Greetings and welcome to the MFA Financial First Quarter 2026 Financial Results. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Hal Schwartz, General Counsel, to begin.

Thank you, Operator, 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 NFA'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, 2025, 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 first quarter 2026 results. Thank you for your time. I would now like to turn this call over to MFA's CEO, Craig Knudsen.

Thank you, Hal. Good morning, everyone, and thank you for joining us for MFA Financial's first quarter 2026 earnings call. With me today are Brian Wolfson, our President and Chief Investment Officer, Mike Roper, our Chief Financial Officer, and other members of our senior management team. I will offer some general remarks on the macro, economic, and political landscapes, and will then provide an update on MFA's business initiatives and portfolio activities. Then I'll turn the call over to Mike, followed by Brian, before we open up the call for questions. Moving to market conditions in the first quarter of 2026, it was very much a tale of two market environments. Fixed income markets began the year with a continuation of strong investor demand and low volatility that we experienced in the second half of 2025. The economy continued to exhibit resiliency, and the labor market seemed to stabilize, particularly with a surprisingly robust January nonfarm payroll print in early February. Particularly well, aided also by a directive for the GSEs to purchase $200 billion of agency mortgage-backed securities in early January. Unfortunately, the party ended abruptly with the onset of a war in Iran, which spiked volatility pushed rates sharply higher and dramatically raised oil prices. Higher energy prices renewed fears of inflation and markets adjusted expectations for fewer or even no rate cuts later this year. Mortgage spreads widened significantly against this backdrop and contributed to an economic return for MFA in the first quarter of negative 1.2 percent. However, despite the market volatility and heightened geopolitical tension, markets remained open and orderly. We priced two non-QM securizations in March, and while spreads were modestly wider, the market functioned normally. This is a testament to the expansion, maturity, and depth of these markets over the last four years. The second of these two non-QM securizations was a relever of two previous deals, which is a good example of what we often refer to as an underappreciated source of optionality that our ability to call these deals as they season and pay down, enabling us to lower borrowing costs and unlock additional capital. Our investment portfolio to $12.5 billion in the first quarter, adding almost $700 million of agencies, including TBAs, $471 million of non-QM loans, and Lima One originated $219 million of business purpose loans. Our asset management team continues to work diligently to resolve delinquent loans in the portfolio. This can be maddeningly time-consuming, but our team has been working out delinquent loans for over a decade, the majority of which were purchased as non-performing loans, and they're the best in the business at this and uniquely suited to the task. Finally, our listeners will recall that we began a program in the third quarter of last year to issue additional shares of our two outstanding preferred stock issues via an ATM and use the proceeds to repurchase common shares at a significant discount to book. While this program is 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. Finally, we continue to pursue expense reductions both at MFA and at Lima One, which Mike will discuss shortly. I will note that we have added an additional distributable earnings metric that we are introducing in response to requests from analysts and investors, distributable earnings prior to realized credit losses, and Mike will describe this in more detail shortly. We believe that this new DE metric offers a useful representation of how we think about the earnings power of the portfolio. And for those of you that follow commercial mortgage REITs, this should be a very familiar concept. Taken together, MFA has a diversified business strategy that includes multiple attractive target asset classes with a robust ability to source these assets, a reliable and proven ability to obtain durable, non-recourse leverage to generate attractive ROEs, a highly confident in-house asset management capability, a keen focus on expense management, and a demonstrated responsible capital issuance philosophy. And I'll now turn the call over to Mike to discuss our financial results.

Thanks, Craig, and good morning, everyone. That book value was $12.70 per share, and economic book value was $13.22 per share, each down approximately 3.8% from the end of 2025. MFA again paid a common dividend of $0.36 and delivered a quarterly total economic return of negative 1.2%. For the first quarter, MFA generated a gap loss of approximately $1 million, or $0.11 per basic common share. Our gap results for the quarter were adversely impacted by net mark-to-market losses on the portfolio of approximately $28.8 million, driven by higher rates and wider spreads than March 31st. Our income for the quarter was $59.2 million, an increase from $55.5 million in the fourth quarter, driven by rate cuts late last year and growth in our investment portfolio. These benefits were partially offset by interest income reversals totaling $3.5 million associated with loans moving to non-accrual status in our transitional loan portfolio during the quarter. On the G&A front, we're happy to report that we again made significant progress with our cost reduction initiatives series of agreements to relocate our corporate headquarters to a new location here in New York without paying any early lease termination. As a result of these agreements, $1.4 million of accelerated non-cash depreciation expense recognized this quarter and an additional $5 million expected in the second quarter. Following these accelerated non-cash charges, we expect to realize run rate expense reductions of approximately $4 million per year related to the move, or nearly $40 million in total over the remaining term of our prior lease. Including the expected savings from the relocation, we now estimate that our expense reduction initiatives have achieved nearly $20 million per year of run rate overhead savings versus 2024 levels. To our DE, distributable earnings for the first quarter were approximately $31.1 million, or $0.30 per share. The increase was primarily attributable to a $0.03 benefit associated with the lease modification and approximately $0.02 of higher mortgage banking income at Lima One. These benefits were partially offset by an aggregate two-cent charge related to higher carrying on our fair value loans. We remain focused on growing ROEs, and we continue to expect that our DE will begin to reconverge with the level of our common dividend later this year. As Craig mentioned earlier, this quarter, we are introducing an additional non-GAAP measure which further adjusts our distributable earnings to exclude realized credit losses on our residential whole loans held at fair value. We're providing this new disclosure to give additional context around our distributable earnings as credit losses on our legacy multifamily portfolio continue to flow through our DE. As we've noted on prior calls, because resolving NPLs doesn't impact our DE until long after the loan has been marked down in our gap results and book value, these losses can potentially obscure the current earnings power of the portfolio. While credit losses are a normal and recurring part of investing in credit assets, we expect that the resolution of the legacy multifamily portfolio and improvements in processes and underwriting more broadly at Lima One should result in significantly lower loss rates across more recent vintages of origination. As a result, we believe this new metric, alongside our reported gap results and our existing DE disclosure, can give investors a clearer view of the underlying earnings capacity of our investment portfolio as we work through the resolution of these troubled legacy assets. results. While the timing of loan resolutions and resultant credit charges can be difficult to reliably forecast, we expect realized credit losses on the legacy transitional loan portfolio to accelerate meaningfully in the second quarter before beginning to normalize as we move through the back half of 2026 and into the first half of 2027. As a result, we expect that the difference between DE and this new supplemental DE measure will narrow considerably over time and we We anticipate reassessing the usefulness of this new measure as the runoff transitional portfolio continues to wind down. Finally, subsequent to quarter end, we estimate that it is at the close of business on Friday approximately flat to the end of the first quarter. I'd now like to turn the call over to Brian, who will discuss our investment portfolio and Lima One.

Over $1 billion of residential mortgage assets. This included $471 million of non-QM loans, nearly $400 million of agency securities in in addition to $300 million of TVAs, and $219 million of business purpose loans originated by Lehman. QM remains our largest asset class. During the quarter, we grew our non-QM book to $5.5 billion. We added $471 million new loans with an average coupon of 7% and an LTV of 68%. Although our portfolio has grown significantly in recent years, along with the broader non-QM industry, we remain highly focused on credit quality and continue to review every loan prior to our non-QM book remains strong with a default rate just above 4%. We issued two securitizations. First, in early March, we issued our 22nd non-QM deal, selling $326 million of bonds at an average coupon of 5.12%. The newly originated loans in that deal carry an average coupon above 7%. Later in March, we re-securitized over $400 million of seasoned non-QM loans that had been in two deals we issued several years ago. This re-lever unlocked approximately $40 million of cash and additional financing capacity. We expect this move to be accretive to our earnings moving forward. We continue to grow our agency portfolio, which now exceeds $3.5 billion in size. This quarter continued to focus on low pay-up spec pools. After the escalation in the Middle East unleashed a broader sell-off, spreads widened by nearly 40 basis points from the tights, establishing a $300 million TBA position in late March. Since quarter end, spreads have tightened about 10 basis points. We expect to add to the portfolio depending on market conditions, and I've originated 219 million of business purpose loans during the first quarter. This included 145 million of new transitional loans and 74 million of rental term loans. We continue to sell the longer duration rental loans at a premium to third-party investors. This quarter, we sold 81 million, generating $2.7 million of gain-on-sale income. Rich banking income at Lima rose to $7.7 million, an increase of 34% in monthly submissions and origination pipeline reached their highest level since 2020. In the relaunch of multifamily lending underway, we expect Lima's contribution to our earnings to grow from here. Lastly, touching on our credit performance. During the quarter, delinquencies rose in our residential loan portfolio to 7.8%. The increase was driven primarily by elevated default activity in our legacy multifamily book, which, as a reminder, has been in runoff mode. We've made further progress shrinking that multifamily book and resolving non-performing loans since quarter end, and our delinquency rate has already fallen back to 7.3 to recycling that capital back into income-producing assets as we move through the year. In summary, for our investment platform, we grew the portfolio, we executed two non-QM securitizations, saw strong momentum at Lima One and continued to move our credit borrowings towards non-marked market financing. We believe the current environment positions us well for the year ahead. And with that, we'll turn the call over to the operator for questions.

Thank you. Ladies and gentlemen, at this time, we would like to begin the Q&A session. If you'd like to ask a question, press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, ask a question, press star 1 on your phone. We'll pause for a moment while we pull for questions. Your first question comes from Boz George with KBW. Please state your question.

Hey guys, good morning. Actually, how much capital was tied up in the remaining multifamily transitional portfolio at quarter end? And does your guidance on the convergence between the EAD and the dividend sort of include

the redeployment of that as well? Yes, to answer your second question first, the forward guidance on DE reconverging by the end of the year does include anticipated paydowns of some of the troubled assets and redeploying into our target capital is locked in that multifamily book. It's just over $100 million at the end of the quarter. Okay, great. Thanks. And then on the

expenses, so after the second quarter, you know, and that sort of noise is over with the depreciation, what's kind of a decent run rate for expenses going forward?

Yeah, so I think there's always a little bit of noise from quarter to quarter in our G&A for various reasons. So, you know, for example, this quarter we had about $4 million of accelerated non-cash stock-based comp charges, which is consistent with the first quarter of the past few years, and then the 2.4 of the accelerated depreciation. So if you sort of take this quarter and sort of normalize for those one-timers, and then it's about a penny a quarter for the – or a million bucks a quarter for the lease changes, I think that's a pretty good start for, you know, the run rate of G&A.

Okay. And each 1Q will have that non-cash comp piece that kind of bumps it up a little bit?

Yeah, exactly. So the accounting rules require us to expense awards made to retirement-eligible employees on the grant date instead of over the three-year service period.

Okay, great.

Your next question comes from Marissa Wilbos with UBS. Please say your question.

Thank you, and good morning. On the agency MBS portfolio, how should we think about it? Is it ultimately something that you're going to rotate back into non-QM and BPL, or is this strategic re-weighting in the portfolio. Yeah, I would think we'll most likely have

some exposure, but the level of exposure will be wound down a bit, you know, depending on the attractiveness on the credit side. So, as Lima does grow their production, you could expect that agency, you know, portfolio as we receive paydowns and we could also sell bonds to, you know, in addition to non-QM purchases as well.

Okay, great. And for Lima One, you know, what is its posture on AI and automation, you know, its servicing, underwriting? I mean, is there a cost target that you're willing to share for 26, 27 there?

I know we were, you know, trying to reduce G&A there by sort of 10-plus percent, and we were on the, you know, we're sort of on the way doing that. We had some efficiencies gained in Q1. We are utilizing AI down there, utilizing the Claude and Anthropics AI infrastructure to help accelerate those moves. It's unclear at what point, if there was an exact, we'll accrue to the business, but it's one of those things that we're exploring and will be sort of ongoing benefits as we utilize the AI.

Okay, great. Thank you.

Your next question comes from Matthew Erdner with Jones Trading. Please say your question.

Hey, good morning, guys. Thanks for taking the question. I'd like to touch on the multifamily. Is there anything that specifically drove the delinquencies to increase quarter over quarter significantly?

Well, the whole portfolio is really, you know, the loan structure was the three-year with sort of two-year extensions. So they're all really coming up on maturity and have been extended. So, you know, at this point, there might be some where the borrower has been out trying to get refinancing and they realize they can't get the same amount of proceeds that they borrowed initially. So then they're, you know, they sort of call it a day and we have to deal with the property or, you know, work out a mutual resolution. But, you know, really, I think it's the fact that they're sort of towards the end of life, you're going to see more, you know, delinquencies in certain cases where the borrower isn't able to.

Got it. And then, you know, as it relates to that, you know, should we expect you guys to kind of bring some of these properties in, stabilize, and then sell? Or are you guys going to look for them to kind of just hit the market, go out, see what they can get, and then, you know, move on from the asset?

I mean, it's really a case-by-case basis. Some assets we will, you know, try to stabilize where it makes sense, depending on, you know, the time and capital required to do so. But in some instances, it just makes sense to, you know, hit the bid and move on.

Got it. That's helpful. And then one last one for me as it relates to this. You know, I appreciate you throwing in the adjustment there for DE. You know, should we expect a number kind of similar to 3Q, 2Q of last year, you know, when you say you expect the losses to accelerate meaningfully at 2Q?

Yeah. So, you know, listen, as I said in my prepared remarks, it's really hard to have, you know, a reliable forecast of when exactly, you know, the losses are going to hit. You know, every foreclosure is different, every borrower is different, and there can be some timing differences from, you know, quarter to quarter pretty easily. I think with that said, in the immediate term, and, you know, we expect this primarily in the second quarter, you know, we're expecting somewhere in, call it the high teens, of credit losses on multifamily resolutions. Like I said, it's – and part of the reason why, you know, our guidance is the back half of 2026 is, you know, one of these, you know, bad multifamily loans rolling through the next quarter can be a, you know, three or four cent swing in DE or the timing of that resolution. But, you know, our base case is somewhere in the mid to high teens of credit losses for the second quarter before beginning to normalize in the back half of the year and into 27. Got it. I appreciate the comments. That's helpful.

Thank you, guys. Thank you.

Your next question comes from Mikhail Goberman with Citizens JMP. Please state your question.

Hey, good morning, guys. Hope everybody's doing well. If I could just to clear up one thing, when you talk about distributable earnings converging with the $0.36 dividend in the latter half of the year, are you referring to the current $0.30 figure you printed in Q1 or the $0.34 prior to realized credit losses figure?

Yeah, that's referring to our $0.30 DE or the DE with loss adjustments.

Gotcha. Thank you for that. And sort of looking at the Lima One pipeline, what do you guys see the product mix of that going forward? Obviously a very good quarter to start the year. Do you guys see momentum picking up in Q2, Q3? And, yeah, just kind of your thoughts on the product mix there going forward.

Yeah, I mean, so right now the mix is really split between the transitional and the rentals. As we sort of bring wholesale more online, we could see, you know, growth on the rental side, which could accelerate. But we're also seeing great growth on the transitional. So when we said pipeline is sort of the highest it's been in the past couple years, right, that's, you know, plus or minus $200 million at the moment. And, you know, just think about what pipeline, you know, converts to actual loans, usually it might be 50% to 60% to 75%, so, you know, depending on, you know, coupon timing, what have you. So that might go to, like, $100 million plus or minus per month in the near term, and we still expect to grow from there. And, you know, one thing we haven't really hit upon yet is multifamily is relaunched, but the pipeline and submissions, it's really not including the multifamily figures. So we still hit low growth mode.

Great. Thank you, guys.

Thanks, Mikil. Thank you.

And just a reminder to the audience, to ask a question, press star 1 on your phone. Your next question comes from Doug Harder with BTIG. Please state your question.

Thanks. On the transitional loans, if you could just remind us sort of at what level those are marked and just how we should think about resolutions and, you know, working through that book and any impact that should have on book value.

Yeah, I'll speak to the second half of your question first. We mark these loans every quarter to fair value, and that's not just what we would expect in a credit loss situation. It's what we think we could solve a loan for. So there's not a huge market for delinquent transitional loans, so a loan rolling delinquent can have a pretty big impact on its fair value, even if we think the LTV is good enough to be piffed on that asset. As far as the, you know, the mark level, you know, I think, as I kind of said a second ago, it's a story of delinquent loans. You know, the current loans with their, you know, call it 10%, 11% coupon tend to be marked just slightly below part, whereas the delinquent loans, it's really on a loan-by-loan basis. I think the weighted average for the portfolio, or I should say the total discount for the portfolio in multifamily is just over $50 million, and then single-family $15 to $20 million.

So, I mean, I guess it just depends on the ultimate resolution, but you feel like on the delinquent loans you've been fairly conservative.

Yes, for sure. You know, we've always taken great pride in our confidence and the level of our marks. I think we've said over the last few quarters that as we've resolved some of these delinquent loans, we're almost entirely generating gains. You know, this quarter we resolved another, I think it's $160 million of delinquent loans, and the P&L versus our prior mark on those assets generated a gain of about $14 million this quarter. So, you know, again, all of the empirical evidence, including where we've executed loan sales in prior quarters, gives us a lot of confidence in where we had

these assets marked. Great. Thank you. Thanks, Doug.

Thank you. And there are no further questions at this time, so I'll hand it back to Craig Knudsen for closing remarks. Thank you. All right. Well, thanks, everyone, for your interest

in MFA financial and we look forward to speaking with you again in August when we announce second

quarter results. And that concludes today's call. All parties may disconnect. Have a good day.