MFA Finl (NYSE:MFA) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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View the webcast at https://event.choruscall.com/mediaframe/webcast.html?webcastid=gPDAxTgM
Summary
MFA Finl reported a negative economic return of 1.2% for Q1 2026, impacted by market volatility due to geopolitical tensions and higher interest rates.
The company’s investment portfolio grew to $12.5 billion, with significant additions in non-QM loans, agency securities, and business purpose loans.
Management introduced a new Distributable Earnings (DE) metric to give investors a clearer view of portfolio earnings, expecting DE to align with the common dividend later in 2026.
Cost reduction initiatives at MFA Finl and Lima One have led to an estimated $20 million in annual savings, with further reductions expected from a corporate headquarters relocation.
The company successfully completed two non-QM securitizations in March, demonstrating resilience in market operations despite widened spreads.
Lima One had strong origination activity, generating $7.7 million in mortgage banking income, with expectations for continued growth.
Delinquencies rose to 7.8% in the residential loan portfolio, primarily due to legacy multifamily book issues, but are expected to normalize as troubled assets resolve.
Management remains confident in their asset mark process, noting gains from resolutions of delinquent loans.
Full Transcript
OPERATOR
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 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.
Hal Schwartz (General Counsel)
Thank you, 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 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 10K for 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 CEO Craig Knudsen.
Craig Knudsen (Chief Executive Officer)
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 non farm payroll print in early February. Mortgages performed 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 and contributed to an economic return for MFA in the first quarter of -1.2%. However, despite the market volatility and heightened geopolitical tension, markets remained open and orderly. We priced two non QM securitizations in March and while spreads were modestly wider, the market functioned normally. This is a testament to the expansion, maturity and and depth of these markets over the last four years. The second of these two non QM securitizations was a re lever 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. We grew our investment portfolio to $12.5 billion in the first quarter and adding almost $700 million of agencies including To Be Announced (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 competent 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.
Mike Roper (Chief Financial Officer)
Thanks Craig and good morning everyone. At March 31, GAAP 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 $$0.36 and delivered a quarterly total economic return of negative 1.2%. For the first quarter, MFA generated a GAAP loss of approximately $1 million or $$0.11 per basic common share. Our GAAP 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. On March 31, net interest 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 and A front, we’re happy to report that we again made significant progress with our cost reduction initiatives. In February we entered into a series of agreements to relocate our corporate headquarters to a new location here in New York without paying any early lease termination fees. As a result of these agreements, we expect some short term noise in our reported …
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