MFA Financial, Inc.

Greetings and welcome to the MFA Financial Fourth 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 during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Hal Schwartz, General Counsel. Thank you. You may begin.

Thank you, Operator, 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 end of 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 fourth quarter and full-year 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 fourth quarter and year-end 2025 earnings call. With me today are Brian Wolfson, our President and Chief Investment Officer, Mike Roper, our CFO, and other members of our senior management team. I'll begin with some general remarks on 2025, touch on the macro and political landscapes, and will then provide an update on MFA's initiatives to foster earnings growth and increase ROEs. I will then turn the call over to Mike, followed by Brian, before we open up for questions. After three very difficult years for fixed income investors, 2025 felt like an exit from a dark tunnel. The Bloomberg U.S. Aggregate Index was up 7.3% in 2025 after being down 7.1% for the prior three years, or just under 2.5% annually. Following a 100 basis point reduction in the Fed funds rate via three rate cuts in the last three months of 2024, we had to wait nine months until September of 2025 for the next rate cut, which was quickly followed by two more in October and December. Treasury rates also declined during the year, with two-year yields dropping 77 basis points and 10-year yields dropping by 39 basis points. More importantly, the 210 spread steepened from 32 basis points at the beginning of the year to 70 basis points at the end of the year. This positively sloped yield curve, while perhaps somewhat modest, is a welcome change from the environment we faced from 2022 to 2024. Additionally, volatility has declined. The move index began 2025 at just under 100, 98.8, before briefly spiking after Liberation Day in early April, to almost 140, and then trended down for the succeeding months, ending the year at just under 64. Now, to put this in context, the move index was above 100 for almost the entirety of 2022, 2023, and 2024. The combination of lower rates, lower volatility, and a positively sloped yield curve are all favorable for the mortgage market and for our business. With recent developments in Washington, D.C., and a strong focus on housing affordability, it seems likely that government policy, while certainly never certain, will continue to be supportive for our markets. The recent initiative for the GSEs to buy $200 billion of agency MBS, the nomination of a new Fed chair with the expectation of further rate cuts later in 2026, and the repeated mantra of do no harm with respect to the mortgage market are all constructive for our market and for our business. We are excited about 2026 as we start the year with these tailwinds at our back. In the fourth quarter of 2025, MFA continued to execute on our strategic initiatives to cap off a solid year of performance. Our total economic return in the fourth quarter was 3.1% and 9% for the full year of 2025. Total shareholder return for the year was 6%. During our last earnings call in November, I provided details on several strategic actions that we were initiating to increase earnings and grow ROEs over the coming year. I'm happy to report material progress on these fronts. While the results will take several quarters to be fully reflected in our financials, the building blocks are in place. As discussed on our last call, we have deployed over $100 million of excess cash into our target assets in order to reduce the cash drag on earnings. We acquired 1.9 billion of loans and securities in the fourth quarter, including 1.2 billion of agencies purchased early in the quarter, 443 million of non-QM loans, and Lima 1 also originated $226 million of new business purpose loans in Q4. We have highlighted the underappreciated optionality in our outstanding securitization ladder for quite some time now. With a constructive rate environment and tight securitization spreads, we believe we will have significant opportunity to call some of these deals and relever the underlying loans. reducing our cost of funds while also generating incremental cash to redeploy. We're also excited about the prospects for 2026 at Lima One. We hired 45 new salespeople in 2025. We are debuting a new wholesale channel, and we are relaunching multifamily lending in the first quarter of 2026. In addition, we have rolled out several best-in-class technology platforms to enhance the borrower experience and drive operational efficiencies at Lima. The results of these initiatives are not immediate, but we again feel that the building blocks are in place. A number of us visited Greenville in late January to attend Lima's annual meeting, and the energy and enthusiasm at Lima One is palpable. Growth at Lima One in 2026 we believe will contribute materially to MFA's earnings. We continue to work diligently to resolve delinquent loans in the portfolio. This can be maddeningly time-consuming, but our team has been working out delinquent loans for over a decade, the majority of which, by the way, were purchased as non-performing loans. And our team is the best in the business at this and uniquely suited to the task. We resolved over $150 million of delinquent loans in the fourth quarter, unlocking substantial capital to be redeployed at mid-teen ROEs. We've made substantial progress in reducing G&A expenses, both at Lima and at MFA. 2025 G&A was $119 million, down from $132 million in 2024. Many of these actions take some time to be realized, depending on when in the year they occur and whether or not there are severance expenses associated with them. We're confident that we will continue to make progress on expense reductions in 2026. Finally, our listeners will recall that we began a program in the third quarter of 2025 to issue additional shares of our two preferred stock issues via an ATM, and use the proceeds to repurchase our common stock at a significant discount to book. The stock buyback authorization expired at the end of last year, but our Board has reauthorized this program, and we expect that we will continue to utilize these two programs when the trading window opens after we file our 10-K. While this program is 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 meaningful active measures to materially increase earnings in ROEs, and we expect to begin to see these results in 2026. And I'll now turn the call over to Mike to discuss the financial results. Thanks, Craig, and good morning, everyone.