MFA Financial, Inc.

Greetings and welcome to the MFA Financial Inc. Third Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Hal Schwartz. MFA Financial. Please go ahead.

Thank you, Rochelle, and good morning, everyone. The information discussed on this conference call today may contain or refer to forward-looking statements regarding MFA Financial, Inc., which reflect management's beliefs, expectations, and assumptions as to MFA's future performance and operations. When used, statements that are not historical in nature, including those containing words such as will, believe, expect, anticipate, estimate, should, could, would, or similar expressions, are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they are made. These types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors, including those described in MFA's annual report on Form 10-K for the year ended December 31, 2024, and other reports that it may file from time to time with the Securities and Exchange Commission. These risks, uncertainties, and other factors could cause MFA's actual results to differ materially from those projected, expressed, or implied in any forward-looking statements it makes. For additional information regarding MFA's use of forward-looking statements, please see the relevant disclosure in the press release announcing MFA's third quarter 2025 financial results. Thank you for your time. I would now like to turn this call over to MFA's CEO, Craig Knudson.

Thank you, Hal. Good morning, everyone, and thank you for joining us for MFA Financial's third quarter 2025 earnings call. With me today are Brian Wolfson, our president and chief investment officer, Mike Roper, our chief financial officer, and other members of our senior management team. MFA continued to execute on our business objectives during the third quarter and delivered a total economic return of 2.6% to shareholders. After my remarks this morning, Mike will provide details on our financial results, and then Brian will discuss our portfolio activity, financing, and Lima One before we open up the call to questions. For today's call, I will focus on a new slide that we've added to our earnings deck. This is page four, which lays out various actions we have taken to increase earnings and grow ROEs over the next year. Although we have previously mentioned some of these plans, we think it is important to highlight these initiatives in the aggregate, as we believe that together these programs will have a meaningful impact on MFA's earnings, returns on equity, and dividend generation. The first initiative is higher capital deployment. Over the last several years, we have consistently operated with high levels of liquidity, often with over $300 million of unrestricted cash. This strategy was prudent, particularly during 2022 and 2023, when the bond market experienced extreme volatility against the backdrop of an unprecedented tightening cycle by the Fed and allowed us to capitalize on temporary market dislocations to add assets at attractive yields. During these years, we also executed on a liability strategy to create durable and non-mark-to-market financing for the vast majority of our assets, much of which was through securizations. Also over this time, we began adding agency MBS beginning in December of 2022. As we discussed at the time, we saw agencies as an attractive complement to our mortgage credit portfolio. In addition to providing very attractive returns, agencies significantly increased the liquidity of our overall portfolio and helped us manage the cash needs for margin calls on our interest rate swap hedge position. Fast forward to today, with increased clarity on the path of interest rates, lower market volatility, The increased portfolio liquidity provided by our agency portfolio and the predominance of non-mark-to-market financing on our loan portfolios, we have increased confidence to deploy more of our excess liquidity into our target asset classes, including an increased allocation to agency MBS. Holding nearly 20% of our equity in cash has been a significant drag on earnings. While the four-ish percent that we earn on cash is certainly better than the zero we earned in 2021, it's more than 1,000 basis points less than the ROEs we generate in all other asset classes. Investing $100 million of this excess cash will still leave us with substantial liquidity, but the incremental earnings will have a meaningful and immediate impact on earnings and ROE. Finally, our ladder of outstanding securizations is another potential source of additional capital. Because these securitizations de-lever over time, calling them and re-securitizing the underlying loan collateral often frees up tens of millions of dollars of capital to deploy into new assets, significantly boosting portfolio ROEs, even if the new securitization deal comes with a higher cost of funds. We've shared progress over the last several quarters on our efforts to grow origination volumes at Lima One, and we're happy to report that we are starting to see these efforts bear fruit. We announced on our second quarter earnings call back in 2024 that we'd made the decision to pause multifamily transitional lending at Lima One. We used this pause as an opportunity to initiate a comprehensive review of the multifamily underwriting guideline and processes. This review led to some changes, and we have recently hired a new multifamily leadership and underwriting team. In the last year and a half, multifamily seems to have found some footing. With prices above the lows from early 2024, new construction starts down materially about 50% between 2024 and 2025, and supply and demand in more balanced. We are confident that the changes we have made have significantly strengthened our product offering, and we expect to resume multifamily lending in early 2026. During 2025, we have also made significant new hires to Lima's sales team, rolled out technology initiatives that materially improve the borrower experience, and we're planning to launch a wholesale origination channel next year as well. These initiatives take time to produce results, but we are confident that we have the right team, the right mindset, and the right processes to produce quality loan production that we can now begin to scale. Business purpose loans generate some of the highest ROEs of all of MFA's target asset classes. So growth at Lima One into 2026 will contribute materially to MFA's earnings. Another initiative has been expense reductions. Over the last year, we've taken a hard look across all of our operating expenses, both at MFA and Lima One. While most of the significant reductions have been personnel-related, we've also canceled or renegotiated many vendor contracts. As Mike stated on our last earnings call, our goal is to reduce run rate G&A expenses by 7% to 10% versus 2024 levels, which is about $9 million to $13 million a year, or $0.02 to $0.04 per share per quarter. While we have realized the significant amount of savings already, we anticipate that additional savings will be realized throughout 2026, as many of these actions take time to be realized. A further initiative has been accelerating the resolution of non-performing loans. These loans are across MFA's loan portfolio, but many are business purpose loans, including the aforementioned multifamily transitional loans. Our team has over 10 years of on-the-ground experience resolving non-performing loans, dating back to 2014 and 2015 when we were large buyers of RPLs and NPLs from banks and the GSEs. We've been working closely with Lima One servicing professionals to resolve these loans, whether through loan sales, foreclosure and liquidation, or other forms of asset resolution. and we've made significant progress. The multifamily transitional loan portfolio is almost half of what it was a year ago, and delinquent loans are down from $86 million to $47 million so far in 2025. Economically, losses associated with these loans were reflected in fair value marks when they emerged, which in most cases was over a year ago or more, when these fair value marks flowed through GAAP earnings and book value. But these non-performing loans tie up a lot of capital. In some cases, these loans or REO properties may be unlevered, in which case they are funded 100% with equity. In other cases, they may be funded partly with borrowing, but the advance rate on delinquent loans is generally lower than for performing loans. Additionally, we generally do not recognize interest income on delinquent loans due to our non-accrual policy. So the equity that we have tied up in non-performing loans is a significant drag on our earnings and ROE. As we free up capital by resolving these problem assets, we can invest it in our target asset classes that generate mid to high teen ROEs. Finally, during the third quarter, we began a program to modestly modify our capital structure. Under our recently implemented preferred stock ATM program, we have issued additional shares of both our Series B and Series C preferred stock and used the proceeds to repurchase common stock at a significant discount to economic book value. While modest in size thus far, this is very accretive, and importantly, because we are issuing equity in the form of preferred stock, we are not shrinking our equity base despite repurchasing common stock. In the aggregate, we believe we are taking active measures to materially increase earnings and ROEs, and we expect to begin to see these results in 2026. And I'll now turn the call over to Mike to discuss our financial results.