemption of aggregate principal amount (as a percent)   100.00%              
Senior notes carrying value   $ 271,800         $ 271,800    
Deferred financing fees   $ 3,200         $ 3,200    
Weighted average note rate including certain fees and costs (as a percent)   4.69%         4.69%    
6.50% Convertible Notes                  
Debt Obligations                  
Interest rate (as a percent)               6.50%  
Proceeds from issued debt             $ 200    
5.625% Notes                  
Debt Obligations                  
Principal amount         $ 125,000 $ 100,000      
Interest rate (as a percent)   5.625%       5.625% 5.625%   5.625%
Proceeds from issued debt         $ 25,000     $ 122,300  
Redemption of aggregate principal amount (as a percent)           100.00%      
Senior notes carrying value   $ 123,200         $ 123,200   $ 123,100
Deferred financing fees   $ 1,800         $ 1,800   $ 1,900
Weighted average note rate including certain fees and costs (as a percent)   6.08%         6.08%   6.08%
5.75% Notes                  
Debt Obligations                  
Principal amount       $ 90,000          
Interest rate (as a percent)   5.75%   5.75%     5.75%   5.75%
Proceeds from issued debt       $ 88,200          
Redemption of aggregate principal amount (as a percent)       100.00%          
Senior notes carrying value   $ 88,500         $ 88,500   $ 88,400
Deferred financing fees   $ 1,500         $ 1,500   $ 1,600
Weighted average note rate including certain fees and costs (as a percent)   6.18%         6.18%   6.18%
7.375% Convertible Notes                  
Debt Obligations                  
Interest rate (as a percent)         7.375%        
Debt instrument redemption value         $ 97,900        
4.75% Notes                  
Debt Obligations                  
Redemption of aggregate principal amount (as a percent)     100.00% 100.00%          
Senior notes carrying value   $ 108,400         $ 108,400   $ 108,400
Deferred financing fees   $ 1,600         $ 1,600   $ 1,600
Weighted average note rate including certain fees and costs (as a percent)   5.23%         5.23%   5.23%
4.50% Notes                  
Debt Obligations                  
Principal amount   $ 275,000         $ 275,000    
Interest rate (as a percent)   4.50%         4.50%    
8.00% Notes | Subsequent Event                  
Debt Obligations                  
Principal amount $ 40,500                
Interest rate (as a percent) 8.00%                
Proceeds from issued debt $ 39,800                
v3.20.1
Real Estate Owned (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Real Estate Owned        
Real estate owned, net $ 13,270,000   $ 13,220,000  
Restricted cash due to escrow requirement 304,067,000 $ 291,865,000 210,875,000 $ 180,606,000
Real Estate Owned        
Real Estate Owned        
Less: Impairment loss (16,807,000)   (16,807,000)  
Less: Accumulated depreciation and amortization (11,507,000)   (11,327,000)  
Real estate owned, net 13,270,000   13,220,000  
Restricted cash due to escrow requirement 400,000   500,000  
Real Estate Owned | Hotel        
Real Estate Owned        
Less: Impairment loss (14,307,000)   (14,307,000)  
Less: Accumulated depreciation and amortization (10,460,000)   (10,320,000)  
Real estate owned, net $ 10,298,000   10,208,000  
Weighted average occupancy rate of properties (as a percent) 41.00% 53.00%    
Amount of weighted average daily rate of properties $ 154 $ 130    
Amount of weighted average daily revenue of properties 64 $ 69    
Real Estate Owned | Office        
Real Estate Owned        
Less: Impairment loss (2,500,000)   (2,500,000)  
Less: Accumulated depreciation and amortization (1,047,000)   (1,007,000)  
Real estate owned, net 2,972,000   3,012,000  
Real Estate Owned | Land        
Real Estate Owned        
Real estate owned, gross 7,803,000   7,803,000  
Real Estate Owned | Land | Hotel        
Real Estate Owned        
Real estate owned, gross 3,294,000   3,294,000  
Real Estate Owned | Land | Office        
Real Estate Owned        
Real estate owned, gross 4,509,000   4,509,000  
Real Estate Owned | Building and intangible assets        
Real Estate Owned        
Real estate owned, gross 33,781,000   33,551,000  
Real Estate Owned | Building and intangible assets | Hotel        
Real Estate Owned        
Real estate owned, gross 31,771,000   31,541,000  
Real Estate Owned | Building and intangible assets | Office        
Real Estate Owned        
Real estate owned, gross $ 2,010,000   $ 2,010,000  
v3.20.1
Allowance for Loss-Sharing Obligations (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Roll forward of loss contingency accrual      
Provisions for loss sharing $ 21,537 $ 454  
Guarantee obligations 32,400 31,500  
Fannie Mae      
Roll forward of loss contingency accrual      
Allowance for loss sharing obligations $ 38,400    
Loss-sharing obligations (as a percent) 0.26%    
Loss-Sharing Obligation      
Roll forward of loss contingency accrual      
Outstanding advances under the Fannie Mae DUS program $ 400   $ 500
Loss-Sharing Obligation | Fannie Mae      
Roll forward of loss contingency accrual      
Beginning balance of the period 34,648 34,298  
Impact of adopting CECL 14,406    
Provisions for loss sharing 21,896 879  
Provisions reversal for loan repayments (358) (425)  
Recoveries (charge-offs) , net 160 (234)  
Ending balance of the period 70,752 $ 34,518  
Maximum quantifiable liability $ 2,760,000   $ 2,730,000
v3.20.1
Basis of Presentation and Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2020
Basis of Presentation and Significant Accounting Policies  
Basis of Presentation

Basis of Presentation

These 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 2019 Annual Report.

Principles of Consolidation

Principles of Consolidation

These consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other joint ventures in which we own a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary. Entities in which we have a significant influence are accounted for under the equity method. Our VIEs are described in Note 15. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home" orders, to close financial markets and to restrict operations of non-essential businesses. Such actions are creating significant disruptions in global supply chains, and adversely impacting many industries. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown. The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear, making any estimate or assumption as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Credit Losses

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which utilizes a current expected credit loss methodology (“CECL”) for the recognition of credit losses for our structured loans and investments, held-to-maturity debt securities and our loss-sharing obligations related to the Fannie Mae DUS program, at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected credit losses. This methodology replaces the multiple existing impairment methods in GAAP and generally requires that a loss be incurred before it is recognized. We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting periods prior to January 1, 2020 have been unadjusted and reported in accordance with previously applicable GAAP. In connection with the adoption of ASU 2016-13, we recorded a $28.6 million increase to accumulated deficit,which is net of a deferred tax asset of $3.6 million as of January 1, 2020.

The following table illustrates the impact of adopting ASU 2016-13 (in thousands):

January 1, 2020

    

As Reported

    

    

    

    

 

Under

 

As Reported

 

Impact of

 

ASU 2016-13

 

Pre-Adoption

 

Adoption

Assets:

 

  

 

  

 

  

Allowance for credit losses:

 

  

 

  

 

  

Structured loans and investments (1)

$

88,363

$

71,069

$

17,294

Held-to-maturity debt securities

 

501

501

Deferred taxassets

27,307

23,713

3,594

Liabilities:

 

  

 

  

 

  

Allowance for loss-sharing obligations

 

16,847

 

2,441

 

14,406

(1)See Note 3 for details by asset class.

Other Accounting Pronouncements Adopted

Description

    

Adoption Date

    

Effect on Financial Statements

In November 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends the guidance for determining whether a decision-making fee is a variable interest and requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP).

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with changes between hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. Early adoption is permitted upon issuance of the update.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. This ASU eliminates step two from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value with the carrying amount of goodwill.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

Description

    

Effective Date

    

Effect on Financial Statements

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022.

We have not adopted any of the optional expedients or exceptions through March 31, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

Significant Accounting Policies

See Item 8 – Financial Statements and Supplementary Data in our 2019 Annual Report for a description of our significant accounting policies. Upon the adoption of ASU 2016-13 on January 1, 2020, we adjusted certain significant accounting policies, as follows:

Allowance for Credit Losses. We estimate allowances for credit losses on our structured loans and investments (including unfunded loan commitments), loss-sharing obligations related to the Fannie Mae DUS program and our held-to-maturity debt securities under CECL. This method is based on expected credit losses for the life of the investment as of each balance sheet date. Our estimation of credit losses utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future. We have licensed a third party model to assist with the measurement of expected credit losses, which utilizes incurred losses inherent in the portfolio. The loss factors are determined through the generation of probability of defaults (PD) and loss

given defaults (LGD) for similar loans with similar credit. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect our expected credit losses.

Our method for calculating the estimate of expected credit loss takes into account historical experience and current conditions for similar loans and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on our assessment of the most likely scenario of assumptions and plausible outcomes for the US economy, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect our loss experience. We regularly evaluate the reasonable and supportable forecast period to determine if a change is needed.

Beyond our reasonable and supportable forecast period, we generally revert to historical loss information over the remaining loan/asset period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. We may make adjustments to historical loss information for differences in risk that may not reflect the characteristics of our current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. We generally expect to use an average historical loss for reversion, utilizing an immediate or straight line method for the remaining life of the investments.

We also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as necessary. Our qualitative analysis includes a review of data that may directly impact our estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e. refinance, sale, bankruptcy) which allows us to more accurately and reasonably determine the amount of the expected loss for these investments. We also evaluate the contractual life of our assets to determine if changes are needed for contractual extension options, renewals, modifications and prepayments.

To the extent possible, we estimate our allowance for credit losses using a pooling approach for homogeneous assets with similar risk characteristics with the goal of enhancing the precision of their estimate. If particular assets no longer display risk characteristics that are similar to those of the pool, we may decide to revise our pools or perform an individual assessment of expected credit losses. If it is determined that a foreclosure is probable, or we expect repayment through the operation or sale of the collateral and the borrower is experiencing financial difficulty, we calculate expected credit losses based on the fair value of the collateral as of the reporting date.

During the loan review process, if we determine that it is probable that we will be unable to collect all amounts due for both principal and interest according to the contractual terms of a loan, we consider that loan impaired. We evaluate the capitalization and market discount rates, as well as the borrower's operating income and cash flows, in estimating the value of the underlying collateral when determining if a loan is impaired. We may also obtain a third party appraisal, which may value the collateral through an "as-is" or "stabilized value" methodology. Such appraisals may be used as an additional source of valuation information only and no adjustments are made to appraisals. If upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, we record a specific allowance for credit losses with a corresponding charge to the provision for credit losses, and remove the impaired loan from the CECL analysis described above.

If the loan modification constitutes a concession whereas we do not receive ample consideration in return for the modification, and the borrower is experiencing financial difficulties and cannot repay the loan under the current terms, then the modification is considered by us to be a troubled debt restructuring. We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current. The allowance for credit losses on a troubled debt restructuring is measured using the same method as all other loans held for investment.

Charge-offs to the allowance for credit losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale; when a modification or restructuring takes place in which we grant a concession to a borrower or agree to a discount in full or partial satisfaction of the loan; when we take ownership and control of the underlying collateral in full satisfaction of the loan; when loans are reclassified as other investments; or when significant collection efforts have ceased and it is highly likely that a loss has been realized.

Loss on restructured loans is recorded when we have granted a concession to the borrower in the form of principal forgiveness related to the payoff or the substitution or addition of a new debtor for the original borrower or when we incur costs on behalf of the borrower related to the modification, payoff or the substitution or addition of a new debtor for the original borrower. When a loan is restructured, we record our investment at net realizable value, taking into account the cost of all concessions at the date of restructuring. In addition, a gain or loss may be recorded upon the sale of a loan to a third party in the consolidated statements of operations in the period in which the loan was sold.

v3.20.1
Equity
3 Months Ended
Mar. 31, 2020
Equity  
Equity

Note 16 — Equity

Preferred Stock. The Series A, B and C preferred stock outstanding are redeemable by us.

Common Stock.

We have an “At-The-Market” equity offering sales agreement with JMP Securities LLC (“JMP”) which entitles us to issue and sell up to 7,500,000 shares of our common stock 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 three months ended March 31, 2020, we sold 1,350,000 shares for net proceeds of $19.4 million. As of March 31, 2020, we had approximately 3,000,000 shares available under this agreement.

In March 2020, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $100.0 million of our outstanding common stock. The repurchase of our common stock may be made from time to time in the open market, in privately negotiated transactions or in compliance with a Rule 10b5-1 plan based on our stock price, general market conditions, applicable legal requirements and other factors. The program may be discontinued or modified at any time. As of April 30, 2020, we repurchased 993,106 shares of our common stock under this program at a total cost of $3.9 million and an average cost of $3.98 per share.

During the three months ended March 31, 2020, we issued 319,259 and 41,601 shares in connection with the settlements of our 5.25% and 5.375% Convertible Notes, respectively. In February 2020, we also used a portion of the net proceeds from our public offering in December 2019 to purchase an aggregate of 747,500 shares of our common stock and OP Units from our chief executive officer and ACM at the same price the underwriters paid to purchase the shares.

As of March 31, 2020, we had $118.2 million available under our $500.0 million shelf registration statement that was declared effective by the SEC in June 2018.

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 (the "Acquisition"). Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $0.01 per share and is entitled to one vote each on any matter submitted for stockholder approval. The OP Units are entitled to receive distributions if and when our Board of Directors authorizes and declares common stock distributions. The OP Units are also redeemable for cash, or at our option, for shares of our common stock on a one-for-one basis.

At March 31, 2020, there were 20,369,265 OP Units outstanding, which represented 15.6% of the voting power of our outstanding stock.

Distributions. Dividends declared (on a per share basis) during the three months ended March 31, 2020 were as follows:

Common Stock

Preferred Stock

Dividend (1)

Declaration Date

    

Dividend

    

Declaration Date

    

Series A

    

Series B

    

Series C

February 13, 2020

$

0.30

January 31, 2020

$

0.515625

$

0.484375

$

0.53125

(1)The dividend declared on January 31, 2020 was for December 1, 2019 through February 29, 2020.

Common Stock – On May 6, 2020, the Board of Directors declared a cash dividend of $0.30 per share of common stock. The dividend is payable on July 15, 2020 to common stockholders of record as of the close of business on June 30, 2020.

Preferred Stock – On May 1, 2020, the Board of Directors declared a cash dividend of $0.515625 per share of 8.25% Series A preferred stock; a cash dividend of $0.484375 per share of 7.75% Series B preferred stock; and a cash dividend of $0.53125 per share of 8.50% Series C preferred stock. These amounts reflect dividends from March 1, 2020 through May 31, 2020 and are payable on June 1, 2020 to preferred stockholders of record on May 15, 2020.

Deferred Compensation. In March 2020, we issued 298,991 shares of restricted common stock to employees under the 2017 Amended Omnibus Stock Incentive Plan (the “2017 Plan”) with a total grant date fair value of $3.2 million. Substantially all of these shares have one third vest as of the grant date and one third vesting on each of the first and second anniversaries of the grant date. In March 2020, we issued 36,396 shares of fully vested common stock to the independent members of the Board of Directors under the 2017 Plan with a grant date fair value of $0.4 million.

In March 2020, we issued 45,928 shares of restricted common stock to our chief executive officer under his 2017 annual incentive agreement with a grant date fair value of $0.5 million. One quarter of the shares vested as of the grant date and one quarter will vest on each of the first, second and third anniversaries of the grant date. Our chief executive officer was also granted up to 275,569 performance-based restricted stock units with a grant date fair value of $0.1 million that vest at the end of a four-year performance period based on our achievement of certain total stockholder return objectives. During the first quarter of 2020, 421,348 shares of previously granted performance-based restricted stock units fully vested, which were net settled for 215,014 common shares.

During the first quarter of 2020, 143,096 shares were withheld by us from the net settlement of restricted common stock by employees for payment of withholding taxes.

Earnings Per Share. Basic EPS is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period using the treasury stock method. Our common stock equivalents include the weighted average dilutive effect of performance-based restricted stock units granted to our chief executive officer, OP Units and convertible senior unsecured notes.

A reconciliation of the numerator and denominator of our basic and diluted EPS computations ($ in thousands, except share and per share data) is as follows:

irad

Three Months Ended March 31,

2020

2019

    

Basic

    

Diluted

    

Basic

    

Diluted

Net (loss) income attributable to common stockholders (1)

$

(59,310)

$

(59,310)

$

22,650

$

22,650

Net (loss) income attributable to noncontrolling interest (2)

(10,934)

5,468

Net (loss) income attributable to common stockholders and noncontrolling interest

$

(59,310)

$

(70,244)

$

22,650

$

28,118

Weighted average shares outstanding

 

110,792,412

 

110,792,412

 

85,151,878

 

85,151,878

Dilutive effect of OP Units (2)

20,424,787

20,554,434

Dilutive effect of restricted stock units (3)

 

 

 

 

1,376,514

Dilutive effect of convertible notes (4)

786,685

Weighted average shares outstanding

 

110,792,412

 

131,217,199

 

85,151,878

 

107,869,511

Net (loss) income per common share (1)

$

(0.54)

$

(0.54)

$

0.27

$

0.26

(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)Mr. Kaufman is granted restricted stock units annually, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives.
(4)The convertible senior unsecured notes impact diluted earnings per share if the average price of our common stock exceeds the conversion price, as calculated in accordance with the terms of the indenture, of which was antidilutive for March 31, 2020.
v3.20.1
Equity (Tables)
3 Months Ended
Mar. 31, 2020
Equity  
Schedule of dividends declared by the Company (on a per share basis)

Common Stock

Preferred Stock

Dividend (1)

Declaration Date

    

Dividend

    

Declaration Date

    

Series A

    

Series B

    

Series C

February 13, 2020

$

0.30

January 31, 2020

$

0.515625

$

0.484375

$

0.53125

(1)The dividend declared on January 31, 2020 was for December 1, 2019 through February 29, 2020.

Schedule of reconciliation of the numerator and denominator of the basic and diluted EPS computations

irad

Three Months Ended March 31,

2020

2019

    

Basic

    

Diluted

    

Basic

    

Diluted

Net (loss) income attributable to common stockholders (1)

$

(59,310)

$

(59,310)

$

22,650

$

22,650

Net (loss) income attributable to noncontrolling interest (2)

(10,934)

5,468

Net (loss) income attributable to common stockholders and noncontrolling interest

$

(59,310)

$

(70,244)

$

22,650

$

28,118

Weighted average shares outstanding

 

110,792,412

 

110,792,412

 

85,151,878

 

85,151,878

Dilutive effect of OP Units (2)

20,424,787

20,554,434

Dilutive effect of restricted stock units (3)

 

 

 

 

1,376,514

Dilutive effect of convertible notes (4)

786,685

Weighted average shares outstanding

 

110,792,412

 

131,217,199

 

85,151,878

 

107,869,511

Net (loss) income per common share (1)

$

(0.54)

$

(0.54)

$

0.27

$

0.26

(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)Mr. Kaufman is granted restricted stock units annually, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives.
(4)The convertible senior unsecured notes impact diluted earnings per share if the average price of our common stock exceeds the conversion price, as calculated in accordance with the terms of the indenture, of which was antidilutive for March 31, 2020.
v3.20.1
Loans and Investments - Investment Portfolio and Concentration of Credit Risk (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
loan
borrower
Dec. 31, 2019
USD ($)
loan
borrower
Mar. 31, 2019
USD ($)
Loans and Investments      
Loans and investments, gross $ 4,800,544 $ 4,279,611  
Unearned revenue (20,288) (18,582)  
Loans and investments, net 4,638,004 4,189,960  
Allowance for credit losses $ (142,252) $ (71,069) $ (71,069)
Percent of Total 100.00% 100.00%  
Loan Count | loan 292 272  
Wtd. Avg. Pay Rate (as a percent) 5.70% 5.98%  
Wtd. Avg. Remaining Months to Maturity 22 months 6 days 22 months 3 days  
Wtd. Avg. First Dollar LTV Ratio (as percent) 4.00% 4.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 77.00% 76.00%  
Credit risk concentration      
Loans and Investments      
Amortized cost basis $ 4,800,544    
Allowance for credit losses - CECL $ 4,800,544    
Wtd. Avg. First Dollar LTV Ratio (as percent) 4.00%    
Wtd. Avg. Last Dollar LTV Ratio (as percent) 77.00%    
Credit risk concentration | Single-Family Rental      
Loans and Investments      
Amortized cost basis $ 98,936    
Allowance for credit losses - CECL $ 98,936    
Percent of Total 2.00%    
Wtd. Avg. First Dollar LTV Ratio (as percent) 0.00%    
Wtd. Avg. Last Dollar LTV Ratio (as percent) 70.00%    
Total assets | Credit risk concentration      
Loans and Investments      
Loan Count | loan 25 24  
Number of different borrowers | borrower 5 5  
Concentration risk, percentage 13.00% 13.00%  
Bridge loans      
Loans and Investments      
Loans and investments, gross $ 4,342,335 $ 3,836,832  
Percent of Total 90.00% 90.00%  
Loan Count | loan 234 217  
Wtd. Avg. Pay Rate (as a percent) 5.50% 5.77%  
Wtd. Avg. Remaining Months to Maturity 18 months 12 days 18 months  
Wtd. Avg. First Dollar LTV Ratio (as percent) 1.00% 0.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 77.00% 75.00%  
Bridge loans | Single-Family Rental      
Loans and Investments      
Number of loans under the loan portfolio | loan 10 11  
Total loan commitment $ 54,400 $ 66,700  
Preferred equity investments      
Loans and Investments      
Loans and investments, gross $ 201,509 $ 181,058  
Percent of Total 4.00% 4.00%  
Loan Count | loan 11 10  
Wtd. Avg. Pay Rate (as a percent) 8.30% 7.62%  
Wtd. Avg. Remaining Months to Maturity 59 months 6 days 68 months 24 days  
Wtd. Avg. First Dollar LTV Ratio (as percent) 70.00% 69.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 88.00% 89.00%  
Mezzanine loans      
Loans and Investments      
Loans and investments, gross $ 175,389 $ 191,575  
Percent of Total 4.00% 4.00%  
Loan Count | loan 27 24  
Wtd. Avg. Pay Rate (as a percent) 7.85% 9.70%  
Wtd. Avg. Remaining Months to Maturity 48 months 12 days 36 months 21 days  
Wtd. Avg. First Dollar LTV Ratio (as percent) 24.00% 22.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 75.00% 73.00%  
Other      
Loans and Investments      
Loans and investments, gross $ 81,311 $ 70,146  
Percent of Total 2.00% 2.00%  
Loan Count | loan 20 21  
Wtd. Avg. Pay Rate (as a percent) 5.14% 2.88%  
Wtd. Avg. Remaining Months to Maturity 76 months 3 days 84 months 24 days  
Wtd. Avg. First Dollar LTV Ratio (as percent) 0.00% 0.00%  
Wtd. Avg. Last Dollar LTV Ratio (as percent) 69.00% 70.00%  
Other | Single-Family Rental      
Loans and Investments      
Number of loans under the loan portfolio | loan 19 12  
Total loan commitment $ 74,900 $ 41,600  
Unpaid principal balance, funded $ 24,000 $ 30,000  
Other | Purchased Loans [Member]      
Loans and Investments      
Number of loans under the loan portfolio | loan 1 9  
Total loan commitment $ 6,400 $ 28,600  
v3.20.1
Derivative Financial Instruments, Agency Business (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
item
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
item
Derivative Financial Instruments      
Notional Value, classified in Other Assets $ 341,180   $ 173,532
Notional Value, classified in Other Liabilities 153,816   347,701
Net gains (losses) from changes in the fair value of derivatives 8,200 $ (2,500)  
Gain (loss) on derivative instruments (50,731) (2,465)  
Income from mortgage servicing rights 21,934 14,232  
Other Income      
Derivative Financial Instruments      
Gain (loss) on derivative instruments $ 21,900 $ 14,200  
Swap Futures      
Derivative Financial Instruments      
Derivative, maturity term 3 months    
Swap Futures | Minimum      
Derivative Financial Instruments      
Derivative Swap Rate Period 5 years    
Swap Futures | Maximum      
Derivative Financial Instruments      
Derivative Swap Rate Period 10 years    
Swap Futures | Agency Business | Other Income      
Derivative Financial Instruments      
Realized gain (loss) on derivatives $ 46,000    
Unrealized gain (loss) on derivatives (9,800)    
Swap Futures | Structured Business | Other Income      
Derivative Financial Instruments      
Realized gain (loss) on derivatives (2,600)    
Unrealized gain (loss) on derivatives (400)    
Non-Qualifying | Agency Business      
Derivative Financial Instruments      
Notional Value, classified in Other Assets 1,125,696   848,633
Fair Value, classified in Other Assets 12,683   1,435
Fair Value, classified in Other Liabilities $ (5,113)   $ (3,097)
Non-Qualifying | Rate lock commitments | Agency Business      
Derivative Financial Instruments      
Count | item 10   5
Notional Value, classified in Other Assets $ 99,893   $ 37,657
Fair Value, classified in Other Assets 2,069   1,066
Fair Value, classified in Other Liabilities $ (4,808)   $ (202)
Non-Qualifying | Forward Sale Commitments | Agency Business      
Derivative Financial Instruments      
Count | item 59   79
Notional Value, classified in Other Assets $ 395,103   $ 483,576
Fair Value, classified in Other Assets 10,614   369
Fair Value, classified in Other Liabilities $ (305)   $ (2,895)
Non-Qualifying | Swap Futures | Agency Business      
Derivative Financial Instruments      
Count | item 6,307   3,274
Notional Value, classified in Other Assets $ 630,700   $ 327,400
Non-Qualifying | Swap Futures | Structured Business      
Derivative Financial Instruments      
Count | item 345   271
Notional Value, classified in Other Assets $ 34,500   $ 27,100
v3.20.1
Debt Obligations, Convertible Senior Unsecured Notes (Details)
$ / shares in Units, shares in Millions
1 Months Ended 3 Months Ended 12 Months Ended
Sep. 30, 2018
Mar. 31, 2020
USD ($)
$ / shares
shares
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
$ / shares
Dec. 31, 2016
Jan. 31, 2020
$ / shares
Dec. 31, 2018
Jul. 20, 2018
Jul. 03, 2018
Debt Obligations                  
Cash paid for the exchange of convertible notes   $ 21,516,000 $ 3,019,000            
Loss on extinguishment of debt   (1,954,000) $ (128,000)            
Total   5,488,085,000              
Convertible Senior Unsecured Notes                  
Debt Obligations                  
Principal amount   $ 279,398,000   $ 300,914,000          
Proceeds received, net of estimated issuance costs       34,000,000.0          
Loss on extinguishment of debt       7,300,000          
Inducement charge       $ 1,100,000          
Percentage of the Notes required to be repurchased if the agreement is fundamentally changed         100.00%        
Maturity period (in years)   2 years 6 months 3 days   2 years 8 months 1 day          
Unamortized Debt Discount   $ 8,045,000   $ 9,235,000          
Unamortized Deferred Financing Fees   6,664,000   7,527,000          
Total   264,689,000   284,152,000          
Net Carrying Value, Equity Component   9,962,000   9,962,000          
Interest expense   5,200,000   5,200,000          
Interest expense related to cash coupon   3,400,000   3,500,000          
Debt discount   900,000   900,000          
Deferred fees expensed as interest expense   $ 900,000   $ 800,000          
Cost of the notes (as a percent)   6.75%   6.80%          
5.375% Convertible Notes                  
Debt Obligations                  
Principal amount   $ 500,000              
Interest rate (as a percent)   5.375%         5.375%    
Conversion rate of the notes to common stock, per $1,000 principal amount of notes 89.6066                
6.50% Convertible Notes                  
Debt Obligations                  
Interest rate (as a percent)             6.50%    
5.25% Convertible Notes                  
Debt Obligations                  
Principal amount   $ 14,700,000              
Interest rate (as a percent)   5.25%   5.25%     5.25% 5.25% 5.25%
Cash paid for the exchange of convertible notes   $ 233,100,000   $ 228,700,000          
Common stock exchanged (in shares) | shares   4,478,315.0              
4.75% Convertible Notes                  
Debt Obligations                  
Principal amount   $ 1,000   $ 264,000,000.0          
Interest rate (as a percent)   4.75%   4.75%          
Proceeds received, net of estimated issuance costs       $ 256,500,000          
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   56.1695              
Conversion price per share of common stock | $ / shares   $ 17.80              
4.75% Convertible Notes | First Offering                  
Debt Obligations                  
Principal amount       $ 1,000          
Conversion rate of the notes to common stock, per $1,000 principal amount of notes       56.1695          
Conversion price per share of common stock | $ / shares       $ 17.80          
Junior subordinated notes                  
Debt Obligations                  
Principal amount   $ 154,336,000   $ 154,336,000          
Deferred fees expensed as interest expense   1,900,000   $ 2,000,000.0          
Issued on July 3, 2018 | 5.375% Convertible Notes | First Offering                  
Debt Obligations                  
Principal amount   $ 1,000              
Conversion price per share of common stock | $ / shares   $ 11.50              
Issued on July 3, 2018 | 6.50% Convertible Notes | First Offering                  
Debt Obligations                  
Conversion price per share of common stock | $ / shares   9.28              
Issued on July 3, 2018 | 5.25% Convertible Notes | First Offering                  
Debt Obligations                  
Conversion price per share of common stock | $ / shares   $ 12.85              
Issued on July 20, 2018 | 5.375% Convertible Notes | First Offering                  
Debt Obligations                  
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   86.9943              
Issued on July 20, 2018 | 5.375% Convertible Notes | Second Offering                  
Debt Obligations                  
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   80.1703              
Conversion price per share of common stock | $ / shares   $ 11.16              
Issued on July 20, 2018 | 6.50% Convertible Notes | First Offering                  
Debt Obligations                  
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   107.7122              
Issued on July 20, 2018 | 6.50% Convertible Notes | Second Offering                  
Debt Obligations                  
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   115.5849              
Conversion price per share of common stock | $ / shares   $ 8.65              
Issued on July 20, 2018 | 5.25% Convertible Notes | First Offering                  
Debt Obligations                  
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   77.8331              
Issued on July 20, 2018 | 5.25% Convertible Notes | Second Offering                  
Debt Obligations                  
Principal amount   $ 1,000              
Conversion rate of the notes to common stock, per $1,000 principal amount of notes   89.6066              
Conversion price per share of common stock | $ / shares           $ 12.47      
v3.20.1
Debt Obligations, Credit Facilities and Repurchase Agreements (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Jan. 31, 2020
Oct. 31, 2019
Mar. 31, 2020
Dec. 31, 2019
Apr. 30, 2020
Feb. 29, 2020
Mar. 31, 2019
Debt Obligations              
UPB     $ 1,851,758 $ 1,681,146      
Debt Carrying Value     1,846,473 1,678,288      
Collateral Carrying Value     $ 2,118,611 $ 1,747,371      
Weighted Average Note Rate (as a percent)     2.83% 3.54%      
Repurchase facility - securities              
Debt Obligations              
Cash collateral related to margin calls     $ 54,700        
Repurchase facility - securities | CLOs              
Debt Obligations              
Collateral Carrying Value     275,700 $ 234,900      
Repurchase facility - securities | B Piece bonds              
Debt Obligations              
Collateral Carrying Value     64,400 68,700      
Repurchase facility - securities | SFR bonds              
Debt Obligations              
Debt Instrument, Collateral Amount     20,000 20,000      
Structured Business              
Debt Obligations              
Debt Carrying Value     1,055,734 934,694      
Collateral Carrying Value     $ 1,169,574 $ 1,002,993      
Weighted Average Note Rate (as a percent)     3.15% 3.94%      
Weighted average note rate including certain fees and costs (as a percent)     3.55% 4.39%      
Unamortized deferred finance costs     $ 3,900 $ 2,100      
Leverage on loans and investment portfolio financed through credit facilities and repurchase agreements, excluding securities repurchase facility, working capital line of credit and security agreements used to finance leasehold and capital expenditure improvements at corporate office (as a percent)     69.00% 71.00%      
Structured Business | $150 million repurchase facility | Minimum              
Debt Obligations              
Maximum borrowing capacity           $ 75,000  
Structured Business | $150 million repurchase facility | Maximum              
Debt Obligations              
Maximum borrowing capacity           150,000  
Structured Business | $300 million repurchase facility              
Debt Obligations              
Maximum borrowing capacity     $ 300,000        
Structured Business | $128.7 million loan specific credit facilities              
Debt Obligations              
Debt Carrying Value     128,370 $ 128,274      
Collateral Carrying Value     $ 184,212 $ 184,116      
Weighted Average Note Rate (as a percent)     3.35% 4.13%      
Maximum borrowing capacity     $ 128,700 $ 128,700      
Structured Business | $128.7 million loan specific credit facilities | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.10%        
Structured Business | $128.7 million loan specific credit facilities | Maximum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.50%        
Structured Business | $100 million repurchase facility              
Debt Obligations              
Debt Carrying Value     $ 50,247 45,843      
Collateral Carrying Value     $ 66,486 $ 63,800      
Weighted Average Note Rate (as a percent)     2.78% 3.56%      
Maximum borrowing capacity     $ 100,000 $ 100,000      
Structured Business | $100 million repurchase facility | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.75%        
Structured Business | $100 million repurchase facility | Maximum              
Debt Obligations              
Variable rate, spread (as a percent)     1.95%        
Structured Business | $75 million credit facility - One              
Debt Obligations              
Maximum borrowing capacity     $ 75,000        
Structured Business | $75 million credit facility - One | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.75%        
Structured Business | $50 million credit facility - one              
Debt Obligations              
Debt Carrying Value       14,933      
Collateral Carrying Value       $ 17,650      
Weighted Average Note Rate (as a percent)       3.81%      
Maximum borrowing capacity     $ 50,000 $ 50,000      
Structured Business | $50 million credit facility - one | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.00%        
Structured Business | $50 million credit facility - two              
Debt Obligations              
Debt Carrying Value     $ 15,202 12,191      
Collateral Carrying Value     $ 22,817 $ 16,499      
Weighted Average Note Rate (as a percent)     3.54% 4.32%      
Structured Business | $50 million credit facility - two | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.50%        
Structured Business | $50 million credit facility - three              
Debt Obligations              
Debt Carrying Value     $ 5,264 $ 5,254      
Collateral Carrying Value     $ 6,600 $ 6,600      
Weighted Average Note Rate (as a percent)     3.54% 4.32%      
Structured Business | $50 million credit facility - three | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.50%        
Structured Business | $50 million credit facility - three | Maximum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     3.25%        
Structured Business | $25 million credit facility              
Debt Obligations              
Debt Carrying Value     $ 19,659 $ 19,651      
Collateral Carrying Value     $ 30,900 $ 28,572      
Weighted Average Note Rate (as a percent)     3.29% 4.07%      
Maximum borrowing capacity     $ 25,000 $ 25,000      
Structured Business | $25 million credit facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.25%        
Structured Business | $25 million working capital facility              
Debt Obligations              
Debt Carrying Value     $ 25,000        
Weighted Average Note Rate (as a percent)     3.29%        
Maximum borrowing capacity     $ 25,000 25,000      
Structured Business | $25 million working capital facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.25%        
Structured Business | $3.3 million master security agreement              
Debt Obligations              
Debt Carrying Value     $ 2,761 $ 3,267      
Weighted Average Note Rate (as a percent)     4.10% 4.08%      
Maximum borrowing capacity     $ 2,800 $ 2,800      
Structured Business | $3.3 million master security agreement | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.97%        
Structured Business | $3.3 million master security agreement | Maximum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     4.60%        
Structured Business | Repurchase facility - securities              
Debt Obligations              
Debt Carrying Value     $ 219,655 $ 217,105      
Weighted Average Note Rate (as a percent)     3.10% 3.90%      
Structured Business | Repurchase facility - securities | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.20%        
Structured Business | Repurchase facility - securities | Maximum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.75%        
Structured Business | $500 million repurchase facility              
Debt Obligations              
Maximum borrowing capacity     $ 400,000        
Structured Business | $150 million credit facility - one              
Debt Obligations              
Debt Carrying Value     25,560 $ 4,570      
Collateral Carrying Value     $ 31,790 $ 7,000      
Weighted Average Note Rate (as a percent)     2.78% 3.56%      
Maximum borrowing capacity     $ 150,000 $ 150,000      
Structured Business | $150 million credit facility - one | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.75%        
Structured Business | $150 million credit facility - one | Maximum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.50%        
Structured Business | $200 million repurchase facility              
Debt Obligations              
Debt Carrying Value     $ 48,893 40,530      
Collateral Carrying Value     $ 55,682 $ 48,086      
Weighted Average Note Rate (as a percent)     3.44% 4.22%      
Maximum borrowing capacity     $ 200,000 $ 200,000      
Structured Business | $200 million repurchase facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     2.40%        
Structured Business | $400 million repurchase facility              
Debt Obligations              
Debt Carrying Value     $ 214,647 218,418      
Collateral Carrying Value     $ 289,961 $ 291,292      
Weighted Average Note Rate (as a percent)     2.98% 3.76%      
Maximum borrowing capacity     $ 400,000 $ 400,000      
Structured Business | $400 million repurchase facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.95%        
Structured Business | $40.5 million credit facility              
Debt Obligations              
Maximum borrowing capacity     $ 50,000       $ 50,000
Structured Business | $500 million joint repurchase facility              
Debt Obligations              
Debt Carrying Value     300,476 224,658      
Collateral Carrying Value     $ 481,126 $ 339,378      
Weighted Average Note Rate (as a percent)     3.22% 4.06%      
Maximum borrowing capacity     $ 500,000 $ 500,000      
Structured Business | $500 million joint repurchase facility | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.75%        
Structured Business | $500 million joint repurchase facility | Maximum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     3.50%        
Structured Business | Subsequent Event | Repurchase facility - securities              
Debt Obligations              
Debt Carrying Value         $ 40,000    
Agency Business              
Debt Obligations              
Debt Carrying Value     $ 790,739 743,594      
Collateral Carrying Value     $ 949,037 $ 744,378      
Weighted Average Note Rate (as a percent)     2.39% 3.03%      
Unamortized deferred finance costs     $ 1,400 $ 200      
Agency Business | $300 million repurchase facility              
Debt Obligations              
Debt Carrying Value     104,261 187,698      
Collateral Carrying Value     $ 104,291 $ 187,742      
Weighted Average Note Rate (as a percent)     2.14% 2.91%      
Maximum borrowing capacity     $ 300,000 $ 300,000      
Agency Business | $300 million repurchase facility | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.15%        
Agency Business | $750 million ASAP agreement              
Debt Obligations              
Debt Carrying Value     $ 81,451 148,725      
Collateral Carrying Value     $ 81,451 $ 148,725      
Weighted Average Note Rate (as a percent)     2.04% 2.81%      
Maximum borrowing capacity     $ 750,000 $ 750,000      
Agency Business | $750 million ASAP agreement | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.05%        
Agency Business | $750 million ASAP agreement | Minimum | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     0.35% 0.35%      
Agency Business | $500 million repurchase facility              
Debt Obligations              
Maximum borrowing capacity     $ 300,000     $ 500,000  
Committed amount     500,000        
Agency Business | $500 million repurchase facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)   6.00%          
Agency Business | $500 million repurchase facility | Minimum              
Debt Obligations              
Committed amount     400,000        
Agency Business | $500 million repurchase facility | Maximum              
Debt Obligations              
Committed amount     1,100,000        
Agency Business | $250 million credit facility              
Debt Obligations              
Committed amount $ 800,000            
Agency Business | $150 million credit facility - one              
Debt Obligations              
Debt Carrying Value     71,474 $ 89,657      
Collateral Carrying Value     $ 71,667 $ 89,673      
Weighted Average Note Rate (as a percent)     2.14% 2.91%      
Maximum borrowing capacity     $ 150,000 $ 150,000      
Agency Business | $150 million credit facility - one | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.15%        
Agency Business | $150 million credit facility - two              
Debt Obligations              
Debt Carrying Value     $ 35,861 17,690      
Collateral Carrying Value     $ 35,912 $ 17,792      
Weighted Average Note Rate (as a percent)     2.14% 2.91%      
Maximum borrowing capacity     $ 150,000 $ 150,000      
Agency Business | $150 million credit facility - two | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.15%        
Agency Business | $100 million credit facility              
Debt Obligations              
Maximum borrowing capacity     $ 100,000        
Agency Business | $100 million credit facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.15%        
Agency Business | $600 million joint repurchase facility              
Debt Obligations              
Debt Carrying Value     $ 497,692 299,824      
Collateral Carrying Value     $ 655,716 $ 300,446      
Weighted Average Note Rate (as a percent)     2.56% 3.26%      
Variable rate, spread (as a percent)     2.00%        
Maximum borrowing capacity     $ 600,000 $ 600,000      
Agency Business | $600 million joint repurchase facility | LIBOR              
Debt Obligations              
Variable rate, spread (as a percent)     1.50%        
v3.20.1
Securities Held-to-Maturity Rollforward of Allowance (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Debt Securities, Held-to-maturity, Allowance for Credit Loss [Roll Forward]    
Allowance for credit loss $ 0  
Provision for credit loss expense 491  
Allowance for credit loss, ending balance 992  
Accrued interest, held-to-maturity securities 100  
Held-to-Maturity    
Debt Securities, Held-to-maturity, Allowance for Credit Loss [Roll Forward]    
Investment Income, Interest 2,300 $ 2,100
B Piece bonds    
Debt Securities, Held-to-maturity, Allowance for Credit Loss [Roll Forward]    
Provision for credit loss expense 491  
Allowance for credit loss, ending balance 992  
ASU 2016-13 | Impact of Adoption    
Debt Securities, Held-to-maturity, Allowance for Credit Loss [Roll Forward]    
Allowance for credit loss, ending balance 501  
ASU 2016-13 | Impact of Adoption | B Piece bonds    
Debt Securities, Held-to-maturity, Allowance for Credit Loss [Roll Forward]    
Allowance for credit loss, ending balance $ 501  
v3.20.1
Loans Held-for-Sale, Net (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Loans Held-for-Sale, Net      
Loans held-for-sale $ 978,736   $ 847,126
Fair value of future MSR 15,254   16,519
Unearned discount (2,294)   (2,285)
Loans held-for-sale, net 991,696   861,360
Sale of loans held-for-sale 957,060 $ 996,341  
Sale of loans held-for-sale excluding acquired loans 957,100 1,100,000  
Gain on sale of loans held-for-sale $ 13,200 $ 15,100  
Minimum      
Loans Held-for-Sale, Net      
Period of loans held for sale sold 60 days    
Maximum      
Loans Held-for-Sale, Net      
Period of loans held for sale sold 180 days    
Greater than 89 Days Past Due      
Loans Held-for-Sale, Net      
Past Due $ 0   0
Private Label      
Loans Held-for-Sale, Net      
Loans held-for-sale, net 683,526   401,207
Fannie Mae      
Loans Held-for-Sale, Net      
Loans held-for-sale, net 236,459   408,534
Freddie Mac      
Loans Held-for-Sale, Net      
Loans held-for-sale, net 56,311   36,303
FHA      
Loans Held-for-Sale, Net      
Loans held-for-sale, net $ 2,440   $ 1,082
v3.20.1
Equity, Earnings Per Share ("EPS") (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Basic    
Net (loss) income attributable to common stockholders $ (59,310) $ 22,650
Weighted average shares outstanding (in shares) 110,792,412 85,151,878
Net (loss) income per common share (in dollars per share) $ (0.54) $ 0.27
Diluted    
Net (loss) income attributable to noncontrolling interest $ (10,934) $ 5,468
Net (loss) income attributable to common stockholders and noncontrolling interest $ (70,244) $ 28,118
Weighted average shares outstanding (in shares) 110,792,412 85,151,878
Dilutive effect of OP units (in shares) 20,424,787 20,554,434
Dilutive effect of restricted stock units (in shares)   1,376,514
Dilutive effect of convertible notes (in shares)   786,685
Weighted average shares outstanding ( in shares) 131,217,199 107,869,511
Net (loss) income per common share (in dollars per share) $ (0.54) $ 0.26
Chief executive officer | Performance-based restricted stock    
Diluted    
Vesting period (in years) 4 years 4 years
v3.20.1
Fair Value, Carrying Value and Estimated Fair Value (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Oct. 31, 2019
Financial assets:      
Loans and investments, net - Principal/Notional Amount $ 4,800,544 $ 4,279,611  
Total 4,638,004 4,189,960  
Loans held-for-sale, net - Principal/Notional Amount 978,736 847,126  
Loans held-for-sale, net 978,736 847,126  
Securities, held-to-maturity, net - Principal/Notional Amount 106,484 111,028  
Held-to-maturity debt securities 84,406 88,699  
Derivative financial instruments - Principal/Notional Amount 341,180 173,532  
Financial liabilities:      
Credit and repurchase facilities, Principal/Notional Amount 1,851,758 1,681,146  
Credit and repurchase facilities, Carrying value 1,846,473 1,678,288  
Collateralized loan obligations 2,513,096 2,130,121  
Debt fund 68,717 68,629  
Senior unsecured notes 591,854 319,799  
Convertible senior unsecured notes, net 264,689 284,152  
Junior subordinated notes 141,128 140,949  
Derivative financial instruments - Principal/Notional Amount $ 153,816 347,701  
Minimum      
Financial liabilities:      
Period of loans held for sale sold 60 days    
Maximum      
Financial liabilities:      
Period of loans held for sale sold 180 days    
Carrying Value      
Financial assets:      
Total $ 4,638,004 4,189,960  
Loans held-for-sale, net 991,696 861,360  
Capitalized mortgage servicing rights, net 288,954 286,420  
Held-to-maturity debt securities 84,406 88,699  
Derivative financial instruments 12,683 1,435  
Financial liabilities:      
Credit and repurchase facilities, Carrying value 1,846,473 1,678,288  
Collateralized loan obligations 2,513,096 2,130,121  
Debt fund 68,717 68,629  
Senior unsecured notes 591,854 319,799  
Convertible senior unsecured notes, net 264,689 284,152  
Junior subordinated notes 141,128 140,949  
Derivative financial instruments 5,113 3,097  
Fair Value      
Financial assets:      
Total 4,679,039 4,228,071  
Loans held-for-sale, net 1,001,224 876,975  
Capitalized mortgage servicing rights, net 320,052 328,995  
Held-to-maturity debt securities 81,887 91,738  
Derivative financial instruments 12,683 1,435  
Financial liabilities:      
Credit and repurchase facilities, Carrying value 1,848,149 1,677,658  
Collateralized loan obligations 2,260,964 2,147,944  
Debt fund 70,115 70,138  
Senior unsecured notes 514,100 331,225  
Convertible senior unsecured notes, net 246,200 310,778  
Junior subordinated notes 98,143 97,668  
Derivative financial instruments 5,113 3,097  
CLOs      
Financial liabilities:      
Debt instrument - Principal/Notional Amount 2,532,593 2,147,467  
Collateralized loan obligations 2,513,096 2,130,121  
Debt Fund      
Financial liabilities:      
Debt instrument - Principal/Notional Amount 70,000 70,000  
Senior Unsecured Notes      
Financial liabilities:      
Debt instrument - Principal/Notional Amount 600,000 325,000 $ 110,000
Senior unsecured notes 271,800    
Convertible Senior Unsecured Notes      
Financial liabilities:      
Debt instrument - Principal/Notional Amount 279,398 300,914  
Junior subordinated notes      
Financial liabilities:      
Debt instrument - Principal/Notional Amount 154,336 154,336  
Junior subordinated notes $ 141,100 $ 140,900  
v3.20.1
Fair Value, Components of fair value and other relevant information (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Fair Value of Servicing Rights $ 19,241
Total Fair Value Adjustment 19,241
Rate lock commitments  
Notional/Principal Amount 99,893
Fair Value of Servicing Rights 3,987
Interest Rate Movement Effect (4,808)
Total Fair Value Adjustment (821)
Forward Sale Commitments  
Notional/Principal Amount 395,103
Interest Rate Movement Effect 4,808
Total Fair Value Adjustment 4,808
Loans held-for-sale, net  
Notional/Principal Amount 978,735
Fair Value of Servicing Rights 15,254
Total Fair Value Adjustment $ 15,254
v3.20.1
Segment Information - Statements of Income (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Segment Information    
Interest income $ 88,526 $ 71,277
Interest expense 49,982 41,865
Net interest income 38,544 29,412
Other revenue:    
Gain on sales, including fee-based services, net 14,305 16,389
Mortgage servicing rights 21,934 14,232
Servicing revenue 25,124 25,834
Amortization of MSRs (11,822) (12,282)
Property operating income 2,192 2,803
Loss on derivative instruments, net (50,731) (2,465)
Other income, net 1,303 337
Total other revenue 2,305 44,848
Other expenses:    
Employee compensation and benefits 34,252 31,764
Selling and administrative 11,052 9,761
Property operating expenses 2,443 2,396
Depreciation and amortization 1,947 1,912
Provision for loss sharing (net of recoveries) 21,537 454
Provision for loan losses (net of recoveries) 54,382  
Total other expenses 125,613 46,287
Loss before extinguishment of debt, income from equity affiliates and income taxes (84,764) 27,973
Loss on extinguishment of debt 1,954 128
Income from equity affiliates 3,992 2,151
(Provision) benefit for income taxes 14,370 10
Net (loss) income (68,356) 30,006
Preferred stock dividends 1,888 1,888
Net (loss) income attributable to noncontrolling interest (10,934) 5,468
Net (loss) attributable to common stockholders (59,310) 22,650
Operating segments | Structured Business    
Segment Information    
Interest income 78,477 65,809
Interest expense 43,399 38,257
Net interest income 35,078 27,552
Other revenue:    
Property operating income 2,192 2,803
Loss on derivative instruments, net (3,000)  
Other income, net 1,303 337
Total other revenue 495 3,140
Other expenses:    
Employee compensation and benefits 10,846 8,464
Selling and administrative 4,450 4,421
Property operating expenses 2,443 2,396
Depreciation and amortization 620 512
Provision for loan losses (net of recoveries) 53,890  
Total other expenses 72,249 15,793
Loss before extinguishment of debt, income from equity affiliates and income taxes (36,676) 14,899
Loss on extinguishment of debt 1,954 128
Income from equity affiliates 3,992 2,151
(Provision) benefit for income taxes (83)  
Net (loss) income (34,721) 16,922
Preferred stock dividends 1,888 1,888
Net (loss) attributable to common stockholders (36,609) 15,034
Operating segments | Agency Business    
Segment Information    
Interest income 10,049 5,468
Interest expense 6,583 3,608
Net interest income 3,466 1,860
Other revenue:    
Gain on sales, including fee-based services, net 14,305 16,389
Mortgage servicing rights 21,934 14,232
Servicing revenue 25,124 25,834
Amortization of MSRs (11,822) (12,282)
Loss on derivative instruments, net (47,731) (2,465)
Total other revenue 1,810 41,708
Other expenses:    
Employee compensation and benefits 23,406 23,300
Selling and administrative 6,602 5,340
Depreciation and amortization 1,327 1,400
Provision for loss sharing (net of recoveries) 21,537 454
Provision for loan losses (net of recoveries) 492  
Total other expenses 53,364 30,494
Loss before extinguishment of debt, income from equity affiliates and income taxes (48,088) 13,074
(Provision) benefit for income taxes 14,453 10
Net (loss) income (33,635) 13,084
Net (loss) attributable to common stockholders (33,635) 13,084
Other / Eliminations    
Other expenses:    
Net (loss) income attributable to noncontrolling interest (10,934) 5,468
Net (loss) attributable to common stockholders $ 10,934 $ (5,468)
v3.20.1
Variable Interest Entities (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
item
Dec. 31, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Variable Interest Entities        
Loan loss reserves related to VIEs $ 142,252 $ 71,069 $ 71,069  
Assets:        
Restricted cash 304,067 210,875 $ 291,865 $ 180,606
Loans and investments, net (allowance for credit losses of $142,252 and $71,069, respectively) 4,638,004 4,189,960    
Other assets 224,030 125,788    
Total assets 6,934,650 6,239,160    
Liabilities:        
Collateralized loan obligations 2,513,096 2,130,121    
Debt fund 68,717 68,629    
Other liabilities 127,341 134,299    
Total liabilities 5,708,600 4,883,133    
Consolidated variable interest entities        
Assets:        
Restricted cash 301,045 208,467    
Loans and investments, net (allowance for credit losses of $142,252 and $71,069, respectively) 2,911,257 2,557,909    
Other assets 20,711 18,380    
Total assets 3,233,013 2,784,756    
Liabilities:        
Collateralized loan obligations 2,513,096 2,130,121    
Debt fund 68,717 68,629    
Due to related party 231 6,734    
Other liabilities 3,544 4,115    
Total liabilities $ 2,585,588 $ 2,209,599    
Unconsolidated VIEs        
Variable Interest Entities        
Number of VIEs where the reporting entity is not VIE's primary beneficiary and VIEs have variable interest | item 28      
Carrying Amount $ 441,762      
Carrying amount of loans and investments before reserves related to VIEs 129,000      
Loan loss reserves related to VIEs 79,400      
Exposure to real estate debt 4,210,000      
Unconsolidated VIEs | Loans        
Variable Interest Entities        
Carrying Amount 341,010      
Unconsolidated VIEs | B Piece and SFR bonds        
Variable Interest Entities        
Carrying Amount 85,398      
Unconsolidated VIEs | Equity investments        
Variable Interest Entities        
Carrying Amount 12,930      
Unconsolidated VIEs | Agency interest only strips        
Variable Interest Entities        
Carrying Amount $ 2,424      
v3.20.1
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2020
Derivative Financial Instruments  
Derivative Financial Instruments

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. We do not use these derivatives for speculative purposes, but are instead using them to manage our exposure to interest rate risk.

Agency Rate Lock and Forward Sale Commitments. We enter into contractual commitments to originate and sell mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrower "rate locks" a specified interest rate within time frames established by us. All potential borrowers are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers under the GSE programs, we enter into a forward sale commitment with the investor simultaneously with the rate lock commitment with the borrower. The forward sale contract locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale commitment.

These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of other income, net in the consolidated statements of operations. 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 operations. During the three months ended March 31, 2020 and 2019, we recorded a net gain of $8.2 million and a net loss of $2.5 million, respectively, from changes in the fair value of these derivatives in loss on derivative instruments, net and $21.9 million and $14.2 million, respectively, of income from MSRs. See Note 13 for details.

Interest Rate Swap Futures. We enter into over-the-counter interest rate swap futures (“Swap Futures”) to hedge our exposure to changes in interest rates inherent in (1) our Structured Business SFR loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization. The Swap Futures do not meet the criteria for hedge accounting, typically have a three-month maturity and are tied to the five-year and ten-year swap rates. Our Swap Futures are cleared by a central clearing house and variation margin payments, made in cash, are treated as a legal settlement of the derivative itself as opposed to a pledge of collateral.

During the three months ended March 31, 2020, we recorded realized losses of $2.6 million and unrealized losses of $0.4 million to our Structured Business and realized losses of $46.0 million and unrealized losses of $9.8 million to our Agency Business related to our Swap Futures. The realized and unrealized gains and losses are recorded in loss on derivative instruments, net on our consolidated statements of operations.

A summary of our non-qualifying derivative financial instruments is as follows ($ in thousands):

March 31, 2020

Fair Value

Notional

Balance Sheet

Derivative

Derivative

Derivative

    

Count

    

Value

    

Location

    

Assets

    

Liabilities

 

Agency Business

Rate Lock Commitments

10

$

99,893

Other Assets/Other Liabilities

$

2,069

$

(4,808)

Forward Sale Commitments

59

395,103

Other Assets/Other Liabilities

10,614

(305)

Swap Futures

6,307

630,700

$

1,125,696

$

12,683

$

(5,113)

Structured Business

Swap Futures

345

$

34,500

    

December 31, 2019

Agency Business

    

Rate Lock Commitments

5

$

37,657

Other Assets/Other Liabilities

$

1,066

$

(202)

Forward Sale Commitments

79

483,576

Other Assets/Other Liabilities

369

(2,895)

Swap Futures

3,274

327,400

$

848,633

$

1,435

$

(3,097)

Structured Business

Swap Futures

271

$

27,100

v3.20.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 100,000,000 100,000,000
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 110,608,903 109,706,214
Common stock, shares outstanding (in shares) 110,608,903 109,706,214
Assets $ 6,934,650 $ 6,239,160
Liabilities 5,708,600 4,883,133
Loans and investments, net allowance for credit losses 142,252 71,069
Securities held-to-maturity, net allowance for credit losses 992 0
Consolidated variable interest entities    
Assets 3,233,013 2,784,756
Liabilities $ 2,585,588 $ 2,209,599
Special voting preferred shares    
Preferred stock, shares issued (in shares) 20,369,265 20,484,094
Preferred stock, shares outstanding (in shares) 20,369,265 20,484,094
8.25% Series A preferred stock    
Preferred stock, dividend rate (as a percent) 8.25% 8.25%
Preferred stock, aggregate liquidation preference $ 38,788 $ 38,788
Preferred stock, shares issued (in shares) 1,551,500 1,551,500
Preferred stock, shares outstanding (in shares) 1,551,500 1,551,500
7.75% Series B preferred stock    
Preferred stock, dividend rate (as a percent) 7.75% 7.75%
Preferred stock, aggregate liquidation preference $ 31,500 $ 31,500
Preferred stock, shares issued (in shares) 1,260,000 1,260,000
Preferred stock, shares outstanding (in shares) 1,260,000 1,260,000
8.50% Series C preferred stock    
Preferred stock, dividend rate (as a percent) 8.50% 8.50%
Preferred stock, aggregate liquidation preference $ 22,500 $ 22,500
Preferred stock, shares issued (in shares) 900,000 900,000
Preferred stock, shares outstanding (in shares) 900,000 900,000
v3.20.1
Investments in Equity Affiliates
3 Months Ended
Mar. 31, 2020
Investments in Equity Affiliates  
Investments in Equity Affiliates

Note 8 — Investments in Equity Affiliates

We account for all investments in equity affiliates under the equity method. A summary of our investments in equity affiliates is as follows (in thousands):

UPB of Loans to

Investments in Equity Affiliates at

Equity Affiliates at

Equity Affiliates

    

March 31, 2020

    

December 31, 2019

    

March 31, 2020

Arbor Residential Investor LLC

$

29,452

$

26,520

$

AMAC Holdings III LLC

10,471

10,520

15,600

North Vermont Avenue

2,458

2,440

Lightstone Value Plus REIT L.P

1,895

1,895

JT Prime

 

425

 

425

 

West Shore Café

1,688

Lexford Portfolio

1,390

East River Portfolio

 

 

 

Total

$

44,701

$

41,800

$

18,678

Arbor Residential Investor LLC (“ARI”). During the three months ended March 31, 2020 and 2019, we recorded income of $2.9 million and $0.8 million, respectively, to income from equity affiliates in our consolidated statements of operations.

Lexford Portfolio. During the three months ended March 31, 2020 and 2019, we received distributions of $1.1 million and $1.3 million, respectively, from this equity investment, which was recognized as income.

See Note 18 for details of certain investments described above.

v3.20.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)
3 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
8.25% Series A preferred stock      
Preferred stock, dividend rate (as a percent) 8.25% 8.25% 8.25%
7.75% Series B preferred stock      
Preferred stock, dividend rate (as a percent) 7.75% 7.75% 7.75%
8.50% Series C preferred stock      
Preferred stock, dividend rate (as a percent) 8.50% 8.50% 8.50%
v3.20.1
Loans Held-for-Sale, Net
3 Months Ended
Mar. 31, 2020
Loans Held-for-Sale, Net  
Loans Held-for-Sale, Net

Note 4 — Loans Held-for-Sale, Net

Loans held-for-sale, net consists of the following (in thousands):

     

March 31, 2020

     

December 31, 2019

Private Label

$

683,526

$

401,207

Fannie Mae

236,459

408,534

Freddie Mac

 

56,311

36,303

FHA

2,440

1,082

 

978,736

847,126

Fair value of future MSR

15,254

16,519

Unearned discount

 

(2,294)

(2,285)

Loans held-for-sale, net

$

991,696

$

861,360

Our GSE loans held-for-sale are typically sold within 60 days of loan origination, while our Private Label loans are generally expected to be sold and securitized within 180 days of loan origination. During the three months ended March 31, 2020 and 2019, we sold $957.1 million and $1.10 billion, respectively, of loans held-for-sale and recorded gain on sales of $13.2 million and $15.1 million, respectively. At March 31, 2020 and December 31, 2019, there were no loans held-for-sale that were 90 days or more past due, and there were no loans held-for-sale that were placed on a non-accrual status.

v3.20.1
Mortgage Servicing (Tables)
3 Months Ended
Mar. 31, 2020
MSRs  
Mortgage Servicing  
Schedule of product and geographic concentrations in servicing revenue

Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands):

March 31, 2020

Product Concentrations

Geographic Concentrations

UPB 

    

    

Percent of

    

    

Percentage

 

Product

UPB (1)

Total

State

of Total

Fannie Mae

$

14,946,922

74

%  

Texas

18

%

Freddie Mac

4,570,521

 

23

%  

North Carolina

9

%

FHA

679,685

 

3

%  

New York

9

%

Total

$

20,197,128

100

%  

California

8

%

Georgia

6

%

Florida

6

%

Other (2)

44

%

Total

100

%

December 31, 2019

Fannie Mae

    

$

14,832,844

    

74

%  

Texas

    

19

%

Freddie Mac

4,534,714

23

%  

North Carolina

9

%

FHA

691,519

3

%  

New York

9

%

Total

$

20,059,077

100

%  

California

9

%

Florida

6

%

Georgia

6

%

Other (2)

42

%

Total

100

%

(1)Excludes loans which we are not collecting a servicing fee.
(2)No other individual state represented 4% or more of the total.

v3.20.1
Debt Obligations (Tables)
3 Months Ended
Mar. 31, 2020
Debt Obligations  
Schedule of face amount and gain on extinguishment of the company's CDO bonds repurchased by bond class

Borrowings and the corresponding collateral under our Debt Fund were as follows ($ in thousands):

Collateral (3)

Debt

Loans

Cash

Face

Carrying

Wtd. Avg.

Carrying

Restricted

Period

    

Value

    

Value (1)

    

Rate (2)

    

UPB

    

 Value

    

Cash (4)

March 31, 2020

$

70,000

$

68,717

5.21

%  

$

57,795

$

57,586

$

42,205

December 31, 2019

    

$

70,000

    

$

68,629

    

5.99

%  

$

70,755

    

$

68,629

    

$

29,245

(1)Debt carrying value is net of $1.3 million and $1.4 million of deferred financing fees at March 31, 2020 and December 31, 2019, respectively.
(2)At March 31, 2020 and December 31, 2019, the aggregate weighted average note rate, including certain fees and costs, was 6.52% and 7.17%, respectively.
(3)At both March 31, 2020 and December 31, 2019, there was no collateral at risk of default or deemed to be a “credit risk.”
(4)Represents restricted cash held for reinvestment. Excludes restricted cash related to interest payments, delayed fundings and expenses.

Schedule of face value, unamortized discount and net carrying value of the liability and equity components

The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes were as follows (in thousands):

Liability

Equity

 Component

 Component

Unamortized Debt 

Unamortized Deferred 

Net Carrying 

Net Carrying 

Period

    

UPB

    

Discount

    

Financing Fees

    

Value

    

Value

March 31, 2020

$

279,398

$

8,045

$

6,664

$

264,689

$

9,962

December 31, 2019

$

300,914

$

9,235

$

7,527

$

284,152

$

9,962

Credit Facilities and Repurchase Agreements  
Debt Obligations  
Schedule of borrowings

Borrowings under our credit facilities and repurchase agreements are as follows ($ in thousands):

March 31, 2020

December 31, 2019

Debt

Collateral

Debt

Collateral

 

Current

Extended

Carrying

Carrying

Wtd. Avg.

Carrying

Carrying

Wtd. Avg.

  

Maturity

  

Maturity

  

Note Rate

  

Value (1)

  

Value

  

Note Rate

  

Value (1)

  

Value

  

Note Rate

 

Structured Business

$500 million joint repurchase facility

Mar. 2022

N/A

L +

1.75

%  

to

3.50

%  

$

300,476

$

481,126

3.22

%

$

224,658

$

339,378

4.06

$400 million repurchase facility

Dec. 2020

Mar. 2023

L +

1.95

%  

 

214,647

 

289,961

2.98

%

 

218,418

 

291,292

3.76

$200 million repurchase facility

Feb. 2021

(2)

L +

2.40

%  

48,893

55,682

3.44

%

40,530

48,086

4.22

$150 million credit facility (3)

May 2020

May 2023

L +

1.75

%  

to

2.50

%

25,560

31,790

2.78

%

4,570

7,000

3.56

$128.7 million loan specific credit facilities

May 2020 to May 2022

June 2021 to Dec. 2021

L +

2.10

%  

to

2.50

%  

 

128,370

 

184,212

3.35

%

 

128,274

 

184,116

4.13

$100 million repurchase facility

June 2020

June 2021

L +

1.75

%  

to

1.95

%  

 

50,247

 

66,486

2.78

 

45,843

 

63,800

3.56

$75 million credit facility

June 2020

June 2023

L +

1.75

%  

$50 million credit facility

April 2020

April 2022

L +

2.00

%  

 

 

 

14,933

 

17,650

3.81

$50 million credit facility

Oct. 2022

Oct. 2023

L +

2.50

%  

15,202

22,817

3.54

%

12,191

16,499

4.32

$50 million credit facility

Sept. 2020

Sept. 2021

L +

2.50

%  

to

3.25

%  

5,264

6,600

3.54

%

5,254

6,600

4.32

$25 million credit facility

June 2022

June 2023

L +

2.25

%  

19,659

30,900

3.29

%

19,651

28,572

4.07

$25 million working capital facility

Aug. 2020

N/A

L +

2.25

%  

25,000

3.29

%

$2.8 million master security agreements

Dec. 2022

N/A

2.97

%  

to

4.60

%  

2,761

4.10

%

3,267

4.08

%

Repurchase facilities - securities (4)

N/A

N/A

L +

1.20

%

to

2.75

%

219,655

3.10

%

217,105

3.90

%

Structured Business total

$

1,055,734

$

1,169,574

3.15

%

$

934,694

$

1,002,993

3.94

Agency Business

$750 million ASAP agreement (5)

N/A

N/A

L +

1.05

%  

$

81,451

$

81,451

2.04

%

$

148,725

$

148,725

2.81

$600 million joint repurchase facility

Mar. 2021

Mar. 2022

L +

1.50

%  

to

2.00

%

497,692

655,716

2.56

299,824

300,446

3.26

$300 million repurchase facility

Oct. 2020

N/A

L +

1.15

%  

104,261

104,291

2.14

%

187,698

187,742

2.91

$150 million credit facility

Mar. 2021

N/A

L +

1.15

%  

71,474

71,667

2.14

%

89,657

89,673

2.91

$150 million credit facility

July 2020

N/A

L +

1.15

%  

35,861

35,912

2.14

%

17,690

17,792

2.91

$100 million credit facility

June 2020

N/A

L +

1.15

%  

Agency Business total

$

790,739

$

949,037

2.39

%

$

743,594

$

744,378

3.03

Consolidated total

$

1,846,473

$

2,118,611

2.83

%

$

1,678,288

$

1,747,371

3.54

(1)The debt carrying value for the Structured Business at March 31, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $3.9 million and $2.1 million, respectively. The debt carrying value for the Agency Business at March 31, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $1.4 million and $0.2 million, respectively.
(2)This repurchase facility includes six-month extension options into perpetuity.
(3)In February 2020, the committed amount under the facility was temporarily increased $75.0 million to $150.0 million, which expires on May 29, 2020.
(4)These repurchase facilities are subject to margin call provisions associated with changes in interest spreads. As of March 31, 2020 and December 31, 2019, these facilities were collateralized by our CLO bonds retained and consolidated by us with a principal balance of $275.7 million and $234.9 million, respectively, B Piece bonds held-to-maturity with a carrying value of $64.4 million and $68.7 million, respectively, and SFR bonds with a carrying value of $20.0 million at both March 31, 2020 and December 31, 2019. At March 31, 2020, we had posted $54.7 million of cash collateral related to margin calls, which was used to reduce the UPB of the facilities in April 2020. We further reduced this debt in April 2020 to approximately $40.0 million through a debt restructuring and the use of proceeds from our senior notes issued in April 2020.
(5)The note rate under this agreement is subject to a LIBOR Floor of 35 basis points.
CLOs  
Debt Obligations  
Schedule of borrowings

Borrowings and the corresponding collateral under our CLOs are as follows ($ in thousands):

Collateral (3)

Debt

Loans

Cash

    

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

March 31, 2020

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO XIII

$

668,000

$

662,918

2.44

%  

$

665,381

$

662,287

$

100,777

CLO XII

534,193

529,748

2.52

%  

613,317

610,760

CLO XI

533,000

528,981

2.47

%  

640,272

637,633

2,208

CLO X

441,000

437,652

2.48

%  

535,613

533,588

3,656

CLO IX

 

356,400

 

353,797

2.39

%  

 

410,558

 

409,403

 

60,854

Total CLOs

$

2,532,593

$

2,513,096

2.46

%  

$

2,865,141

$

2,853,671

$

167,495

Collateral (3)

Debt

Loans

Cash

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

December 31, 2019

    

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO XII

$

534,193

$

529,448

3.30

%  

$

596,366

$

593,652

$

17,800

CLO XI

533,000

528,690

3.25

%  

624,443

621,508

15,550

CLO X

 

441,000

 

437,391

3.26

%  

 

509,887

 

507,854

 

37,287

CLO IX

356,400

353,473

3.17

%  

407,696

406,463

47,230

CLO VIII

282,874

281,119

3.12

%  

359,186

357,914

544

Total CLOs

$

2,147,467

$

2,130,121

3.23

%  

$

2,497,578

$

2,487,391

$

118,411

(1)Debt carrying value is net of $19.5 million and $17.3 million of deferred financing fees at March 31, 2020 and December 31, 2019, respectively.
(2)At March 31, 2020 and December 31, 2019, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 2.87% and 3.63%, respectively.
(3)As of March 31, 2020 and December 31, 2019, there was no collateral at risk of default or deemed to be a “credit risk” as defined by the CLO indenture.
(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 $89.1 million and $58.6 million at March 31, 2020 and December 31, 2019, respectively.
Summary of the company's CLO compliance tests as of the most recent determination dates

Our CLO compliance tests as of the most recent determination dates in April 2020 are as follows:

Cash Flow Triggers

    

CLO IX

    

CLO X

     

CLO XI

CLO XII

CLO XIII

Overcollateralization (1)

Current

 

134.68

%  

126.98

%

121.95

%

118.87

%

119.76

%

Limit

 

133.68

%  

125.98

%

120.95

%

117.87

%

118.76

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

Interest Coverage (2)

Current

 

361.00

%  

372.24

%

338.30

%

289.89

%

228.91

%

Limit

 

120.00

%  

120.00

%

120.00

%

120.00

%

120.00

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

(1)The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle.
(2)The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

Summary of the Company's CLO overcollateralization ratios

Determination (1)

    

CLO  IX

    

CLO X

CLO XI

CLO XII

     

CLO XIII

April 2020

134.68

%

126.98

%

121.95

%

118.87

%

119.76

%

January 2020

134.68

%

126.98

%

121.95

%

118.87

%

October 2019

134.68

%

126.98

%

121.95

%

July 2019

134.68

%  

126.98

%  

121.95

%  

April 2019

134.69

%  

126.98

%  

(1)The table above 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.

v3.20.1
Agreements and Transactions with Related Parties
3 Months Ended
Mar. 31, 2020
Agreements and Transactions with Related Parties  
Agreements and Transactions with Related Parties

Note 18 — Agreements and Transactions with Related Parties

Shared Services Agreement.We have a shared services agreement with ACM where we provide limited support services to ACM and they reimburse us for the costs of performing such services. During the three months ended March 31, 2020 and 2019, we incurred $0.7 million and $0.9 million, respectively, of costs for services provided to ACM, which are included in due from related party on the consolidated balance sheets.

Other Related Party Transactions. Due from related party was $13.8 million and $10.7 million at March 31, 2020 and December 31, 2019, 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 shared services agreement described above.

Due to related party was $3.1 million and $13.1 million at March 31, 2020 and December 31, 2019, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions.

In certain instances our business requires our executives to charter privately-owned aircraft in furtherance of our business. In October 2019, we entered into an aircraft time sharing agreement with an entity controlled by our chief executive officer that owns 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 months ended March 31, 2020, we reimbursed the aircraft owner $0.3 million for the flights chartered by our executives pursuant the agreement.

In the first quarter of 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, formed AMAC Holdings III LLC ("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 (of which $10.9 million was funded as of March 31, 2020) for an 18% interest in AMAC III.

In July 2019, AMAC III originated a $7.0 million mezzanine loan to a borrower with which we have an outstanding $34.0 million bridge loan. In connection with the AMAC III mezzanine loan, we entered into an inter-creditor agreement with AMAC III. In addition, we originated a $15.6 million Private Label loan in December 2019 to a borrower which is 100% owned by AMAC III, which bears interest at a fixed rate of 3.735% and matures in January 2030. We recorded income of less than $0.1 million in the three months ended March 31, 2020 related to this investment. Interest income recorded from our bridge and Private Label loans totaled $0.9 million for the three months ended March 31, 2020.

In 2018, we originated a $61.2 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 10% of the borrowing entity. The loan has an interest rate of LIBOR plus 4.50% with a LIBOR floor of 2.00% and matures in October 2021. In the fourth quarter of 2019, the related party investors liquidated their equity investment. Interest income recorded from this loan totaled $0.3 million for the three months ended March 31, 2019.

In 2018, we originated a $37.5 million bridge loan, which was used to purchase several multifamily properties. In January 2019, an entity owned, in part, by an immediate family member of our chief executive officer, purchased a 23.9% interest in the borrowing entity. The loan has an interest rate of LIBOR plus 4.25% with a LIBOR floor of

2.375% and matures in October 2020. Interest income recorded from this loan totaled $0.6 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively.

In 2018, we acquired a $19.5 million bridge loan originated by ACM. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 85% of the borrowing entity. The loan has an interest rate of LIBOR plus 4.0% with a LIBOR floor of 2.125% and matures in July 2021. Interest income recorded from this loan totaled $0.3 million for both the three months ended March 31, 2020 and 2019.

In 2018, we originated a $17.7 million bridge loan to an entity owned, in part, by an immediate family member of our chief executive officer, who owns a 10.8% interest in the borrowing entity. The loan was used to purchase several undeveloped parcels of land. The loan had a fixed interest rate of 10% and was scheduled to mature in February 2020. In September 2019, the borrower made a partial paydown of principal totaling $4.7 million and the remaining balance was paid off in January 2020. Interest income recorded from this loan totaled $0.1 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.

In 2018, we originated a $21.7 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% in the borrowing entity. The loan has an interest rate of LIBOR plus 4.75% with a LIBOR floor of 1.25% and matures in June 2021. Interest income recorded from this loan totaled $0.4 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively.

In 2018, we acquired a $9.4 million bridge loan originated by ACM, of which $8.9 million was funded as of March 31, 2020. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% of the borrowing entity. The loan has an interest rate of LIBOR plus 5.0% with a LIBOR floor of 1.25% and matures in January 2021. Interest income recorded from this loan totaled $0.1 million for both the three months ended March 31, 2020 and 2019.

In 2017, we acquired a $32.8 million bridge loan originated by ACM. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 90% of the borrowing entity. The loan had an interest rate of LIBOR plus 5.0% with a LIBOR floor of 1.13% and was scheduled to mature in June 2020. In October 2019, the borrower repaid this loan in full. Interest income recorded from this loan totaled $0.6 million for the three months ended March 31, 2019.

In 2017, we originated two bridge loans totaling $28.0 million on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45% of the borrowing entity. The loans had an interest rate of LIBOR plus 5.25% with LIBOR floors ranging from 1.24% to 1.54% and were scheduled to mature in the fourth quarter of 2020. The borrower refinanced these loans with a $31.1 million bridge loan we originated in November 2019 with an interest rate of LIBOR plus 4.0%, a LIBOR floor of 1.80% and a maturity date in October 2021. Interest income recorded from these loans totaled $0.5 million and $0.6 million for the three months ended March 31, 2020 and 2019, 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 million for both the three months ended March 31, 2020 and 2019.

In 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33% managing member, purchased a multifamily apartment complex which assumed an existing $8.3 million Fannie Mae loan that we service.

Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6% interest at March 31, 2020. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 20% of the original UPB. Upon the sale, we received a 1% loan assumption fee which was governed by existing loan agreements that were in place when the loan was originated in 2015, prior to such purchase. Servicing revenue recorded from this loan was less than $0.1 million for both the three months ended March 31, 2020 and 2019.

In 2016, we originated $48.0 million of bridge loans on six multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns interests ranging from 10.5% to 12.0% in the borrowing entities. The loans had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and were scheduled to mature in September 2019. In 2017, a $6.8 million loan on one property paid off in full and in 2018 four additional loans totaling $28.3 million paid off in full. In January 2019, $10.9 million of the $12.9 million remaining bridge loan paid off, with the $2.0 million remaining UPB converting to a mezzanine loan with a fixed interest rate of 10.0% and a January 2024 maturity. Interest income recorded from the remaining mezzanine loan totaled $0.1 million for both the three months ended March 31, 2020 and 2019.

In 2016, we originated a $12.7 million bridge loan and a $5.2 million preferred equity investment 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. The bridge loan has an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and the preferred equity investment has a fixed interest rate of 10%. The bridge loan and the preferred equity investment paid off in full in May 2019. In March 2020, we originated a $14.8 million Private Label loan and a $3.4 million mezzanine loan to the properties. The Private Label loan bears interest at a fixed rate of 3.10% and the mezzanine loan bears interest at a fixed rate of 9.00% and both loans mature in April 2030. Interest income recorded from these loans totaled less than $0.1 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively.

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. As a result of this transaction, we had an initial indirect interest of 22.5% in this entity. We recorded income from these investments of $2.9 million and $0.8 million in the three months ended March 31, 2020 and 2019, respectively. In connection with a litigation settlement related to this investment, we provided a guaranty of up to 50% of any amounts payable in connection with the settlement. ACM has also provided us with a guaranty to pay up to 50% of any amounts we may pay under this guaranty. The final payment was made under this settlement in January 2020 and we have no additional exposure.

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 June 2018, the owners of Lexford restructured part of its debt and we originated twelve 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 June 2018, had interest rates of LIBOR plus 4.0% and were scheduled to mature in June 2021. During 2019, the borrower made payoffs and partial paydowns of principal totaling $250.0 million. In March 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. Interest income recorded from these loans totaled $0.2 million and $4.5 million during the three months ended March 31, 2020 and 2019, respectively. Further, as part of this June 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 $1.1 million and $1.3 million during the three months ended March 31, 2020 and 2019, respectively, which were recorded as income from equity affiliates. Separate from the loans we originated in June 2018, we provide limited ("bad boy") guarantees for certain other debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard "bad" acts such as fraud or a material misrepresentation by Lexford or us. At March 31, 2020, this debt had an aggregate outstanding balance of $616.5 million and is scheduled to mature between 2020 and 2029.

Several of our executives, including our chief financial officer, general counsel and our chairman, chief executive officer and president, hold similar positions for ACM. Our chief executive officer and his affiliated entities (“the Kaufman Entities”) together beneficially own approximately 31% 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. Upon the closing of the Acquisition in 2016, we issued OP Units, each paired with one share of our special voting preferred shares. At March 31, 2020, ACM holds 3,898,554 shares of our common stock and 14,669,101 OP Units, which represents 14.2% 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.

v3.20.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies  
Commitments and Contingencies

Note 14 — Commitments and Contingencies

Impact of COVID-19. The magnitude and duration of COVID-19 and its impact on our business and on our borrowers is uncertain and will mostly depend on future events, which cannot be predicted. As this pandemic continues and if economic conditions worsen, it may have long-term impacts on our financial position, results of operations and cash flows. See Note 2 and Item 1A. Risk Factors for further discussion of COVID-19.

Agency Business Commitments. Our Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements. Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements.

As of March 31, 2020, we were required to maintain at least $14.8 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. As of March 31, 2020, we met the restricted liquidity requirement with a $45.0 million letter of credit and $2.6 million of cash collateral.

As of March 31, 2020, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $37.1 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. As of March 31, 2020, 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 or FHA, as such requirements for these investors are only required on an annual basis.

As an approved designated seller/servicer under Freddie Mac's SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations required by this program. Under the SBL program, we are required to post collateral equal to $5.0 million, which is satisfied with a $5.0 million letter of credit.

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. As of March 31, 2020, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands):

    

    

Minimum Annual

    

    

Debt

    

Operating Lease

    

Year

    

Obligations

    

Payments

    

Total

2020 (nine months ending December 31, 2020)

$

820,368

$

3,984

$

824,352

2021

 

409,457

 

3,124

 

412,581

2022

 

2,366,841

 

2,775

 

2,369,616

2023

 

781,235

 

2,052

 

783,287

2024

 

378,013

 

1,459

 

379,472

2025

 

 

1,503

 

1,503

Thereafter

 

732,171

 

1,802

 

733,973

Total

$

5,488,085

$

16,699

$

5,504,784

During the three months ended March 31, 2020 and 2019, we recorded lease expense of $1.6 million and $1.5 million, respectively.

Unfunded Commitments. In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $183.8 million as of March 31, 2020 that we are obligated to fund as borrowers meet certain requirements. Specific requirements include, but are not limited to, property renovations, building construction and conversions based on criteria met by the borrower in accordance with the loan agreements.

Litigation. We are currently neither subject to any material litigation nor, to the best of our knowledge, threatened by any material litigation other than the following:

In June 2011, three related lawsuits were filed by the Extended Stay Litigation Trust (the “Trust”), a post-bankruptcy litigation trust alleged to have standing to pursue claims that previously had been held by Extended Stay, Inc. and the Homestead Village L.L.C. family of companies (together “ESI”) (formerly Chapter 11 debtors, together the "Debtors") that have emerged from bankruptcy. Two of the lawsuits were filed in the U.S. Bankruptcy Court for the Southern District of New York, and the third in the Supreme Court of the State of New York, New York County. There were 73 defendants in the three lawsuits, including 55 corporate and partnership entities and 18 individuals. A subsidiary of ours

and certain other entities that are affiliates of ours are included as defendants. The New York State Court action has been removed to the Bankruptcy Court. Our affiliates filed a motion to dismiss the three lawsuits.

The lawsuits all allege, as a factual basis and background certain facts surrounding the June 2007 leveraged buyout of ESI from affiliates of Blackstone Capital. Our subsidiary, Arbor ESH II, LLC, had a $115.0 million investment in the Series A1 Preferred Units of a holding company of Extended Stay, Inc. The New York State Court action and one of the two federal court actions name as defendants, Arbor ESH II, LLC, Arbor Commercial Mortgage, LLC ("ACM ") and ABT-ESI LLC, an entity in which we have a membership interest, among the broad group of defendants. These two actions were commenced by substantially identical complaints. The defendants are alleged in these complaints, among other things, to have breached fiduciary and contractual duties by causing or allowing the Debtors to pay illegal dividends or other improper distributions of value at a time when the Debtors were insolvent. These two complaints also allege that the defendants aided and abetted, induced, or participated in breaches of fiduciary duty, waste, and unjust enrichment (“Fiduciary Duty Claims”) and name a director of ours, and a former general counsel of ACM, each of whom had served on the Board of Directors of ESI for a period of time. We are defending these two defendants and paying the costs of such defense. On the basis of the foregoing allegations, the Trust has asserted claims under a number of common law theories, seeking the return of assets transferred by the Debtors prior to the Debtors' bankruptcy filing.

In the third action, filed in Bankruptcy Court, the same plaintiff, the Trust, has named ACM and ABT-ESI LLC, together with a number of other defendants and asserts claims, including constructive and fraudulent conveyance claims under state and federal statutes, as well as a claim under the Federal Debt Collection Procedure Act.

In June 2013, the Trust filed a motion to amend the lawsuits, to, among other things, (i) consolidate the lawsuits into one lawsuit, (ii) remove 47 defendants, none of whom are related to us, from the lawsuits so that there are 26 remaining defendants, including 16 corporate and partnership entities and 10 individuals, and (iii) reduce the counts within the lawsuits from over 100 down to 17. The remaining counts in the amended complaint against our affiliates are principally state law claims for breach of fiduciary duties, waste, unlawful dividends and unjust enrichment, and claims under the Bankruptcy Code for avoidance and recovery actions, among others. The bankruptcy court granted the motion and the amended complaint has been filed. The amended complaint seeks approximately $139.0 million in the aggregate, plus interest from the date of the alleged unlawful transfers, from director designees, portions of which are also sought from our affiliates as well as from unaffiliated defendants. We have moved to dismiss the referenced actions and intend to vigorously defend against the claims asserted therein. During a status conference held in March 2014, the Court heard oral argument on the motion to dismiss and adjourned the case pending a ruling. Subsequent to that hearing, a new judge was assigned to the case and, in November 2016, the new judge entered an order directing the parties to file supplemental briefs addressing new cases decided since the last round of briefing. Oral arguments regarding the motion to dismiss were heard at a hearing held in January 2017. The Court reserved decision at that hearing. The next hearing on the case has been adjourned to May 19, 2020.

We have not made a loss accrual for this litigation because we believe that it is not probable that a loss has been incurred and an amount cannot be reasonably estimated.

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.

v3.20.1
Loans and Investments (Tables)
3 Months Ended
Mar. 31, 2020
Loans and Investments  
Schedule of Structured Business loan and investment portfolio

Our Structured Business loan and investment portfolio consists of ($ in thousands):

    

    

    

    

    

Wtd. Avg.

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

March 31, 2020

Total

Count

Pay Rate (1)

Maturity

LTV Ratio (2)

LTV Ratio (3)

Bridge loans (4)

$

4,342,335

90

%  

234

 

5.50

%  

18.4

 

1

%  

77

%

Preferred equity investments

 

201,509

 

4

%  

11

 

8.30

%  

59.2

 

70

%  

88

%

Mezzanine loans

175,389

4

%  

27

7.85

%  

48.4

24

%  

75

%

Other (5)

 

81,311

 

2

%  

20

 

5.14

%  

76.1

 

0

%  

69

%

 

4,800,544

 

100

%  

292

 

5.70

%  

22.2

 

4

%  

77

%

Allowance for credit losses

(142,252)

Unearned revenue

 

(20,288)

Loans and investments, net

$

4,638,004

    

    

    

Wtd. Avg.

    

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

    

December 31, 2019

    

Total

    

Count

    

Pay Rate (1)

    

Maturity

    

LTV Ratio (2)

    

LTV Ratio (3)

Bridge loans (4)

$

3,836,832

 

90

%  

217

 

5.77

%  

18.0

 

0

%  

75

%

Preferred equity investments

 

181,058

 

4

%  

10

 

7.62

%  

68.8

 

69

%  

89

%

Mezzanine loans

191,575

4

%  

24

9.70

%  

36.7

22

%  

73

%

Other (5)

70,146

2

%  

21

2.88

%  

84.8

0

%  

70

%

 

4,279,611

 

100

%  

272

 

5.98

%  

22.1

 

4

%  

76

%

Allowance for credit losses

 

(71,069)

Unearned revenue

 

(18,582)

Loans and investments, net

$

4,189,960

(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 that is required to be paid monthly as stated in the individual loan agreements. Certain loans and investments that require an additional rate of interest “Accrual Rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table.
(2)The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.
(3)The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.
(4)As of March 31, 2020 and December 31, 2019, bridge loans included 10 and 11, respectively, single-family rental loans with an aggregate UPB of $54.4 million and $66.7 million, respectively, of which $24.0 million and $30.0 million, respectively, was funded.
(5)As of March 31, 2020 and December 31, 2019, other included 19 and 12, respectively, single-family rental permanent loans with an aggregate UPB of $74.9 million and $41.6 million, respectively, and 1 and 9, respectively, purchased loans with an aggregate UPB of $6.4 million and $28.6 million, respectively.

Summary of the loan portfolio's internal risk ratings and LTV ratios by asset class

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class is as follows ($ in thousands):

    

    

    

Wtd. Avg.

    

Wtd. Avg.

 

UPB by Origination Year

First Dollar

Last Dollar

March 31,2020

2020

2019

2018

2017

2016

Prior

Total

LTV Ratio

LTV Ratio

Multifamily:

 

 

Risk Rating:

 

 

Pass

$

425,994

$

758,705

$

75,000

$

32,500

$

$

350

$

1,292,549

 

Pass/Watch

 

195,114

903,609

188,500

22,100

17,685

1,327,008

 

Special Mention

49,173

616,097

150,459

288,800

1,104,529

Substandard

23,500

10,594

41,494

86,020

8,250

28,800

198,658

Doubtful

 

 

Total Multifamily

$

693,781

$

2,289,005

$

455,453

$

429,420

$

8,250

$

46,835

$

3,922,744

4

%  

76

%

Land:

Percentage of portfolio

82

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

Special Mention

71,019

19,523

19,975

110,517

Substandard

127,928

127,928

Doubtful

Total Land

$

71,019

$

19,523

$

$

19,975

$

$

127,928

$

238,445

0

%  

90

%

Healthcare:

Percentage of portfolio

5

%  

Risk Rating:

 

Pass

$

$

21,350

$

10,000

$

$

$

$

31,350

 

Pass/Watch

51,069

66,500

41,650

159,219

Special Mention

8,500

8,500

Substandard

Doubtful

4,625

4,625

Total Healthcare

$

$

80,919

$

76,500

$

46,275

$

$

$

203,694

0

%  

78

%

Office:

Percentage of portfolio

4

%  

Risk Rating:

Pass

$

$

$

5,000

$

$

$

$

5,000

Pass/Watch

Special Mention

43,151

9,961

53,112

Substandard

41,000

34,000

75,000

Doubtful

880

880

Total Office

$

$

$

46,000

$

77,151

$

$

10,841

$

133,992

3

%  

69

%

Single Family Rental:

Percentage of portfolio

3

%  

Risk Rating:

Pass

$

8,575

$

34,490

$

$

$

$

$

43,065

Pass/Watch

17,570

30,853

48,423

Special Mention

7,287

161

7,448

Substandard

Doubtful

Total Single Family Rental

$

33,432

$

65,504

$

$

$

$

$

98,936

0

%  

70

%

Hotel:

Percentage of portfolio

2

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

Special Mention

Substandard

91,000

91,000

Doubtful

Total Hotel

$

$

91,000

$

$

$

$

$

91,000

32

%  

100

%

Other:

Percentage of portfolio

2

%  

Risk Rating:

Pass

$

$

$

$

$

$

$

Pass/Watch

3,574

3,574

Special Mention

51,300

10,006

61,306

Substandard

41,600

3,553

45,153

Doubtful

1,700

1,700

Total Other

$

$

$

92,900

$

13,580

$

$

5,253

$

111,733

4

%  

77

%

Percentage of portfolio

2

%  

Grand Total

$

798,232

$

2,545,951

$

670,853

$

586,401

$

8,250

$

190,857

$

4,800,544

4

%  

77

%

Summary of the changes in the allowance for credit losses for our loan portfolio

A summary of the changes in the allowance for credit losses is as follows (in thousands):

Three Months Ended March 31, 2020

    

Land

Multifamily

Retail

Hotel

Office

Healthcare

Other

    

Total

Allowance for credit losses:

Beginning balance, prior to adoption of CECL

$

67,869

$

$

$

$

1,500

$

$

1,700

$

71,069

Impact of adopting CECL - January 1, 2020

77

15,688

333

29

287

64

816

17,294

Provision for credit losses (net of recoveries)

 

10,473

16,585

 

10,983

 

7,500

 

4,310

 

3,870

 

168

 

53,889

Ending balance

$

78,419

$

32,273

$

11,316

$

7,529

$

6,097

$

3,934

$

2,684

$

142,252

Three Months Ended March 31, 2019

Allowance for credit losses

$

67,869

$

$

$

$

1,500

$

$

1,700

$

71,069

Summary of our loans considered impaired by asset class

March 31, 2020

Wtd. Avg. First

Wtd. Avg. Last

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

    

UPB (1)

    

 Value

    

Credit Losses

    

Ratio

    

Ratio

    

Land

$

134,215

$

126,800

$

77,869

0

%

97

%

Hotel

 

50,000

 

49,663

 

7,500

 

59

%

 

100

%

Retail

 

33,520

 

31,921

 

11,292

 

3

%

 

100

%

Healthcare

 

4,625

 

4,845

 

3,845

 

0

%

 

100

%

Office

 

2,211

2,211

 

1,500

 

0

%

 

76

%

Commercial

 

1,700

 

1,700

 

1,700

 

63

%

 

63

%

Total

$

226,271

$

217,140

$

103,706

14

%

98

%

    

December 31, 2019

   

    

    

    

    

Wtd. Avg. First

    

Wtd. Avg. Last

    

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

UPB (1)

Value

Credit Losses

Ratio

Ratio

Land

    

$

134,215

    

$

126,800

    

$

67,869

    

0

%

97

%

Office

 

2,226

 

2,226

 

1,500

 

0

%

 

78

%

Commercial

1,700

1,700

1,700

63

%

63

%

Total

$

138,141

$

130,726

$

71,069

1

%

96

%

(1)Represents the UPB of nine and five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at March 31, 2020 and December 31, 2019, respectively.

Summary of our non-performing loans by asset class

A summary of our non-performing loans by asset class is as follows (in thousands):

March 31, 2020

December 31, 2019

Less Than 

Greater  Than

Less Than 

Greater  Than

90 Days

90 Days

90 Days

90 Days

     

UPB

     

Past Due

     

Past Due

     

UPB

     

Past Due

     

Past Due

Healthcare

$

4,625

$

$

4,625

$

$

$

Commercial

1,700

1,700

1,700

1,700

Retail

920

920

1,000

1,000

Office

880

880

880

880

Total

$

8,125

$

$

8,125

$

3,580

$

$

3,580

v3.20.1
Debt Obligations, Debt Covenants (Details) - USD ($)
1 Months Ended 3 Months Ended
Apr. 30, 2020
Apr. 30, 2020
Jan. 31, 2020
Oct. 31, 2019
Jul. 31, 2019
Apr. 30, 2019
Mar. 31, 2020
CLO IX              
Debt Covenants              
Current overcollateralization ratio (as a percent) 134.68% 134.68% 134.68% 134.68% 134.68% 134.69%  
Limit overcollateralization ratio (as a percent) 133.68%            
Current interest coverage ratio (as a percent) 361.00%            
Limit interest coverage ratio (as a percent) 120.00%            
CLO X              
Debt Covenants              
Current overcollateralization ratio (as a percent) 126.98% 126.98% 126.98% 126.98% 126.98% 126.98%  
Limit overcollateralization ratio (as a percent) 125.98%            
Current interest coverage ratio (as a percent) 372.24%            
Limit interest coverage ratio (as a percent) 120.00%            
CLO XI              
Debt Covenants              
Current overcollateralization ratio (as a percent) 121.95% 121.95% 121.95% 121.95% 121.95%    
Limit overcollateralization ratio (as a percent) 120.95%            
Current interest coverage ratio (as a percent) 338.30%            
Limit interest coverage ratio (as a percent) 120.00%            
CLO XII              
Debt Covenants              
Current overcollateralization ratio (as a percent) 118.87% 118.87% 118.87%        
Limit overcollateralization ratio (as a percent) 117.87%            
Current interest coverage ratio (as a percent) 289.89%            
Limit interest coverage ratio (as a percent) 120.00%            
CLO XIII              
Debt Covenants              
Current overcollateralization ratio (as a percent) 119.76% 119.76%          
Limit overcollateralization ratio (as a percent) 118.76%            
Current interest coverage ratio (as a percent) 228.91%            
Limit interest coverage ratio (as a percent) 120.00%            
Junior subordinated notes              
Debt Covenants              
Amount payable on default of senior debt             $ 0
v3.20.1
Debt Obligations, Luxembourg Debt Fund (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Debt Obligations    
Debt, Carrying Value $ 2,513,096 $ 2,130,121
Weighted Average Note Rate (as a percent) 2.83% 3.54%
Luxembourg debt fund    
Debt Obligations    
Debt, Face Value $ 70,000 $ 70,000
Debt, Carrying Value $ 68,717 $ 68,629
Weighted Average Note Rate (as a percent) 5.21% 5.99%
Collateral Loans, UPB $ 57,795 $ 70,755
Collateral Loans, Carrying Value 57,586 68,629
Cash, Restricted Cash 42,205 29,245
Deferred financing fees $ 1,300 $ 1,400
Weighted average note rate including certain fees and costs (as a percent) 6.52% 7.17%
Collateral at risk $ 0 $ 0
v3.20.1
Loans and Investments - Allowance for Credit Losses (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2018
Changes in allowance for loan losses        
Allowance at beginning of period $ 71,069      
Provision for credit loss expense 53,889      
Allowance at end of period 142,252      
Accrued interest receivable related to loans 37,700      
Allowance for credit losses 71,069 $ 142,252 $ 71,069  
Unfunded commitments related to structured loans and investments   183,800    
As Reported Pre-Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance for credit losses       $ 71,069
Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 17,294      
Allowance for credit losses 17,294 17,294    
Land        
Changes in allowance for loan losses        
Provision for credit loss expense 16,585      
Allowance at end of period 32,273      
Allowance for credit losses 32,273 32,273    
Land | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 15,688      
Allowance for credit losses 15,688 15,688    
Multifamily        
Changes in allowance for loan losses        
Provision for credit loss expense 10,473      
Allowance at end of period 78,419      
Allowance for credit losses 78,419 78,419 67,869  
Multifamily | As Reported Pre-Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at beginning of period 67,869      
Allowance for credit losses 67,869      
Multifamily | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 77      
Allowance for credit losses 77 77    
Retail        
Changes in allowance for loan losses        
Provision for credit loss expense 10,983      
Allowance at end of period 11,316      
Allowance for credit losses 11,316 11,316    
Retail | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 333      
Allowance for credit losses 333 333    
Hotel        
Changes in allowance for loan losses        
Provision for credit loss expense 7,500      
Allowance at end of period 7,529      
Allowance for credit losses 7,529 7,529    
Hotel | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 29      
Allowance for credit losses 29 29    
Office        
Changes in allowance for loan losses        
Provision for credit loss expense 4,310      
Allowance at end of period 6,097      
Allowance for credit losses 6,097 6,097 1,500  
Office | As Reported Pre-Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at beginning of period 1,500      
Allowance for credit losses 1,500      
Office | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 287      
Allowance for credit losses 287 287    
Healthcare        
Changes in allowance for loan losses        
Provision for credit loss expense 3,870      
Allowance at end of period 3,934      
Allowance for credit losses 3,934 3,934    
Healthcare | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 64      
Allowance for credit losses 64 64    
Other        
Changes in allowance for loan losses        
Provision for credit loss expense 168      
Allowance at end of period 2,684      
Allowance for credit losses 2,684 2,684 $ 1,700  
Other | As Reported Pre-Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at beginning of period 1,700      
Allowance for credit losses 1,700      
Other | Impact of Adoption | ASU 2016-13        
Changes in allowance for loan losses        
Allowance at end of period 816      
Allowance for credit losses $ 816 $ 816    
v3.20.1
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies  
Schedule of maturities of operating lease liabilities

Debt Obligations and Operating Leases. As of March 31, 2020, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands):

    

    

Minimum Annual

    

    

Debt

    

Operating Lease

    

Year

    

Obligations

    

Payments

    

Total

2020 (nine months ending December 31, 2020)

$

820,368

$

3,984

$

824,352

2021

 

409,457

 

3,124

 

412,581

2022

 

2,366,841

 

2,775

 

2,369,616

2023

 

781,235

 

2,052

 

783,287

2024

 

378,013

 

1,459

 

379,472

2025

 

 

1,503

 

1,503

Thereafter

 

732,171

 

1,802

 

733,973

Total

$

5,488,085

$

16,699

$

5,504,784

v3.20.1
Description of Business (Details)
3 Months Ended
Mar. 31, 2020
segment
Description of Business  
Number of business segments 2
v3.20.1
Agreements and Transactions with Related Parties, Shared Services Agreement (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Former manager | Support Services    
Agreements and transactions with related parties    
Costs for services to related party $ 0.7 $ 0.9
v3.20.1
Fair Value, Level 3 Inputs (Details) - Level 3
$ in Thousands
Mar. 31, 2020
USD ($)
item
Land  
Quantitative information about Level 3 fair value measurements  
Impaired loans, fair value | $ $ 48,931
Land | Discount rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.2150
Land | Revenue growth rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.0300
Hotel  
Quantitative information about Level 3 fair value measurements  
Impaired loans, fair value | $ $ 42,163
Hotel | Discount rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.1150
Hotel | Capitalization rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.0310
Hotel | Revenue growth rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.2500
Retail  
Quantitative information about Level 3 fair value measurements  
Impaired loans, fair value | $ $ 20,629
Retail | Discount rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.1004
Retail | Capitalization rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.0925
Retail | Revenue growth rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.0155
Healthcare  
Quantitative information about Level 3 fair value measurements  
Impaired loans, fair value | $ $ 1,000
Healthcare | Capitalization rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.1430
Office  
Quantitative information about Level 3 fair value measurements  
Impaired loans, fair value | $ $ 711
Office | Discount rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.1100
Office | Capitalization rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.0900
Office | Revenue growth rate  
Quantitative information about Level 3 fair value measurements  
Impaired loans, measurement input 0.0250
Rate lock commitments  
Quantitative information about Level 3 fair value measurements  
Derivative financial instruments | $ $ 2,069
Derivative Asset, Valuation Technique [Extensible List] us-gaap:ValuationTechniqueDiscountedCashFlowMember
Derivative Asset, Measurement Input [Extensible List] Discount rate
Rate lock commitments | Discount rate  
Quantitative information about Level 3 fair value measurements  
Derivative financial instruments measurement input 0.0962
v3.20.1
Commitments and Contingencies, Contractual Commitments (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Agency Business Commitments        
Cash collateral $ 304,067 $ 291,865 $ 210,875 $ 180,606
Debt Obligations        
2020 (nine months ending December 31, 2020) 820,368      
2021 409,457      
2022 2,366,841      
2023 781,235      
2024 378,013      
Thereafter 732,171      
Total 5,488,085      
Minimum Annual Operating Lease Payments        
2020 (nine months ending December 31, 2020) 3,984      
2021 3,124      
2022 2,775      
2023 2,052      
2024 1,459      
2025 1,503      
Thereafter 1,802      
Total 16,699      
Total        
2020 (nine months ending December 31, 2020) 824,352      
2021 412,581      
2022 2,369,616      
2023 783,287      
2024 379,472      
2025 1,503      
Thereafter 733,973      
Total 5,504,784      
Operating lease expense 1,600 $ 1,500    
Unfunded CLO Commitments        
Unfunded commitments related to structured loans and investments 183,800      
Fannie Mae        
Agency Business Commitments        
Minimum liquid assets to be maintained to meet operational liquidity requirements $ 14,800      
Period of funding for collateral requirement 48 months      
Forward Contracts        
Agency Business Commitments        
Period of contractual commitment 60 days      
Restricted liquidity arrangement - loans sold under the Fannie Mae DUS program | Fannie Mae        
Agency Business Commitments        
Letter of credit assigned $ 45,000      
Cash collateral 2,600      
Reserve required to fund additional restricted liquidity over the next 48 months $ 37,100      
Period of additional funding for collateral requirement 48 months      
Cash collateral arrangement - purchase and loss obligations under Freddie Mac's SBL Program        
Agency Business Commitments        
Cash collateral per securitization $ 5,000      
Outstanding letters of credit $ 5,000      
v3.20.1
Segment Information - Origination Data (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Segment Information    
Origination Volumes $ 1,267,219 $ 846,963
Loan Sales Data:    
Sales margin (fee-based services as a % of loan sales) 1.49% 1.49%
MSR rate (MSR income as a % of loan commitments) 1.73% 1.68%
Structured Business    
Segment Information    
New loan originations $ 856,229 $ 416,295
Loan payoffs / paydowns 275,292 279,471
Agency Business    
Segment Information    
Origination Volumes 1,081,973 845,913
Loan Sales Data:    
Loan Sales 957,060 1,101,766
Agency Business | Fannie Mae    
Segment Information    
Origination Volumes 581,973 546,886
Loan Sales Data:    
Loan Sales 754,044 746,937
Agency Business | Private Label    
Segment Information    
Origination Volumes 282,345  
Agency Business | Freddie Mac    
Segment Information    
Origination Volumes 199,711 192,492
Loan Sales Data:    
Loan Sales 179,703 223,773
Agency Business | FHA    
Segment Information    
Origination Volumes 17,944 1,110
Loan Sales Data:    
Loan Sales $ 23,313 25,631
Agency Business | CMBS/Conduit    
Segment Information    
Origination Volumes   105,425
Loan Sales Data:    
Loan Sales   $ 105,425
v3.20.1
Mortgage Servicing (Details) - MSRs - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Mortgage Servicing      
Unpaid principal balance of loans serviced $ 20,197,128   $ 20,059,077
Weighted average servicing fee (as a percent) 0.436%   0.438%
Interest earned on total escrows $ 3,100 $ 4,000  
Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 100.00%   100.00%
Escrow Deposit $ 957,100   $ 947,100
Fee-based servicing portfolio | Agency Business      
Mortgage Servicing      
Escrow Deposit $ 545,600   $ 562,100
Texas | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 18.00%   19.00%
North Carolina | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 9.00%   9.00%
New York | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 9.00%   9.00%
California | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 8.00%   9.00%
Georgia | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 6.00%   6.00%
Florida | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 6.00%   6.00%
Other | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 44.00%   42.00%
Fannie Mae      
Mortgage Servicing      
Unpaid principal balance of loans serviced $ 14,946,922   $ 14,832,844
Fannie Mae | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 74.00%   74.00%
Freddie Mac      
Mortgage Servicing      
Unpaid principal balance of loans serviced $ 4,570,521   $ 4,534,714
Freddie Mac | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 23.00%   23.00%
FHA      
Mortgage Servicing      
Unpaid principal balance of loans serviced $ 679,685   $ 691,519
FHA | Fee-based servicing portfolio      
Mortgage Servicing      
UPB Percentage of Total 3.00%   3.00%
v3.20.1
Loans and Investments - Non-performing Loans (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
loan
Dec. 31, 2019
USD ($)
loan
Non-performing loans by asset class    
Number of loans | loan 292 272
Unpaid principal balance $ 226,271 $ 138,141
Non-performing loans    
Non-performing loans by asset class    
Number of loans | loan 4 3
Carrying value of loans $ 1,800 $ 1,800
Loan loss reserves 6,500 1,700
Unpaid principal balance 8,125 3,580
Greater than 89 Days Past Due    
Non-performing loans by asset class    
Interest income recognized on nonaccrual loans 0 0
Past Due 0 0
Greater than 89 Days Past Due | Non-performing loans    
Non-performing loans by asset class    
Interest income recognized on nonaccrual loans 8,125 3,580
Past Due 8,125 3,580
Land    
Non-performing loans by asset class    
Unpaid principal balance 134,215 134,215
Healthcare    
Non-performing loans by asset class    
Unpaid principal balance 4,625  
Healthcare | Non-performing loans    
Non-performing loans by asset class    
Unpaid principal balance 4,625  
Healthcare | Greater than 89 Days Past Due | Non-performing loans    
Non-performing loans by asset class    
Interest income recognized on nonaccrual loans 4,625  
Past Due 4,625  
Commercial    
Non-performing loans by asset class    
Unpaid principal balance 1,700 1,700
Commercial | Non-performing loans    
Non-performing loans by asset class    
Unpaid principal balance 1,700 1,700
Commercial | Greater than 89 Days Past Due | Non-performing loans    
Non-performing loans by asset class    
Interest income recognized on nonaccrual loans 1,700 1,700
Past Due 1,700 1,700
Retail    
Non-performing loans by asset class    
Unpaid principal balance 33,520  
Retail | Non-performing loans    
Non-performing loans by asset class    
Unpaid principal balance 920 1,000
Retail | Greater than 89 Days Past Due | Non-performing loans    
Non-performing loans by asset class    
Interest income recognized on nonaccrual loans 920 1,000
Past Due 920 1,000
Hotel    
Non-performing loans by asset class    
Unpaid principal balance 50,000  
Office    
Non-performing loans by asset class    
Unpaid principal balance 2,211 2,226
Office | Non-performing loans    
Non-performing loans by asset class    
Unpaid principal balance 880 880
Office | Greater than 89 Days Past Due | Non-performing loans    
Non-performing loans by asset class    
Interest income recognized on nonaccrual loans 880 880
Past Due $ 880 $ 880
v3.20.1
Investments in Equity Affiliates, Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Investment in Equity Affiliates    
Income from equity affiliates $ 3,992 $ 2,151
Arbor Residential Investor LLC | Residential Mortgage Banking Company    
Investment in Equity Affiliates    
Income from equity affiliates 2,900 800
Lexford Portfolio    
Investment in Equity Affiliates    
Distribution received $ 1,100 $ 1,300
v3.20.1
Derivative Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2020
Agency Business  
Schedule of non-qualifying derivative financial instruments

A summary of our non-qualifying derivative financial instruments is as follows ($ in thousands):

March 31, 2020

Fair Value

Notional

Balance Sheet

Derivative

Derivative

Derivative

    

Count

    

Value

    

Location

    

Assets

    

Liabilities

 

Agency Business

Rate Lock Commitments

10

$

99,893

Other Assets/Other Liabilities

$

2,069

$

(4,808)

Forward Sale Commitments

59

395,103

Other Assets/Other Liabilities

10,614

(305)

Swap Futures

6,307

630,700

$

1,125,696

$

12,683

$

(5,113)

Structured Business

Swap Futures

345

$

34,500

    

December 31, 2019

Agency Business

    

Rate Lock Commitments

5

$

37,657

Other Assets/Other Liabilities

$

1,066

$

(202)

Forward Sale Commitments

79

483,576

Other Assets/Other Liabilities

369

(2,895)

Swap Futures

3,274

327,400

$

848,633

$

1,435

$

(3,097)

Structured Business

Swap Futures

271

$

27,100

v3.20.1
Loans Held-for-Sale, Net (Tables)
3 Months Ended
Mar. 31, 2020
Loans Held-for-Sale, Net  
Summary of loans held-for-sale, net

Loans held-for-sale, net consists of the following (in thousands):

     

March 31, 2020

     

December 31, 2019

Private Label

$

683,526

$

401,207

Fannie Mae

236,459

408,534

Freddie Mac

 

56,311

36,303

FHA

2,440

1,082

 

978,736

847,126

Fair value of future MSR

15,254

16,519

Unearned discount

 

(2,294)

(2,285)

Loans held-for-sale, net

$

991,696

$

861,360

v3.20.1
Investments in Equity Affiliates (Tables)
3 Months Ended
Mar. 31, 2020
Investments in Equity Affiliates  
Summary of the company's investments in equity affiliates

UPB of Loans to

Investments in Equity Affiliates at

Equity Affiliates at

Equity Affiliates

    

March 31, 2020

    

December 31, 2019

    

March 31, 2020

Arbor Residential Investor LLC

$

29,452

$

26,520

$

AMAC Holdings III LLC

10,471

10,520

15,600

North Vermont Avenue

2,458

2,440

Lightstone Value Plus REIT L.P

1,895

1,895

JT Prime

 

425

 

425

 

West Shore Café

1,688

Lexford Portfolio

1,390

East River Portfolio

 

 

 

Total

$

44,701

$

41,800

$

18,678

v3.20.1
Basis of Presentation and Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Basis of Presentation and Significant Accounting Policies  
Basis of Presentation and Significant Accounting Policies

Note 2 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

These 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 2019 Annual Report.

Principles of Consolidation

These consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other joint ventures in which we own a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary. Entities in which we have a significant influence are accounted for under the equity method. Our VIEs are described in Note 15. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. During the first quarter of 2020, there was a global outbreak of a novel coronavirus ("COVID-19"), which has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home" orders, to close financial markets and to restrict operations of non-essential businesses. Such actions are creating significant disruptions in global supply chains, and adversely impacting many industries. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown. The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear, making any estimate or assumption as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

Credit Losses

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which utilizes a current expected credit loss methodology (“CECL”) for the recognition of credit losses for our structured loans and investments, held-to-maturity debt securities and our loss-sharing obligations related to the Fannie Mae DUS program, at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected credit losses. This methodology replaces the multiple existing impairment methods in GAAP and generally requires that a loss be incurred before it is recognized. We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting periods prior to January 1, 2020 have been unadjusted and reported in accordance with previously applicable GAAP. In connection with the adoption of ASU 2016-13, we recorded a $28.6 million increase to accumulated deficit,which is net of a deferred tax asset of $3.6 million as of January 1, 2020.

The following table illustrates the impact of adopting ASU 2016-13 (in thousands):

January 1, 2020

    

As Reported

    

    

    

    

 

Under

 

As Reported

 

Impact of

 

ASU 2016-13

 

Pre-Adoption

 

Adoption

Assets:

 

  

 

  

 

  

Allowance for credit losses:

 

  

 

  

 

  

Structured loans and investments (1)

$

88,363

$

71,069

$

17,294

Held-to-maturity debt securities

 

501

501

Deferred taxassets

27,307

23,713

3,594

Liabilities:

 

  

 

  

 

  

Allowance for loss-sharing obligations

 

16,847

 

2,441

 

14,406

(1)See Note 3 for details by asset class.

Other Accounting Pronouncements Adopted

Description

    

Adoption Date

    

Effect on Financial Statements

In November 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends the guidance for determining whether a decision-making fee is a variable interest and requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP).

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with changes between hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. Early adoption is permitted upon issuance of the update.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. This ASU eliminates step two from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value with the carrying amount of goodwill.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

Description

    

Effective Date

    

Effect on Financial Statements

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022.

We have not adopted any of the optional expedients or exceptions through March 31, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

Significant Accounting Policies

See Item 8 – Financial Statements and Supplementary Data in our 2019 Annual Report for a description of our significant accounting policies. Upon the adoption of ASU 2016-13 on January 1, 2020, we adjusted certain significant accounting policies, as follows:

Allowance for Credit Losses. We estimate allowances for credit losses on our structured loans and investments (including unfunded loan commitments), loss-sharing obligations related to the Fannie Mae DUS program and our held-to-maturity debt securities under CECL. This method is based on expected credit losses for the life of the investment as of each balance sheet date. Our estimation of credit losses utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future. We have licensed a third party model to assist with the measurement of expected credit losses, which utilizes incurred losses inherent in the portfolio. The loss factors are determined through the generation of probability of defaults (PD) and loss

given defaults (LGD) for similar loans with similar credit. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect our expected credit losses.

Our method for calculating the estimate of expected credit loss takes into account historical experience and current conditions for similar loans and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on our assessment of the most likely scenario of assumptions and plausible outcomes for the US economy, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect our loss experience. We regularly evaluate the reasonable and supportable forecast period to determine if a change is needed.

Beyond our reasonable and supportable forecast period, we generally revert to historical loss information over the remaining loan/asset period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. We may make adjustments to historical loss information for differences in risk that may not reflect the characteristics of our current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. We generally expect to use an average historical loss for reversion, utilizing an immediate or straight line method for the remaining life of the investments.

We also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as necessary. Our qualitative analysis includes a review of data that may directly impact our estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e. refinance, sale, bankruptcy) which allows us to more accurately and reasonably determine the amount of the expected loss for these investments. We also evaluate the contractual life of our assets to determine if changes are needed for contractual extension options, renewals, modifications and prepayments.

To the extent possible, we estimate our allowance for credit losses using a pooling approach for homogeneous assets with similar risk characteristics with the goal of enhancing the precision of their estimate. If particular assets no longer display risk characteristics that are similar to those of the pool, we may decide to revise our pools or perform an individual assessment of expected credit losses. If it is determined that a foreclosure is probable, or we expect repayment through the operation or sale of the collateral and the borrower is experiencing financial difficulty, we calculate expected credit losses based on the fair value of the collateral as of the reporting date.

During the loan review process, if we determine that it is probable that we will be unable to collect all amounts due for both principal and interest according to the contractual terms of a loan, we consider that loan impaired. We evaluate the capitalization and market discount rates, as well as the borrower's operating income and cash flows, in estimating the value of the underlying collateral when determining if a loan is impaired. We may also obtain a third party appraisal, which may value the collateral through an "as-is" or "stabilized value" methodology. Such appraisals may be used as an additional source of valuation information only and no adjustments are made to appraisals. If upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, we record a specific allowance for credit losses with a corresponding charge to the provision for credit losses, and remove the impaired loan from the CECL analysis described above.

If the loan modification constitutes a concession whereas we do not receive ample consideration in return for the modification, and the borrower is experiencing financial difficulties and cannot repay the loan under the current terms, then the modification is considered by us to be a troubled debt restructuring. We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current. The allowance for credit losses on a troubled debt restructuring is measured using the same method as all other loans held for investment.

Charge-offs to the allowance for credit losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale; when a modification or restructuring takes place in which we grant a concession to a borrower or agree to a discount in full or partial satisfaction of the loan; when we take ownership and control of the underlying collateral in full satisfaction of the loan; when loans are reclassified as other investments; or when significant collection efforts have ceased and it is highly likely that a loss has been realized.

Loss on restructured loans is recorded when we have granted a concession to the borrower in the form of principal forgiveness related to the payoff or the substitution or addition of a new debtor for the original borrower or when we incur costs on behalf of the borrower related to the modification, payoff or the substitution or addition of a new debtor for the original borrower. When a loan is restructured, we record our investment at net realizable value, taking into account the cost of all concessions at the date of restructuring. In addition, a gain or loss may be recorded upon the sale of a loan to a third party in the consolidated statements of operations in the period in which the loan was sold.

v3.20.1
Debt Obligations
3 Months Ended
Mar. 31, 2020
Debt Obligations  
Debt Obligations

Note 10 — Debt Obligations

Credit Facilities and Repurchase Agreements

Borrowings under our credit facilities and repurchase agreements are as follows ($ in thousands):

March 31, 2020

December 31, 2019

Debt

Collateral

Debt

Collateral

 

Current

Extended

Carrying

Carrying

Wtd. Avg.

Carrying

Carrying

Wtd. Avg.

  

Maturity

  

Maturity

  

Note Rate

  

Value (1)

  

Value

  

Note Rate

  

Value (1)

  

Value

  

Note Rate

 

Structured Business

$500 million joint repurchase facility

Mar. 2022

N/A

L +

1.75

%  

to

3.50

%  

$

300,476

$

481,126

3.22

%

$

224,658

$

339,378

4.06

$400 million repurchase facility

Dec. 2020

Mar. 2023

L +

1.95

%  

 

214,647

 

289,961

2.98

%

 

218,418

 

291,292

3.76

$200 million repurchase facility

Feb. 2021

(2)

L +

2.40

%  

48,893

55,682

3.44

%

40,530

48,086

4.22

$150 million credit facility (3)

May 2020

May 2023

L +

1.75

%  

to

2.50

%

25,560

31,790

2.78

%

4,570

7,000

3.56

$128.7 million loan specific credit facilities

May 2020 to May 2022

June 2021 to Dec. 2021

L +

2.10

%  

to

2.50

%  

 

128,370

 

184,212

3.35

%

 

128,274

 

184,116

4.13

$100 million repurchase facility

June 2020

June 2021

L +

1.75

%  

to

1.95

%  

 

50,247

 

66,486

2.78

 

45,843

 

63,800

3.56

$75 million credit facility

June 2020

June 2023

L +

1.75

%  

$50 million credit facility

April 2020

April 2022

L +

2.00

%  

 

 

 

14,933

 

17,650

3.81

$50 million credit facility

Oct. 2022

Oct. 2023

L +

2.50

%  

15,202

22,817

3.54

%

12,191

16,499

4.32

$50 million credit facility

Sept. 2020

Sept. 2021

L +

2.50

%  

to

3.25

%  

5,264

6,600

3.54

%

5,254

6,600

4.32

$25 million credit facility

June 2022

June 2023

L +

2.25

%  

19,659

30,900

3.29

%

19,651

28,572

4.07

$25 million working capital facility

Aug. 2020

N/A

L +

2.25

%  

25,000

3.29

%

$2.8 million master security agreements

Dec. 2022

N/A

2.97

%  

to

4.60

%  

2,761

4.10

%

3,267

4.08

%

Repurchase facilities - securities (4)

N/A

N/A

L +

1.20

%

to

2.75

%

219,655

3.10

%

217,105

3.90

%

Structured Business total

$

1,055,734

$

1,169,574

3.15

%

$

934,694

$

1,002,993

3.94

Agency Business

$750 million ASAP agreement (5)

N/A

N/A

L +

1.05

%  

$

81,451

$

81,451

2.04

%

$

148,725

$

148,725

2.81

$600 million joint repurchase facility

Mar. 2021

Mar. 2022

L +

1.50

%  

to

2.00

%

497,692

655,716

2.56

299,824

300,446

3.26

$300 million repurchase facility

Oct. 2020

N/A

L +

1.15

%  

104,261

104,291

2.14

%

187,698

187,742

2.91

$150 million credit facility

Mar. 2021

N/A

L +

1.15

%  

71,474

71,667

2.14

%

89,657

89,673

2.91

$150 million credit facility

July 2020

N/A

L +

1.15

%  

35,861

35,912

2.14

%

17,690

17,792

2.91

$100 million credit facility

June 2020

N/A

L +

1.15

%  

Agency Business total

$

790,739

$

949,037

2.39

%

$

743,594

$

744,378

3.03

Consolidated total

$

1,846,473

$

2,118,611

2.83

%

$

1,678,288

$

1,747,371

3.54

(1)The debt carrying value for the Structured Business at March 31, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $3.9 million and $2.1 million, respectively. The debt carrying value for the Agency Business at March 31, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $1.4 million and $0.2 million, respectively.
(2)This repurchase facility includes six-month extension options into perpetuity.
(3)In February 2020, the committed amount under the facility was temporarily increased $75.0 million to $150.0 million, which expires on May 29, 2020.
(4)These repurchase facilities are subject to margin call provisions associated with changes in interest spreads. As of March 31, 2020 and December 31, 2019, these facilities were collateralized by our CLO bonds retained and consolidated by us with a principal balance of $275.7 million and $234.9 million, respectively, B Piece bonds held-to-maturity with a carrying value of $64.4 million and $68.7 million, respectively, and SFR bonds with a carrying value of $20.0 million at both March 31, 2020 and December 31, 2019. At March 31, 2020, we had posted $54.7 million of cash collateral related to margin calls, which was used to reduce the UPB of the facilities in April 2020. We further reduced this debt in April 2020 to approximately $40.0 million through a debt restructuring and the use of proceeds from our senior notes issued in April 2020.
(5)The note rate under this agreement is subject to a LIBOR Floor of 35 basis points.

Generally, our credit facilities and repurchase agreements have extension options that are at the discretion of the banking institutions in which we have long standing relationships with. These facilities typically renew annually and also include a "wind-down" feature.

Joint Repurchase Facility. During the three months ended March 31, 2020, we amended our joint repurchase facility shared between the Structured Business and the Agency Business to increase the total committed amount by $400.0 million to $1.10 billion, of which $600.0 million matures in March 2021 and $500.0 million matures in March 2022, with each maturity eligible for a one-year extension option. The amended facility includes an $800.0 million sublimit for Private Label loans, which reduces to $500.0 million in March 2021 unless that portion of the facility is extended through March 2022.

Structured Business

At March 31, 2020 and December 31, 2019, the weighted average interest rate for the credit facilities and repurchase agreements of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 3.55% and 4.39%, respectively. The leverage on our loan and investment portfolio financed through our credit facilities and repurchase agreements, excluding the securities repurchase facilities, working capital facility and the master security agreements used to finance leasehold and capital expenditure improvements at our corporate office, was 69% and 71% at March 31, 2020 and December 31, 2019, respectively.

In March 2020, we amended a $300.0 million repurchase agreement, increasing the committed amount to $400.0 million.

Agency Business

In March 2020, we amended our $500.0 million repurchase facility reducing the committed amount to $300.0 million.

Collateralized Loan Obligations (“CLOs”)

We account for CLO transactions on our consolidated balance sheet as financing facilities. Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us.

Borrowings and the corresponding collateral under our CLOs are as follows ($ in thousands):

Collateral (3)

Debt

Loans

Cash

    

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

March 31, 2020

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO XIII

$

668,000

$

662,918

2.44

%  

$

665,381

$

662,287

$

100,777

CLO XII

534,193

529,748

2.52

%  

613,317

610,760

CLO XI

533,000

528,981

2.47

%  

640,272

637,633

2,208

CLO X

441,000

437,652

2.48

%  

535,613

533,588

3,656

CLO IX

 

356,400

 

353,797

2.39

%  

 

410,558

 

409,403

 

60,854

Total CLOs

$

2,532,593

$

2,513,096

2.46

%  

$

2,865,141

$

2,853,671

$

167,495

Collateral (3)

Debt

Loans

Cash

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

December 31, 2019

    

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO XII

$

534,193

$

529,448

3.30

%  

$

596,366

$

593,652

$

17,800

CLO XI

533,000

528,690

3.25

%  

624,443

621,508

15,550

CLO X

 

441,000

 

437,391

3.26

%  

 

509,887

 

507,854

 

37,287

CLO IX

356,400

353,473

3.17

%  

407,696

406,463

47,230

CLO VIII

282,874

281,119

3.12

%  

359,186

357,914

544

Total CLOs

$

2,147,467

$

2,130,121

3.23

%  

$

2,497,578

$

2,487,391

$

118,411

(1)Debt carrying value is net of $19.5 million and $17.3 million of deferred financing fees at March 31, 2020 and December 31, 2019, respectively.
(2)At March 31, 2020 and December 31, 2019, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 2.87% and 3.63%, respectively.
(3)As of March 31, 2020 and December 31, 2019, there was no collateral at risk of default or deemed to be a “credit risk” as defined by the CLO indenture.
(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 $89.1 million and $58.6 million at March 31, 2020 and December 31, 2019, respectively.

CLO XIII. In March 2020, we completed CLO XIII, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $738.0 million. Of the total CLO notes issued, $668.0 million were investment grade notes issued to third party investors and $70.0 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $640.5 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio. The financing has a three-year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $159.5 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date (a majority of which was subsequently utilized ) which will result in the issuer owning loan obligations with a face value of $800.0 million, representing leverage of 84%. We retained a residual interest in the portfolio with a notional amount of $132.0 million, including the $70.0 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.41% plus one-month LIBOR and interest payments on the notes are payable monthly.

CLO VIII. In March 2020, we completed the unwind of CLO VIII, redeeming $282.9 million of outstanding notes, which were repaid primarily from the refinancing of the remaining assets primarily within CLO XIII, as well as with cash held

by CLO VIII, and expensed $1.5 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of operations.

Luxembourg Debt Fund

Our Luxembourg commercial real estate debt fund (“Debt Fund”) was a VIE for which we were the primary beneficiary and was consolidated in our financial statements. As previously planned, in April 2020 we completed the unwind of the Debt Fund and redeemed all the outstanding notes with a portion of the proceeds from our senior unsecured notes issued in March 2020 described below.

Borrowings and the corresponding collateral under our Debt Fund were as follows ($ in thousands):

Collateral (3)

Debt

Loans

Cash

Face

Carrying

Wtd. Avg.

Carrying

Restricted

Period

    

Value

    

Value (1)

    

Rate (2)

    

UPB

    

 Value

    

Cash (4)

March 31, 2020

$

70,000

$

68,717

5.21

%  

$

57,795

$

57,586

$

42,205

December 31, 2019

    

$

70,000

    

$

68,629

    

5.99

%  

$

70,755

    

$

68,629

    

$

29,245

(1)Debt carrying value is net of $1.3 million and $1.4 million of deferred financing fees at March 31, 2020 and December 31, 2019, respectively.
(2)At March 31, 2020 and December 31, 2019, the aggregate weighted average note rate, including certain fees and costs, was 6.52% and 7.17%, respectively.
(3)At both March 31, 2020 and December 31, 2019, there was no collateral at risk of default or deemed to be a “credit risk.”
(4)Represents restricted cash held for reinvestment. Excludes restricted cash related to interest payments, delayed fundings and expenses.

Senior Unsecured Notes

In March 2020, we issued $275.0 million aggregate principal amount of 4.50% senior unsecured notes due in March 2027 (the "4.50% Notes") in a private placement. We received proceeds of $271.8 million from the issuance, after deducting the underwriting discount and other offering expenses. We used a significant portion of the net proceeds to repay secured indebtedness. The 4.50% Notes are unsecured and can be redeemed by us at any time prior to December 15, 2026, 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 4.50% Notes on or after December 15, 2026, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in March and September starting in September 2020. At March 31, 2020, the debt carrying value of the 4.50% Notes was $271.8 million, net of $3.2 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 4.69%.

In October 2019, we issued $110.0 million aggregate principal amount of 4.75% senior unsecured notes due in October 2024 (the "4.75% Notes") in a private placement. We received proceeds of $108.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 4.75% Notes are unsecured and can be redeemed by us at any time prior to October 15, 2024, 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 4.75% Notes on or after October 15, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October starting in April 2020. At both March 31, 2020 and December 31, 2019, the debt carrying value of the

4.75% Notes was $108.4 million, net of $1.6 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 5.23%.

In March 2019, we issued $90.0 million aggregate principal amount of 5.75% senior unsecured notes due in April 2024 (the "5.75% Notes") in a private placement. We received proceeds of $88.2 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds to make investments and for general corporate purposes. The 5.75% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2024, 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 5.75% Notes on or after April 1, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in April and October. At March 31, 2020 and December 31, 2019, the debt carrying value of the 5.75% Notes were $88.5 million and $88.4 million, respectively, net of $1.5 million and $1.6 million, respectively, of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 6.18% at both March 31, 2020 and December 31, 2019.

In March 2018, we issued $100.0 million aggregate principal amount of 5.625% senior unsecured notes due in May 2023 (the "Initial Notes") in a private placement, and, in May 2018, we issued an additional $25.0 million (the "Reopened Notes" and, together with the Initial Notes, the "5.625% Notes,") which brought the aggregate outstanding principal amount to $125.0 million. The Reopened Notes are fully fungible with, and rank equally in right of payment with the Initial Notes. We received total proceeds of $122.3 million from the issuances, after deducting the underwriting discount and other offering expenses. We used the net proceeds from the Initial Notes to fully redeem our 7.375% Notes totaling $97.9 million and the net proceeds from the Reopened Notes to make investments and for general corporate purposes. The 5.625% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2023, 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 5.625% Notes on or after April 1, 2023, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. The interest is paid semiannually in May and November. At March 31, 2020 and December 31, 2019, the debt carrying value of the 5.625% Notes were $123.2 million and $123.1 million, respectively, net of $1.8 million and $1.9 million, respectively, of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 6.08% at both March 31, 2020 and December 31, 2019.

Subsequent Event

In April 2020, we issued $40.5 million aggregate principal amount of 8.00% senior unsecured notes due in 2023 in a private offering, generating net proceeds of $39.8 million. A significant portion of the net proceeds were used to repay secured indebtedness that financed our securities with margin call exposure.

Convertible Senior Unsecured Notes

In 2019, we issued $264.0 million in aggregate principal amount of 4.75% convertible senior notes (the “4.75% Convertible Notes”) through a private placement offering, which includes the exercised purchaser’s total over-allotment option of $34.0 million. The 4.75% Convertible Notes pay interest semiannually in arrears and are scheduled to mature in November 2022, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rate and the conversion rate at December 31, 2019 was 56.1695 shares of common stock per $1,000 of principal representing a conversion price of $17.80 per share of common stock. We received proceeds totaling $256.5 million, net of the underwriter’s discount and fees, which is being amortized through interest expense over the life of such notes. We used the net proceeds from the issuance primarily for the exchange of $228.7 million of our 5.25% convertible notes for a combination of $233.1 million in cash (which includes accrued interest) and 4,478,315 shares of our common stock. The remaining net proceeds were used for general corporate purposes. During 2019, we recorded a loss on extinguishment of debt of $7.3 million in connection with this exchange, which included an inducement charge of $1.1

million. As of March 31, 2020, the 4.75% Convertible Notes had conversion rates of 56.1695 shares, common stock per $1,000 of principal, which represented a conversion price of $17.80 per share of common stock.

In 2018, we completed a similar exchange where we used the net proceeds from two separate private placements of our 5.25% convertible senior notes (the "5.25% Convertible Notes") to initially exchange portions of our 5.375% convertible senior notes (the "5.375% Convertible Notes") and 6.50% convertible senior notes (the "6.50% Convertible Notes").

At March 31, 2020, there were $0.5 million, $14.7 million and $0.2 million aggregate principal amount remaining of our 5.25% Convertible Notes issued on July 3, 2018, 5.25% Convertible Notes issued on July 20, 2018 and 5.375% Convertible Notes, respectively. The initial conversion rates of the 5.25% Convertible Notes issued on July 3, 2018, 5.25% Convertible Notes issued on July 20, 2018 and 5.375% Convertible Notes were 86.9943 shares, 77.8331 shares and 107.7122 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.50 per share, $12.85 per share and $9.28 per share of common stock, respectively. At March 31, 2020, the 5.25% Convertible Notes issued on July 3, 2018, 5.25% Convertible Notes issued on July 20, 2018 and 5.375% Convertible Notes had conversion rates of 89.6066 shares, 80.1703 shares and 115.5849 shares, respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.16 per share, $12.47 per share and $8.65 per share of common stock, respectively. The 5.25% Convertible Notes and 5.375% Convertible Notes pay interest semiannually in arrears and have scheduled maturity dates in July 2021 and November 2020, respectively, unless earlier converted or repurchased by the holders pursuant to their terms.

Our convertible senior unsecured notes are not redeemable by us prior to their maturities and are convertible by the holder into, at our election, cash, shares of our common stock, or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may require us to repurchase all, or any portion, of their notes for cash equal to 100% of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the agreements. We intend to settle the principal balance of our convertible debt in cash and have not assumed share settlement of the principal balance for purposes of computing earnings per share (“EPS”). At the time of issuance, there was no precedent or policy that would indicate that we would settle the principal in shares or the conversion spread in cash.

Accounting guidance requires that convertible debt instruments with cash settlement features, including partial cash settlement, account for the liability component and equity component (conversion feature) of the instrument separately. The initial value of the liability component reflects the present value of the discounted cash flows using the nonconvertible debt borrowing rate at the time of the issuance. The debt discount represents the difference between the proceeds received from the issuance and the initial carrying value of the liability component, which is accreted back to the notes principal amount through interest expense over the term of the notes, which was 2.51 years and 2.67 years at March 31, 2020 and December 31, 2019, respectively, on a weighted average basis.

The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes were as follows (in thousands):

Liability

Equity

 Component

 Component

Unamortized Debt 

Unamortized Deferred 

Net Carrying 

Net Carrying 

Period

    

UPB

    

Discount

    

Financing Fees

    

Value

    

Value

March 31, 2020

$

279,398

$

8,045

$

6,664

$

264,689

$

9,962

December 31, 2019

$

300,914

$

9,235

$

7,527

$

284,152

$

9,962

During the three months ended March 31, 2020, we incurred interest expense on the notes totaling $5.2 million, of which $3.4 million, $0.9 million and $0.9 million related to the cash coupon, the debt discount and amortization of the deferred

financing fees, respectively. During the three months ended March 31, 2019, we incurred total interest expense on the notes of $5.2 million, of which $3.5 million, $0.9 million and $0.8 million related to the cash coupon, the debt discount and amortization of the deferred financing fees, respectively. Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 6.75% and 6.80% at March 31, 2020 and December 31, 2019, respectively.

Junior Subordinated Notes

The carrying values of borrowings under our junior subordinated notes were $141.1 million and $140.9 million at March 31, 2020 and December 31, 2019, respectively, which is net of a deferred amount of $11.3 million and $11.4 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $1.9 million and $2.0 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a floating rate based on LIBOR. The weighted average note rate was 4.28% and 4.75% at March 31, 2020 and December 31, 2019, respectively. Including certain fees and costs, the weighted average note rate was 4.37% and 4.83% at March 31, 2020 and December 31, 2019, respectively.

Debt Covenants

Credit Facilities, Repurchase Agreements and Unsecured Debt. The credit facilities, repurchase agreements and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at March 31, 2020.

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 as of March 31, 2020, as well as on the most recent determination dates in April 2020. 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 (i) cash on hand, (ii) income from any CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) accessing the equity or debt capital markets, if available. We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time.

Our CLO compliance tests as of the most recent determination dates in April 2020 are as follows:

Cash Flow Triggers

    

CLO IX

    

CLO X

     

CLO XI

CLO XII

CLO XIII

Overcollateralization (1)

Current

 

134.68

%  

126.98

%

121.95

%

118.87

%

119.76

%

Limit

 

133.68

%  

125.98

%

120.95

%

117.87

%

118.76

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

Interest Coverage (2)

Current

 

361.00

%  

372.24

%

338.30

%

289.89

%

228.91

%

Limit

 

120.00

%  

120.00

%

120.00

%

120.00

%

120.00

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

(1)The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle.
(2)The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows:

Determination (1)

    

CLO  IX

    

CLO X

CLO XI

CLO XII

     

CLO XIII

April 2020

134.68

%

126.98

%

121.95

%

118.87

%

119.76

%

January 2020

134.68

%

126.98

%

121.95

%

118.87

%

October 2019

134.68

%

126.98

%

121.95

%

July 2019

134.68

%  

126.98

%  

121.95

%  

April 2019

134.69

%  

126.98

%  

(1)The table above represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented.

The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other.

v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
Document Transition Report false  
Entity File Number 001-32136  
Entity Registrant Name Arbor Realty Trust, Inc.  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 20-0057959  
Entity Address, Address Line One 333  
Entity Address, Address Line Two Earle Ovington Boulevard  
Entity Address, Address Line Three Suite 900  
Entity Address, City or Town Uniondale  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 11553  
City Area Code 516  
Local Phone Number 506-4200  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   110,251,395
Entity Central Index Key 0001253986  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Common Stock    
Title of 12(b) Security Common Stock, par value $0.01 per share  
Trading Symbol ABR  
Security Exchange Name NYSE  
Series A Preferred Stock    
Title of 12(b) Security Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share  
Trading Symbol ABR-PA  
Security Exchange Name NYSE  
Series B Preferred Stock    
Title of 12(b) Security Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share  
Trading Symbol ABR-PB  
Security Exchange Name NYSE  
Series C Preferred Stock    
Title of 12(b) Security Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share  
Trading Symbol ABR-PC  
Security Exchange Name NYSE  
v3.20.1
Mortgage Servicing
3 Months Ended
Mar. 31, 2020
Mortgage Servicing  
Mortgage Servicing

Note 6 — Mortgage Servicing

Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands):

March 31, 2020

Product Concentrations

Geographic Concentrations

UPB 

    

    

Percent of

    

    

Percentage

 

Product

UPB (1)

Total

State

of Total

Fannie Mae

$

14,946,922

74

%  

Texas

18

%

Freddie Mac

4,570,521

 

23

%  

North Carolina

9

%

FHA

679,685

 

3

%  

New York

9

%

Total

$

20,197,128

100

%  

California

8

%

Georgia

6

%

Florida

6

%

Other (2)

44

%

Total

100

%

December 31, 2019

Fannie Mae

    

$

14,832,844

    

74

%  

Texas

    

19

%

Freddie Mac

4,534,714

23

%  

North Carolina

9

%

FHA

691,519

3

%  

New York

9

%

Total

$

20,059,077

100

%  

California

9

%

Florida

6

%

Georgia

6

%

Other (2)

42

%

Total

100

%

(1)Excludes loans which we are not collecting a servicing fee.
(2)No other individual state represented 4% or more of the total.

At March 31, 2020 and December 31, 2019, our weighted average servicing fee was 43.6 basis points and 43.8 basis points, respectively. At March 31, 2020 and December 31, 2019, we held total escrow balances of $957.1 million and $947.1 million, respectively, which is not reflected in our consolidated balance sheets. Of the total escrow balances, we held $545.6 million and $562.1 million at March 31, 2020 and December 31, 2019, respectively, related to loans we are servicing within our Agency Business. 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, 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, was $3.1 million and $4.0 million during the three months ended March 31, 2020 and 2019, respectively, and is a component of servicing revenue, net in the consolidated statements of operations.

v3.20.1
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($)
$ in Thousands
Preferred Stock
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Total Arbor Realty Trust, Inc. Stockholders' Equity
Noncontrolling Interest
Total
Balance at Dec. 31, 2018 $ 89,502 $ 840 $ 879,029 $ (74,133) $ 895,238 $ 170,328 $ 1,065,566
Balance (in shares) at Dec. 31, 2018 24,365,084 83,987,707          
Increase (Decrease) in Stockholders' Equity              
Issuance of common stock upon vesting of restricted stock units   $ 2 (2,904)   (2,902)   (2,902)
Issuance of common stock upon vesting of restricted stock units (in shares)   203,492          
Net settlement on vesting of restricted stock     (585)   (585)   (585)
Net settlement on vesting of restricted stock (in shares)   (45,953)          
Issuance of common stock from convertible debt   $ 2 2,505   2,507   2,507
Issuance of common stock from convertible debt (in shares)   210,466          
Extinguishment of convertible senior unsecured notes     (1,331)   (1,331)   (1,331)
Stock-based compensation   $ 4 3,752   3,756   3,756
Stock-based compensation (in shares)   440,174          
Issuance of common stock from special dividend   $ 9 10,070   10,079   10,079
Issuance of common stock from special dividend (in shares)   901,432          
Issuance of operating partnership units and special voting preferred stock from special dividend $ 2       2 2,476 2,478
Issuance of operating partnership units and special voting preferred stock from special dividend (in shares) 221,666            
Distributions - common stock       (23,101) (23,101)   (23,101)
Distributions - preferred stock       (1,888) (1,888)   (1,888)
Distributions - preferred stock of private REIT       (5) (5)   (5)
Distributions - noncontrolling interest           (5,566) (5,566)
Redemption of operating partnership units $ (3) $ 3 2,935   2,935 (4,566) (1,631)
Redemption of operating partnership units (in shares) (387,706) 258,677          
Net income (loss)       24,538 24,538 5,468 30,006
Balance at Mar. 31, 2019 $ 89,501 $ 860 893,471 (74,589) 909,243 168,140 1,077,383
Balance (in shares) at Mar. 31, 2019 24,199,044 85,955,995          
Increase (Decrease) in Stockholders' Equity              
Change in accounting principal       (24,106) (24,106) (4,501) (28,607)
Balance - January 1, 2020 (as adjusted for change in accounting principal $ 89,501 $ 1,097 1,154,932 (85,026) 1,160,504 166,916 1,327,420
Balance at Dec. 31, 2019 $ 89,501 $ 1,097 1,154,932 (60,920) 1,184,610 171,417 1,356,027
Balance (in shares) at Dec. 31, 2019 24,195,594 109,706,214          
Increase (Decrease) in Stockholders' Equity              
Issuance of common stock   $ 14 19,410   19,424   19,424
Issuance of common stock (in shares)   1,350,000          
Repurchase of common stock   $ (13) (11,278)   (11,291)   (11,291)
Repurchase of common stock (in shares)   (1,249,777)          
Net settlement on vesting of restricted stock   $ 1 (1,631)   (1,630)   (1,630)
Net settlement on vesting of restricted stock (in shares)   65,419          
Issuance of common stock from convertible debt   $ 3 (186)   (183)   (183)
Issuance of common stock from convertible debt (in shares)   360,860          
Stock-based compensation   $ 4 3,513   3,517   3,517
Stock-based compensation (in shares)   381,315          
Forfeiture of unvested restricted stock (in shares)   (5,128)          
Distributions - common stock       (33,249) (33,249)   (33,249)
Distributions - preferred stock       (1,888) (1,888)   (1,888)
Distributions - preferred stock of private REIT       (4) (4)   (4)
Distributions - noncontrolling interest           (6,110) (6,110)
Redemption of operating partnership units $ (1)   (1,599)   (1,600)   (1,600)
Redemption of operating partnership units (in shares) (114,829)            
Net income (loss)       (57,422) (57,422) (10,934) (68,356)
Balance at Mar. 31, 2020 $ 89,500 $ 1,106 $ 1,163,161 $ (177,589) $ 1,076,178 $ 149,872 1,226,050
Balance (in shares) at Mar. 31, 2020 24,080,765 110,608,903          
Increase (Decrease) in Stockholders' Equity              
Change in accounting principal             $ 28,607
v3.20.1
Agreements and Transactions with Related Parties, Other Related Party (Details)
$ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Mar. 31, 2020
USD ($)
shares
Sep. 30, 2019
USD ($)
Jan. 31, 2019
USD ($)
Oct. 31, 2018
USD ($)
Aug. 31, 2018
USD ($)
Jun. 30, 2018
USD ($)
property
loan
Apr. 30, 2018
Mar. 31, 2020
USD ($)
shares
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
loan
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
item
loan
property
Dec. 31, 2016
USD ($)
property
shares
Dec. 31, 2015
USD ($)
Jul. 31, 2019
USD ($)
Agreements and transactions with related parties                              
Due to related party $ 3,103             $ 3,103   $ 13,100          
Due from Related Parties 13,821             13,821   $ 10,651          
Income from equity affiliates               3,992 $ 2,151            
Residential Mortgage Banking Company                              
Agreements and transactions with related parties                              
Maximum percentage of guaranty provided by the Company in relation to the settlement                           50.00%  
Bridge loan, several multifamily properties                              
Agreements and transactions with related parties                              
Principal amount                     $ 37,500        
Percentage of ownership interest of related party in the entity       85.00%                      
Bridge loan, six multifamily properties                              
Agreements and transactions with related parties                              
UPB converted to a mezzanine loan     $ 2,000                        
Bridge loan, six multifamily properties | Maturity date of September 2019                              
Agreements and transactions with related parties                              
Principal amount                         $ 12,900    
AMAC III                              
Agreements and transactions with related parties                              
Cash distribution received               100              
Lexford Portfolio | Bridge loans | Maturity Date of June 2021                              
Agreements and transactions with related parties                              
Paydowns of principal made by borrower               250,000              
Base spread (as a percent)           4.00%                  
Unsecured financing provided by an unsecured lender to certain parent entities of the property owners 50,000             50,000              
Lexford Portfolio | Private Label | Maturity date of March 2030                              
Agreements and transactions with related parties                              
Principal amount $ 34,600             34,600              
Fixed rate of interest (as a percent) 3.30%                            
ACM, Certain executives and Consortium of independent outside investors | Mezzanine loans | Mature date of April 2030                              
Agreements and transactions with related parties                              
Principal amount $ 3,400             3,400              
Fixed rate of interest (as a percent) 9.00%                            
ACM, Certain executives and Consortium of independent outside investors | Private Label | Mature date of April 2030                              
Agreements and transactions with related parties                              
Principal amount $ 14,800             14,800              
Fixed rate of interest (as a percent) 3.10%                            
ACM, Certain executives and Consortium of independent outside investors | AMAC III                              
Agreements and transactions with related parties                              
Amount invested $ 10,900             10,900 $ 30,000            
Ownership interest (as a percent)                 18.00%            
ACM, Certain executives and Consortium of independent outside investors | AMAC III | Private Label                              
Agreements and transactions with related parties                              
Percentage of ownership interest of related party in the entity                   100.00%          
Interest income recorded               900              
Fixed rate of interest (as a percent)                   3.735%          
Amount of loan to related party                   $ 15,600          
Unaffiliated borrower | Bridge loans                              
Agreements and transactions with related parties                              
Principal amount                   $ 13,100          
Unaffiliated borrower | AMAC III | Mezzanine loans                              
Agreements and transactions with related parties                              
Refinanced loan amount               300              
ACM / Our "Former Manager" | Residential Mortgage Banking Company                              
Agreements and transactions with related parties                              
Noncontrolling interest in equity method investment acquired (as a percent)                           50.00%  
Indirect ownership percentage                           22.5%  
Acquisition purchase price                           $ 9,600  
Income from equity affiliates               $ 2,900 $ 800            
Maximum percentage of guaranty provided by the Company in relation to the settlement                           50.00%  
ACM / Our "Former Manager" | ACM Acquisition                              
Agreements and transactions with related parties                              
Number of preferred stock shares paired with each OP units | shares                         1    
Number of shares held by related party | shares 3,898,554             3,898,554              
OP units hold as part of acquisition | shares               14,669,101              
Percentage of voting power held by related party 14.20%             14.20%              
Consortium of investors including other unaffiliated investors, certain of officers and chief executive officer | Bridge loan, several multifamily properties                              
Agreements and transactions with related parties                              
Principal amount       $ 19,500                      
Base spread (as a percent)       4.00%                      
Interest income recorded               $ 300              
Consortium of investors including other unaffiliated investors, certain of officers and chief executive officer | Bridge loan, several multifamily properties | LIBOR                              
Agreements and transactions with related parties                              
Base spread (as a percent)       2.125%                      
Consortium of investors including other unaffiliated investors, certain of officers and chief executive officer | Bridge loan, one multifamily property                              
Agreements and transactions with related parties                              
Principal amount $ 34,000             34,000     $ 61,200        
Percentage of ownership interest of related party in the entity                     10.00%        
Interest income recorded                 300            
Consortium of investors including other unaffiliated investors, certain of officers and chief executive officer | Bridge loan, one multifamily property | LIBOR                              
Agreements and transactions with related parties                              
Base spread (as a percent)                     4.50%        
LIBOR floor (as a percentage)                     2.00%        
Consortium of investors including an immediate family member of our officers | Bridge loan, one multifamily property                              
Agreements and transactions with related parties                              
Principal amount                             $ 7,000
Consortium of investors including an immediate family member of our officers | Fannie Mae loan on a multifamily property                              
Agreements and transactions with related parties                              
Percentage of maximum loss-sharing obligation unpaid principal balance                       5.00%      
Principal amount                       $ 46,900      
Percentage of ownership interest of related party in the entity                       17.60%      
Consortium of investors including an immediate family member of our officers | Fannie Mae loan on a multifamily property | Maximum                              
Agreements and transactions with related parties                              
Interest income recorded               100 100            
Certain officers, including our Chief Executive Officer and our Former Manager | Bridge loan, six multifamily properties | Maturity date of September 2019                              
Agreements and transactions with related parties                              
Principal amount                         $ 48,000    
Number of properties owned | property                         6    
Base spread (as a percent)                         4.50%    
LIBOR floor (as a percentage)                         0.25%    
Interest income recorded               100              
Number of bridge loans paid off | loan                   4   1      
Proceeds from repayment in full     $ 10,900             $ 28,300   $ 6,800      
Certain officers, including our Chief Executive Officer and our Former Manager | Bridge loan, six multifamily properties | Maturity date of September 2019 | Minimum                              
Agreements and transactions with related parties                              
Percentage of ownership interest of related party in the entity                         10.50%    
Certain officers, including our Chief Executive Officer and our Former Manager | Bridge loan, six multifamily properties | Maturity date of September 2019 | Maximum                              
Agreements and transactions with related parties                              
Percentage of ownership interest of related party in the entity                         12.00%    
Certain officers, including our Chief Executive Officer and our Former Manager | Mezzanine loans | Maturity date of January 2024                              
Agreements and transactions with related parties                              
Fixed rate of interest (as a percent)     10.00%                        
Certain certain officers, chief executive officer, and other unaffiliated investors | Preferred equity investments | Maturity date November 2018, extended from May 2018 | Multifamily                              
Agreements and transactions with related parties                              
Equity investment                         $ 5,200    
Fixed rate of interest (as a percent)                         10.00%    
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, several multifamily properties | Maturity Date of January 2021                              
Agreements and transactions with related parties                              
Due to related party                     $ 9,400        
Principal amount $ 8,900             8,900              
Percentage of ownership interest of related party in the entity             75.00%                
Interest income recorded               100              
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, several multifamily properties | Maturity Date of January 2021 | LIBOR                              
Agreements and transactions with related parties                              
Base spread (as a percent)             5.00%                
LIBOR floor (as a percentage)             1.25%                
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, several multifamily properties | Maturity date of June 2020                              
Agreements and transactions with related parties                              
Due to related party                       $ 32,800      
Percentage of ownership after transaction                       90.00%      
Base spread (as a percent)                       5.00%      
LIBOR floor (as a percentage)                       1.13%      
Interest income recorded                 600            
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties                              
Agreements and transactions with related parties                              
Interest income recorded               100 400            
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties | Maturity date of fourth quarter 2020                              
Agreements and transactions with related parties                              
Principal amount                       $ 28,000      
Number of properties owned | property                       2      
Percentage of ownership interest of related party in the entity                       45.00%      
Base spread (as a percent)                       5.25%      
Interest income recorded               500 600            
Number of bridge loans originated | item                       2      
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties | Maturity date of fourth quarter 2020 | Minimum                              
Agreements and transactions with related parties                              
LIBOR floor (as a percentage)                       1.24%      
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties | Maturity date of fourth quarter 2020 | Maximum                              
Agreements and transactions with related parties                              
LIBOR floor (as a percentage)                       1.54%      
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties | Maturity date of January 2019                              
Agreements and transactions with related parties                              
Principal amount                         $ 12,700    
Number of properties owned | property                         2    
Percentage of ownership interest of related party in the entity                         50.00%    
Base spread (as a percent)                         4.50%    
LIBOR floor (as a percentage)                         0.25%    
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties | Maturity date of October 2021                              
Agreements and transactions with related parties                              
Principal amount                       $ 31,100      
LIBOR floor (as a percentage)                       1.80%      
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, two multifamily properties | Maturity date of October 2021 | LIBOR                              
Agreements and transactions with related parties                              
Base spread (as a percent)                       4.00%      
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, one multifamily property | Maturity Date of June 2021                              
Agreements and transactions with related parties                              
Principal amount           $ 21,700                  
Percentage of ownership interest of related party in the entity           75.00%                  
Interest income recorded               $ 400 300            
Certain certain officers, chief executive officer, and other unaffiliated investors | Bridge loan, one multifamily property | Maturity Date of June 2021 | LIBOR                              
Agreements and transactions with related parties                              
Base spread (as a percent)           4.75%                  
LIBOR floor (as a percentage)           1.25%                  
Chief executive officer | Minimum                              
Agreements and transactions with related parties                              
Ownership interest limit of our common stock under company charter (as a percent) 5.00%             5.00%              
Kaufman Entities                              
Agreements and transactions with related parties                              
Percentage of our Former Manager's outstanding membership interest of related party in another related party 31.00%             31.00%              
Board of Directors | Ginkgo                              
Agreements and transactions with related parties                              
Percentage of managing member                       33.00%      
Consortium of affiliated investors | Lexford Portfolio                              
Agreements and transactions with related parties                              
Management fee, percentage of gross revenues of underlying properties               4.75%              
Immediate family member of chief executive officer | Bridge Loan, several undeveloped parcels of land                              
Agreements and transactions with related parties                              
Principal amount         $ 17,700                    
Paydowns of principal made by borrower   $ 4,700                          
Percentage of ownership interest of related party in the entity         10.80%                    
Interest income recorded               $ 100 500            
Fixed rate of interest (as a percent)         10.00%                    
Immediate family member of chief executive officer | Bridge loan, several multifamily properties                              
Agreements and transactions with related parties                              
Percentage of ownership interest of related party in the entity     23.90%                        
LIBOR floor (as a percentage)     2.375%                        
Immediate family member of chief executive officer | Bridge loan, several multifamily properties | LIBOR                              
Agreements and transactions with related parties                              
Base spread (as a percent)     4.25%                        
Interest income recorded               600 700            
Lexford Portfolio | Preferred equity investments                              
Agreements and transactions with related parties                              
Income from equity affiliates               1,100 1,300            
Lexford Portfolio | Bridge loans | Maturity Date of June 2021                              
Agreements and transactions with related parties                              
Principal amount           $ 280,500                  
Interest income recorded               200 4,500            
Maximum exposure under guaranty $ 616,500             $ 616,500              
Number of bridge loans originated | loan           12                  
Number of multifamily properties renovated | property           72                  
Ginkgo | Fannie Mae                              
Agreements and transactions with related parties                              
Loan purchased a multifamily apartment complex which assumed                       $ 8,300      
Percentage of maximum loss-sharing obligation unpaid principal balance                       20.00%      
Percentage of loan assumption fee                       1.00%      
Percentage of ownership after transaction               3.60%              
Ginkgo | Maximum | Fannie Mae                              
Agreements and transactions with related parties                              
Servicing revenue               $ 100 $ 100            
v3.20.1
Fair Value, Level 3 Derivative Instruments (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Derivative assets    
Balance at beginning of period $ 1,066 $ 324
Settlements (11,717) (14,157)
Realized gains recorded in earnings 10,651 13,833
Unrealized gains recorded in earnings 2,069 400
Balance at end of period $ 2,069 $ 400
v3.20.1
Commitments and Contingencies, Litigation (Details)
$ in Millions
1 Months Ended
Jun. 15, 2011
USD ($)
defendant
lawsuit
Jun. 30, 2013
USD ($)
lawsuit
defendant
Jun. 30, 2011
defendant
lawsuit
Arbor ESH II, LLC      
Litigation      
Investments in the Series A1 Preferred Units of a holding company of Extended Stay, Inc. | $ $ 115.0    
Lawsuits filed by Extended Stay Litigation Trust (the Trust)      
Litigation      
Number of lawsuits or complaints filed | lawsuit     3
Number of lawsuits filed in United States Bankruptcy Court | lawsuit     2
Number of defendants     73
Number of defendants who are corporate and partnership entities     55
Number of defendants named in a legal action who are individuals     18
Lawsuits filed by Extended Stay Litigation Trust (the Trust) | Fiduciary Duty Claims      
Litigation      
Number of lawsuits or complaints filed | lawsuit 2    
Number of defendants 2    
Lawsuits filed by Extended Stay Litigation Trust (the Trust) | Motion to amend the lawsuits      
Litigation      
Number of lawsuits consolidated | lawsuit   1  
Number of defendants removed due to consolidation of lawsuits   47  
Number of defendants related to the entity   0  
Number of defendants remaining due to consolidation of lawsuits   26  
Number of defendants who are corporate and partnership entities   16  
Number of defendants named in a legal action who are individuals   10  
Number of lawsuits before amendment | lawsuit   100  
Number of lawsuits after amendment | lawsuit   17  
Aggregate amount which the Trust would be seeking from the affiliates of the entity | $   $ 139.0  
v3.20.1
Segment Information - Key Servicing Metrics (Details) - Agency Business - MSRs - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Segment Information    
UPB of Servicing Portfolio $ 20,197,128 $ 20,059,077
Wtd. Avg. Servicing Fee Rate (basis points) 0.436% 0.438%
Wtd. Avg. Life of Servicing Portfolio (in years) 8 years 10 months 24 days 8 years 9 months 18 days
Fannie Mae    
Segment Information    
UPB of Servicing Portfolio $ 14,946,922 $ 14,832,844
Wtd. Avg. Servicing Fee Rate (basis points) 0.493% 0.493%
Wtd. Avg. Life of Servicing Portfolio (in years) 8 years 7 years 9 months 18 days
Freddie Mac    
Segment Information    
UPB of Servicing Portfolio $ 4,570,521 $ 4,534,714
Wtd. Avg. Servicing Fee Rate (basis points) 0.294% 0.30%
Wtd. Avg. Life of Servicing Portfolio (in years) 10 years 7 months 6 days 10 years 7 months 6 days
FHA    
Segment Information    
UPB of Servicing Portfolio $ 679,685 $ 691,519
Wtd. Avg. Servicing Fee Rate (basis points) 0.152% 0.154%
Wtd. Avg. Life of Servicing Portfolio (in years) 19 years 1 month 6 days 18 years 8 months 12 days
v3.20.1
Investments in Equity Affiliates, Summary (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Investment in Equity Affiliates    
Investment in Equity Affiliates $ 44,701 $ 41,800
UPB of Loans to Equity Affiliates 18,678  
Arbor Residential Investor LLC    
Investment in Equity Affiliates    
Investment in Equity Affiliates 29,452 26,520
AMAC Holdings III LLC    
Investment in Equity Affiliates    
Investment in Equity Affiliates 10,471 10,520
UPB of Loans to Equity Affiliates 15,600  
North Vermont Avenue    
Investment in Equity Affiliates    
Investment in Equity Affiliates 2,458 2,440
Lightstone Value Plus REIT L.P    
Investment in Equity Affiliates    
Investment in Equity Affiliates 1,895 1,895
JT Prime    
Investment in Equity Affiliates    
Investment in Equity Affiliates 425 $ 425
West Shore Cafe    
Investment in Equity Affiliates    
UPB of Loans to Equity Affiliates 1,688  
Lexford Portfolio    
Investment in Equity Affiliates    
UPB of Loans to Equity Affiliates $ 1,390  
v3.20.1
Capitalized Mortgage Servicing Rights (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Capitalized Mortgage Servicing Rights      
Balance at beginning of period $ 286,420    
Balance at end of period 288,954   $ 286,420
MSRs      
Capitalized Mortgage Servicing Rights      
Balance at beginning of period 286,420 $ 273,770 273,770
Additions 20,275 20,609  
Amortization (11,821) (12,282)  
Write-downs and payoffs (5,920) (4,458)  
Balance at end of period 288,954 277,639 286,420
Prepayment fees collected 5,100 4,900  
Valuation allowance 0   $ 0
Expected amortization of capitalized MSRs balances      
2020 (nine months ending 12/31/2020) 34,716    
2021 43,228    
2022 38,728    
2023 34,495    
2024 30,481    
2025 27,573    
Thereafter 79,733    
Total $ 288,954    
MSRs | Minimum      
Capitalized Mortgage Servicing Rights      
Percentage of MSRs discount rate 8.00%    
MSRs | Maximum      
Capitalized Mortgage Servicing Rights      
Percentage of MSRs discount rate 15.00%    
MSRs | Weighted average      
Capitalized Mortgage Servicing Rights      
Percentage of MSRs discount rate 13.00%    
Estimated life remaining 8 years 1 month 6 days   8 years
Acquired MSRs      
Capitalized Mortgage Servicing Rights      
Balance at beginning of period $ 64,519 97,084 $ 97,084
Amortization (4,206) (5,915)  
Write-downs and payoffs (1,736) (3,140)  
Balance at end of period 58,577 88,029 64,519
Originated MSRs      
Capitalized Mortgage Servicing Rights      
Balance at beginning of period 221,901 176,686 176,686
Additions 20,275 20,609  
Amortization (7,615) (6,367)  
Write-downs and payoffs (4,184) (1,318)  
Balance at end of period $ 230,377 $ 189,610 $ 221,901
v3.20.1
Loans and Investments - Summary of impaired loans (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
Mar. 31, 2019
Dec. 31, 2019
USD ($)
Loans and Investments      
Amortized cost basis $ 226,271,000   $ 138,141,000
Carrying Value 217,140,000   130,726,000
Allowance for Loan Losses $ 103,706,000   71,069,000
Wtd. Avg. First Dollar LTV Ratio 0.14 0.01  
Wtd. Avg. Last Dollar LTV Ratio   0.96  
Interest Income Recognized $ 0.98    
Land      
Loans and Investments      
Amortized cost basis 134,215,000   134,215,000
Carrying Value 126,800,000   126,800,000
Allowance for Loan Losses $ 77,869,000   67,869,000
Wtd. Avg. First Dollar LTV Ratio 0 0  
Wtd. Avg. Last Dollar LTV Ratio   0.97  
Interest Income Recognized $ 97    
Hotel      
Loans and Investments      
Amortized cost basis 50,000,000    
Carrying Value 49,663,000    
Allowance for Loan Losses $ 7,500,000    
Wtd. Avg. First Dollar LTV Ratio 0.59    
Interest Income Recognized $ 100    
Retail      
Loans and Investments      
Amortized cost basis 33,520,000    
Carrying Value 31,921,000    
Allowance for Loan Losses $ 11,292,000    
Wtd. Avg. First Dollar LTV Ratio 0.03    
Interest Income Recognized $ 100    
Healthcare      
Loans and Investments      
Amortized cost basis 4,625,000    
Carrying Value 4,845,000    
Allowance for Loan Losses $ 3,845,000    
Wtd. Avg. First Dollar LTV Ratio 0    
Interest Income Recognized $ 100    
Office      
Loans and Investments      
Amortized cost basis 2,211,000   2,226,000
Carrying Value 2,211,000   2,226,000
Allowance for Loan Losses $ 1,500,000   1,500,000
Wtd. Avg. First Dollar LTV Ratio 0 0  
Wtd. Avg. Last Dollar LTV Ratio   0.78  
Interest Income Recognized $ 76    
Commercial      
Loans and Investments      
Amortized cost basis 1,700,000   1,700,000
Carrying Value 1,700,000   1,700,000
Allowance for Loan Losses $ 1,700,000   $ 1,700,000
Wtd. Avg. First Dollar LTV Ratio 0.63 0.63  
Wtd. Avg. Last Dollar LTV Ratio   0.63  
Interest Income Recognized $ 63    
v3.20.1
Capitalized Mortgage Servicing Rights (Tables)
3 Months Ended
Mar. 31, 2020
Capitalized Mortgage Servicing Rights  
Summary of capitalized MSR activity

A summary of our capitalized MSR activity is as follows (in thousands):

Three Months Ended March 31, 2020

     

Acquired

     

Originated

     

Total

Balance at beginning of period

$

64,519

$

221,901

$

286,420

Additions

20,275

20,275

Amortization

(4,206)

(7,615)

(11,821)

Write-downs and payoffs

(1,736)

(4,184)

(5,920)

Balance at end of period

$

58,577

$

230,377

$

288,954

     

Three Months Ended March 31, 2019

Balance at beginning of period

$

97,084

$

176,686

$

273,770

Additions

20,609

20,609

Amortization

(5,915)

(6,367)

(12,282)

Write-downs and payoffs

(3,140)

(1,318)

(4,458)

Balance at end of period

$

88,029

$

189,610

$

277,639

Schedule of expected amortization of capitalized MSRs recorded

The expected amortization of capitalized MSRs recorded as of March 31, 2020 is as follows (in thousands):

Year

     

Amortization

2020 (nine months ending 12/31/2020)

$

34,716

2021

 

43,228

2022

 

38,728

2023

 

34,495

2024

 

30,481

2025

27,573

Thereafter

 

79,733

Total

$

288,954

v3.20.1
Real Estate Owned (Tables)
3 Months Ended
Mar. 31, 2020
Real Estate Owned  
Schedule of real estate owned

March 31, 2020

December 31, 2019

    

Hotel

    

Office

    

    

Hotel

    

Office

    

(in thousands)

Property

Building

Total

Property

Building

Total

Land

$

3,294

$

4,509

$

7,803

$

3,294

$

4,509

$

7,803

Building and intangible assets

 

31,771

2,010

33,781

 

31,541

 

2,010

 

33,551

Less: Impairment loss

(14,307)

(2,500)

(16,807)

(14,307)

(2,500)

(16,807)

Less: Accumulated depreciation and amortization

 

(10,460)

(1,047)

(11,507)

 

(10,320)

 

(1,007)

 

(11,327)

Real estate owned, net

$

10,298

$

2,972

$

13,270

$

10,208

$

3,012

$

13,220

v3.20.1
Fair Value (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value.  
Summary of the principal amounts, carrying values and the estimated fair values of the Company's financial instruments

March 31, 2020

December 31, 2019

Principal /

Carrying

Estimated

Principal /

Carrying

Estimated

    

Notional Amount

    

Value

    

Fair Value

    

Notional Amount

    

Value

    

Fair Value

Financial assets:

Loans and investments, net

$

4,800,544

$

4,638,004

$

4,679,039

$

4,279,611

$

4,189,960

$

4,228,071

Loans held-for-sale, net

978,736

991,696

1,001,224

847,126

861,360

876,975

Capitalized mortgage servicing rights, net

n/a

288,954

320,052

n/a

286,420

328,995

Securities held-to-maturity, net

106,484

84,406

81,887

111,028

88,699

91,738

Derivative financial instruments

341,180

 

12,683

 

12,683

173,532

 

1,435

 

1,435

Financial liabilities:

Credit and repurchase facilities

$

1,851,758

$

1,846,473

$

1,848,149

$

1,681,146

$

1,678,288

$

1,677,658

Collateralized loan obligations

2,532,593

 

2,513,096

 

2,260,964

2,147,467

 

2,130,121

 

2,147,944

Debt fund

70,000

 

68,717

 

70,115

70,000

68,629

70,138

Senior unsecured notes

600,000

 

591,854

 

514,100

325,000

 

319,799

 

331,225

Convertible senior unsecured notes, net

279,398

264,689

246,200

300,914

284,152

310,778

Junior subordinated notes

154,336

 

141,128

 

98,143

154,336

 

140,949

 

97,668

Derivative financial instruments

153,816

 

5,113

 

5,113

347,701

 

3,097

 

3,097

Schedule of certain financial assets and financial liabilities measured at fair value on a recurring basis

Fair Value Measurements Using Fair

Carrying

Value  Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Derivative financial instruments

$

12,683

$

12,683

$

$

10,614

$

2,069

Financial liabilities:

Derivative financial instruments

$

5,113

$

5,113

$

$

5,113

$

Schedule of certain financial assets and financial liabilities measured at fair value on a nonrecurring basis

Fair Value Measurements Using Fair

Net Carrying

Value Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Impaired loans, net (1)

$

113,434

$

113,434

$

$

$

113,434

(1)We had an allowance for loan losses of $103.7 million relating to nine impaired loans with an aggregate carrying value, before loan loss reserves, of $217.1 million at March 31, 2020.

Schedule of quantitative information about Level 3 fair value measurements

Quantitative information about Level 3 fair value measurements at March 31, 2020 were as follows ($ in thousands):

Valuation

    

    

Fair Value

    

Techniques

    

Significant Unobservable Inputs

 

Financial assets:

Impaired loans:

Land

$

48,931

Discounted cash flows

 

Discount rate

21.50

%

 

Revenue growth rate

3.00

%

Hotel

42,163

 

Discounted cash flows /

 

Discount rate

11.50

%

direct capitalization

 

Capitalization rate

3.10

%

 

Revenue growth rate

25.00

%

Retail

20,629

Discounted cash flows

Discount rate

10.04

%

Capitalization rate

9.25

%

Revenue growth rate

1.55

%

Healthcare

1,000

Discounted cash flows

Capitalization rate

14.30

%

Office

711

Discounted cash flows

 

Discount rate

11.00

%

 

Capitalization rate

9.00

%

 

Revenue growth rate

2.50

%

Derivative financial instruments:

Rate lock commitments

2,069

Discounted cash flows

W/A discount rate

9.62

%

Schedule of roll forward of Level 3 derivative instruments

Fair Value Measurements Using Significant Unobservable Inputs

Three Months Ended March 31, 

    

2020

    

2019

Derivative assets and liabilities, net

Balance at beginning of period

$

1,066

$

324

Settlements

(11,717)

(14,157)

Realized gains recorded in earnings

10,651

13,833

Unrealized gains recorded in earnings

2,069

400

Balance at end of period

$

2,069

$

400

Schedule of components of fair value and other relevant information

The components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale were as follows (in thousands):

Notional/

Fair Value of

Interest Rate

Total Fair Value

March 31, 2020

    

Principal Amount

    

Servicing Rights

    

Movement Effect

    

Adjustment

Rate lock commitments

$

99,893

$

3,987

$

(4,808)

$

(821)

Forward sale commitments

395,103

4,808

4,808

Loans held-for-sale, net (1)

978,735

15,254

15,254

Total

$

19,241

$

$

19,241

(1)Loans held-for-sale, net are recorded at the lower of cost or market on an aggregate basis and includes fair value adjustments related to estimated cash flows from MSRs.

Schedule of fair value of assets and liabilities

Fair Value Measurements Using Fair Value Hierarchy

    

Carrying Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Loans and investments, net

$

4,638,004

$

4,679,039

$

$

$

4,679,039

Loans held-for-sale, net

991,696

1,001,224

985,970

15,254

Capitalized mortgage servicing rights, net

288,954

320,052

320,052

Securities held-to-maturity, net

84,406

81,887

81,887

Financial liabilities:

Credit and repurchase facilities

$

1,846,473

$

1,848,149

$

$

790,739

$

1,057,410

Collateralized loan obligations

 

2,513,096

 

2,260,964

 

 

 

2,260,964

Debt fund

68,717

70,115

70,115

Senior unsecured notes

 

591,854

 

514,100

 

514,100

 

 

Convertible senior unsecured notes, net

264,689

246,200

246,200

Junior subordinated notes

 

141,128

 

98,143

 

 

 

98,143

v3.20.1
Real Estate Owned
3 Months Ended
Mar. 31, 2020
Real Estate Owned  
Real Estate Owned

Note 9 — Real Estate Owned

Our real estate assets at both March 31, 2020 and December 31, 2019 were comprised of a hotel property and an office building.

March 31, 2020

December 31, 2019

    

Hotel

    

Office

    

    

Hotel

    

Office

    

(in thousands)

Property

Building

Total

Property

Building

Total

Land

$

3,294

$

4,509

$

7,803

$

3,294

$

4,509

$

7,803

Building and intangible assets

 

31,771

2,010

33,781

 

31,541

 

2,010

 

33,551

Less: Impairment loss

(14,307)

(2,500)

(16,807)

(14,307)

(2,500)

(16,807)

Less: Accumulated depreciation and amortization

 

(10,460)

(1,047)

(11,507)

 

(10,320)

 

(1,007)

 

(11,327)

Real estate owned, net

$

10,298

$

2,972

$

13,270

$

10,208

$

3,012

$

13,220

During the three months ended March 31, 2020 and 2019, our hotel property had a weighted average occupancy rate of 41% and 53%, respectively, a weighted average daily rate of $154 and $130, respectively, and weighted average revenue per available room of $64 and $69, respectively. The operation of a hotel property is seasonal with the majority of

revenues earned in the first two quarters of the calendar year. As a result of the COVID-19 pandemic, our hotel property has temporarily ceased operations beginning in April 2020.

Our office building was fully occupied by a single tenant until April 2017 when the lease expired. The building is currently vacant.

Our real estate owned assets had restricted cash balances due to escrow requirements totaling $0.4 million and $0.5 million at March 31, 2020 and December 31, 2019, respectively.

v3.20.1
Capitalized Mortgage Servicing Rights
3 Months Ended
Mar. 31, 2020
Capitalized Mortgage Servicing Rights  
Capitalized Mortgage Servicing Rights

Note 5 — Capitalized Mortgage Servicing Rights

Our capitalized mortgage servicing rights (“MSRs”) reflect commercial real estate MSRs derived from loans sold in our Agency Business or acquired MSRs. The discount rates used to determine the present value of our MSRs throughout the periods presented for all MSRs were between 8% - 15% (representing a weighted average discount rate of 13%) based on our best estimate of market discount rates. The weighted average estimated life remaining of our MSRs was 8.1 years and 8.0 years at March 31, 2020 and December 31, 2019, respectively.

A summary of our capitalized MSR activity is as follows (in thousands):

Three Months Ended March 31, 2020

     

Acquired

     

Originated

     

Total

Balance at beginning of period

$

64,519

$

221,901

$

286,420

Additions

20,275

20,275

Amortization

(4,206)

(7,615)

(11,821)

Write-downs and payoffs

(1,736)

(4,184)

(5,920)

Balance at end of period

$

58,577

$

230,377

$

288,954

     

Three Months Ended March 31, 2019

Balance at beginning of period

$

97,084

$

176,686

$

273,770

Additions

20,609

20,609

Amortization

(5,915)

(6,367)

(12,282)

Write-downs and payoffs

(3,140)

(1,318)

(4,458)

Balance at end of period

$

88,029

$

189,610

$

277,639

We collected prepayment fees totaling $5.1 million and $4.9 million during the three months ended March 31, 2020 and 2019, respectively. Prepayment fees are included as a component of servicing revenue, net on the consolidated statements of operations. As of March 31, 2020 and December 31, 2019, we had no valuation allowance recorded on any of our MSRs.

The expected amortization of capitalized MSRs recorded as of March 31, 2020 is as follows (in thousands):

Year

     

Amortization

2020 (nine months ending 12/31/2020)

$

34,716

2021

 

43,228

2022

 

38,728

2023

 

34,495

2024

 

30,481

2025

27,573

Thereafter

 

79,733

Total

$

288,954

Actual amortization may vary from these estimates.

v3.20.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CONSOLIDATED STATEMENTS OF OPERATIONS    
Interest income $ 88,526 $ 71,277
Interest expense 49,982 41,865
Net interest income 38,544 29,412
Other revenue:    
Gain on sales, including fee-based services, net 14,305 16,389
Mortgage servicing rights 21,934 14,232
Servicing revenue, net 13,302 13,552
Property operating income 2,192 2,803
Loss on derivative instruments, net (50,731) (2,465)
Other income, net 1,303 337
Total other revenue 2,305 44,848
Other expenses:    
Employee compensation and benefits 34,252 31,764
Selling and administrative 11,052 9,761
Property operating expenses 2,443 2,396
Depreciation and amortization 1,947 1,912
Provision for loss sharing (net of recoveries) 21,537 454
Provision for credit losses (net of recoveries) 54,382  
Total other expenses 125,613 46,287
(Loss) income before extinguishment of debt, income from equity affiliates and income taxes (84,764) 27,973
Loss on extinguishment of debt (1,954) (128)
Income from equity affiliates 3,992 2,151
Benefit for income taxes 14,370 10
Net (loss) income (68,356) 30,006
Preferred stock dividends 1,888 1,888
Net (loss) income attributable to noncontrolling interest (10,934) 5,468
Net (loss) attributable to common stockholders $ (59,310) $ 22,650
Basic (loss) earnings per common share (in dollars per share) $ (0.54) $ 0.27
Diluted (loss) earnings per common share (in dollars per share) $ (0.54) $ 0.26
Weighted average shares outstanding:    
Basic (in shares) 110,792,412 85,151,878
Diluted (in shares) 131,217,199 107,869,511
Dividends declared per common share (in dollars per share) $ 0.30 $ 0.27
v3.20.1
Description of Business
3 Months Ended
Mar. 31, 2020
Description of Business  
Description of Business

Note 1 — Description of Business

Arbor Realty Trust, Inc. (“we,” “us,” or “our”) is a Maryland corporation formed in 2003. 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 and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity. We may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the government-sponsored enterprises, or "GSEs"), the Government National Mortgage Association ("Ginnie Mae"), Federal Housing Authority ("FHA") and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, "HUD"). We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae Delegated Underwriting and Servicing ("DUS") lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan ("SBL") lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and sell finance products through conduit/commercial mortgage-backed securities ("CMBS") programs and during the second half of 2019, we began to originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label" loans. We intend to pool and securitize the Private Label loans and sell certain securities in the securitizations to third-party investors, while retaining the highest risk bottom tranche bond referred to as the "B Piece."

Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership ("ARLP"), for which we serve as the general partner, and ARLP's subsidiaries. We are organized to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on that portion of its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of taxable income is distributed and provided that certain other requirements are met. Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through taxable REIT subsidiaries ("TRS"), which is part of our TRS consolidated group (the "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. See Note 17 for details.

v3.20.1
Basis of Presentation and Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2020
Basis of Presentation and Significant Accounting Policies  
Schedule of impact of adopting ASU 2016-13

The following table illustrates the impact of adopting ASU 2016-13 (in thousands):

January 1, 2020

    

As Reported

    

    

    

    

 

Under

 

As Reported

 

Impact of

 

ASU 2016-13

 

Pre-Adoption

 

Adoption

Assets:

 

  

 

  

 

  

Allowance for credit losses:

 

  

 

  

 

  

Structured loans and investments (1)

$

88,363

$

71,069

$

17,294

Held-to-maturity debt securities

 

501

501

Deferred taxassets

27,307

23,713

3,594

Liabilities:

 

  

 

  

 

  

Allowance for loss-sharing obligations

 

16,847

 

2,441

 

14,406

(1)See Note 3 for details by asset class.
Schedules of Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements

Description

    

Adoption Date

    

Effect on Financial Statements

In November 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends the guidance for determining whether a decision-making fee is a variable interest and requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP).

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with changes between hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. Early adoption is permitted upon issuance of the update.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. This ASU eliminates step two from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value with the carrying amount of goodwill.

First quarter of 2020

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

Description

    

Effective Date

    

Effect on Financial Statements

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022.

We have not adopted any of the optional expedients or exceptions through March 31, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

v3.20.1
Income Taxes
3 Months Ended
Mar. 31, 2020
Income Taxes  
Income Taxes

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 criteria to maintain our REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.

The Agency Business is operated through our TRS Consolidated Group and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.

In the three months ended March 31, 2020 and 2019, we recorded a tax benefit of $14.4 million and less than $0.1 million, respectively. The tax benefit recorded in the three months ended March 31, 2020 consisted of a deferred tax benefit of $19.9 million and a current tax provision of $5.5 million. The tax benefit recorded in the three months ended March 31, 2019 consisted of a deferred tax benefit of $4.2 million and a current tax provision of $4.2 million.

Current and deferred taxes are primarily recorded on the portion of earnings (losses) recognized by us with respect to our interest in the TRS’s. Deferred income tax assets and liabilities are calculated based on temporary differences between our U.S. GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets.

v3.20.1
Fair Value
3 Months Ended
Mar. 31, 2020
Fair Value.  
Fair Value

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):

March 31, 2020

December 31, 2019

Principal /

Carrying

Estimated

Principal /

Carrying

Estimated

    

Notional Amount

    

Value

    

Fair Value

    

Notional Amount

    

Value

    

Fair Value

Financial assets:

Loans and investments, net

$

4,800,544

$

4,638,004

$

4,679,039

$

4,279,611

$

4,189,960

$

4,228,071

Loans held-for-sale, net

978,736

991,696

1,001,224

847,126

861,360

876,975

Capitalized mortgage servicing rights, net

n/a

288,954

320,052

n/a

286,420

328,995

Securities held-to-maturity, net

106,484

84,406

81,887

111,028

88,699

91,738

Derivative financial instruments

341,180

 

12,683

 

12,683

173,532

 

1,435

 

1,435

Financial liabilities:

Credit and repurchase facilities

$

1,851,758

$

1,846,473

$

1,848,149

$

1,681,146

$

1,678,288

$

1,677,658

Collateralized loan obligations

2,532,593

 

2,513,096

 

2,260,964

2,147,467

 

2,130,121

 

2,147,944

Debt fund

70,000

 

68,717

 

70,115

70,000

68,629

70,138

Senior unsecured notes

600,000

 

591,854

 

514,100

325,000

 

319,799

 

331,225

Convertible senior unsecured notes, net

279,398

264,689

246,200

300,914

284,152

310,778

Junior subordinated notes

154,336

 

141,128

 

98,143

154,336

 

140,949

 

97,668

Derivative financial instruments

153,816

 

5,113

 

5,113

347,701

 

3,097

 

3,097

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. 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.

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.

Determining which category an asset or liability falls within the hierarchy requires judgment and we evaluate our hierarchy disclosures each quarter.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Loans and investments, net. Fair values of loans and investments that are not impaired are estimated using inputs based on direct capitalization rate and discounted cash flow methodologies using discount rates, which, in our opinion, best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality (Level 3). Fair values of impaired loans and investments are estimated using inputs that require significant judgments, which include assumptions regarding discount rates, capitalization rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plans and other factors (Level 3).

Loans held-for-sale, net. Consists of originated loans that are generally expected to be transferred or sold within 60 days to 180 days of loan funding, and are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics (Level 2). Fair value includes the fair value allocated to the associated future MSRs and is calculated pursuant to the valuation techniques described below for capitalized mortgage servicing rights, net (Level 3).

Capitalized mortgage servicing rights, net. Fair values are estimated using inputs based on discounted future net cash flow methodology (Level 3). The fair value of MSRs carried at amortized cost are estimated using a process that involves the use of independent third-party valuation experts, supported by commercially available discounted cash flow models and analysis of current market data. The key inputs used in estimating fair value include the contractually specified servicing fees, prepayment speed of the underlying loans, discount rate, annual per loan cost to service loans, delinquency rates, late charges and other economic factors.

Securities held-to-maturity, net. Fair values are approximated using inputs based on current market quotes received from financial sources that trade such securities and are based on prevailing market data and, in some cases, are derived from third-party proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions (Level 3).

Derivative financial instruments. The fair values of rate lock and forward sale commitments are estimated using valuation techniques, which include internally-developed models developed based on changes in the U.S. Treasury rate and other observable market data (Level 2). The fair value of rate lock commitments includes the fair value of the expected net cash flows associated with the servicing of the loans, see capitalized mortgage servicing rights, net above for details on the applicable valuation technique (Level 3). We also consider the impact of counterparty non-performance risk when measuring the fair value of these derivatives. Given the credit quality of our counterparties, the short duration of interest rate lock commitments and forward sale contracts, and our historical experience, the risk of nonperformance by our counterparties is not significant.

Credit facilities and repurchase agreements. Fair values for credit facilities and repurchase agreements 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 facilities and repurchase agreement for the Agency Business bear interest at rates that are similar to those available in the market currently and the fair values are estimated using Level 2 inputs. For these facilities, the fair values approximate their carrying values.

Collateralized loan obligations, Debt Fund 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, net. Fair values are estimated based on current market quotes received from inactive markets (Level 2).

We measure certain financial assets and financial liabilities at fair value on a recurring basis. The fair values of these financial assets and liabilities were determined using the following input levels as of March 31, 2020 (in thousands):

Fair Value Measurements Using Fair

Carrying

Value  Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Derivative financial instruments

$

12,683

$

12,683

$

$

10,614

$

2,069

Financial liabilities:

Derivative financial instruments

$

5,113

$

5,113

$

$

5,113

$

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 as of March 31, 2020 (in thousands):

Fair Value Measurements Using Fair

Net Carrying

Value Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Impaired loans, net (1)

$

113,434

$

113,434

$

$

$

113,434

(1)We had an allowance for loan losses of $103.7 million relating to nine impaired loans with an aggregate carrying value, before loan loss reserves, of $217.1 million at March 31, 2020.

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 loan 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 we will be unable to collect all amounts due for both principal and interest 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 loan losses. 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. The table above and below includes all impaired loans, regardless of the period in which the impairment was recognized.

Quantitative information about Level 3 fair value measurements at March 31, 2020 were as follows ($ in thousands):

Valuation

    

    

Fair Value

    

Techniques

    

Significant Unobservable Inputs

 

Financial assets:

Impaired loans:

Land

$

48,931

Discounted cash flows

 

Discount rate

21.50

%

 

Revenue growth rate

3.00

%

Hotel

42,163

 

Discounted cash flows /

 

Discount rate

11.50

%

direct capitalization

 

Capitalization rate

3.10

%

 

Revenue growth rate

25.00

%

Retail

20,629

Discounted cash flows

Discount rate

10.04

%

Capitalization rate

9.25

%

Revenue growth rate

1.55

%

Healthcare

1,000

Discounted cash flows

Capitalization rate

14.30

%

Office

711

Discounted cash flows

 

Discount rate

11.00

%

 

Capitalization rate

9.00

%

 

Revenue growth rate

2.50

%

Derivative financial instruments:

Rate lock commitments

2,069

Discounted cash flows

W/A discount rate

9.62

%

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 were as follows (in thousands):

Fair Value Measurements Using Significant Unobservable Inputs

Three Months Ended March 31, 

    

2020

    

2019

Derivative assets and liabilities, net

Balance at beginning of period

$

1,066

$

324

Settlements

(11,717)

(14,157)

Realized gains recorded in earnings

10,651

13,833

Unrealized gains recorded in earnings

2,069

400

Balance at end of period

$

2,069

$

400

The components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale were as follows (in thousands):

Notional/

Fair Value of

Interest Rate

Total Fair Value

March 31, 2020

    

Principal Amount

    

Servicing Rights

    

Movement Effect

    

Adjustment

Rate lock commitments

$

99,893

$

3,987

$

(4,808)

$

(821)

Forward sale commitments

395,103

4,808

4,808

Loans held-for-sale, net (1)

978,735

15,254

15,254

Total

$

19,241

$

$

19,241

(1)Loans held-for-sale, net are recorded at the lower of cost or market on an aggregate basis and includes fair value adjustments related to estimated cash flows from MSRs.

We measure certain assets and liabilities for which fair value is only disclosed. The fair value of these assets and liabilities are determined using the following input levels as of March 31, 2020 (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

$

4,638,004

$

4,679,039

$

$

$

4,679,039

Loans held-for-sale, net

991,696

1,001,224

985,970

15,254

Capitalized mortgage servicing rights, net

288,954

320,052

320,052

Securities held-to-maturity, net

84,406

81,887

81,887

Financial liabilities:

Credit and repurchase facilities

$

1,846,473

$

1,848,149

$

$

790,739

$

1,057,410

Collateralized loan obligations

 

2,513,096

 

2,260,964

 

 

 

2,260,964

Debt fund

68,717

70,115

70,115

Senior unsecured notes

 

591,854

 

514,100

 

514,100

 

 

Convertible senior unsecured notes, net

264,689

246,200

246,200

Junior subordinated notes

 

141,128

 

98,143

 

 

 

98,143

v3.20.1
Debt Obligations, Junior Subordinated Notes (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Debt Obligations    
Debt carrying value $ 141,128 $ 140,949
Weighted average note rate (as a percent) 2.83% 3.54%
Junior subordinated notes    
Debt Obligations    
Debt carrying value $ 141,100 $ 140,900
Deferred amount Due at maturity 11,300 11,400
Deferred fees expensed as interest expense $ 1,900 $ 2,000
Weighted average note rate (as a percent) 4.28% 4.75%
Weighted average note rate including certain fees and costs (as a percent) 4.37% 4.83%
v3.20.1
Debt Obligations, Collateralized Loan Obligations (Details)
$ in Thousands
1 Months Ended 3 Months Ended
Mar. 31, 2020
USD ($)
tranche
Jun. 30, 2019
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Debt Obligations          
Proceeds from issuance of collateralized loan obligations     $ 668,000    
Debt, Carrying Value $ 2,513,096   $ 2,513,096 $ 2,130,121  
Weighted average note rate (as a percent) 2.83%   2.83% 3.54%  
Restricted cash related to interest payments, delayed fundings and expenses       $ 89,100 $ 58,600
Payoffs and paydowns of collateralized loan obligations     $ 282,874    
CLOs          
Debt Obligations          
Debt, Face Value $ 2,532,593   2,532,593 2,147,467  
Debt, Carrying Value $ 2,513,096   $ 2,513,096 $ 2,130,121  
Weighted average note rate (as a percent) 2.46%   2.46% 3.23%  
Collateral Loans, Unpaid Principal $ 2,865,141   $ 2,865,141 $ 2,497,578  
Collateral Loans, Carrying Value 2,853,671   2,853,671 2,487,391  
Cash, Restricted Cash 167,495   167,495 118,411  
Deferred financing fees $ 19,500   $ 19,500 $ 17,300  
Weighted average note rate including certain fees and costs (as a percent) 2.87%   2.87% 3.63%  
Collateral at risk $ 0   $ 0 $ 0  
CLO XIII          
Debt Obligations          
Number of tranches of CLO notes issued | tranche 8        
Value of the tranches issued $ 738,000   738,000    
Debt, Face Value 668,000   668,000    
Debt, Carrying Value $ 662,918   $ 662,918    
Weighted average note rate (as a percent) 2.44%   2.44%    
Collateral Loans, Unpaid Principal $ 665,381   $ 665,381    
Collateral Loans, Carrying Value 662,287   662,287    
Cash, Restricted Cash 100,777   100,777    
Proceeds from issuance of collateralized loan obligations for acquiring additional loan obligations 159,500        
Notional amount of residual interest retained 132,000   132,000    
Value of portfolio loans as collateral 640,500   640,500    
Face value of loan obligations will be owned by the issuer $ 800,000   $ 800,000    
Leverage (as a percent) 84.00%   84.00%    
CLO XIII | One-month LIBOR          
Debt Obligations          
Weighted average note rate including certain fees and costs (as a percent) 1.41%   1.41%    
CLO XIII | Investment grade          
Debt Obligations          
Debt, Face Value $ 668,000   $ 668,000    
CLO XIII | Below investment grade          
Debt Obligations          
Debt, Carrying Value 70,000   70,000    
Notional amount of residual interest retained 70,000   70,000    
CLO XII          
Debt Obligations          
Debt, Face Value 534,193   534,193 534,193  
Debt, Carrying Value $ 529,748   $ 529,748 $ 529,448  
Weighted average note rate (as a percent) 2.52%   2.52% 3.30%  
Collateral Loans, Unpaid Principal $ 613,317   $ 613,317 $ 596,366  
Collateral Loans, Carrying Value 610,760   610,760 593,652  
Cash, Restricted Cash       17,800  
CLO XI          
Debt Obligations          
Debt, Face Value 533,000   533,000 533,000  
Debt, Carrying Value $ 528,981   $ 528,981 $ 528,690  
Weighted average note rate (as a percent) 2.47%   2.47% 3.25%  
Collateral Loans, Unpaid Principal $ 640,272   $ 640,272 $ 624,443  
Collateral Loans, Carrying Value 637,633   637,633 621,508  
Cash, Restricted Cash 2,208   2,208 15,550  
Replacement period   3 years      
Maximum period to acquire additional loan obligations   180 days      
CLO X          
Debt Obligations          
Debt, Face Value 441,000   441,000 441,000  
Debt, Carrying Value $ 437,652   $ 437,652 $ 437,391  
Weighted average note rate (as a percent) 2.48%   2.48% 3.26%  
Collateral Loans, Unpaid Principal $ 535,613   $ 535,613 $ 509,887  
Collateral Loans, Carrying Value 533,588   533,588 507,854  
Cash, Restricted Cash 3,656   3,656 37,287  
CLO IX          
Debt Obligations          
Debt, Face Value 356,400   356,400 356,400  
Debt, Carrying Value $ 353,797   $ 353,797 $ 353,473  
Weighted average note rate (as a percent) 2.39%   2.39% 3.17%  
Collateral Loans, Unpaid Principal $ 410,558   $ 410,558 $ 407,696  
Collateral Loans, Carrying Value 409,403   409,403 406,463  
Cash, Restricted Cash 60,854   $ 60,854 47,230  
CLO VIII          
Debt Obligations          
Debt, Face Value       282,874  
Debt, Carrying Value       $ 281,119  
Weighted average note rate (as a percent)       3.12%  
Collateral Loans, Unpaid Principal       $ 359,186  
Collateral Loans, Carrying Value       357,914  
Cash, Restricted Cash       $ 544  
Payoffs and paydowns of collateralized loan obligations 282,900        
Deferred fees expensed as interest expense $ 1,500        
v3.20.1
Variable Interest Entities (Tables)
3 Months Ended
Mar. 31, 2020
Variable Interest Entities  
Schedule of the assets and liabilities related to the consolidated CLOs and Debt Fund

The assets and liabilities related to these consolidated CLOs and Debt Fund are as follows (in thousands):

    

March 31, 2020

    

December 31, 2019

Assets:

Restricted cash

$

301,045

$

208,467

Loans and investments, net

2,911,257

2,557,909

Other assets

20,711

18,380

Total assets

$

3,233,013

$

2,784,756

 

 

Liabilities:

Collateralized loan obligations

$

2,513,096

$

2,130,121

Debt fund

68,717

68,629

Due to related party

231

6,734

Other liabilities

 

3,544

 

4,115

Total liabilities

$

2,585,588

$

2,209,599

Summary of the Company's variable interests in identified VIEs, of which the company is not the primary beneficiary

A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, as of March 31, 2020 is as follows (in thousands):

Type

    

Carrying Amount (1)

Loans

$

341,010

B Piece and SFR bonds

85,398

Equity investments

12,930

Agency interest only strips

2,424

Total

$

441,762

(1)Represents the carrying amount of loans and investments before reserves. At March 31, 2020, $129.0 million of loans to VIEs had corresponding loan loss reserves of $79.4 million. The maximum loss exposure as of March 31, 2020 would not exceed the carrying amount of our investment.

v3.20.1
Basis of Presentation and Significant Accounting Policies, Credit Losses (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Jan. 01, 2020
Dec. 31, 2019
Schedule of impact of adopting ASU 2016-13      
Accumulated deficit $ 177,589   $ 60,920
Allowance for credit losses:      
Held-to-maturity debt securities 84,406   88,699
Liabilities:      
Allowance for loss-sharing obligations $ 70,752   $ 34,648
ASU 2016-13      
Schedule of impact of adopting ASU 2016-13      
Accumulated deficit   $ 28,600  
Allowance for credit losses:      
Structured loans and investments (1) [1]   88,363  
Held-to-maturity debt securities   501  
Deferred tax asset   27,307  
Liabilities:      
Allowance for loss-sharing obligations   16,847  
As Reported Pre-Adoption      
Allowance for credit losses:      
Structured loans and investments (1) [1]   71,069  
Deferred tax asset   23,713  
Liabilities:      
Allowance for loss-sharing obligations   2,441  
Impact of Adoption      
Allowance for credit losses:      
Structured loans and investments (1) [1]   17,294  
Held-to-maturity debt securities   501  
Deferred tax asset   3,594  
Liabilities:      
Allowance for loss-sharing obligations   $ 14,406  
Transition method   Modified Retrospective  
Impact of Adoption | ASU 2016-13      
Allowance for credit losses:      
Deferred tax asset   $ 3,600  
[1] See Note 3 for details by asset class.
v3.20.1
Loans and Investments - Charge-offs and Recoveries Narratives (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
loan
Dec. 31, 2019
USD ($)
Mar. 31, 2019
USD ($)
loan
Loans and Investments      
Provision for credit loss expense $ 53,889    
Number of loans for which no provision for loan loss made | loan 0   0
Allowance for credit losses $ 142,252 $ 71,069 $ 71,069
Six loans collateralized by a land development project | Maturity date of March 2020      
Loans and Investments      
Number of loans with unpaid principal balance | loan 6    
Unpaid principal balance on loans $ 120,300    
Five loans collateralized by a land development project | Maturity date of March 2020      
Loans and Investments      
Number of loans with unpaid principal balance | loan 5    
Unpaid principal balance on loans $ 111,000    
Weighted average accrual rate of interest (as a percent) 8.38%    
Allowance for credit losses $ 71,400 $ 61,400  
Office      
Loans and Investments      
Provision for credit loss expense 4,310    
Allowance for credit losses 6,097   $ 1,500
Hotel      
Loans and Investments      
Provision for credit loss expense 7,500    
Allowance for credit losses $ 7,529