NEW YORK--(BUSINESS WIRE)--MFA Financial, Inc. (NYSE: MFA) announced today that its Board of Directors has declared a regular quarterly cash dividend of $0.36 per share of common stock. The dividend will be paid on October 31, 2025, to common stockholders of record on September 30, 2025. MFA Financial, Inc. is a leading specialty finance company that invests in residential mortgage loans, residential mortgage-backed securities and other real estate assets. Through its wholly owned subsidiary Li. ...

Core Viewpoint - Small-cap companies are rapidly adopting AI technologies, leading to increased efficiency and potential profit growth, while currently being the cheapest sector in the market [2] Group 1: Small-Cap Dividend Stocks - BlackRock TCP Capital (TCPC) has a yield of 15.7% and invests in over 150 companies across 20 industries, but is currently facing restructuring due to credit issues [3] - TCPC is trading at an 18% discount to its net asset value (NAV), with a regular yield of 14% and an additional 1.7% from special dividends [4] - New Mountain Finance (NMFC) offers a 12.1% yield and is also trading at a 14% discount to NAV, focusing on U.S. upper-middle-market businesses [5][6] - NMFC's NAV has declined nearly 2% quarter-over-quarter, with markdowns in healthcare and consumer products, but its credit quality remains stable [8][9] - Kayne Anderson BDC (KBDC) has a yield of 12.6% and targets companies with $10 million to $75 million in EBITDA, with a focus on defensive industries [10] - KBDC has initiated a $100 million buyback program and has seen investments increase in Q3, despite a slight decline in NAV [12] Group 2: Income-Generating Investments - Mach Natural Resources LP (MNR) offers a 16.0% distribution and operates primarily in the Anadarko Basin, with a focus on natural gas [13] - MNR trades at approximately 3.5 times this year's EBITDAX estimates, which is below the average for comparable MLPs [14] - MFA Financial (MFA) has a yield of 14.4% and invests in residential mortgage loans and securities, with a recent 13% QoQ increase in origination fees [15][17] - MFA's distributable earnings are expected to drop significantly this year, but the market does not seem to be pricing in a dividend cut [18] - Armour Residential REIT (ARR) offers a high yield of 19.0% but has a history of dividend cuts, trading at about 90% of book value [19][21]

Company Overview - MFA Financial is a mortgage real estate investment trust (mREIT) that focuses on mortgage investments [1] - The company currently offers a high dividend yield of over 14%, attracting income investors [1] Investment Focus - The emphasis is on income investing through various financial instruments such as common shares, preferred shares, or bonds [1] - The company is positioned to appeal to investors looking for substantial income returns [1]

Group 1: Annaly Capital Management (NLY) - NLY has four preferred shares, with NLY-F and NLY-I showing materially negative yield to call, while NLY-G has a positive yield to call of 8.73%, which is lower than most baby bonds in the sector [2] - A new preferred share, NLY-J, has been issued with a fixed-rate coupon of 8.875%. The share is callable after five years, limiting upside if rates fall, while increasing interest rate risk if rates rise [3] - NLY-J's trading price has increased from $24.80 to $25.10, indicating a common trend for preferred shares to rise in the initial weeks after issuance [4] Group 2: MFA Financial (MFA) - MFA has two preferred shares and two baby bonds, with MFA-C showing a reasonable floating spread of 5.79% over 3-month LIBOR, resulting in a stripped yield of approximately 10.3% to 10.4% at a price of $24.23 [5][6] - MFA-B is a fixed-rate share with an 8.84% stripped yield at $21.58, but the potential upside is limited, making it less attractive compared to baby bonds [8] - Overall, MFA-C is slightly favored over MFA-B, but baby bonds are preferred if their prices dip modestly, as this can significantly impact yield to call and yield to maturity [9] Group 3: ARMOUR Residential REIT (ARR) - ARR was the worst-performing mortgage REIT last week, with shares dropping 4.6%, significantly worse than peers [13][14] - The price-to-NAV for ARR has decreased to a projected 0.92x, indicating a decline in market sentiment following a public offering announcement [14][16] - The public offering was made at about 98% of book value, which did not excite shareholders, contributing to the decline in share price [16]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) MFA Financial, Inc.'s unaudited consolidated financial statements for Q2 2025 include balance sheets, income statements, and cash flows, with notes on accounting policies and asset specifics | Financial Highlight (In Thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $11,674,687 | $11,409,604 | | Residential whole loans, net | $8,819,525 | $8,811,224 | | Securities, at fair value | $1,829,809 | $1,537,513 | | **Total Liabilities** | $9,852,560 | $9,567,812 | | Financing agreements | $9,505,802 | $9,155,461 | | **Total Stockholders' Equity** | $1,822,127 | $1,841,792 | | Statement of Operations (In Thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net Interest Income | $61,276 | $118,813 | | Other Income/(Loss), net | $12,250 | $36,762 | | Net Income/(Loss) | $33,184 | $74,360 | | Net Income Available to Common Stock | $22,624 | $55,581 | | **Diluted EPS** | **$0.21** | **$0.52** | [Note 1. Organization](index=10&type=section&id=Note%201.%20Organization) MFA Financial, Inc. operates as a Maryland REIT, distributing 90% of taxable income, and uses TRS for non-REIT activities - The Company operates as a **Real Estate Investment Trust (REIT)** and must distribute at least **90%** of its taxable income to shareholders[22](index=22&type=chunk) - The Company utilizes **Taxable REIT Subsidiaries (TRS)** to hold certain assets and conduct activities that a **REIT** cannot directly[22](index=22&type=chunk) [Note 3. Residential Whole Loans](index=21&type=section&id=Note%203.%20Residential%20Whole%20Loans) The residential whole loan portfolio totaled $8.8 billion, mainly Non-QM and Business Purpose loans, with credit loss allowance at $9.9 million | Loan Type | Held at Carrying Value (in thousands) | Held at Fair Value (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | Non-QM loans | $657,760 | $4,187,992 | $4,845,752 | | Business purpose loans | $106,809 | $2,791,750 | $2,898,559 | | Legacy RPL/NPL loans | $436,270 | $597,435 | $1,033,705 | | **Total (Net of Allowance)** | **$1,190,890** | **$7,628,635** | **$8,819,525** | - The total allowance for **credit losses** on **residential whole loans** held at carrying value was **$9.9 million** as of June 30, 2025, a decrease from **$10.7 million** at December 31, 2024[89](index=89&type=chunk) - The delinquency rate (**60+ days past due**) for the total **residential whole loan** portfolio was **7.3%** of UPB as of June 30, 2025, a slight decrease from **7.5%** at year-end 2024[81](index=81&type=chunk)[83](index=83&type=chunk) [Note 4. Securities, at Fair Value](index=28&type=section&id=Note%204.%20Securities%2C%20at%20Fair%20Value) The securities portfolio grew to $1.83 billion, primarily Agency MBS, with Term Notes repaid and holdings in CRT and Non-Agency MBS | Security Type | Fair Value (June 30, 2025) | Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | | Agency MBS | $1,746,072 | $1,392,635 | | Term Notes Backed by MSR Collateral | $0 | $54,588 | | CRT Securities | $61,246 | $67,642 | | Non-Agency MBS | $22,491 | $22,648 | | **Total Securities** | **$1,829,809** | **$1,537,513** | - During Q2 2025, the **Term Notes Backed by MSR Collateral** were repaid in full[101](index=101&type=chunk) - For the six months ended June 30, 2025, the company recognized a net gain of **$27.8 million** on securities and other portfolio investments, a significant reversal from the **$7.6 million** net loss in the same period of 2024[112](index=112&type=chunk) [Note 6. Financing Agreements](index=36&type=section&id=Note%206.%20Financing%20Agreements) Total financing agreements increased to $9.51 billion, primarily securitized debt and mark-to-market provisions, with a 4.68% weighted average funding cost | Financing Type | Balance (June 30, 2025) | Balance (Dec 31, 2024) | | :--- | :--- | :--- | | Agreements with mark-to-market collateral provisions | $3,160,692 | $2,600,050 | | Agreements with non-mark-to-market collateral provisions | $256,813 | $576,774 | | Securitized debt | $5,904,033 | $5,794,977 | | 8.875% Senior Notes due 2029 | $111,646 | $111,270 | | 9.00% Senior Notes due 2029 | $72,618 | $72,390 | | **Total Financing Agreements** | **$9,505,802** | **$9,155,461** | - The company's **weighted average cost of funding** for Q2 2025 was **4.68%**, including a **64 basis point** reduction from the net carry of **interest rate swaps**[138](index=138&type=chunk) - As of June 30, 2025, the company had financing agreements with **16 counterparties**, with the largest exposures to **Wells Fargo (8.69% of stockholders' equity)** and **Barclays (5.12% of stockholders' equity)**[150](index=150&type=chunk) [Note 10. Stockholders' Equity](index=44&type=section&id=Note%2010.%20Stockholders%27%20Equity) Stockholders' equity details preferred and common stock, with Series C preferred dividend now floating and common stock dividends at $0.36 per share - The dividend rate on the **Series C Preferred Stock** transitioned from a fixed **6.50%** to a floating rate after March 31, 2025, resulting in a higher dividend of **$0.61911 per share** for the second quarter[173](index=173&type=chunk)[174](index=174&type=chunk)[176](index=176&type=chunk) | Declaration Date | Record Date | Payment Date | Dividend Per Share | | :--- | :--- | :--- | :--- | | June 12, 2025 | June 30, 2025 | July 31, 2025 | $0.36 | | March 6, 2025 | March 31, 2025 | April 30, 2025 | $0.36 | - The company did not repurchase any shares of its **common stock** during the six months ended June 30, 2025. As of June 30, 2025, **$200 million** remained available under the **stock repurchase program**[184](index=184&type=chunk) [Note 15. Segment Reporting](index=58&type=section&id=Note%2015.%20Segment%20Reporting) The company operates two segments: Mortgage-Related Assets ($96.6M net income) and Lima One ($14.1M net income), with Corporate reporting a $36.4M net loss | Segment (Six Months Ended June 30, 2025) | Total Assets (in thousands) | Net Income/(Loss) (in thousands) | | :--- | :--- | :--- | | Mortgage-Related Assets | $8,176,258 | $96,583 | | Lima One | $3,153,196 | $14,137 | | Corporate | $345,233 | $(36,360) | | **Total** | **$11,674,687** | **$74,360** | - The **Lima One** segment includes the mortgage origination and servicing business, related assets, and associated economics[248](index=248&type=chunk) - The **Mortgage-Related Assets** segment comprises the remainder of the company's investments and their associated financing and hedging economics[250](index=250&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, Q2 2025 GAAP EPS of $0.22, Distributable Earnings of $0.24, and reconciles non-GAAP measures - In Q2 2025, the company generated **GAAP EPS** of **$0.22** and non-GAAP **Distributable Earnings** of **$0.24 per basic common share**[267](index=267&type=chunk) - The company added **$876 million** of **target assets** in Q2 2025, including **$503 million** of **Non-QM loans** and **$242 million** of **Business purpose loans**[266](index=266&type=chunk) - **GAAP book value per common share** was **$13.12** and **Economic book value per common share** (a **non-GAAP measure**) was **$13.69** as of June 30, 2025[267](index=267&type=chunk)[278](index=278&type=chunk) [Results of Operations](index=73&type=section&id=Results%20of%20Operations) Financial results show Q2 2025 net income decreased QoQ to $22.6 million, while 6M 2025 net income increased YoY to $55.6 million - **QoQ Analysis (Q2'25 vs Q1'25):** **Net income** decreased by **$10.3 million**, mainly due to a **$12.3 million** decrease in **Other Income/(Loss), net**, partially offset by a **$3.7 million** increase in **Net Interest Income**[308](index=308&type=chunk)[309](index=309&type=chunk) - **YoY Analysis (6M'25 vs 6M'24):** **Net income** increased by **$6.9 million**, driven by a **$17.5 million** increase in **Net Interest Income** and a **$6.5 million** decrease in **Operating and Other Expense**, which was partially offset by a **$15.5 million** decrease in **Other Income/(Loss), net**[337](index=337&type=chunk)[338](index=338&type=chunk) [Reconciliation of GAAP and Non-GAAP Financial Measures](index=89&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Financial%20Measures) GAAP metrics are reconciled to non-GAAP measures, with Q2 2025 Distributable Earnings at $24.7 million and Economic Book Value at $13.69 per share | Metric (Q2 2025) | Per Share | Total (in millions) | | :--- | :--- | :--- | | GAAP Net Income (basic) | $0.22 | $22.4 | | Distributable Earnings (non-GAAP) | $0.24 | $24.7 | | Metric (as of June 30, 2025) | Per Share | | :--- | :--- | | GAAP Book Value | $13.12 | | Economic Book Value (non-GAAP) | $13.69 | [Liquidity and Capital Resources](index=91&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity includes $275.7 million in cash, with debt-to-equity at 5.2x and recourse leverage at 1.8x, maintaining compliance with all financial covenants - As of June 30, 2025, the company had **$275.7 million** of **cash and cash equivalents** and unused **financing capacity** of approximately **$4.0 billion**[381](index=381&type=chunk)[417](index=417&type=chunk) - The **debt-to-equity ratio** increased to **5.2x** at June 30, 2025, from **5.0x** at December 31, 2024. The **recourse leverage multiple** increased to **1.8x** from **1.7x**[387](index=387&type=chunk) - The company was in compliance with all **financial covenants** as of June 30, 2025[391](index=391&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=94&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company details exposure to interest rate, credit, liquidity, and prepayment risks, using interest rate swaps, with a 100 bps rate increase impacting net portfolio value by 1.32% | Change in Interest Rates | Change in Estimated Net Portfolio Value (in thousands) | Percentage Change in Total Stockholders' Equity | | :--- | :--- | :--- | | +100 Basis Point Increase | $(156,402) | (8.58)% | | +50 Basis Point Increase | $(68,607) | (3.77)% | | -50 Basis Point Decrease | $49,418 | 2.71% | | -100 Basis Point Decrease | $79,648 | 4.37% | - The company is exposed to **credit risk** primarily through its **residential whole loans**. This risk is managed via **underwriting**, low LTV ratios, and acquiring **non-performing loans** at a discount[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk) - **Liquidity risk** stems from financing long-maturity assets with shorter-term borrowings and the potential for **margin calls** if collateral values decline[416](index=416&type=chunk) [Item 4. Controls and Procedures](index=99&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's **disclosure controls and procedures** were effective as of June 30, 2025[421](index=421&type=chunk) - No material changes were made to the company's **internal control over financial reporting** during the quarter ended June 30, 2025[422](index=422&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=99&type=section&id=Item%201.%20Legal%20Proceedings) There are no material pending legal proceedings involving the company or its assets - There are no **material pending legal proceedings** involving the company[424](index=424&type=chunk) [Item 1A. Risk Factors](index=99&type=page&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the 2024 Annual Report on Form 10-K - No **material changes** to **risk factors** were reported since the **2024 Form 10-K**[425](index=425&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=99&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The $200 million stock repurchase program, authorized in February 2024, had no activity in Q2 2025, leaving the full amount available - A **$200 million stock repurchase program** is in effect through the end of 2025[426](index=426&type=chunk) - No shares were repurchased during Q2 2025, leaving the full **$200 million** authorization available as of June 30, 2025[428](index=428&type=chunk)[429](index=429&type=chunk)

Financial Data and Key Metrics Changes - The economic book value decreased by 1% to $13.69 per share, while GAAP book value also fell by 1% to $13.12 per share [14] - Distributable earnings (DE) for the quarter were $0.24 per share, down from $0.29 per share in the previous quarter, primarily due to credit losses [17] - GAAP earnings were $33.2 million or $0.22 per basic common share, driven by an increase in net interest income to $61.3 million [14][15] Business Line Data and Key Metrics Changes - The company sourced $876 million in loans and securities, including $500 million in non-QM loans and $217 million in business purpose loans [12][20] - The delinquency rate for loans over 60 days decreased from 7.5% to 7.3% [15][24] - Lima One originated $217 million in business purpose loans, with an increase in mortgage banking income from $5.4 million to $6.1 million [23] Market Data and Key Metrics Changes - The market for securitized mortgage credit assets continues to deepen, with increased liquidity and strong investor appetite [6][9] - Mortgage credit spreads widened in April but retraced to levels seen at the end of Q1 by the end of the second quarter [6][22] - The company completed its eighteenth non-QM securitization in May, selling $291 million of bonds at an average coupon of 5.76% [21] Company Strategy and Development Direction - The company aims to continue focusing on non-QM loans, business purpose loans, and agency securities, with plans to grow the business purpose loan originations [20][23] - The management is optimistic about the economic return potential of the portfolio, indicating that the economic earnings power is closer to a 10% dividend yield [29] - The company is actively resolving non-performing loans and expects to utilize additional loan sales to accelerate the resolution of underperforming assets [16] Management's Comments on Operating Environment and Future Outlook - The management noted that the economic and macro environments appear clearer as the year progresses, with resilient growth despite slower than expected rates [8][9] - There is a consensus for two rate cuts later this year, which is favorable for mortgage REITs [9] - The management expressed confidence in the current earnings power of the portfolio and the sustainability of the common dividend [18] Other Important Information - The company expects to lower its G&A expenses by 7% to 10% per year from 2024 levels due to ongoing expense reduction initiatives [18] - Subsequent to the quarter end, the economic book value is estimated to have increased by approximately 1% to 2% [19] Q&A Session Summary Question: Economic return for the portfolio - Management discussed the economic return of the portfolio and indicated that the economic earnings power is much closer to a 10% dividend yield, with potential upside as capital is redeployed from troubled loans [28][29] Question: New loan officers at Lima One - The new hires are focused on the West and Midwest, with expectations for aggressive growth in the latter half of the year as they ramp up [40][41] Question: Capital allocation trends - Management indicated that they would continue to deploy capital across non-QM, HC, and business purpose loans, with a preference for increasing business purpose loan originations [33][49] Question: Distribution potential for new transitional loans - Management noted that they have been selling rental loans and expect to grow originations, with a balance between securitization financing and loan sales [56] Question: Execution risk for developers - Management stated that they are not seeing material pressure on rental income and exit prices, tracking these metrics month to month [65][66] Question: Relative risk of loan vintages - Management indicated that the 2023 vintage for multifamily loans was tougher, but overall LTVs are low, minimizing concerns about losses [67] Question: Callability of non-QM portfolio - Management explained that lower interest rates could lead to more callable deals, but the impact would be marginal due to offsetting swaps [70][72]

Financial Performance - GAAP Book Value was $1312 per common share and Economic Book Value was $1369 per common share[4] - GAAP Net Income was $022 per common share and Distributable Earnings was $024 per common share[4] - Quarterly Dividend was $036 per common share, resulting in a Dividend Yield of 158%[4] Portfolio Activity - Acquired $876 million of residential mortgage loans and securities, growing the investment portfolio to $108 billion[7] - Purchased $503 million of Non-QM loans[4, 8] - Lima One originated $217 million of new business purpose loans (BPLs)[4, 8] - Added $131 million of Agency MBS[4, 8] Liability Management - Overall leverage rose to 52x, while recourse leverage remained 18x[9] - Issued the 18th Non-QM securitization in May, collateralized by $318 million UPB of loans[11, 23] - Effective cost of funds remained stable at 468%[11] Lima One Highlights - Lima One originated $217 million in total origination volume, with an average coupon of 102% for Q2 originations[4, 12] - New Construction Loans were $72 million, New Rehab Loans were $63 million, and New Bridge Loans were $32 million[12] - Rental Loans Originated were $50 million, and Rental Loans Sold were $38 million, generating $11 million in Gain-on-sale Income with an average coupon of 75%[12] Loan Portfolio Credit Metrics - Non-QM Loans UPB is $488 billion, with an average loan balance of $514K and an LTV of 59%[6, 21] - Single-family Rental Loans UPB is $132 billion, with an average loan balance of $226K and an LTV of 60%[6, 21] - Single-family Transitional Loans UPB is $886 million, with an average loan balance of $540K and an LTV of 68%[6, 21]

Group 1 - MFA Financial reported quarterly earnings of $0.24 per share, missing the Zacks Consensus Estimate of $0.28 per share, and down from $0.44 per share a year ago, representing an earnings surprise of -14.29% [1] - The company posted revenues of $61.28 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.41%, compared to year-ago revenues of $53.49 million [2] - MFA Financial shares have lost about 10% since the beginning of the year, while the S&P 500 has gained 7.1% [3] Group 2 - The current consensus EPS estimate for the coming quarter is $0.30 on revenues of $57.44 million, and for the current fiscal year, it is $1.18 on revenues of $234.18 million [7] - The Zacks Industry Rank indicates that the REIT and Equity Trust sector is currently in the bottom 37% of over 250 Zacks industries, suggesting potential underperformance compared to the top 50% of ranked industries [8] Group 3 - The estimate revisions trend for MFA Financial was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] - Another stock in the same industry, Ready Capital, is expected to report a quarterly loss of $0.01 per share, reflecting a year-over-year change of -114.3% [9]

Core Insights - David A. Johnson is the founder and principal of Endurance Capital Management, specializing in various investment vehicles including stocks, bonds, options, ETFs, REITs, real estate, closed-end funds, hedge funds, and private credit [1] Group 1 - David A. Johnson has over 30 years of experience in investing and holds a Master of Science (MS) Degree in Finance with a concentration in Investment Analysis from Boston University [1] - He also possesses a Certificate in Financial Planning and an MBA from Fordham University [1]

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Total assets reached $11.52 billion by March 31, 2025, with Q1 2025 net income increasing to $41.2 million and basic EPS to $0.32 Consolidated Balance Sheet Highlights (Unaudited) | (in billions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$11.52** | **$11.41** | | Residential whole loans, net | $8.78 | $8.81 | | Securities, at fair value | $1.79 | $1.54 | | **Total Liabilities** | **$9.68** | **$9.57** | | Financing agreements | $9.37 | $9.16 | | **Total Stockholders' Equity** | **$1.84** | **$1.84** | Consolidated Statements of Operations Highlights (Unaudited) | (in millions, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Interest Income | $57.54 | $47.81 | | Other Income/(Loss), net | $24.51 | $22.40 | | **Net Income** | **$41.18** | **$23.21** | | Net Income Available to Common Stock | $32.96 | $15.00 | | **Basic Earnings per Common Share** | **$0.32** | **$0.14** | | **Diluted Earnings per Common Share** | **$0.31** | **$0.14** | Consolidated Statements of Cash Flows Highlights (Unaudited) | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $(14.56) | $53.47 | | Net cash provided by/(used in) investing activities | $(251.55) | $(91.40) | | Net cash provided by/(used in) financing activities | $138.09 | $78.90 | | **Net increase/(decrease) in cash, cash equivalents and restricted cash** | **$(128.02)** | **$40.96** | [Notes to the Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail accounting policies, fair value elections, and VIE consolidation, highlighting the $8.8 billion residential loan portfolio and $5.9 billion securitized debt - The company has elected to be treated as a REIT and must distribute at least **90%** of its annual REIT taxable income to stockholders. Certain subsidiaries are treated as taxable REIT subsidiaries (TRS)[22](index=22&type=chunk) - Since the second quarter of 2021, the company has elected the fair value option for all originated or acquired residential whole loans. Loans acquired before this period and not elected for fair value are held at carrying value[26](index=26&type=chunk) Residential Whole Loan Portfolio by Type (March 31, 2025) | Loan Type | Carrying/Fair Value (in billions) | | :--- | :--- | | Non-QM loans | $4.54 | | Single-family rental loans | $1.31 | | Legacy RPL/NPL loans | $1.06 | | Single-family transitional loans | $0.99 | | Multifamily transitional loans | $0.84 | | **Total** | **$8.78** | Financing Agreements Breakdown (March 31, 2025) | Financing Type | Carrying/Fair Value (in billions) | | :--- | :--- | | Securitized debt | $5.87 | | Agreements with mark-to-market collateral provisions | $2.89 | | Agreements with non-mark-to-market collateral provisions | $0.42 | | Senior Notes | $0.18 | | **Total** | **$9.37** | Segment Net Income (Three Months Ended March 31, 2025) | Segment | Net Income/(Loss) (in millions) | | :--- | :--- | | Mortgage-Related Assets | $56.18 | | Lima One | $5.38 | | Corporate | $(20.39) | | **Total Net Income** | **$41.18** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2025 performance includes GAAP EPS of $0.32, Distributable Earnings of $0.29, $875 million in new assets, and a dividend increase to $0.36 - The company's principal business objective is to deliver shareholder value through distributable income and asset performance linked to residential mortgage credit fundamentals[251](index=251&type=chunk) - In Q1 2025, the company added approximately **$875 million** of target assets, including **$383 million** of Non-QM loans, **$223 million** of Business purpose loans, and **$268 million** of Agency MBS[262](index=262&type=chunk) - The dividend on common stock was increased from **$0.35** to **$0.36** per share during the quarter, reflecting the Board's confidence in the portfolio's earnings power[263](index=263&type=chunk) Q1 2025 Performance Summary | Metric | Value | | :--- | :--- | | GAAP EPS (basic) | $0.32 | | Distributable Earnings per share (non-GAAP) | $0.29 | | GAAP Book Value per share | $13.28 | | Economic Book Value per share (non-GAAP) | $13.84 | Net Interest Spread and Margin (Including Swaps) | Quarter Ended | Net Interest Spread | Net Interest Margin | | :--- | :--- | :--- | | March 31, 2025 | 1.84% | 2.63% | | December 31, 2024 | 1.99% | 2.76% | | March 31, 2024 | 2.06% | 2.88% | [Reconciliation of GAAP and Non-GAAP Financial Measures](index=86&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Financial%20Measures) Reconciliation details non-GAAP Distributable Earnings ($0.29 per share) and Economic Book Value ($13.84 per share), offering supplemental financial insights - Distributable earnings is a non-GAAP measure that adjusts GAAP net income by removing unrealized gains/losses on investments, debt, and hedges, as well as certain non-cash expenses and one-time securitization costs[351](index=351&type=chunk) - Economic book value is a non-GAAP measure that adjusts GAAP book value by marking the portfolios of residential whole loans and securitized debt held at carrying value to their respective fair values[356](index=356&type=chunk) Reconciliation to Distributable Earnings (Q1 2025) | (in millions, except per share) | Amount | | :--- | :--- | | GAAP Net income used in basic EPS | $32.75 | | Total adjustments | $(2.18) | | **Distributable earnings** | **$30.58** | | GAAP earnings per basic common share | $0.32 | | **Distributable earnings per basic common share** | **$0.29** | Reconciliation to Economic Book Value (March 31, 2025) | (in millions, except per share) | Amount | | :--- | :--- | | GAAP Stockholders' Equity for book value per common share | $1,363.4 | | Fair value adjustments (Loans & Debt) | $56.8 | | **Economic book value** | **$1,420.2** | | GAAP book value per common share | $13.28 | | **Economic book value per common share** | **$13.84** | [Quantitative and Qualitative Disclosures about Market Risk](index=92&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to interest rate, credit, liquidity, and prepayment risks, managed through derivatives and underwriting, with interest rate sensitivity detailed - The company is exposed to interest rate risk as borrowing costs on financing agreements typically change more quickly than yields on its assets. Swaps are used to mitigate this risk[381](index=381&type=chunk) Interest Rate Sensitivity Analysis (Shock Table) as of March 31, 2025 | Change in Interest Rates | Change in Estimated Net Portfolio Value ($ in millions) | Percentage Change in Total Stockholders' Equity | | :--- | :--- | :--- | | +100 Basis Point Increase | $(147.49) | (8.02)% | | +50 Basis Point Increase | $(64.93) | (3.53)% | | -50 Basis Point Decrease | $47.29 | 2.57% | | -100 Basis Point Decrease | $76.94 | 4.19% | - Credit risk is present in the residential whole loan portfolio. It is managed through underwriting, low LTV ratios, and acquiring distressed loans at significant discounts[394](index=394&type=chunk)[395](index=395&type=chunk) - Liquidity risk stems from financing long-maturity assets with shorter-term borrowings and potential margin calls. As of March 31, 2025, the company had **$253.7 million** in cash and cash equivalents, plus **$156.0 million** in unencumbered residential whole loans and Agency MBS[405](index=405&type=chunk)[406](index=406&type=chunk) [Controls and Procedures](index=97&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[410](index=410&type=chunk) - No material changes in the company's internal control over financial reporting occurred during the quarter ended March 31, 2025[411](index=411&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=97&type=section&id=Item%201.%20Legal%20Proceedings) There are no material pending legal proceedings involving the company or its assets - There are no material pending legal proceedings[413](index=413&type=chunk) [Risk Factors](index=97&type=section&id=Item%201A.%20Risk%20Factors) No material changes from the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - There are no material changes from the risk factors set forth in the 2024 Form 10-K[414](index=414&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=97&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A $200 million stock repurchase program was authorized, with no shares repurchased in Q1 2025, but shares were withheld for employee equity tax obligations - A **$200 million** stock repurchase program was authorized on February 29, 2024, and remains fully available as of March 31, 2025[415](index=415&type=chunk)[417](index=417&type=chunk) - No shares were repurchased under the publicly announced program in Q1 2025. However, **482,079 shares** were withheld to satisfy tax obligations from employee equity plan settlements[418](index=418&type=chunk)[419](index=419&type=chunk) [Defaults Upon Senior Securities](index=98&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities - None[421](index=421&type=chunk) [Mine Safety Disclosures](index=98&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None[422](index=422&type=chunk) [Other Information](index=98&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[423](index=423&type=chunk) [Exhibits](index=98&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including CEO/CFO certifications and Interactive Data Files (iXBRL) - The exhibits filed include CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act and iXBRL data files[428](index=428&type=chunk)