Core Viewpoint - MFA Financial, Inc. is recognized as one of the best stocks for passive income, with a recent price target increase from RBC Capital indicating positive expectations for the company's return on equity (ROE) expansion [1][2]. Group 1: Financial Performance and Market Conditions - The CEO highlighted a significant improvement in the fixed income investment environment in 2025, suggesting a transition from a prolonged downturn to a more favorable macro backdrop characterized by a positively sloped yield curve and lower market volatility [3]. - MFA Financial entered 2026 with favorable momentum, which is expected to act as a tailwind for the company's performance [3]. Group 2: Strategic Investments and Asset Management - During the fourth quarter, MFA deployed over $100 million of excess cash into targeted investments and completed $1.9 billion in purchases of loans and securities, including $1.2 billion in agency securities, $443 million in non-QM loans, and $226 million in new business-purpose loans [4]. - The company resolved over $150 million of delinquent loans during the quarter, allowing for the redeployment of capital into investments anticipated to generate mid-teens returns on equity [5]. Group 3: Company Overview - MFA Financial, Inc. is a specialty finance company focused on investing in residential mortgage loans, residential mortgage-backed securities, and other real estate assets, with a primary focus on residential whole loans and mortgage securities [6].

Company Overview - Binary Tree Analytics (BTA) has a background in investment banking cash and derivatives trading, focusing on providing transparency and analytics for capital markets instruments and trades [1] - BTA specializes in Closed-End Funds (CEFs), Exchange-Traded Funds (ETFs), and Special Situations, aiming to deliver high annualized returns with a low volatility profile [1] - The company has over 20 years of investment experience, having obtained a Finance major from a top university [1]

Stock Repurchase Program - The company has authorized a $200 million stock repurchase program effective through the end of 2025, with approximately $190 million remaining available for repurchase upon expiration [210]. - In 2025, the company repurchased 1,026,117 shares at an average cost of $9.76 per share, totaling approximately $10.0 million [212]. - The stock repurchase program does not require a minimum number of shares to be purchased, and repurchases may be suspended at any time without prior notice [211]. - The company has not repurchased any shares through the stock repurchase program during 2024 [212]. Investment Risks - A significant portion of the company's residential whole loans and mortgage securities are concentrated in states like California, Florida, Texas, Georgia, and New York, which may be disproportionately affected by economic downturns [57]. - The company faces risks related to the valuation of its investments, particularly in residential whole loans, which are difficult to value and depend on borrowers' ability to service their debt [68]. - The company may be subject to counterparty risk if sellers of residential whole loans breach representations and warranties, potentially leading to losses [61]. - The U.S. Government's mortgage loan modification and refinancing programs may adversely affect the value and returns on mortgage-backed securities (MBS) and residential whole loan investments [69]. - The foreclosure process in states like New York, Florida, and New Jersey can be lengthy and costly, potentially increasing losses in the residential whole loan portfolio [72]. - The company faces risks from borrower defaults and bankruptcies, which could materially affect financial condition and results of operations [82]. - Business purpose loans involve high risks, including the borrower's ability to repay being affected by economic conditions and project completion [78]. - The market value of certain investment securities may decline, leading to impairments that adversely affect financial results [76]. Financial Performance and Volatility - The company has experienced increased volatility in GAAP results due to the fair value option accounting model for certain investments [63]. - Prepayment rates on mortgage loans can significantly impact profitability, especially if borrowers prepay at unexpected rates [84]. - Increased borrowing costs relative to interest income may significantly affect profitability, especially during periods of rising interest rates [89]. - The Federal Reserve raised the federal funds rate seven times in 2022 and eleven times in 2023, contributing to ongoing inflationary pressures that could impact financial performance [91]. - Adverse developments in major financial institutions could rapidly reduce borrowing capacity, negatively affecting liquidity and profitability [87]. Regulatory and Compliance Risks - The company is subject to extensive regulation, which could materially adversely affect its business and ability to pay dividends to stockholders [110]. - Regulatory changes, including those stemming from the Dodd-Frank Act, may increase compliance costs and impact the company's operations [113]. - Changes in regulatory guidelines, such as the General QM Final Rule effective March 1, 2021, may increase economic and compliance costs for participants in the mortgage industry [117]. - The company must comply with complex REIT requirements, which may hinder its ability to pursue attractive investment opportunities [148]. - Compliance with REIT requirements may limit the company's ability to hedge effectively, potentially increasing tax liabilities [158]. Cybersecurity and Operational Risks - The company faces significant cybersecurity risks, including potential unauthorized access to borrower data, which could adversely affect its reputation and financial results [99]. - The company is highly dependent on its information systems, and any failure or cybersecurity incident could disrupt its business operations and negatively impact its financial performance [102]. - The company relies on third-party servicers for managing mortgages, and any failure in their performance could negatively impact financial results [70]. - Increased compliance costs and regulatory scrutiny may adversely affect servicers' ability to perform servicing obligations, impacting the company's investments [73]. REIT Qualification and Tax Implications - The company must distribute at least 90% of its REIT taxable income to maintain its REIT status, which limits cash available for other business purposes [143]. - Failure to qualify as a REIT could result in substantial corporate tax liabilities, reducing cash available for distribution to stockholders [140]. - The company may incur a 100% tax on prohibited transactions, limiting its ability to engage in certain beneficial transactions [152]. - The net income of the company's TRSs is not subject to REIT distribution requirements, which could jeopardize REIT qualification if certain asset value thresholds are exceeded [149]. Market Conditions and Competitive Landscape - The company operates in a highly competitive market for investment opportunities, which may limit its ability to acquire desirable investments [183]. - Future cash dividends on common stock are subject to uncertainty, particularly during severe market disruptions in the mortgage and housing sectors [181]. - Future offerings of debt securities may rank senior to common stock, potentially diluting existing stockholders and adversely affecting market price [176]. - The company’s charter restricts ownership to no more than 9.8% of outstanding shares by any individual, which may limit business combination opportunities [173].

Core Viewpoint - MFA Financial, Inc. has declared dividends on its Series B and Series C preferred stocks, indicating a commitment to returning value to shareholders through consistent dividend payments [1] Group 1: Dividend Declaration - The Board of Directors has declared dividends on the Company's outstanding 7.50% Series B Cumulative Redeemable Preferred Stock [1] - The Board has also declared dividends on the 6.50% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock [1]

Core Viewpoint - MFA Financial is optimistic about its future earnings and return on equity, driven by a supportive interest rate environment and strategic initiatives to enhance profitability [4][7]. Policy and Market Environment - A focus on housing affordability in Washington is expected to support mortgage markets, with an initiative for GSEs to purchase $200 billion of agency MBS and anticipated rate cuts in 2026 [1]. - Treasury yields have declined significantly, with the 2-year yield down 77 basis points and the 10-year yield down 39 basis points for the year, leading to a steeper yield curve [2]. Financial Performance - The Bloomberg US Aggregate Index rose 7.3% in 2025 after three consecutive annual declines, indicating a recovery in fixed income markets [3]. - MFA's GAAP book value was $13.20 and economic book value was $13.75 at year-end, with Q4 GAAP EPS at $0.42 and distributable earnings at $0.27 per share [5][8]. Earnings and Strategic Actions - MFA executed several strategic actions to boost earnings, including deploying over $100 million of excess cash, resolving over $150 million of delinquent loans, and reducing G&A expenses to $119.4 million for 2025 [6][13]. - The company acquired nearly $2 billion of residential mortgage assets in Q4, with a focus on agency and non-QM loans [14][19]. Portfolio and Securitization - The agency portfolio grew over 50% during the quarter to $3.3 billion, primarily through purchases made before spreads tightened [14]. - MFA issued its 21st non-QM securitization in December, selling $424 million of bonds at an average cost of 5.26%, and plans to call and reissue certain securitizations to unlock capital [16]. Growth Initiatives - Lima One is identified as a key growth driver, with plans to expand its sales team and relaunch multifamily lending in 2026 [17]. - The company sold $45 million of longer-duration rental loans to third-party investors, generating $1.4 million in gain-on-sale income [18]. Future Outlook - Management expects distributable earnings to align with the common dividend in the latter half of 2026, with an estimated 3% increase in economic book value since year-end [21].

Financial Data and Key Metrics Changes - As of December 31, GAAP book value was $13.20 per share, and economic book value was $13.75 per share, both showing modest increases from the end of September [21] - Total economic return for the fourth quarter was 3.1% and 9% for the full year of 2025, with total shareholder return for the year at 6% [11][21] - GAAP earnings for the fourth quarter were $54.3 million, or $0.42 per basic common share, with net interest income at $55.5 million, a decline from $56.8 million in the third quarter [23] Business Line Data and Key Metrics Changes - In the fourth quarter, the company acquired $1.9 billion of loans and securities, including $1.2 billion of agencies and $443 million of non-QM loans [13] - The agency portfolio grew by over 50% to $3.3 billion during the quarter, with significant investments made before spreads tightened [29] - Distributable earnings for the fourth quarter were approximately $27.8 million, or $0.27 per share, an increase from $0.20 per share in the third quarter [26] Market Data and Key Metrics Changes - The Bloomberg US Aggregate Index was up 7.3% in 2025, following a decline of 7.1% over the previous three years [6] - Treasury rates declined, with 2-year yields dropping 77 basis points and 10-year yields dropping by 39 basis points [7] - The MOVE Index, which measures bond market volatility, ended the year at just under 64, down from above 100 for most of the previous three years [8] Company Strategy and Development Direction - The company is focused on increasing earnings and growing return on equity (ROE) through strategic initiatives, including deploying excess cash into target assets [12] - The company plans to relaunch multifamily lending and has hired 45 new salespeople at Lima One, indicating a push for growth in 2026 [14] - The company is also working on resolving delinquent loans, with over $150 million resolved in the fourth quarter, unlocking capital for redeployment [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment, citing favorable conditions for the mortgage market due to lower rates and government support for housing affordability [9][10] - The company expects to see the results of its strategic initiatives reflected in financials in 2026, with a focus on enhancing earnings and ROEs [20] - Management noted that while the delinquency rate across the loan portfolio ended the year at just over 7%, it is expected to remain elevated in the legacy portfolio as it winds down [35] Other Important Information - The company reported a decline in general and administrative (G&A) expenses, totaling $119 million for 2025, down from $132 million in 2024 [25] - Approximately 40% of the 2025 common dividends were treated as a tax-deferred return of capital, enhancing after-tax yield for shareholders [21][22] - The company has reauthorized a stock buyback program, utilizing proceeds from preferred stock issuance to repurchase common stock at a discount [20] Q&A Session Summary Question: Can you talk about the run rate ROE on your EAD once loss provisions are through? - Management indicated that DE on a lossless basis was in the 8%-9% range, expected to rise to 10-11% in the back half of 2026 [44] Question: Can you discuss the re-entry into the multifamily market? - The company is targeting higher quality loans with larger average amounts, focusing on an originate-to-sell model [46] Question: How do you think about the potential deals that could be called? - Management noted that several deals could unlock $50 million-$100 million of capital for redeployment [51] Question: What are your expectations for margins and total volumes throughout the year? - The company anticipates healthy spreads and significant growth potential, particularly in the back half of the year [68]

Financial Data and Key Metrics Changes - As of December 31, GAAP book value was $13.20 per share, and economic book value was $13.75 per share, both showing modest increases from the end of September [21] - Total economic return for the fourth quarter was 3.1% and 9% for the full year of 2025, with total shareholder return for the year at 6% [11][21] - GAAP earnings for the fourth quarter were $54.3 million, or $0.42 per basic common share, with net interest income at $55.5 million, a slight decline from $56.8 million in the previous quarter [23] Business Line Data and Key Metrics Changes - In the fourth quarter, the company acquired $1.9 billion of loans and securities, including $1.2 billion of agencies and $443 million of non-QM loans [13] - The agency book grew by over 50% to $3.3 billion during the quarter, with a focus on low pay-up spec pools [29] - Lima One originated $226 million of new loans in the fourth quarter, including various types of loans, contributing to $5.7 million of mortgage banking income [32] Market Data and Key Metrics Changes - The Bloomberg US Aggregate Index increased by 7.3% in 2025, following a decline of 7.1% over the previous three years [6] - Treasury rates declined, with 2-year yields dropping 77 basis points and 10-year yields dropping by 39 basis points, leading to a steepening of the 2-10 spread from 32 basis points to 70 basis points [7] Company Strategy and Development Direction - The company is focused on increasing earnings and return on equity (ROE) through strategic initiatives, including deploying over $100 million of excess cash into target assets [12] - The company plans to relaunch multifamily lending and has made investments in technology and sales force at Lima One to enhance growth [14][15] - The company is optimistic about 2026, expecting supportive government policies and favorable market conditions to drive growth [10] Management's Comments on Operating Environment and Future Outlook - Management noted that 2025 felt like an exit from a challenging period for fixed income investors, with lower rates and volatility creating a favorable environment for the mortgage market [5][9] - The company expects to see the results of its strategic initiatives reflected in financials in 2026, with a focus on resolving delinquent loans and reducing expenses [17][20] Other Important Information - The company reported a decline in general and administrative (G&A) expenses to $119 million in 2025 from $132 million in 2024, achieving a reduction of approximately 9.5% [25] - Approximately 40% of the 2025 common dividends were treated as a tax-deferred return of capital, enhancing the after-tax yield for shareholders [21][22] Q&A Session Summary Question: Can you talk about the run rate ROE on your EAD once loss provisions are through? - Management indicated that DE on a lossless basis was in the 8%-9% range, expected to rise to 10-11% in the back half of 2026 [44] Question: Can you discuss the re-entry into the multifamily market? - The company is targeting higher quality loans with larger unit sizes and an originate-to-sell model to capture fees [46] Question: How do you think about the potential deals that could be called? - Management noted that several deals could unlock $50 million-$100 million of capital for reinvestment [52] Question: How should we think about capital allocation going forward? - The expectation is to initially increase investments in the agency portfolio before transitioning to non-QM and BPL asset classes [55] Question: What are your expectations for margins and total volumes throughout the year? - The company anticipates healthy spreads and significant growth potential, particularly in the back half of the year [70]

Financial Data and Key Metrics Changes - As of December 31, GAAP book value was $13.20 per share, and economic book value was $13.75 per share, both showing modest increases from the end of September [14] - For the fourth quarter, MFA generated GAAP earnings of $54.3 million, or $0.42 per basic common share, with net interest income at $55.5 million, a slight decline from $56.8 million in the previous quarter [15][16] - Distributable earnings for the fourth quarter were approximately $27.8 million, or $0.27 per share, an increase from $0.20 per share in the third quarter [18] Business Line Data and Key Metrics Changes - In the fourth quarter, MFA acquired $1.9 billion of loans and securities, including $1.2 billion of agencies, $443 million of non-QM loans, and $226 million of new business purpose loans [10] - The agency book grew by over 50% to $3.3 billion during the quarter, with a focus on low payout spec pools [20] - Lima One originated $226 million of new loans in the fourth quarter, including various types of loans such as new construction and rehab loans [22] Market Data and Key Metrics Changes - The Bloomberg US Aggregate Index was up 7.3% in 2025, following a decline of 7.1% over the previous three years [5] - Treasury rates declined, with 2-year yields dropping 77 basis points and 10-year yields dropping by 39 basis points [5] - The delinquency rate across the entire loan portfolio ended the year at just over 7%, down from 7.5% a year ago [23] Company Strategy and Development Direction - MFA is focused on increasing earnings and growing return on equity (ROE) through strategic initiatives, including deploying excess cash into target assets [9] - The company is excited about 2026, starting the year with favorable market conditions and government support for housing affordability [6][7] - MFA plans to relaunch multifamily lending and has made investments in technology and sales force to enhance operational efficiency [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the mortgage market due to lower rates, reduced volatility, and a positively sloped yield curve [6] - The company expects to see results from its strategic initiatives in 2026, with a focus on resolving delinquent loans and reducing general and administrative expenses [12][13] - Management anticipates that distributable earnings will reconverge with the common dividend in the latter half of 2026 [30] Other Important Information - MFA paid a common dividend of $0.36 for the fourth quarter and $1.44 for the full year, with approximately 40% of dividends treated as a tax-deferred return of capital [14] - The company has rolled out several technology platforms to enhance borrower experience and drive operational efficiencies [11] Q&A Session Summary Question: Can you talk about the run rate ROE on your EAD once loss provisions are through? - Management indicated that DE on a lossless basis is expected to be in the 8%-9% range, potentially reaching 10-11% in the back half of next year [29] Question: Can you discuss the re-entry into the multifamily market? - The company is targeting higher quality loans with larger unit sizes and an originate-to-sell model to capture fees [31] Question: How do you think about the potential deals that could be called? - Management expects to unlock $50 million-$100 million of capital that can be redeployed, with several deals anticipated in the coming quarters [36] Question: How should we think about capital allocation going forward? - The expectation is to initially increase investments in the agency portfolio before transitioning to non-QM and BPL asset classes as capital is freed up [40] Question: What are your expectations for margins and total volumes throughout the year? - The company anticipates healthy spreads and significant growth potential, particularly in the back half of the year as new channels come online [54]

Earnings Presentation FOURTH QUARTER 2025 Forward-looking statements When used in this presentation or other written or oral communications, statements that are not historical in nature, including those containing words such as "will," "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "could," "would," "may," the negative of these words or similar expressions, are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of ...

Core Viewpoint - MFA Financial's high dividend yield of approximately 15% is deemed unsustainable due to significant payout ratios and deteriorating cash flow coverage, raising concerns for income investors and retirees [1] Financial Performance - MFA Financial paid out 180% of its Q3 2025 earnings as dividends, with a payout ratio of 180% for the quarter and 128.6% over the trailing twelve months [1] - The company reported distributable earnings of $0.20 per share while paying out $0.36 per share in dividends for Q3 2025 [1] - Operating cash flow for the first nine months of 2025 was only $38.6 million against $140.5 million in dividends paid, resulting in a coverage ratio of 0.27x [1] Leverage and Financial Health - As of Q3 2025, MFA Financial had total debt of $6.60 billion and equity of $1.82 billion, leading to a debt-to-equity ratio of 3.62x, which is considered elevated for a mortgage REIT [1] - The company has negative retained earnings of -$1.88 billion, indicating cumulative losses exceed profits over time [1] - Cash on hand was limited at $305 million, covering only 4.6% of total debt [1] Dividend History and Risks - MFA Financial maintained a stable dividend of $0.20 per quarter from 2014 to 2019, but cut its dividend to $0.05 during the 2020 pandemic [1] - The recent increase to $0.36 in Q1 2025 was the first raise in three years, highlighting the challenges in maintaining dividend stability [1] - The company faces elevated risks regarding dividend sustainability due to high payout ratios and deteriorating cash flow coverage [1]