MFA Financial, Inc. 8.875% Senior Notes Q1 FY2025 earnings call

• Craig Knutson started by discussing the first quarter market environment, MFA's portfolio return of 1.9%, dividend increase to $0.36, and activities like sourcing $875 million of loans and securities. • Mike Roper discussed GAAP and economic book values, GAAP earnings, net interest income growth, and distributable earnings. • Bryan Wulfsohn talked about investment portfolio growth in non-QM, Agency MBS, and Lima One, credit performance, and progress in resolving multi-family loans.

At March 31, GAAP book value was $13.28 per share and economic book value was $13.84 per share, each down less than 1% since the end of December. For the first quarter, MFA generated GAAP earnings of $41.2 million or $0.32 per basic common share. Net interest income was $57.5 million. Lima One contributed $5.4 million of mortgage banking income for the quarter, a decline from $8.5 million in the fourth quarter.

• Distributable earnings are expected to be increasingly volatile in the next several quarters but will converge with the dividend over the back half of the next 12 months. • Subsequent to quarter-end, economic book value is estimated to be down approximately 2% to 4% primarily due to wider spreads.

• Market volatility and uncertainty due to trade policy impacts. • Credit spread widening and higher rates. • Uncertain timing of loan resolutions, particularly with multi-family loans where borrower tactics could delay foreclosure. • Potential impact of tariffs on project costs and delinquencies in the BPL portfolio.

Q: In terms of the impact from the swap runoff, can you talk about the second quarter versus the first quarter?

A: The impact for the second quarter is in line with previous expectations, with another $100 million expiring and expected to have about a $0.02 impact.

Q: On the loan resolutions, when are you seeing resolutions relative to where you had the loans marked?

A: Generally, resolutions have been near the mark, with most fair value write-downs on these assets taking place last year, and the majority of the credit discount expected to flush out over the next year or so.

Q: On the new BPL originations, what sector are you focused on?

A: Focus is on ground up, bridge, and fixed flip, with the bulk of new origination over the past quarter being ground up.

Q: On the agency book, how does that determine ultimate sizing as portfolio allocation?

A: We hedge with SOFR swaps, and the portfolio could get to $2 billion, with reassessment of market conditions over a few quarters.

Q: On interest rate sensitivity and convexity risk, how is it driven?

A: It's model-driven, not just from the Agency MBS portfolio, with a more conservative approach to calculating convexity.