MFA FINANCIAL, INC.

Previous wording

These forward-looking statements include information about possible or assumed future results with respect to our business, financial condition, liquidity, results of operations, plans and objectives. Among the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements that we make are: general economic developments and trends, including the current tensions in international trade, and the performance of the labor, housing, real estate, mortgage finance and broader financial markets; inflation, increases in interest rates and changes in the market (i.e., fair) value of our residential whole loans, MBS, securitized debt and other assets, as well as changes in the value of our liabilities accounted for at fair value through earnings; the effectiveness of hedging transactions; changes in the prepayment rates on residential mortgage assets, an increase of which could result in a reduction of the yield on certain investments in our portfolio and could require us to reinvest the proceeds received by us as a result of such prepayments in investments with lower coupons, while a decrease in which could result in an increase in the interest rate duration of certain investments in our portfolio making their valuation more sensitive to changes in interest rates and could result in lower forecasted cash flows; credit risks underlying our assets, including changes in the default rates and management’s assumptions regarding default rates and loss severities on the mortgage loans in our residential whole loan portfolio; our ability to borrow to finance our assets and the terms, including the cost, maturity and other terms, of any such borrowings; implementation of or changes in government regulations or programs affecting our business (including as a result of the current U.S. Presidential administration); our estimates regarding taxable income the actual amount of which is dependent on a number of factors, including, but not limited to, changes in the amount of interest income and financing costs, the method elected by us to accrete the market discount on residential whole loans and the extent of prepayments, realized losses and changes in the composition of our residential whole loan portfolios that may occur during the applicable tax period, including gain or loss on any MBS disposals and whole loan modifications, foreclosures and liquidations; the timing and amount of distributions to stockholders, which are declared and paid at the discretion of our Board and will depend on, among other things, our taxable income, our financial results and overall financial condition and liquidity, maintenance of our REIT qualification and such other factors as the Board deems relevant; our ability to maintain our qualification as a REIT for federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended (or the “Investment Company…

Excerpt shortened here; the source contains the full paragraph.

Current wording

These forward-looking statements include information about possible or assumed future results with respect to our business, financial condition, liquidity, results of operations, plans and objectives. Among the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements that we make are: general economic developments and trends, including the current tensions in international trade, and the performance of the labor, housing, real estate, mortgage finance and broader financial markets; inflation, increases in interest rates and changes in the market (i.e., fair) value of our residential whole loans, MBS, securitized debt and other assets, as well as changes in the value of our liabilities accounted for at fair value through earnings; the effectiveness of hedging transactions; changes in the prepayment rates on residential mortgage assets, an increase of which could result in a reduction of the yield on certain investments in our portfolio and could require us to reinvest the proceeds received by us as a result of such prepayments in investments with lower coupons, while a decrease in which could result in an increase in the interest rate duration of certain investments in our portfolio making their valuation more sensitive to changes in interest rates and could result in lower forecasted cash flows; credit risks underlying our assets, including changes in the default rates and management’s assumptions regarding default rates and loss severities on the mortgage loans in our residential whole loan portfolio; our ability to borrow to finance our assets and the terms, including the cost, maturity and other terms, of any such borrowings; implementation of or changes in government regulations or programs affecting our business (including as a result of the current U.S. Presidential administration); our estimates regarding taxable income the actual amount of which is dependent on a number of factors, including, but not limited to, changes in the amount of interest income and financing costs, the method elected by us to accrete the market discount on residential whole loans and the extent of prepayments, realized losses and changes in the composition of our residential whole loan portfolios that may occur during the applicable tax period, including gain or loss on any MBS disposals and whole loan modifications, foreclosures and liquidations; the timing and amount of distributions to stockholders, which are declared and paid at the discretion of our Board and will depend on, among other things, our taxable income, our financial results and overall financial condition and liquidity, maintenance of our REIT qualification and such other factors as the Board deems relevant; our ability to maintain our qualification as a REIT for federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended (or the “Investment Company…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

At March 31, 2025, we had total assets of approximately $11.5 billion, of which $8.8 billion, or 76%, represented residential whole loans. Our residential whole loans include primarily: (i) loans to finance (or refinance) one-to-four family residential properties that are not considered to meet the definition of a “Qualified Mortgage” in accordance with guidelines adopted by the Consumer Financial Protection Bureau (“Non-QM loans”), (ii) short-term business purpose loans collateralized by residential properties made to non-occupant borrowers that generally intend to rehabilitate or construct residential housing and then refinance or sell the properties (“Single-family transitional loans”), (iii) short-term business purpose loans collateralized by multifamily properties, typically with a loan balance below $10 million, made to non-occupant borrowers that generally intend to rehabilitate or stabilize and then refinance or sell the properties (“Multifamily transitional loans”) (collectively, with Single-family transitional loans, “Transitional loans,” also sometimes referred to as “Rehabilitation loans” or “Fix and Flip loans”), (iv) business purpose loans to finance (or refinance) non-owner occupied one-to-four family residential properties that are rented to one or more tenants (“Single-family rental loans” and, collectively with Transitional loans, “Business purpose loans”), (v) loans primarily secured by residential real estate that were generally either non-performing or re-performing at acquisition (“Legacy RPL/NPL”) and (vi) loans on investor properties that conform to the standards for purchase by a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (“Agency eligible investor loans,” which are included in “Other loans”). In addition, at March 31, 2025, we had approximately $1.8 billion or 16% of total assets invested in investments in securities, including Agency MBS, Term notes backed by MSR collateral, CRT securities and Non-Agency MBS.

Current wording

At June 30, 2025, we had total assets of approximately $11.7 billion, of which $8.8 billion, or 76%, represented residential whole loans. Our residential whole loans include primarily: (i) loans to finance (or refinance) one-to-four family residential properties that are not considered to meet the definition of a “Qualified Mortgage” in accordance with guidelines adopted by the Consumer Financial Protection Bureau (“Non-QM loans”), (ii) business purpose loans primarily originated by Lima One, to finance (or refinance) non-owner occupied one-to-four family residential properties that are rented to one or more tenants (“Single-family rental loans,” (iii) short-term business purpose loans primarily originated by Lima One, collateralized by residential properties made to non-occupant borrowers that generally intend to rehabilitate or construct residential housing and then refinance or sell the properties (“Single-family transitional loans”), (iv) short-term business purpose loans primarily originated by Lima One, collateralized by multifamily properties, typically with a loan balance below $10 million, made to non-occupant borrowers that generally intend to rehabilitate or stabilize and then refinance or sell the properties (“Multifamily transitional loans,” collectively with Single-family transitional loans, “Transitional loans,” also sometimes referred to as “Rehabilitation loans” or “Fix and Flip loans” and, collectively with Single-family rental loans, “Business purpose loans”), (v) loans primarily secured by residential real estate that were generally either non-performing or re-performing at acquisition (“Legacy RPL/NPL”) and (vi) loans on investor properties that conform to the standards for purchase by a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (“Agency eligible investor loans,” which are included in “Other loans”). In addition, at June 30, 2025, we had approximately $1.8 billion, or 16%, of total assets invested in investments in securities, including Agency MBS, CRT securities and Non-Agency MBS.

Previous wording

CPR levels are impacted by, among other things, conditions in the housing market, new regulations, government and private sector initiatives, interest rates, availability of credit to home borrowers, underwriting standards and the economy in general. In particular, CPR presents the annualized constant rate of principal repayment in excess of scheduled principal amortization. CPRs on our residential mortgage securities and whole loans may differ significantly. For the three months ended March 31, 2025, the average CPRs on certain of our loan portfolios were: 13.1% for Non-QM loans, 11.0% for Single-family rental loans, and 6.4% for Legacy RPL/NPL loans. In addition, for the three months ended March 31, 2025, the repayment rate (which includes both scheduled and unscheduled repayments of principal) was 63.0% for our Single-family transitional loans and 36.9% for our Multifamily transitional loans.

Current wording

CPR levels are impacted by, among other things, conditions in the housing market, new regulations, government and private sector initiatives, interest rates, availability of credit to home borrowers, underwriting standards and the economy in general. In particular, CPR presents the annualized constant rate of principal repayment in excess of scheduled principal amortization. CPRs on our residential mortgage securities and whole loans may differ significantly. For the three months ended June 30, 2025, the average CPRs on certain of our loan portfolios were: 15.3% for Non-QM loans, 9.7% for Single-family rental loans, and 8.7% for Legacy RPL/NPL loans. In addition, for the three months ended June 30, 2025, the repayment rate (which includes both scheduled and unscheduled repayments of principal) was 69.8% for our Single-family transitional loans and 39.9% for our Multifamily transitional loans.

Previous wording

It is generally our business strategy to hold our residential mortgage assets as long-term investments. On at least a quarterly basis, excluding investments for which the fair value option has been elected or for which specialized loan accounting is otherwise applied, we assess our ability and intent to continue to hold each asset and, as part of this process, we monitor our investments in securities that are designated as AFS for impairment. A change in our ability and/or intent to continue to hold any of these securities that are in an unrealized loss position, or a deterioration in the underlying characteristics of these securities, could result in our recognizing future impairment charges or a loss upon the sale of any such security.

Current wording

It is generally our business strategy to hold our residential mortgage assets as long-term investments. As part of Lima One’s mortgage banking activities, from time to time, we sell certain loans shortly after origination. On at least a quarterly basis, excluding investments for which the fair value option has been elected or for which specialized loan accounting is otherwise applied, we assess our ability and intent to continue to hold each asset and, as part of this process, we monitor our investments in securities that are designated as AFS for impairment. A change in our ability and/or intent to continue to hold any of these securities that are in an unrealized loss position, or a deterioration in the underlying characteristics of these securities, could result in our recognizing future impairment charges or a loss upon the sale of any such security.

Previous wording

During the first quarter of 2025, fixed-income markets again experienced significant volatility as investors reacted to economic uncertainty related to changing expectations of inflation, economic growth, labor market strength, changes to trade policy, and the implementation of earlier announced tariffs shortly after quarter-end and the ensuing uncertainty and tension. Despite this volatility, fixed-income markets delivered strong returns with the Bloomberg US Aggregate Index returning 2.78% for the first quarter, as Treasury rates moved lower across the yield curve while credit spreads generally widened modestly. During the quarter, we were able to add $875 million of our target assets at attractive yields. These additions included approximately $383 million of Non-QM loans, approximately $223 million of funded originations of Business purpose loans and draws on existing Transitional loans by Lima One, and approximately $268 million of Agency MBS. During the quarter we executed one securitization and issued $283 million of securitized debt.

Current wording

During the second quarter of 2025, fixed-income markets saw significant volatility driven by a combination of substantial changes to U.S. trade policy, rising geopolitical risks, a downgrade of U.S. sovereign debt, increasing expectations of deficit spending and inflation, and several other significant macroeconomic developments. Despite these challenges, fixed-income markets delivered positive returns by quarter-end with the Bloomberg US Aggregate Index returning 1.21% for the second quarter, and the 10-year Treasury rate effectively unchanged from the beginning of the quarter. During the quarter, we were able to add $876 million of our target assets at attractive yields. These additions included approximately $503 million of Non-QM loans, approximately $242 million of funded originations of Business purpose loans and draws on existing Transitional loans by Lima One, and approximately $131 million of Agency MBS. During the quarter, we executed one securitization and issued $291 million of securitized debt.

Previous wording

During the quarter we generated GAAP earnings per share (or EPS) of $0.32 per basic common share and Distributable earnings, a non-GAAP financial measure that excludes the impact of fair value changes and certain other items, of $0.29 per basic common share. At March 31, 2025, our GAAP book value was $13.28 and our Economic book value, a non-GAAP financial measure of our financial position that adjusts GAAP book value by the amount of unrealized mark-to-market gains or losses on our residential whole loans and securitized debt held at carrying value, was $13.84 per common share, each representing decreases of less than 1% as compared to December 31, 2024. During the quarter, we increased the dividend on our common stock from $0.35 per common share to $0.36 per common share, an increase that reflects our Board’s confidence in the earnings power of our portfolio.

Current wording

During the quarter, we generated GAAP earnings per share (or EPS) of $0.22 per basic common share and Distributable earnings, a non-GAAP financial measure that excludes the impact of fair value changes and certain other items, of $0.24 per basic common share. At June 30, 2025, our GAAP book value was $13.12 and our Economic book value, a non-GAAP financial measure of our financial position that adjusts GAAP book value by the amount of unrealized mark-to-market gains or losses on our residential whole loans and securitized debt held at carrying value, was $13.69 per common share, each representing decreases of 1% as compared to March 31, 2025.

Previous wording

For the quarter, our Lima One subsidiary originated Business purpose loans with a maximum unpaid principal balance of $213 million, a decrease from the $236 million originated in the fourth quarter of 2024. During the quarter, we made significant progress in augmenting Lima One’s sales force, made several key hires in leadership positions, and continued to enhance Lima One’s technology platform, including a new borrower portal. During the quarter, Lima One sold recently originated Single-family rental loans with an unpaid principal balance of $67.6 million to third parties and realized gains of $1.9 million. We believe that these sales to third parties help to strengthen Lima One’s franchise value, create additional distribution channels to accommodate future growth, and enhance returns.

Current wording

For the quarter, our Lima One subsidiary originated Business purpose loans with a maximum unpaid principal balance of $217 million, an increase from the $213 million originated in the first quarter of 2025. We continued to make progress augmenting Lima One’s sales force and enhancing Lima One’s technology platform. During the quarter, Lima One sold recently originated Single-family rental loans with an unpaid principal balance of $37.4 million to third parties and realized gains of $1.1 million.

Previous wording

First quarter 2025 portfolio activity and impact on financial results

Current wording

Second quarter 2025 portfolio activity and impact on financial results

Previous wording

At March 31, 2025, our residential mortgage asset portfolio, which includes residential whole loans and REO, and Securities, at fair value, was approximately $10.7 billion, compared to $10.5 billion at December 31, 2024.

Current wording

At June 30, 2025, our residential mortgage asset portfolio, which includes residential whole loans and REO, and Securities, at fair value, was approximately $10.8 billion, compared to $10.7 billion at March 31, 2025.

Previous wording

(3) Primarily includes sales, changes in fair value and changes in the allowance for credit losses.

Current wording

(3) Primarily includes loan sales, changes in fair value and changes in the allowance for credit losses.

Previous wording

At March 31, 2025, our total recorded investment in residential whole loans and REO was $8.9 billion, or 83.3% of our residential mortgage asset portfolio. Of this amount, $4.5 billion are Non-QM loans, $1.3 billion are Single-family rental loans,$1.0 billion are Single-family transitional loans, $0.8 billion are Multifamily transitional loans and $1.1 billion are Legacy RPL/NPL loans. Loan acquisition activity of $606.9 million for the three months ended March 31, 2025 included $161.9 million of Single-family transitional loans (including draws), $383.4 million of Non-QM loans, $55.5 million of Single-family rental loans and $6.1 million of Multifamily transitional loans (including draws). For the three months ended March 31, 2025, we recognized approximately $151.3 million of residential whole loan interest income on our consolidated statements of operations, representing an effective yield of 6.77%, with Single-family transitional loans generating an effective yield of 9.77%, Multifamily transitional loans generating an effective yield of 8.67%, Single-family rental loans generating an effective yield of 6.42%, Non-QM loans generating an effective yield of 5.78% and Legacy RPL/NPL loans generating an effective yield of 7.01%. Since the second quarter of 2021 we have elected the fair value option for all loan acquisitions, and 86% of our total loan portfolio is measured at fair value through earnings. Included in earnings in Other Income/(Loss), net are net gains/losses on these loans of $54.4 million for the three months ended March 31, 2025. At March 31, 2025 and December 31, 2024, we had REO with an aggregate carrying value of $130.6 million and $130.9 million, respectively, which is included in Other assets on our consolidated balance sheets.

Current wording

At June 30, 2025, our total recorded investment in residential whole loans and REO was $9.0 billion, or 83.0% of our residential mortgage asset portfolio. Of this amount, $4.8 billion are Non-QM loans, $1.3 billion are Single-family rental loans, $0.9 billion are Single-family transitional loans, $0.7 billion are Multifamily transitional loans and $1.0 billion are Legacy RPL/NPL loans. Loan acquisition activity of $744.8 million for the three months ended June 30, 2025 included $187.5 million of Single-family transitional loans (including draws), $503.0 million of Non-QM loans, $49.5 million of Single-family rental loans and $4.7 million of Multifamily transitional loans (including draws). For the three months ended June 30, 2025, we recognized approximately $154.6 million of residential whole loan interest income on our consolidated statements of operations, representing an effective yield of 6.85%, with Single-family transitional loans generating an effective yield of 9.79%, Multifamily transitional loans generating an effective yield of 8.39%, Single-family rental loans generating an effective yield of 6.45%, Non-QM loans generating an effective yield of 5.79% and Legacy RPL/NPL loans generating an effective yield of 8.69%. Since the second quarter of 2021 we have elected the fair value option for all loan acquisitions, and 86% of our total loan portfolio is measured at fair value through earnings. Included in earnings in Other Income/(Loss), net are net gains/(losses) on these loans of $33.6 million for the three months ended June 30, 2025. At June 30, 2025 and March 31, 2025, we had REO with an aggregate carrying value of $135.8 million and $130.6 million, respectively, which is included in Other assets on our consolidated balance sheets.

Previous wording

At March 31, 2025, we held $1.8 billion of Securities, at fair value, including $1.6 billion of Agency MBS, $54.7 million of MSR-related assets, $64.5 million of CRT securities and $22.9 million of Non-Agency MBS. For the three months ended March 31, 2025, there were $267.6 million purchases of Agency MBS securities and we sold a CRT security for $2.4 million. The net yield on our Securities, at fair value was 6.07% for the three months ended March 31, 2025, compared to 6.05% for the three months ended December 31, 2024.

Current wording

At June 30, 2025, we held $1.8 billion of Securities, at fair value, including $1.7 billion of Agency MBS, $61.2 million of CRT securities and $22.5 million of Non-Agency MBS. For the three months ended June 30, 2025, we purchased $131.1 million of

Previous wording

For the three months ended March 31, 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.1 million. The total allowance for credit losses recorded on residential whole loans held at carrying value at March 31, 2025 was $10.2 million.

Current wording

For the three months ended June 30, 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.8 million. The total allowance for credit losses recorded on residential whole loans held at carrying value at June 30, 2025 was $9.9 million.

Previous wording

During the first quarter of 2025, we completed one securitization collateralized by $305.0 million UPB of Non-QM loans. This securitization provided longer term, non-recourse, non-mark-to-market financing. During the quarter, interest rates exhibited significant volatility, but ended the quarter lower, while credit spreads widened modestly. The net impact of interest rate fluctuations resulted in net mark-to-market gains on the GAAP value of our investment portfolio. We continue to closely follow the actions of the Federal Reserve regarding the path and timing of changes in interest rates and the impact such rate changes would be expected to have on levels of inflation, the overall economic environment and our business.

Current wording

During the second quarter of 2025, we completed one securitization collateralized by $318.4 million UPB of Non-QM loans. This securitization provided longer term, non-recourse, non-mark-to-market financing. During the quarter, interest rates exhibited significant volatility, and the yield curve steepened, as shorter duration rates ended the quarter lower while rates for longer maturities ended higher. The net impact of interest rate fluctuations resulted in net mark-to-market gains on the GAAP value of our investment portfolio. We continue to closely follow the actions of the Federal Reserve regarding the path and timing of changes in interest rates and the impact such rate changes would be expected to have on levels of inflation, the overall economic environment and our business.

Previous wording

Our GAAP book value per common share was $13.28 as of March 31, 2025. Book value per common share was $13.39 as of December 31, 2024. Economic book value per common share, a non-GAAP financial measure of our financial position that adjusts GAAP book value by the amount of unrealized mark-to-market gains or losses on our residential whole loans and securitized debt held at carrying value, was $13.84 as of March 31, 2025, a decrease from $13.93 as of December 31, 2024. The decrease in GAAP book value during the first quarter of 2025 primarily reflects dividends declared on our common stock in excess of GAAP comprehensive income. The modest decrease in Economic book value during the first quarter of 2025 primarily reflects dividends declared on our common stock in excess of GAAP earnings. For additional information regarding the calculation of Economic book value per share, including a reconciliation to GAAP book value per share, refer to “Reconciliation of GAAP and Non-GAAP Financial Measures” below.

Current wording

Our GAAP book value per common share was $13.12 as of June 30, 2025 and was $13.28 as of March 31, 2025. Economic book value per common share, a non-GAAP financial measure, was $13.69 as of June 30, 2025, a decrease from $13.84 as of March 31, 2025. The decreases in GAAP book value and Economic book value during the second quarter of 2025 primarily reflect dividends declared on our common stock in excess of GAAP comprehensive income. For additional information regarding the calculation of Economic book value per share, including a reconciliation to GAAP book value per share, refer to “Reconciliation of GAAP and Non-GAAP Financial Measures” below.

Previous wording

(1)Includes $253.7 million of cash and cash equivalents, $219.6 million of restricted cash, $53.1 million of Other loans and $17.5 million of capital contributions made to loan origination partners, as well as other assets and other liabilities.

Current wording

(1)Includes $275.7 million of cash and cash equivalents, $269.2 million of restricted cash, $51.5 million of Other loans and $20.2 million of capital contributions made to loan origination partners, as well as other assets and other liabilities.

Previous wording

Our Transitional loans contain various contractual extension features, typically ranging from three to twenty-four months subject to certain conditions, generally including our consent. Transitional loans are generally only extended if the loan is current and in compliance with various other loan terms. Given the short duration of our Transitional loans, maturity extensions are a regular occurrence, irrespective of market conditions. At March 31, 2025, approximately 30% of our Multifamily transitional loans and 30% of our Single-family transitional loans held as of period end had been extended.

Current wording

Our Transitional loans contain various contractual extension features, typically ranging from three to twenty-four months subject to certain conditions, generally including our consent. Transitional loans are generally only extended if the loan is current and in compliance with various other loan terms. Given the short duration of our Transitional loans, maturity extensions are a regular occurrence, irrespective of market conditions. At June 30, 2025, approximately 37% of our Multifamily transitional loans and 29% of our Single-family transitional loans held as of period end had been extended.

Previous wording

We estimate that for the three months ended March 31, 2025, our REIT taxable income was approximately $37.8 million.

Current wording

We estimate that for the six months ended June 30, 2025, our REIT taxable income was approximately $70.7 million.

Previous wording

We estimate that for the three months ended March 31, 2025, our net TRS taxable income (loss) will be $(16.5) million. Net income or loss generated by our TRS subsidiaries is included in consolidated GAAP net income, but may not be included in REIT taxable income in the same period. REIT taxable income generally does not include taxable income of the TRS unless and until it is distributed to the REIT. For example, because our securitization transactions that are treated as a sale for tax purposes are undertaken by a domestic TRS, any gain or loss recognized on the sale is not included in our REIT taxable income until it is distributed by the TRS. Similarly, the income earned from loans, securities, REO and other investments held by our domestic TRS is excluded from REIT taxable income until it is distributed by the TRS. Net income of our foreign domiciled TRS subsidiaries is included in REIT taxable income as if distributed to the REIT in the taxable year it is earned by the foreign domiciled TRS. A TRS may carry forward its net taxable losses indefinitely as net operating losses to offset up to 80% of its taxable income in future tax years, but REIT taxable income generally does not include the net taxable loss of a TRS unless the TRS liquidates for tax purposes.

Current wording

We estimate that for the six months ended June 30, 2025, our net TRS taxable income (loss) will be $(43.3) million. Net income or loss generated by our TRS subsidiaries is included in consolidated GAAP net income, but may not be included in REIT taxable income in the same period. REIT taxable income generally does not include taxable income of the TRS unless and until it is distributed to the REIT. For example, because our securitization transactions that are treated as a sale for tax purposes are undertaken by a domestic TRS, any gain or loss recognized on the sale is not included in our REIT taxable income until it is distributed by the TRS. Similarly, the income earned from loans, securities, REO and other investments held by our domestic TRS is excluded from REIT taxable income until it is distributed by the TRS. Net income of our foreign domiciled TRS subsidiaries is included in REIT taxable income as if distributed to the REIT in the taxable year it is earned by the foreign domiciled TRS. A TRS may carry forward its net taxable losses indefinitely as net operating losses to offset up to 80% of its taxable income in future tax years, but REIT taxable income generally does not include the net taxable loss of a TRS unless the TRS liquidates for tax purposes.

Previous wording

Numerous regulations have been issued pursuant to the Dodd-Frank Act, including regulations regarding mortgage loan servicing, underwriting and loan originator compensation, and others could be issued in the future. As a result, we are unable to fully predict at this time how the Dodd-Frank Act, as well as other laws or regulations that may be adopted in the future, will affect our business, results of operations and financial condition, or the environment for repurchase financing and other forms of borrowing, the investing environment for Agency MBS, Non-Agency MBS and/or residential mortgage loans, the securitization industry, interest rate swap agreements (or Swaps) and other derivatives. We believe that the Dodd-Frank Act and the regulations promulgated thereunder are likely to continue to increase the economic and compliance costs for participants in the mortgage and securitization industries, including us.

Current wording

Numerous regulations have been issued pursuant to the Dodd-Frank Act, including regulations regarding mortgage loan servicing, underwriting and loan originator compensation, and others could be issued in the future. As a result, we are unable to fully predict at this time how the Dodd-Frank Act, as well as other laws or regulations that may be adopted in the future, will affect our business, results of operations and financial condition, or the environment for repurchase financing and other forms of borrowing, the investing environment for Agency MBS, Non-Agency MBS and/or residential mortgage loans, the securitization industry, and the derivative investing environment (particularly Swaps, inclusive of interest rate swap agreements and ERIS swap futures). We believe that the Dodd-Frank Act and the regulations promulgated thereunder are likely to continue to increase the economic and compliance costs for participants in the mortgage and securitization industries, including us.

Previous wording

Services Association of America, et al. v. Consumer Financial Protection Bureau, et al., concluding that the CFPB’s funding structure unconstitutionally violates the Appropriations Clause of the U.S. Constitution, and vacated the payday lending rule that was the subject of challenge. On May 16, 2024, the Supreme Court reversed the Fifth Circuit's decision in the Community Financial case and upheld the CFPB’s funding mechanism as constitutionally permissible. However, future litigation and court rulings may still cast uncertainty on the CFPB’s authority and funding mechanism. Any such uncertainty could adversely impact the cash flow on mortgage loans.

Current wording

In addition, certain court rulings may call into question the CFPB’s authority and other rules promulgated during CFPB’s self-funding structure. For example, in October 2022, the Fifth Circuit Court of Appeals issued an opinion in Community Financial Services Association of America, et al. v. Consumer Financial Protection Bureau, et al., concluding that the CFPB’s funding structure unconstitutionally violates the Appropriations Clause of the U.S. Constitution, and vacated the payday lending rule that was the subject of challenge. On May 16, 2024, the Supreme Court reversed the Fifth Circuit's decision in the Community Financial case and upheld the CFPB’s funding mechanism as constitutionally permissible. However, future litigation and court rulings may still cast uncertainty on the CFPB’s authority and funding mechanism. Any such uncertainty could adversely impact the cash flow on mortgage loans.

Previous wording

For the first quarter of 2025, we had net income available to our common stock and participating securities of $33.0 million, or $0.32 per basic common share and $0.31 per diluted common share, compared to net loss available to common stock and participating securities of $(2.3) million, or $(0.02) per basic and diluted common share, for the fourth quarter of 2024. The increase in net income available to common stock and participating securities in the current period primarily reflects an increase in Other income/(loss), net of $24.5 million for the current quarter compared to an Other income/(loss), net of $(7.1) million in the immediately prior quarter, as well as higher Net Interest Income, partially offset by higher Operating and Other Expense and a lower benefit from income taxes.

Current wording

For the second quarter of 2025, we had net income available to our common stock and participating securities of $22.6 million, or $0.22 per basic common share and $0.21 per diluted common share, compared to net income available to common stock and participating securities of $33.0 million, or $0.32 per basic common share and $0.31 per diluted common share, for the first quarter of 2025. The decrease in net income available to common stock and participating securities in the current period primarily reflects a decrease in Other income/(loss), net to $12.3 million for the current quarter compared to an Other income/(loss), net of $24.5 million in the immediately prior quarter, as well as a $2.3 million increase in preferred stock dividends paid as a result of the higher floating rate payable on our Series C preferred stock, partially offset by lower Compensation and benefits expenses and higher net interest income.

Previous wording

For the first quarter of 2025, our net interest spread and margin (including the impact of swaps) were 1.84% and 2.63%, respectively, compared to a net interest spread and margin (including the impact of swaps) of 1.99% and 2.76%, respectively, for the fourth quarter of 2024. Our net interest income increased by $6.7 million and was $57.5 million for the first quarter of 2025, compared to $50.8 million for the fourth quarter of 2024. For the first quarter of 2025, net interest income, which does not include the benefit of swap carry, includes higher net interest income from our residential whole loan portfolio of $4.4 million, compared to the fourth quarter of 2024, primarily due to lower average balances of, and rates on, our financing agreements and an increase in yields on our residential whole loan portfolio, partially offset by lower average balance of our residential whole loan portfolio and higher average balances of and rates on our securitized debt. Net interest income for the first quarter of 2025 also includes higher net interest income from our Securities, at fair value portfolio of $3.4 million, compared to the fourth quarter of 2024, primarily due to higher average balances of our securities portfolio and lower rates on securities repurchase agreements, partially offset by higher average balances of our securities repurchase agreements. In addition, the first quarter of 2025 had lower interest income of approximately $1.3 million from cash and cash equivalents and other interest earnings assets, as compared to the fourth quarter of 2024.

Current wording

For the second quarter of 2025, our net interest spread and margin (including the impact of net Swap carry) were 1.98% and 2.73%, respectively, compared to a net interest spread and margin (including the impact of net Swap carry) of 1.84% and 2.63%, respectively, for the first quarter of 2025. Our net interest income increased by $3.7 million and was $61.3 million for the second quarter of 2025, compared to $57.5 million for the first quarter of 2025. For the second quarter of 2025, net interest income, which does not include the benefit of net Swap carry, includes higher net interest income from our Securities, at fair value portfolio of $2.4 million, compared to the first quarter of 2025, primarily due to an increase in interest income from a higher yield on, and average balances of, our securities portfolio, partially offset by an increase in expense from higher average balances of our securities repurchase agreements. Net interest income for the second quarter of 2025 also includes higher net interest income from our residential whole loan portfolio of $0.9 million, compared to the first quarter of 2025, primarily due to an increase in interest income from a higher yield on, and average balances of, our residential whole loan portfolio, partially offset by an increase in interest expense from higher average balances of our residential whole loan financing agreements and our securitized debt. In addition, the second quarter of 2025 had higher interest income of approximately $0.5 million from cash and cash equivalents and other interest earnings assets, as compared to the first quarter of 2025.

Previous wording

(6)Reflects the impact of positive or negative swap carry. Positive swap carry results when income from the receive leg of a swap is greater than the expense on the pay leg. Negative swap carry results when income from the receive leg is less than the expense on the pay leg.

Current wording

(6)Reflects the impact of positive or negative net Swap carry. Positive net Swap carry results when income from the receive leg of a Swap is greater than the expense on the pay leg. Negative net Swap carry results when income from the receive leg is less than the expense on the pay leg.

Previous wording

(1)Reflects the difference between the yield on average interest-earning assets and average cost of funds (including net swap income or expense).

Current wording

(1)Reflects the difference between the yield on average interest-earning assets and average cost of funds (including net Swap carry).

Previous wording

(2)Reflects annualized net interest income (including net swap income or expense) divided by average interest-earning assets.

Current wording

(2)Reflects annualized net interest income (including net Swap carry) divided by average interest-earning assets.

Previous wording

The following table presents the components of the net interest spread earned on our Residential whole loans for the quarterly periods presented:

Current wording

The following table presents the components of the net interest spread earned on our Residential mortgage assets for the quarterly periods presented:

Previous wording

(2)Reflects annualized interest expense divided by average balance of agreements with mark-to-market collateral provisions (repurchase agreements), agreements with non-mark-to-market collateral provisions, and securitized debt. Cost of funding shown in the table above includes the impact of the net carry (the difference between swap interest income received and swap interest expense paid) on our Swaps. While we have not elected hedge accounting treatment for Swaps and, accordingly, net carry is not presented in interest expense in our consolidated statement of operations, we believe it is appropriate to allocate net carry to the cost of funding to reflect the economic impact of our Swaps on the funding costs shown in the table above. For the quarter ended March 31, 2025, this decreased the overall funding cost by 60 basis points for our Residential whole loans, 45 basis points for our Business purpose loans, 77 basis points for our Non-QM loans, and 31 basis points for our Legacy RPL/NPL loans. For the quarter ended December 31, 2024, this decreased the overall funding cost by 101 basis points for our Residential whole loans, 80 basis points for our Business purpose loans, 136 basis points for our Non-QM loans, and 19 basis points for our Legacy RPL/NPL loans. For the quarter ended September 30, 2024, this decreased the overall funding cost by 131 basis points for our Residential whole loans, 101 basis points for our Business purpose loans, 175 basis points for our Non-QM loans, and 56 basis points for our Legacy RPL/NPL loans. For the quarter ended June 30, 2024, this decreased the overall funding cost by 128 basis points for our Residential whole loans, 92 basis points for our Business purpose loans, 163 basis points for our Non-QM loans, and 107 basis points for our Legacy RPL/NPL loans. For the quarter ended March 31, 2024, this decreased the overall funding cost by 132 basis points for our Residential whole loans, 99 basis points for our Business purpose loans, 168 basis points for our Non-QM loans, and 107 basis points for our Legacy RPL/NPL loans.

Current wording

(2)Reflects annualized interest expense divided by average balance of agreements with mark-to-market collateral provisions (repurchase agreements), agreements with non-mark-to-market collateral provisions, and securitized debt.

Previous wording

Interest income on our Securities, at fair value portfolio for the first quarter of 2025 increased by $4.9 million, or 25%, to $24.7 million, compared to $19.7 million for the fourth quarter of 2024. This increase primarily reflects a $321.1 million increase in the average balance of this portfolio to $1.6 billion for the first quarter of 2025 from the fourth quarter of 2024.

Current wording

Interest income on our Securities, at fair value portfolio for the second quarter of 2025 increased by $4.1 million, or 17%, to $28.8 million, compared to $24.7 million for the first quarter of 2025. This increase includes $2.6 million of accelerated discount accretion for MSR-related assets that were repaid in full during the quarter, and overall reflects an increase in the yield to 6.60% for the second quarter of 2025 from 6.07% for the first quarter of 2025, and a $118.9 million increase in the average balance of this portfolio to $1.7 billion for the second quarter of 2025 from the first quarter of 2025.

Previous wording

Interest income on our residential whole loans for the first quarter of 2025 decreased by $1.5 million, or 1.0%, to $151.3 million, compared to $152.8 million for the fourth quarter of 2024. This decrease primarily reflects a $241.0 million decrease in the average balance of this portfolio to $8.9 billion for the first quarter of 2025 from the fourth quarter of 2024, partially offset by an increase in the yield to 6.77% for the first quarter of 2025 from 6.65% for the fourth quarter of 2024.

Current wording

Interest income on our residential whole loans for the second quarter of 2025 increased by $3.3 million, or 2.2%, to $154.6 million, compared to $151.3 million for the first quarter of 2025. This increase primarily reflects an increase in the yield to 6.85% for the second quarter of 2025 from 6.77% for the first quarter of 2025, and a $85.3 million increase in the average balance of this portfolio to $9.0 billion for the second quarter of 2025 from the first quarter of 2025.

Previous wording

Our interest expense for the first quarter of 2025 decreased by $4.6 million, or 3.6%, to $123.0 million, from $127.5 million for the fourth quarter of 2024. This decrease primarily reflects a decrease in the average balance of, and rates on, our financing agreements on residential whole loans as well as a decrease in the rates on our securities repurchase agreements, partially offset by higher average balance of our securities repurchase agreements and higher average balance of, and rates on, our securitized debt.

Current wording

Our interest expense for the second quarter of 2025 increased by $4.1 million, or 3.3%, to $127.1 million, from $123.0 million for the first quarter of 2025. This increase primarily reflects an increase in the average balance of our securities repurchase agreements and financing agreements on residential whole loans, as well as an increase in the average balance of, and rates on, our securitized debt, partially offset by lower rates on our financing agreements on residential whole loans.

Previous wording

For the first quarter of 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.1 million compared to a provision for credit losses of $0.4 million for the fourth quarter of 2024. The provision recorded in the current period primarily reflects minor changes to modeling assumptions, partially offset by the run-off of loans held at carrying value.

Current wording

For the second quarter of 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.8 million compared to a provision for credit losses of $0.1 million for the first quarter of 2025. The provision recorded in the current period primarily reflects minor changes to modeling assumptions, partially offset by the run-off of loans held at carrying value.

Previous wording

We had no provision for credit losses on Other Assets for the first quarter of 2025 or the fourth quarter of 2024.

Current wording

We had no provision for credit losses on Other Assets for the second quarter of 2025 or the first quarter of 2025.

Previous wording

For the first quarter of 2025, Other Income/(Loss), net was $24.5 million, compared to Other Income/(Loss), net of $(7.1) million for the fourth quarter of 2024. The components of Other Income/(Loss), net for the first quarter of 2025 and fourth quarter of 2024 are summarized in the table below:

Current wording

For the second quarter of 2025, Other Income/(Loss), net was $12.3 million, compared to Other Income/(Loss), net of $24.5 million for the first quarter of 2025. The components of Other Income/(Loss), net for the second quarter of 2025 and first quarter of 2025 are summarized in the table below:

Previous wording

Compensation and benefits expenses are composed of salaries, annual bonus, stock-based awards, long-term incentives, Lima One sales commissions, related payroll taxes, medical insurance, 401(k) matching and other benefits expenses. Compensation and benefits expense increased by $5.2 million to $23.3 million for the first quarter of 2025, compared to $18.0 million for the fourth quarter of 2024, primarily driven by the accelerated recognition of stock-based compensation in the first quarter of 2025 related to awards made to retirement eligible employees in January 2025.

Current wording

Compensation and benefits expenses are composed of salaries, annual bonus, stock-based awards, long-term incentives, Lima One sales commissions, related payroll taxes, medical insurance, 401(k) matching and other benefits expenses. Compensation and benefits expense decreased by $3.9 million to $19.3 million for the second quarter of 2025, compared to $23.3 million for the first quarter of 2025, primarily as a result of the inclusion of accelerated recognition of stock-based compensation in the first quarter of 2025 related to awards made to retirement eligible employees in January 2025, as well as inclusion in the first quarter of 2025 of 2024 year-end bonus related expenses, and a reduction in the 2025 year-end bonus accrual, partially offset by higher expense recognition from the accrual of severance costs.

Previous wording

Other general and administrative expenses are comprised of leasing and other office expenses, professional fees, insurance costs, board of directors fees, and miscellaneous expenses. Other general and administrative expenses of $10.3 million for the first quarter of 2025 were relatively unchanged when compared to $10.0 million for the fourth quarter of 2024.

Current wording

Other general and administrative expenses are comprised of leasing and other office expenses, professional fees, insurance costs, board of directors fees, and miscellaneous expenses. Other general and administrative expenses of $10.6 million for the second quarter of 2025 were higher when compared to $10.3 million for the first quarter of 2025, primarily driven by rental expenses for the new Lima One headquarters and an increase as a result of the waiver of certain expenses in the first quarter of 2025, partially offset by lower expenses at Lima One and lower professional fees at our corporate offices.

Previous wording

Loan servicing and other related operating expenses are composed of non-recoverable advances, upfront costs on securitization and other fees related to our residential whole loan activities. These expenses decreased compared to the prior quarter period by approximately $3.8 million, or 34.3%, primarily due to lower expenses recognized related to loan securitization activities.

Current wording

Loan servicing and other related operating expenses are composed of non-recoverable advances, upfront costs on securitization and other fees related to our residential whole loan activities. These expenses increased compared to the prior quarter period by approximately $1.3 million, or 18.4%, primarily due to higher expenses recognized related to property preservation, taxes, insurance, and certain other non-recoverable carrying costs on our residential whole loan and REO portfolios.

Previous wording

Three Month Period Ended March 31, 2025 Compared to the Three Month Period Ended March 31, 2024

Current wording

Six Month Period Ended June 30, 2025 Compared to the Six Month Period Ended June 30, 2024

Previous wording

The following table summarizes the changes in our results of operations for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Current wording

The following table summarizes the changes in our results of operations for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2025, we had net income available to our common stock and participating securities of $33.0 million, or $0.32 per basic common share and $0.31 per diluted common share, compared to a net income available to our common stock and participating securities of $15.0 million, or $0.14 per basic and diluted common share, for the three months ended March 31, 2024. The net income available to common stock and participating securities in the current period primarily reflects higher net interest income of $9.7 million, lower Operating and Other Expenses of $3.7 million, an increase in Other Income/(Loss), net of $2.1 million, and a benefit from income taxes compared to a provision in the prior year period.

Current wording

For the six months ended June 30, 2025, we had net income available to our common stock and participating securities of $55.6 million, or $0.53 per basic common share and $0.52 per diluted common share, compared to a net income available to our common stock and participating securities of $48.7 million, or $0.47 per basic and $0.46 per diluted common share, for the six months ended June 30, 2024. The net income available to common stock and participating securities in the current period increased from the prior period primarily as a result of higher net interest income of $17.5 million and lower Operating and Other Expenses of $6.5 million, partially offset by a decrease in Other Income/(Loss), net of $15.5 million, as well as a $2.3 million increase in preferred stock dividends paid as a result of the higher floating rate payable on our Series C preferred stock.