Greetings, and welcome to the MFA Financial, Inc. Third Quarter 2025 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Hal Schwartz, MFA Financial. Please go ahead.

Thank you, Rachelle, 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 ended 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 third quarter 2025 financial results. Thank you for your time. I would now like to turn this call over to MFA's CEO, Craig Knutson.

Thank you, Hal. Good morning, everyone, and thank you for joining us for MFA Financial's Third Quarter 2025 Earnings Call. With me today are Bryan Wulfsohn, our President and Chief Investment Officer; Mike Roper, our Chief Financial Officer; and other members of our senior management team. MFA continued to execute on our business objectives during the third quarter and delivered a total economic return of 2.6% to shareholders. After my remarks this morning, Mike will provide details on our financial results, and then Bryan will discuss our portfolio activity, financing, and Lima One before we open up the call to questions. For today's call, I will focus on a new slide that we've added to our earnings deck. This is Page 4, which lays out various actions we have taken to increase earnings and grow ROEs over the next year. Although we have previously mentioned some of these plans, we think it is important to highlight these initiatives in the aggregate, as we believe that together, these programs will have a meaningful impact on MFA's earnings, returns on equity, and dividend generation. The first initiative is higher capital deployment. Over the last several years, we have consistently operated with high levels of liquidity, often with over $300 million of unrestricted cash. This strategy was prudent, particularly during 2022 and 2023, when the bond market experienced extreme volatility against the backdrop of an unprecedented tightening cycle by the Fed and allowed us to capitalize on temporary market dislocations to add assets at attractive yields. During these years, we also executed on a liability strategy to create durable and non-mark-to-market financing for the vast majority of our assets, much of which was through securitizations. Also, over this time, we began adding Agency MBS beginning in December of 2022. As we discussed at the time, we saw agencies as an attractive complement to our mortgage credit portfolio. In addition to providing very attractive returns, agencies significantly increased the liquidity of our overall portfolio and helped us manage the cash needs for margin calls on our interest rate swap hedge position. Fast forward to today, with increased clarity on the path of interest rates, lower market volatility, the increased portfolio liquidity provided by our agency portfolio, and the predominance of non-mark-to-market financing on our loan portfolios, we have increased confidence to deploy more of our excess liquidity into our target asset classes, including an increased allocation to Agency MBS. Holding nearly 20% of our equity in cash has been a significant drag on earnings. While the 4% that we earn on cash is certainly better than the 0 we earned in 2021, it's more than 1,000 basis points less than the ROEs we generate in all other asset classes. Investing $100 million of this excess cash will still leave us with substantial liquidity, but the incremental earnings will have a meaningful and immediate impact on earnings and ROE. Finally, our ladder of outstanding securitizations is another potential source of additional capital. Because these securitizations delever over time, calling them and resecuritizing the underlying loan collateral often frees up tens of millions of dollars of capital to deploy into new assets, significantly boosting portfolio ROEs even if the new securitization deal comes with a higher cost of funds. We've shared progress over the last several quarters on our efforts to grow origination volumes at Lima One, and we're happy to report that we are starting to see these efforts bear fruit. We announced on our second quarter earnings call back in 2024 that we've made the decision to pause multifamily transitional lending at Lima One. We used this pause as an opportunity to initiate a comprehensive review of the multifamily underwriting guidelines and processes. This review led to some changes, and we have recently hired a new multifamily leadership and underwriting team. In the last 1.5 years, multifamily seems to have found some footing with prices above the lows from early 2024, new construction starts down materially about 50% between 2024 and '25, and supply and demand in more balance. We are confident that the changes we have made have significantly strengthened our product offering, and we expect to resume multifamily lending in early 2026. During 2025, we have also made significant new hires to Lima's sales team, rolled out technology initiatives that materially improve the borrower experience, and we're planning to launch a wholesale origination channel next year as well. These initiatives take time to produce results, but we are confident that we have the right team, the right mindset, and the right processes to produce quality loan production that we can now begin to scale. Business purpose loans generate some of the highest ROEs of all of MFA's target asset classes, so growth at Lima One into 2026 will contribute materially to MFA's earnings. Another initiative has been expense reductions. Over the last year, we've taken a hard look across all of our operating expenses, both at MFA and Lima One. While most of the significant reductions have been personnel-related, we've also canceled or renegotiated many vendor contracts. As Mike stated on our last earnings call, our goal is to reduce run-rate G&A expenses by 7% to 10% versus 2024 levels, which is about $9 million to $13 million a year or $0.02 to $0.04 per share per quarter. While we have realized a significant amount of savings already, we anticipate that additional savings will be realized throughout 2026 as many of these actions take time to be realized. A further initiative has been accelerating the resolution of nonperforming loans. These loans are across MFA's loan portfolio, but many are business purpose loans, including the aforementioned multifamily transitional loans. Our team has over 10 years of on-the-ground experience resolving nonperforming loans, dating back to 2014 and 2015 when we were large buyers of RPLs and NPLs from banks and the GSEs. We've been working closely with Lima One servicing professionals to resolve these loans, whether through loan sales, foreclosure and liquidation or other forms of asset resolution. We've made significant progress. The multifamily transitional loan portfolio is almost half of what it was a year ago, and delinquent loans are down from $86 million to $47 million so far in 2025. Economically, losses associated with these loans were reflected in fair value marks when they emerged, which in most cases was over a year ago or more when these fair value marks flow through GAAP earnings and book value. But these nonperforming loans tie up a lot of capital. In some cases, these loans or REO properties may be unlevered, in which case, they are funded 100% with equity. In other cases, they may be funded partly with borrowing, but the advance rate on delinquent loans is generally lower than for performing loans. Additionally, we generally do not recognize interest income on delinquent loans due to our nonaccrual policy. Thus, the equity that we have tied up in nonperforming loans is a significant drag on our earnings and ROE. As we free up capital by resolving these problem assets, we can invest it in our target asset classes that generate mid- to high-teen ROEs. Finally, during the third quarter, we began a program to modestly modify our capital structure. Under our recently implemented preferred stock ATM program, we have issued additional shares of both our Series B and Series C preferred stock and used the proceeds to repurchase common stock at a significant discount to economic book value. While 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 active measures to materially increase earnings and ROEs, and we expect to begin to see these results in 2026. And I'll now turn the call over to Mike to discuss our financial results.

Thanks, Craig, and good morning. At September 30, GAAP book value was $13.13 per share and economic book value was $13.69 per share. Each effectively unchanged from the end of June. GAAP earnings of $48.1 million or $0.36 per basic common share. Net interest income was $56.8 million for the quarter, a modest decline driven primarily by the nonrecurring acceleration of discount accretion from the redemption of our MSR-related assets last quarter. As Craig mentioned, we continue to make progress with our expense reduction initiatives. Quarterly G&A expenses totaled $29 million, a $900,000 decline from $29.9 million last quarter and a $4.8 million decline from $33.8 million in the third quarter of 2024. Year-to-date G&A expenses were $92.4 million versus $103.9 million for the same period last year, a decline of approximately 11%. While we're proud of the savings achieved thus far, we continue to make progress on initiatives that we expect will bring additional savings in the back half of 2026. Distributable earnings for the third quarter were approximately $21 million or $0.20 per share, a decline from $0.24 per share in the second quarter. DE was again adversely impacted by credit losses on our loan portfolio, which totaled $0.11 per share for the quarter. DE, excluding these credit losses, declined modestly to $0.32 per share from $0.35 per share last quarter, a decline driven largely by the nonrecurring income in the second quarter on our MSR-related assets. Though we continue to expect some near-term pressure on our distributable earnings, as we made progress on the highly accretive strategic initiatives Craig spoke to earlier, we expect to see growth in our DE in the quarters ahead and continue to believe that our DE will reconverge with the level of our common dividend by mid-2026. Moving to our capital. During the quarter, we sold approximately 70,000 shares of our Series B preferred stock and approximately 125,000 shares of our Series C preferred stock for aggregate proceeds of approximately $4.5 million at a yield well below our common cost of capital. During the quarter, we repurchased approximately 500,000 shares of our common stock at a discount of approximately 27% to our economic book value. As we continue to execute on our strategic initiatives to grow earnings, we find the opportunity in MFA's common stock today to be extraordinarily compelling. Given current market conditions and the trading level of our common stock, we expect to continue to issue preferred shares and repurchase our common shares as a way to enhance returns to our shareholders without sacrificing scale. Finally, subsequent to quarter end, we estimate that our economic book value is up by approximately 1% from the end of the third quarter.

Thanks, Mike. We acquired $1.2 billion of loans and securities in our target asset classes during the third quarter. This included $453 million of non-QM loans, $473 million of agency securities, and $260 million of loans originated by Lima One. I'll expand on the latter two in a moment. Our non-QM portfolio now exceeds $5 billion in size and remains our largest asset class. The loans we purchased during the quarter carry an average coupon of 7.6% and an LTV of only 68%, which we believe helps insulate us from a softer housing environment. We remain focused on credit quality and maintain a robust diligence process, utilizing in-house resources in addition to independent third-party reviews. Credit performance in our non-QM book continues to be strong with a delinquency rate just over 4%. We issued our 19th and 20th non-QM securitizations during the quarter, selling $673 million of bonds at an average coupon of 5.4%. We've now securitized over $7 billion of non-QM paper since our first issuance in 2020. I want to thank our many investors who have consistently supported our deals. We grew our Agency MBS position to $2.2 billion during the third quarter, adding almost $500 million of securities. Spreads have tightened, but it remains possible to generate mid-teens ROE with leverage on these investments. We continue to focus on lower pay-up spec pools that provide additional prepayment protection than generic pools. Our portfolio is predominantly comprised of 5.5% purchased at a slight discount to par. Our portfolio interest rate exposure remained stable over the quarter with our duration decreasing slightly, just under 1 year. As Craig mentioned earlier, we plan to invest our excess cash into our target assets, which includes agencies. Subsequent to quarter-end, we acquired an additional $900 million of Agency securities, and we plan to marginally grow our position further while spreads remain attractive. Given the liquidity of our agency portfolio, we retain the flexibility to opportunistically rotate capital should credit spreads widen from here. Turning to Lima One, Lima originated $260 million of business purpose loans during the quarter, a 20% increase from the second quarter. This included $200 million of single-family transitional loans with an average coupon of over 10% and over $60 million of new rental loans with an average coupon of 7%. During the quarter, we sold $66 million of recently originated rental loans at a premium to third-party investors, generating $1.6 million in gain-on-sale income. Lima overall contributed $5.6 million of mortgage banking income to our earnings. During the quarter, we made important progress in positioning Lima for growth. We hired new talent to help expand Lima's product offerings and origination channels, and we've continued adding to our sales team across the country. As Craig mentioned, Lima is planning to reenter the multifamily lending space in addition to opening up a wholesale channel focused on single-family rental lending. We are exploring partnerships with third-party investors interested in these credits to accelerate ROE growth. We believe these hires, along with further technology improvements, will help support Lima's origination volume in future quarters. Finally, turning to our credit performance. The delinquency rate for our entire loan portfolio declined by 50 basis points to 6.8% in the third quarter. This was driven by decreases in nearly every asset class, including our multifamily book, where we sold $15 million of delinquent loans at levels in line with our marks from the prior quarter. Over the quarter, we resolved $223 million of nonperforming loans, generating a gain to our prior quarter marks of nearly $15 million. We are excited by the prospect of recycling all of that capital into income-producing assets moving forward. Wrapping up, we're excited about the growth prospects across our business and look forward to sharing our continued progress next quarter.

Our first question today will come from Bose George with KBW.

Should the starting point be $0.32, essentially just removing that loss provision? And just to clarify, since that loss provision was already included in the mark, it doesn't affect your book value, correct?

Sorry, Bose, we didn't hear the first part of your question. Can you just repeat the question?

Sure. Yes, the first part was when we consider the run rate EAD for the company, should we start at $0.32, which is essentially the $0.20 after excluding the loss provision from this quarter? The second part is whether the loss provision is accounted for in the mark, just to confirm there is no book value impact from these loss provisions.

Yes. Thanks, Bose. So I guess a couple of things. We stripped out 100% of the losses in that $0.32 number. This is not a zero-loss business. So it's certainly heightened right now, but call it, $0.01 or $0.02 or maybe slightly north of that, certainly not $11. I think if you look at the initiatives Craig spoke to, there's a lot of ROE to be found there, right? And if you look at the lossless DE ROE, it's something like 9% or so. And then if you look at our dividend yield on book value, it's about 10%. So there's a lot of upside to be found in some of the initiatives Craig spoke to. And you can very cleanly bridge the gap between that sort of lossless DE today and where we think we can take DE to and the earnings potential of the portfolio.

Okay. Great. That's helpful. And then regarding additional capital deployment, you mentioned the $100 million of excess. How much capital is currently tied up in the delinquent loans? How much could that represent in terms of additional investment?

I estimate that the amount associated with the delinquent loans could be around $40 million to $60 million. Additionally, the losses that are reflected in our DE have been included in the book value for some time now. For the current quarter, we achieved approximately a $15 million gain from the resolutions of these assets when comparing it to the previous quarter. These issues are quite old, and in many cases, resolving them has positively impacted our book value.

Okay. Great. Regarding the additional capital, you can consider $150 million multiplied by the relevant return on equity as a way to gauge the incremental contribution. This is after accounting for the $100 million net of the cash you're generating.

That's exactly right.

If I could ask about Lima One, originations were very strong there. What kind of margins are you guys seeing in that portfolio? And do you guys need sort of a higher level of margins to get that mortgage banking income quarterly up from the $5.6 million you did in this quarter to sort of, let's say, a higher single teen million dollar level?

Yes. The margins are quite healthy. In the short term, you're earning around 1 to 2 points on origination, along with an additional servicing strip on the back end. I believe that growth in this area will contribute to an increase in mortgage banking income. Regarding the loan sales related to rental loans, they typically sell at a premium of about 2 to 3.5 points, and we are also collecting origination fees on those loans. The margins remain strong, but we need to boost origination volume to drive income growth.

And that's essentially what the move into multifamily is expected to achieve, right?

Right. The multifamily plus the wholesale.

Right. Great. Maybe if I could ask one more about your Agency MBS capital allocation, how you guys are thinking about what that level might be going forward, what it might grow to?

Yes. I mean in terms of the equity allocation, where we are today, we could see some marginal growth as sort of I stated in the prepared remarks, but we don't see it dramatically changing after this additional purchase of $900 million post quarter end.

We thought it was a good quarter. The move to get back into multifamily at Lima One, can you say what the levered returns that you're seeing there are? And when you think about the credit box, I mean, have there been any meaningful changes or kind of like edits or tweaks to the credit box? And how you guys are just thinking about like the sustainability of the credit there?

Sure. I mean in terms of ROEs, we think mid-teens ROEs are achievable. And we also said that we would utilize sort of third-party capital partners as well with that. So we don't necessarily need to take all the loans on our balance sheet. So what really it does do efficiently is help grow sort of the mortgage banking income line down at Lima One. And in terms of the types of assets that we're looking at, really, it's moving somewhat up in market and quality and then thinking more about bridge versus value add.

Okay. That's interesting about the bridge. You guys talked about the agency portfolio. We really like what you guys are doing there. Can you talk about the range for leverage that you guys think you can tolerate in that portfolio? And then on the hedging, I mean, are you using any products which maybe help you better manage the liquidity in that portfolio versus some of the products or the kind of structure that you've operated with in the hedge portfolio in the past?

So yes, from a leverage perspective, we’re not really aiming to increase that leverage. It’s still around plus or minus 8. In terms of the hedges we utilize, we employ cleared swaps and have also started using SOFR futures from ERIS. They offer similar economic benefits to cleared swaps, but the initial margin is significantly lower. For instance, we’ve added almost $300 million in notional hedges, exchanging some cleared swaps for SOFR futures, which reduces the initial margin by $16 million to $17 million. This amount can then be reinvested into an asset with a mid-teens return on equity. By unlocking the earnings potential of the portfolio, this change amounts to about $2 million a year, making it quite attractive.

And at this time, there are no further questions. I would like to turn the floor back to Craig Knutson for additional closing remarks.

Thank you, and thank you for your interest in MFA Financial. We look forward to speaking with you again in February when we announce fourth quarter and full-year results.

Thank you. That does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.