MFA Finl Reports Solid Fourth Quarter and Full Year 2025 Results

MFA Finl has successfully navigated a challenging economic landscape to deliver solid financial performance in the fourth quarter and full year of 2025. With a total economic return of 3.1% for the quarter and 9% for the full year, the company has positioned itself favorably for continued growth. The leadership team provided insights into strategic initiatives, operational efficiencies, and future market opportunities during the recent earnings call.

Financial Performance

MFA Finl reported GAAP earnings of $54.3 million, translating to $0.42 per share for the fourth quarter. This marks a significant increase compared to the previous quarter's earnings of $0.20 per share. The company's net interest income for the quarter was $55.5 million, slightly down from $56.8 million in the third quarter, primarily due to lower yields on legacy loan portfolios. However, this decline was offset by higher interest income on both agency mortgage-backed securities and non-QM loans, attributed to the company's strategic asset purchases totaling $1.9 billion in the fourth quarter.

Year-over-Year Comparisons

• GAAP Book Value: Increased to $13.20 per share at year-end.
• Economic Book Value: Rose to $13.75 per share.
• Common Dividends: Maintained at $0.36 per share for the fourth quarter, totaling $1.44 for the full year.
• Total Shareholder Return: 6% for the year, with approximately 40% of dividends treated as tax-deferred.

With effective tax planning, the company has enhanced the after-tax dividend yield for shareholders. This approach has provided a robust return on equity, expected to converge with the common dividend in the latter half of 2026.

Strategic Initiatives

MFA Finl's management highlighted several strategic initiatives aimed at enhancing earnings and increasing return on equity. Key actions taken include:

• Asset Purchases: The acquisition of $1.9 billion in loans and securities, including $1.2 billion of agency securities and $443 million of non-QM loans, effectively reducing cash drag on earnings.
• Operational Efficiencies: Continuous progress in reducing general and administrative expenses, which totaled $27 million for the fourth quarter, down from $29 million in the previous quarter. Full-year G&A expenses decreased by approximately 9.5%.
• Lima One Growth: The company is expanding its subsidiary, Lima One, by hiring 45 new salespeople and relaunching multifamily lending in early 2026, aiming to capture growth in this segment.
• Securitization Opportunities: With a favorable rate environment, MFA Finl plans to call some of its outstanding securitizations to reduce costs of funds and unlock additional liquidity for redeployment into target assets.

Management is optimistic about the long-term prospects for Lima One, anticipating that growth in this area will materially contribute to MFA's overall earnings in 2026.

Future Outlook

The company provided an encouraging outlook for 2026, citing several favorable macroeconomic factors:

• Lower Interest Rates: Following multiple rate cuts by the Federal Reserve in late 2024 and early 2025, MFA expects continued support for the mortgage market, which bodes well for its operations.
• Government Support: MFA anticipates ongoing government initiatives aimed at enhancing housing affordability, which are likely to positively impact the mortgage market.
• Operational Enhancements: Continued focus on resolving delinquent loans and improving credit performance, with a delinquency rate across the loan portfolio decreasing to just over 7% by year-end.

Craig Knudsen, CEO, expressed optimism about the company's strategic positioning, stating, > "With recent developments in Washington and a strong focus on housing affordability, we feel confident as we move into 2026 with tailwinds at our back."

Conclusion

In summary, MFA Finl has demonstrated resilience and strategic foresight in navigating a challenging economic environment. The company’s solid financial performance, marked by a significant increase in earnings and ongoing operational efficiencies, positions it well for future growth. With a promising outlook for 2026 fueled by favorable macroeconomic conditions and strategic initiatives, MFA Finl appears poised for a successful year ahead. Investors should keep an eye on the company's ability to execute its strategies effectively and maintain its trajectory of growth.

As MFA Finl continues to adapt to market conditions and enhance shareholder value, the upcoming quarters will be critical in evaluating the success of its initiatives and overall performance.