MFA Financial (NYSE:MFA) executives struck an optimistic tone on the company’s fourth-quarter and full-year 2025 earnings call, pointing to a more constructive interest rate backdrop and outlining steps they believe will lift earnings and return on equity in 2026.
Management cites improving macro environment
CEO Craig Knutson said 2025 marked a notable change after “three very difficult years for fixed income investors,” highlighting that the Bloomberg US Aggregate Index rose 7.3% in 2025 following three straight annual declines. He noted the Federal Reserve cut rates three times in the final three months of 2024, then delivered additional cuts in September, October, and December of 2025.
On the policy front, Knutson said a focus on housing affordability in Washington appeared supportive for mortgage markets, referencing an initiative for the GSEs to buy $200 billion of agency MBS and expectations for additional rate cuts later in 2026.
Quarterly results and book value
CFO Mike Roper said GAAP book value at December 31 was $13.20 per share and economic book value was $13.75 per share, both modestly higher than at the end of September. MFA paid a $0.36 common dividend in the fourth quarter and delivered a total economic return of 3.1%. For the full year, MFA paid $1.44 in common dividends and delivered a total economic return of about 9%, while total shareholder return for 2025 was 6%, according to Knutson.
Roper reported fourth-quarter GAAP earnings of $54.3 million, or $0.42 per basic common share. Net interest income was $55.5 million, down modestly from $56.8 million in the third quarter. He attributed the decline primarily to lower yields on the legacy RPL and NPL loan portfolio and to interest reversals tied to increased nonaccrual loans in the multifamily transitional loan portfolio. Those factors were “largely offset,” he said, by higher interest income from Agency MBS and non-QM loans due to significant fourth-quarter asset purchases.
Distributable earnings (DE) were approximately $27.8 million, or $0.27 per share, up from $0.20 per share in the prior quarter. Roper said the increase was primarily driven by $0.09 of lower credit-related charges, partially offset by $0.03 of lower gains from REO sales.
Strategic actions: deploying cash, resolving delinquencies, lowering expenses
Management emphasized a set of initiatives aimed at boosting earnings and ROE, which Knutson said were progressing but would take several quarters to fully show up in results. He said MFA deployed more than $100 million of excess cash into target assets to reduce “cash drag” on earnings.
Knutson also said the company resolved more than $150 million of delinquent loans in the fourth quarter, describing the effort as a way to unlock capital that can be redeployed at “mid-teen ROEs.” On expenses, he said the company made “substantial progress” reducing G&A costs at both MFA and Lima One. Roper reported full-year 2025 G&A expenses of $119.4 million, down from $132 million in 2024, and said fourth-quarter G&A was $27 million versus about $29 million in the third quarter. Management said it expects additional run-rate expense reductions in 2026.
Portfolio activity, securitizations, and call-and-reissue opportunity
President and CIO Bryan Wulfsohn said MFA acquired nearly $2 billion of residential mortgage assets in the fourth quarter, including:
- $1.2 billion of agency securities
- $443 million of non-QM loans
- $226 million of business purpose loans originated by Lima One
Wulfsohn said the agency portfolio grew more than 50% during the quarter to $3.3 billion, with purchases primarily made in late October before spreads tightened. He said the portfolio was mostly 5.5% coupons bought at or slightly below par and focused on “low pay-up spec pools” intended to provide prepayment protection. With tighter spreads later in 2025 and into 2026—especially after what he described as the President’s directive for the GSEs to buy mortgage bonds—he said MFA has slowed agency purchases, though management still sees potential for “low double-digit ROE” on levered agency investments.
Non-QM whole loans remained the largest asset class at $5.3 billion, Wulfsohn said. MFA acquired $443 million of non-QM loans with an average coupon of 7.3% and loan-to-value “just shy of 69%,” emphasizing a continued focus on credit quality and loan-by-loan reviews prior to acquisition.
On financing, Wulfsohn said MFA issued its 21st non-QM securitization in December, selling $424 million of bonds at an average cost of 5.26%. He said securitization spreads had tightened and were “highly attractive” for regular issuers. Management also reiterated expectations to call and reissue certain securitizations as a source of liquidity and improved economics, noting $2.3 billion of callable securitized debt outstanding that has, in some cases, materially delevered since issuance. In Q&A, management suggested several deals could be completed in coming quarters and could unlock roughly $50 million to $100 million of capital to redeploy.
Lima One growth plans and common stock repurchases funded by preferred issuance
Management described Lima One as a key earnings growth driver for 2026. Knutson said Lima One hired 45 new salespeople in 2025, is debuting a wholesale channel, and will relaunch multifamily lending in the first quarter of 2026. Wulfsohn said Lima One originated $226 million of new loans in the fourth quarter, including $83 million of new construction loans, $48 million of rehab loans, $25 million of bridge loans, and $70 million of rental term loans.
Wulfsohn said Lima continues to sell longer-duration rental loans to third-party investors at a premium; in the quarter, it sold $45 million and generated $1.4 million of gain-on-sale income. Lima produced $5.7 million of mortgage banking income, with management noting origination volumes were seasonally lower in the fourth quarter.
Separately, Knutson and Roper discussed a strategy introduced in the third quarter of 2025: issuing additional shares of two preferred stock series through an at-the-market program and using proceeds to repurchase common stock at a discount to book value. Roper said that during the quarter MFA sold about 163,000 shares of Series C preferred and about 53,000 shares of Series B preferred for roughly $5 million in proceeds, then repurchased about 540,000 common shares at a weighted average discount of about 33% to economic book value. Management said the board reauthorized the repurchase program after the prior authorization expired at year-end and expects to continue the approach when trading windows reopen after filing the 10-K.
Looking ahead, Roper said management expects distributable earnings to “reconverge” with the common dividend in the back half of 2026. He also said MFA estimated economic book value had increased by about 3% since year-end.
About MFA Financial (NYSE:MFA)
MFA Financial, Inc, headquartered in New York City, is a real estate investment trust that specializes in investing in residential mortgage loans and mortgage-related securities. The company’s primary objective is to generate attractive risk-adjusted returns through net interest income and capital appreciation. As a mortgage REIT, MFA Financial focuses on constructing a diversified portfolio of agency and non-agency residential mortgage assets, leveraging its expertise in acquiring, financing and servicing mortgage products.
MFA Financial’s investment portfolio encompasses a wide range of mortgage instruments, including adjustable-rate and fixed-rate mortgage loans, interest-only securities, and agency mortgage-backed securities guaranteed by government-sponsored entities.
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