MFA Financial(MFA) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements 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 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] - 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] 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 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] - 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] - 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] 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 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] - 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] 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 | $13.84 | Quantitative and Qualitative Disclosures about Market Risk The company is exposed to interest rate, credit, liquidity, and prepayment risks, managed through derivatives and underwriting, with interest rate sensitivity detailed - The company is exposed to interest rate risk as borrowing costs on financing agreements typically change more quickly than yields on its assets. Swaps are used to mitigate this risk[381] Interest Rate Sensitivity Analysis (Shock Table) as of March 31, 2025 | Change in Interest Rates | Change in Estimated Net Portfolio Value ($ 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][395] - 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][406] Controls and Procedures 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] - No material changes in the company's internal control over financial reporting occurred during the quarter ended March 31, 2025[411] PART II. OTHER INFORMATION Legal Proceedings There are no material pending legal proceedings involving the company or its assets - There are no material pending legal proceedings[413] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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][417] - 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][419] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[421] Mine Safety Disclosures The company reported no mine safety disclosures - None[422] Other Information The company reported no other information for this item - None[423] Exhibits 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]