MFA FINANCIAL, INC. (MFA)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Quarterly Report on Form 10-Q, we refer to MFA Financial, Inc. and its subsidiaries as “the Company,” “MFA,” “we,” “us,” or “our,” unless we specifically state otherwise or the context otherwise indicates.

The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the year ended December 31, 2025.

Forward Looking Statements

When used in this Quarterly Report on Form 10-Q, in future filings with the SEC or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as “will,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “could,” “would,” “may,” the negative of these words or similar expressions, are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and, as such, may involve known and unknown risks, uncertainties and assumptions.

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. 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 or 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 Act), including statements regarding the concept release issued by the SEC relating to interpretive issues under the Investment Company Act with respect to the status under the Investment Company Act of certain companies that are engaged in the business of acquiring mortgages and mortgage-related interests; our ability to continue growing our residential whole loan portfolio, which is dependent on, among other things, the supply of loans offered for sale in the market; targeted or expected returns on our investments in recently-originated mortgage loans, the performance of which is, similar to our other mortgage loan investments, subject to, among other things, differences in prepayment risk, credit risk and financing costs associated with such investments; risks associated with the ongoing operation of Lima One Holdings, LLC (including, without limitation, industry competition, unanticipated expenditures relating to or liabilities arising from its operation (including, among other things, a failure to realize management’s assumptions regarding expected growth in business purpose loan (BPL) origination volumes and credit risks underlying BPLs, including changes in the default rates and management’s assumptions regarding default rates and loss severities on the BPLs originated by Lima One)); expected returns on our investments in nonperforming residential whole loans (or NPLs), which are affected by, among other things, the length of time required to foreclose upon, sell, liquidate or otherwise reach a resolution of the property underlying the NPL, home price values, amounts advanced to carry the asset (e.g., taxes, insurance, maintenance expenses, etc. on the underlying property) and the amount ultimately realized upon resolution of the asset; risks associated with our investments in loan originators; the failure to realize the expected expense savings resulting from the anticipated relocation of our corporate headquarters in New York City; risks associated with investing in real estate assets generally, including changes in business conditions and the general economy; and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC. These forward-looking statements are based on beliefs, assumptions and expectations of our future performance, taking into account information currently available. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Business/General

We are a specialty finance company that invests in and finances residential mortgage assets. We invest, on a leveraged basis, in residential whole loans, residential mortgage securities and other real estate assets. Through our wholly-owned subsidiary, Lima One, a leading nationwide originator and servicer of business purpose loans (or BPLs), we also originate and service business purpose loans for real estate investors. Our principal business objective is to deliver shareholder value through the generation of distributable income and through asset performance linked to residential mortgage credit fundamentals. We selectively invest in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return. We are an internally-managed real estate investment trust.

At March 31, 2026, we had total assets of approximately $13.2 billion, of which $8.8 billion, or 66%, 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 March 31, 2026, we had approximately $3.5 billion, or 27%, of total assets invested in investments in Agency MBS.

The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income and the market value of our assets, liabilities and hedges that are accounted for at fair value through earnings, which is driven by numerous factors, including the supply and demand for residential mortgage assets in the marketplace, the terms and availability of adequate financing, general economic and real estate conditions (both on a national and local level), the impact of government actions in the real estate and mortgage sector, and the credit performance of our credit sensitive residential mortgage assets. Changes in these factors, or uncertainty in the market regarding the potential for changes in these factors, can result in significant changes in the value and/or performance of our investment portfolio. Further, our GAAP results may be impacted by market volatility, resulting in changes in market values of certain financial instruments for which changes in fair value are recorded in net income each period, including certain residential whole loans, securitized debt and Swaps. Our net interest income varies primarily as a result of changes in interest rates, the slope of the yield curve (i.e., the differential between long-term and short-term interest rates), borrowing costs (i.e., our interest expense), the level of loan delinquencies, which may result in changes in the amount of non-accrual loans, and prepayment speeds, the behavior of which involves various risks and uncertainties. Interest rates and conditional prepayment rates (or CPRs) (which is an annualized measure of the amount of unscheduled principal prepayments on an asset as a percentage of the asset balance), vary according to the type of investment, conditions in the financial markets, competition and o

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K.

GENERAL

We are a specialty finance company that invests in and finances residential mortgage assets. We invest, on a leveraged basis, in residential whole loans, residential mortgage securities and other real estate assets. Through our wholly-owned subsidiary, Lima One, a leading nationwide originator and servicer of business purpose loans (or BPLs), we also originate and service business purpose loans for real estate investors. Our principal business objective is to deliver shareholder value through the generation of distributable income and through asset performance linked to residential mortgage credit fundamentals. We selectively invest in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return. We are an internally-managed real estate investment trust.

At December 31, 2025, we had total assets of approximately $13.0 billion, of which $8.8 billion, or 68%, 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 December 31, 2025, we had approximately $3.3 billion or 25% of total assets invested in investments in Agency MBS.

The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income and the market value of our assets, liabilities and hedges that are accounted for at fair value through earnings, which is driven by numerous factors, including the supply and demand for residential mortgage assets in the marketplace, the terms and availability of adequate financing, general economic and real estate conditions (both on a national and local level), the impact of government actions in the real estate and mortgage sector, and the credit performance of our credit sensitive residential mortgage assets. Changes in these factors, or uncertainty in the market regarding the potential for changes in these factors, can result in significant changes in the value and/or performance of our investment portfolio. Further, our GAAP results may be impacted by market volatility, resulting in changes in market values of certain financial instruments for which changes in fair value are recorded in net income each period, including certain residential whole loans, securitized debt and Swaps. Our net interest income varies primarily as a result of changes in interest rates, the slope of the yield curve (i.e., the differential between long-term and short-term interest rates), borrowing costs (i.e., our interest expense), the level of loan delinquencies, which may result in changes in the amount of non-accrual loans, and prepayment speeds, the behavior of which involves various risks and uncertainties. Interest rates and conditional prepayment rates (or CPRs) (which is an annualized measure of the amount of unscheduled principal prepayments on an asset as a percentage of the asset balance), vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. Our financial results are also impacted by estimates of credit losses that are required to be recorded when loans that are not accounted for at fair value through net income are acquired or originated, as well as changes in these credit loss estimates that will be required to be made periodically.

With respect to our business operations, increases in interest rates, in general, may, over time, cause: (i) the interest expense associated with our borrowings to increase; (ii) the value of certain of our residential mortgage assets and securitized debt to decline; (iii) coupons on our adjustable-rate assets to reset, on a delayed basis, to higher interest rates; (iv) prepayments on our assets to decline, thereby slowing the amortization of purchase premiums and the accretion of our purchase discounts, and slowing our ability to redeploy capital to generally higher yielding investments; and (v) the value of our derivative hedging instruments, if any, to increase. Conversely, decreases in interest rates, in general, may, over time, cause: (i) the interest expense associated with our borrowings to decrease; (ii) the value of certain of our residential mortgage assets and securitized debt, to increase; (iii) coupons on

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our adjustable-rate assets, on a delayed basis, to lower interest rates; (iv) prepayments on our assets to increase, thereby accelerating the amortization of purchase premiums and the accretion of our purchase discounts, and accelerating the redeployment of our capital to generally lower yielding investments; and (v) the value of our derivative hedging instruments, if any, to decrease. Further, changes in spreads will also impact the valuation of our residential mortgage assets and securitized debt, which could result in volatility in GAAP earnings. In addition, our borrowing costs and credit lines are further affected by the type of collateral we pledge and general conditions in the credit market.

Our investments in residential mortgage assets expose us to credit risk, meaning that we are generally subject to credit losses due to the risk of delinquency, default and foreclosure on the underlying real estate collateral. Our investment process for credit sensitive assets focuses primarily on quantifying and pricing credit risk. With respect to investments in Business purpose and Non-QM loans, we believe that sound underwriting standards, including low LTVs at origination, significantly mitigate our risk of loss. Further, we believe the discounted purchase prices paid on Legacy RPL/NPL loans mitigate our risk of loss in the event that we receive less than 100% of the unpaid principal balance of these investments.

Premiums arise when we acquire an MBS at a price in excess of the aggregate principal balance of the mortgages securing the MBS (i.e., par value) or when we acquire residential whole loans at a price in excess of their unpaid principal balance. Conversely, discounts arise when we acquire an MBS at a price below the aggregate principal balance of the mortgages securing the MBS or when we acquire residential whole loans at a price below their unpaid principal balance. Accretable purchase discounts on these investments are accreted to interest income. Premiums paid to purchase loans are amortized against interest income over the life of the investment using the effective yield method, adjusted for actual prepayment activity. An increase in the prepayment rate, as measured by the CPR, will typically accelerate the amortization of purchase premiums, thereby reducing the interest income earned on these assets.

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 year ended December 31, 2025, the average CPRs on certain of our loan portfolios were: 14.3% for Non-QM loans, 10.5% for Single-family rental loans, and 8.1% for Legacy RPL/NPL loans. In addition, for the year ended December 31, 2025, the repayment rate (which includes both scheduled and unscheduled repayments of principal) was 67.7% for our Single-family transitional loans and 42.5% for our Multifamily transitional loans.

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.

Our residential mortgage investments have longer-term contractual maturities than our non-securitization related financing liabilities, and the interest rates we pay on our non-securitization related financings will typically change at a faster pace than the interest rates we earn on our investments. In order to reduce this interest rate risk exposure, we may enter into derivative instruments, which currently include Swaps.

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Recent Market Conditions and Our Strategy

Following years of volatility, 2025 delivered strong fixed income returns as markets benefited from a shift in monetary policy and continued macroeconomic resilience. Credit spreads tightened and the yield curve steepened over the year, with yields on two-year Treasuries declining by 78 basis points while ten-year Treasuries declined by 43 basis points. The Bloomberg US Aggregate Index returned 7.3% for the year, marking its strongest annual performance in five years. We capitalized on these constructive market conditions by accelerating the pace of capital deployment, benefiting from increased price stability and a favorable lending environment. During 2025, we were able to add $4.8 billion of our target assets at attractive yields. These additions included $2.1 billion of Agency MBS, $1.8 billion of Non-QM loans, and approximately $900 million of funded originations of Business purpose loans and draws on existing Transitional loans at Lima One. During 2025, we executed five securitizations and issued $1.7 billion of securitized debt.

During the year, we generated GAAP earnings per share (or EPS) of $1.31 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 $1.00 per basic common share. For the year, compensation and benefits and other G&A expenses were $119.4 million, a 9.5% reduction from $131.9 million incurred in 2024 attributable to expense reduction initiatives. At December 31, 2025, our GAAP book value was $13.20 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 $13.75 per common share, each down approximately 1% compared to December 31, 2024. During the year, we declared dividends totaling $1.44 per common share.

For the year, our Lima One subsidiary originated Business purpose loans with a maximum unpaid principal balance of $0.9 billion, a decrease from the $1.4 billion originated in 2024. During the year, we expanded Lima One’s sales force, invested in technology initiatives that we expect to improve the borrower experience, and made key hires to Lima One’s leadership team in strategic growth areas. In early 2026, we relaunched multifamily lending and began funding loans through our newly established wholesale channel, which represent two key areas of growth for Lima One. During 2025, Lima One sold $212.9 million of recently originated single-family rental loans to third parties and realized gains of $6.1 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.

For additional information regarding the calculation of Distributable earnings and Economic book value per share, including a reconciliation to GAAP Net Income and GAAP book value per share, respectively, refer to “Reconciliation of GAAP and Non-GAAP Financial Measures” below.

2025 Portfolio Activity and impact on financial results

At December 31, 2025, our residential mortgage asset portfolio, which includes residential whole loans and REO, and Securities, at fair value, was approximately $12.3 billion compared to $10.5 billion at December 31, 2024.

The following table presents the activity for our residential mortgage asset portfolio for the year ended December 31, 2025:

(1)Primarily includes principal repayments and sales of REO.

(2)Includes draws on previously originated Transitional loans.

(3)Primarily includes sales of residential whole loans and securities, changes in fair value and changes in the allowance for credit losses.

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At December 31, 2025, our total recorded investment in residential whole loans and REO was $8.9 billion, or 72.7% of our residential mortgage asset portfolio. Of this amount, $5.3 billion are Non-QM loans, $1.2 billion are Single-family rental loans, $0.7 billion are Single-family transitional loans, $0.5 billion are Multifamily transitional loans and $1.0 billion are Legacy RPL/NPL loans. Loan acquisition activity of $2.7 billion during 2025 included $655.7 million of Single-family transitional loans (including draws), $1.8 billion of Non-QM loans, $235.4 million of Single-family rental loans and $14.8 million of Multifamily transitional loans (including draws). During 2025, we recognized approximately $605.6 million of residential whole loan interest income on our consolidated statements of operations, representing an effective yield of 6.74%, with Single-family transitional loans generating an effective yield of 9.48%, Multifamily transitional loans generating an effective yield of 8.54%, Single-family rental loans generating an effective yield of 6.43%, Non-QM loans generating an effective yield of 5.87% and Legacy RPL/NPL loans generating an effective yield of 7.92%. Since the second quarter of 2021 we have elected the fair value option for all loan acquisitions, and 88% of our total loan portfolio is measured at fair value through earnings. Included in earnings in Other Income/(Loss), net are net gains on these loans of $133.7 million for the year ended December 31, 2025. At December 31, 2025 and 2024, we had REO with an aggregate carrying value of $135.0 million and $130.9 million, respectively, which is included in Other assets on our consolidated balance sheets.

At December 31, 2025, we held $3.4 billion of Securities, at fair value, including $3.3 billion of Agency MBS, $34.9 million of CRT securities and $22.1 million of Non-Agency MBS. During 2025, we purchased $2.1 billion of Agency MBS and sold $27.0 million of CRT securities and $17.5 million of Agency MBS. The net yield on our Securities, at fair value was 5.93% for 2025, compared to 6.59% for 2024.

For the year ended December 31, 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.9 million. The total allowance for credit losses recorded on residential whole loans held at carrying value at December 31, 2025 was $9.7 million.

During 2025, we completed five Non-QM loan securitizations with unpaid principal balance (or UPB) of loans sold of $1.8 billion. These securitizations provide longer term, non-recourse, fixed rate financing. 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.

Our GAAP book value per common share was $13.20 as of December 31, 2025. Book value per common share decreased from $13.39 as of December 31, 2024. Economic book value per common share, a non-GAAP financial measure, was $13.75 as of December 31, 2025, a decrease from $13.93 as of December 31, 2024. The decrease in GAAP book value and Economic book value during 2025 primarily reflects dividends declared on our common stock in excess of our 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.

For more information regarding market factors which impact our portfolio, see Part I, Item 1A. “Risk Factors” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” of this Annual Report on Form 10-K.

Information About Our Assets

The table below presents certain information about our asset allocation at December 31, 2025:

ASSET ALLOCATION

(1)Includes $213.2 million of cash and cash equivalents, $173.5 million of restricted cash, $57.1 million of other securities, $51.0 million of Other loans and $20.2 million of capital contributions made to loan origination partners, as well as other assets and other liabilities.

(2)Total Debt/Net Equity ratio represents the sum of borrowings under our financing agreements as a multiple of net equity allocated.

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Residential Whole Loans

The following table presents the contractual maturities of our residential whole loan portfolios at December 31, 2025. Amounts presented do not reflect estimates of prepayments or scheduled amortization.

(1)Excludes an allowance for credit losses of $1.7 million at December 31, 2025.

(2)Excludes an allowance for credit losses of $2.0 million at December 31, 2025.

(3)Excludes an allowance for credit losses of $6.0 million at December 31, 2025.

The following table presents, at December 31, 2025, the dollar amount of certain of our residential whole loans, contractually maturing after one year, and indicates whether the loans have fixed interest rates or adjustable interest rates:

(1)Includes loans on which borrowers have defaulted and are not making payments of principal and/or interest as of December 31, 2025.

(2)Excludes an allowance for credit losses.

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 December 31, 2025, approximately 66% of our Multifamily transitional loans and 31% of our Single-family transitional loans held as of period end had been extended.

For additional information regarding our residential whole loan portfolios, including information about delinquency trends, see Note 3 to the consolidated financial statements, included under Item 8 of this Annual Report on Form 10-K.

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Securities, at Fair Value

The following table presents information with respect to our Securities, at fair value at December 31, 2025 and December 31, 2024:

(1)Weighted average yield is annualized interest income divided by average amortized cost basis for Securities, at fair value held at December 31, 2025 and December 31, 2024.

Tax Considerations

Current period estimated taxable income

We estimate that for 2025, our REIT taxable income was approximately $127.4 million.

Key differences between GAAP net income and REIT Taxable Income

Residential Whole Loans and Securities

The determination of taxable income attributable to residential whole loans and securities is dependent on a number of factors, including principal payments, defaults, loss mitigation efforts and loss severities. In estimating taxable income for such investments during the year, management considers estimates of the amount of discount expected to be accreted. Such estimates require significant judgment and actual results may differ from these estimates.

Potential timing differences can arise with respect to the accretion of discount and amortization of premium into income as well as the recognition of gain or loss for tax purposes as compared to GAAP. For example: a) while our REIT uses fair value accounting for GAAP in some instances, it generally is not used for purposes of determining taxable income; b) impairments generally are not recognized by us for income tax purposes until the asset is written-off or sold; c) capital losses may only be recognized by us to the extent of our capital gains; capital losses in excess of capital gains generally are carried over by us for potential offset against future capital gains; and d) tax hedge gains and losses resulting from the termination of Swaps by us generally are amortized over the remaining term of the Swap.

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Securitization

Generally, securitization transactions for GAAP and tax can be characterized as either sales or financings, depending on transaction type, structure and available elections. For GAAP purposes, our securitizations have generally been treated as on-balance sheet financing transactions. For tax purposes, they have been characterized primarily as sale transactions.

Where a securitization has been characterized as a sale, gain or loss is recognized for tax purposes. In addition, we own or may in the future acquire interests in securitization and/or re-securitization trusts, in which several of the classes of securities are or will be issued with original issue discount (or OID). As the holder of the retained interests in the trust, for tax purposes we generally will be required to include OID in our current gross interest income over the term of the applicable securities as the OID accrues. The rate at which the OID is recognized into taxable income is calculated using a constant rate of yield to maturity, with realized losses impacting the amount of OID recognized in REIT taxable income once they are actually incurred. REIT taxable income may be recognized in excess of economic income (i.e., OID) or in advance of the corresponding cash flow from these assets, thereby affecting our dividend distribution requirement to stockholders.

For securitization and/or re-securitization transactions that were treated as a sale of the underlying collateral for tax purposes, the unwinding of any such transaction will likely result in taxable income or loss. Given that securitization and re-securitization transactions are typically accounted for as financing transactions for GAAP purposes, such income or loss is not likely to be recognized for GAAP. As a result, the income recognized from securitization and re-securitization transactions may differ for tax and GAAP purposes.

Whether our investments are held by our REIT or one of its Taxable REIT Subsidiaries (TRS)

We estimate that for 2025, our net TRS taxable income (loss) will be $(56.0) 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.

Consequently, our REIT taxable income calculated in a given period may differ significantly from our GAAP net income.

Recent tax legislation

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OBBBA”), which includes several changes to U.S. federal income tax law, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. The Company is still evaluating the potential impacts of the OBBBA; however, the Company does not anticipate it will have a material impact on the Company’s financial statements.

Results of Operations

In this section, we discuss the results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion related to our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the Year Ended December 31, 2024, which was filed with the SEC on February 20, 2025, and is available on the SEC’s website at www.sec.gov and on our website at www.mfafinancial.com.

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Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

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

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General

For 2025, we had net income available to our common stock and participating securities of $136.5 million, or $1.31 per basic common share and $1.30 per diluted common share, compared to net income available to our common stock and participating securities for 2024 of $86.4 million, or $0.83 per basic common share and $0.82 per diluted common share. The net income available to common stock and participating securities in the current period increased from the prior period primarily as a result of $28.4 million higher net interest income, $15.4 million lower operating and other expenses, and $15.5 million higher Other income/(loss), net, partially offset by a $7.4 million increase in preferred stock dividends paid as a result of the higher floating rate payable on our Series C preferred stock.

Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of interest-earning assets and interest-bearing liabilities and the corresponding interest rates earned or paid. Our net interest income varies primarily as a result of changes in interest rates, the slope of the yield curve (i.e., the differential between long-term and short-term interest rates), borrowing costs (i.e., our interest expense), the level of loan delinquencies, which may result in changes in the amount of non-accrual loans, and prepayment speeds on our investments. Interest rates and CPRs (which measure the amount of unscheduled principal prepayment on a bond or loan as a percentage of its unpaid balance) vary according to the type of investment, conditions in the financial markets and other factors, none of which can be predicted with any certainty.

The changes in average interest-earning assets and average interest-bearing liabilities and their related yields and costs are discussed in greater detail below under “Interest Income” and “Interest Expense.”

For 2025, our net interest spread and margin (including the impact of net Swap carry) were 1.84% and 2.55%, respectively, compared to a net interest spread and margin (including the impact of net Swap carry) of 2.10% and 2.91%, respectively, for 2024. Our net interest income, which does not include the benefit of net Swap carry, increased by $28.4 million, or 14.0%, to $231.1 million from $202.7 million for 2024. Net interest income for 2025 included approximately $23.3 million of higher net interest income for our Securities, at fair value portfolio compared to 2024, primarily due to higher amounts invested in Agency MBS, partially offset by a related increase in average balance of securities financing agreements. In addition, net interest income for 2025 included $12.7 million higher net interest income from our residential whole loan portfolio compared to 2024, primarily due to a decrease in average balances of, and rates on, residential whole loan financing agreements, partially offset by an increase in average balances of, and rates on, our securitized debt and a decrease in amounts invested in the loan portfolio. Net interest income for 2025 also had approximately $11.1 million less interest income from cash and other interest earning assets compared to 2024.

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Analysis of Net Interest Income

The following table sets forth certain information about the average balances of our assets and liabilities and their related yields and costs for the years ended December 31, 2025 and 2024. Average yields are derived by dividing interest income by the average amortized cost basis of the related assets, and average costs are derived by dividing interest expense by the average balance of the related liabilities, for the periods shown. The yields and costs may include premium amortization and discount accretion which are considered adjustments to interest income or expense.

(1)Yields presented throughout this Annual Report on Form 10-K are calculated using average amortized cost basis data for residential whole loans and securities, which excludes unrealized gains and losses. For GAAP reporting purposes, securities purchases and sales are reported on the trade date. Average amortized cost basis data used to determine yields is calculated based on the settlement date of the associated purchase or sale as interest income is not earned on purchased assets and continues to be earned on sold assets until settlement date.

(2)Includes average interest-earning cash, cash equivalents and restricted cash.

(3)Includes both securitized debt, at carrying value and securitized debt, at fair value.

(4)Collateralized financing agreements include the following: mark-to-market asset based financing and non-mark-to-market asset based financing. For additional information, see Note 6, included under Item 8 of this Annual Report on Form 10-K.

(5)Net interest rate spread reflects the difference between the yield on average interest-earning assets and average cost of funds.

(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.

(7)Net interest margin reflects net interest income (including net Swap carry) divided by average interest-earning assets.

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Rate/Volume Analysis

The following table presents the extent to which changes in interest rates (yield/cost) and changes in the volume (average balance) of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) the changes attributable to changes in volume (changes in average balance multiplied by prior rate); (ii) the changes attributable to changes in rate (changes in rate multiplied by prior average balance); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately, based on absolute values, to the changes due to rate and volume.

The following table presents certain quarterly information regarding our net interest spread and net interest margin for the quarterly periods presented:

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

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

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

(1)Reflects annualized interest income on Residential whole loans divided by average amortized cost basis of Residential whole loans. Excludes servicing costs.

(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.

(3)Reflects 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 Swap carry is not presented in interest expense in our consolidated statement of operations, we believe it is appropriate to allocate net Swap carry by asset class to reflect the economic impact of our Swaps on the net interest spread shown in the table above.

Interest Income

Interest income on our Securities, at fair value portfolio for 2025 increased $60.1 million to $121.3 million from $61.1 million for 2024. This increase primarily reflects a higher average amortized cost basis of the portfolio of $1.1 billion due to purchases of Agency MBS, partially offset by a decrease in the net yield on our Securities, at fair value portfolio to 5.93% for 2025, compared to 6.59% for 2024.

Interest income on our residential whole loans for 2025 decreased by $27.9 million, or 4.4%, to $605.6 million compared to $633.6 million for 2024. This decrease is primarily due to a $0.4 billion lower average balance of this portfolio to $9.0 billion for 2025 from $9.4 billion for 2024.

Interest income on our cash and other interest earning assets for 2025 decreased by $11.1 million to $18.2 million, compared to $29.3 million for 2024. This decrease primarily reflects a $28.7 million lower average balance of other interest earning assets as well as a lower yield earned on our cash and cash equivalents to 3.32% for 2025 from 4.12% for 2024.

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Interest Expense

Our interest expense for 2025 decreased by $7.3 million, or 1.4%, to $514.0 million, from $521.2 million for 2024. This decrease primarily reflects the lower overall average balances of, and rates on, our residential whole loan financing agreements, lower rates on our securities repurchase agreements, as well as lower expense for convertible senior notes as these notes matured in June 2024 and were repaid in full. These decreases were partially offset by the impact of higher average balances of, and rates on, our securitized debt, higher average balances of our securities repurchase agreements, and $2.2 million and $0.4 million of higher interest expense related to our 9.00% and 8.875% senior notes issued in April and January 2024, respectively.

Provision for Credit Losses on Residential Whole Loans Held at Carrying Value

For 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.9 million compared to a reversal of provision of $3.1 million for 2024. The provision for the current period primarily reflects minor changes to modeling assumptions, partially offset by the run-off of loans held at carrying value. The reversal of provision recorded in 2024 primarily reflects the run-off of loans held at carrying value and minor changes to modeling assumptions.

Provision for Credit Losses on Other Assets

For 2025, we had no provision for credit losses on Other Assets. For 2024, we recorded a provision for credit losses on Other Assets of $1.1 million, related to an uncollectible receivable from an unrelated third-party servicer.

Other Income/(Loss), net

For 2025, Other Income/(Loss), net was $101.0 million, compared to an Other Income/(Loss), net of $85.4 million for 2024.  The components of Other (Loss)/Income, net for 2025 and 2024 are summarized in the table below:

(1) Includes realized credit losses, net of recoveries, on liquidated residential whole loans or residential whole loans that were transferred to REO of $(26.6) million and $(11.5) million in 2025 and 2024, respectively.

During the past two years we have seen an increase in realized credit losses on our residential whole loans at fair value, as we have worked to accelerate the resolution of certain non-performing loans. While we cannot predict the timing or amount of future credit losses, we expect that credit losses may remain heightened relative to historical levels in the short term as we continue to work to accelerate the resolution of certain non-performing loans. Credit losses are generally initially recognized in “Net gain/(loss) on residential whole loans measured at fair value through earnings” as unrealized losses and are later reclassified to “Other Income/(Loss), net” when the credit loss is realized.

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Operating and Other Expense

Operating and other expenses are composed of compensation and benefits, other general and administrative, loan servicing and other related operating expenses and amortization of Lima One intangible assets.

Compensation and benefits expenses are composed of salaries, annual bonus, stock-based awards, long-term incentives, Lima One origination related commissions, related payroll taxes, medical insurance, 401(k) matching and other benefits expenses. Compensation and benefits expense decreased $10.0 million to $77.7 million for 2025, compared to $87.7 million for 2024, primarily driven by lower expense recognition from cash bonus and stock-based awards, lower accrual of severance costs, and a reduction in Lima One salary expenses from reduced headcount.

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 decreased by $2.5 million to $41.7 million for 2025 compared to $44.3 million for 2024, primarily as a result of lower expense recognized on the disposal of fixed assets at Lima One, as well as lower costs associated with IT infrastructure, industry conferences and related travel expenses, and lower professional fees, partially offset by higher rental expense for the new Lima One headquarters.

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 in 2025 compared to 2024 by approximately $1.9 million, or 5.3%, primarily due to lower expenses recognized on upfront costs on securitizations, with five securitizations in 2025 compared to eight in 2024, partially offset by higher expenses recognized related to property preservation, taxes, insurance, and certain other non-recoverable carrying costs on our residential whole loan and REO portfolios.

Selected Financial Ratios

The following table presents information regarding certain of our financial ratios at or for the dates presented:

(1)Reflects annualized net income divided by average total assets.

(2)Reflects annualized net income divided by average total stockholders’ equity.

(3)Reflects dividends declared per share of common stock divided by earnings per share. The ratio has not been calculated for periods where earnings per share is negative as the calculations are not meaningful.

(4)Reflects total average stockholders’ equity divided by total average assets.

(5)Represents the sum of our borrowings under financing agreements and payable for unsettled purchases divided by stockholders’ equity.

(6)Represents the sum of our borrowings under financing agreements (excluding securitized debt and other non-recourse debt) and payable for unsettled purchases divided by stockholders’ equity.

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Reconciliation of GAAP and Non-GAAP Financial Measures

Reconciliation of GAAP Net Income to non-GAAP Distributable Earnings

“Distributable earnings” is a non-GAAP financial measure of our operating performance, within the meaning of Regulation G and Item 10(e) of Regulation S-K, as promulgated by the Securities and Exchange Commission. Distributable earnings is determined by adjusting GAAP net income/(loss) by removing certain unrealized gains and losses, primarily on residential mortgage investments, associated debt, and hedges that are, in each case, accounted for at fair value through earnings, certain realized gains and losses, as well as certain non-cash expenses and securitization-related transaction costs. Realized gains and losses arising from loans sold to third-parties by Lima One shortly after the origination of such loans are included in Distributable earnings. The transaction costs are primarily comprised of costs only incurred at the time of execution of our securitizations and include costs such as underwriting fees, legal fees, diligence fees, bank fees and other similar transaction related expenses. These costs are all incurred prior to or at the execution of our securitizations and do not recur. Recurring expenses, such as servicing fees, custodial fees, trustee fees and other similar ongoing fees are not excluded from Distributable earnings. Management believes that the adjustments made to GAAP earnings result in the removal of (i) income or expenses that are not reflective of the longer term performance of our investment portfolio, (ii) certain non-cash expenses, and (iii) expense items required to be recognized solely due to the election of the fair value option on certain related residential mortgage assets and associated liabilities. Distributable earnings is one of the factors that our Board of Directors considers when evaluating distributions to our shareholders. Accordingly, we believe that the adjustments to compute Distributable earnings specified below provide investors and analysts with additional information to evaluate our financial results.

Distributable earnings should be used in conjunction with results presented in accordance with GAAP. Distributable earnings does not represent and should not be considered as a substitute for net income or cash flows from operating activities, each as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of our GAAP net income/(loss) used in the calculation of basic EPS to our non-GAAP Distributable earnings for the quarterly periods below:

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Selected Financial Ratios (using Distributable earnings)

The following table presents information regarding certain of our financial ratios at or for the dates presented:

(1)Reflects annualized Distributable earnings before preferred dividends divided by average total assets.

(2)Reflects annualized Distributable earnings before preferred dividends divided by average total stockholders’ equity.

(3)Reflects dividends declared per share of common stock divided by Distributable earnings per share.

Reconciliation of GAAP Book Value per Common Share to non-GAAP Economic Book Value per Common Share

“Economic book value” is a non-GAAP financial measure of our financial position. To calculate our Economic book value, our portfolios of Residential whole loans and securitized debt held at carrying value are adjusted to their fair value, rather than the carrying value that is required to be reported under the GAAP accounting model applied to these financial instruments. These adjustments are also reflected in the table below in our end of period stockholders’ equity. Management considers that Economic book value provides investors with a useful supplemental measure to evaluate our financial position as it reflects the impact of fair value changes for all of our investment activities, irrespective of the accounting model applied for GAAP reporting purposes. Economic book value does not represent and should not be considered as a substitute for Stockholders’ Equity, as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of our GAAP book value per common share to our non-GAAP Economic book value per common share as of the quarterly periods below:

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements include the accounts of all of our subsidiaries. The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements, giving due consideration to materiality. Actual results could differ from these estimates.

Our accounting policies are described in Note 2 to the consolidated financial statements, included under Item 8 of this Annual Report on Form 10-K. Management believes the policies which more significantly rely on estimates and judgments to be as follows:

Fair Value Measurements - Residential Whole Loans

GAAP requires the categorization of fair value measurements into three broad levels that form a hierarchy. The following describes the valuation methodologies used for our financial instrument investments categorized as level 3 in the valuation hierarchy, which require the most significant estimates and judgments to be made.

We determine the fair value of our residential whole loans after considering valuations obtained from third-parties that specialize in providing valuations of residential mortgage loans. The valuation approach applied generally depends on whether the loan is considered performing or non-performing at the date the valuation is performed. For performing loans, estimates of fair value are derived using a discounted cash flow approach, where estimates of cash flows are determined from the scheduled payments, adjusted using forecasted prepayment, default and loss given default rates. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, the estimated value of the collateral, expected costs and estimated home price levels. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Indications of loan value such as actual trades, bids, offers and generic market color may be used in determining the appropriate discount yield. The estimation of cash flows used in pricing models is inherently subjective and imprecise. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in fair value. See “Quantitative and Qualitative Disclosures about Market Risk” for further information about the sensitivity of our investment portfolio to changes in market factors, particularly market interest rates.

See Note 13 to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for information regarding the assumptions used in valuing our residential whole loans.

Residential whole loans, at fair value are recorded on our consolidated balance sheets at fair value and changes in their fair value are recorded through earnings. We held $7.7 billion and $7.5 billion of residential whole loans, at fair value, at December 31, 2025 and 2024, respectively, which represented 59.2% and 65.8% of our total assets at those dates, respectively. Residential whole loans, at fair value recorded valuation changes of $133.7 million, $46.0 million and $89.9 million during the years ended December 31, 2025, 2024, and 2023, respectively.

With respect to Residential whole loans, at carrying value, the fair value for these loans is disclosed in the footnotes to the consolidated financial statements and changes in their fair value do not impact earnings. We held $1.1 billion and $1.3 billion of residential whole loans, at carrying value, at December 31, 2025 and 2024, respectively, which represented 8.4% and 11.4% of our total assets at those dates, respectively. Residential whole loans, at carrying value experienced net fair value changes of $25.4 million, $20.4 million and $34.6 million during the years ended December 31, 2025, 2024, and 2023, respectively.

Recent Accounting Standards to Be Adopted in Future Periods

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (or ASU 2024-03). The amendments in ASU 2024-03 primarily require entities to disclose additional details regarding certain expenses on both an annual and interim basis. ASU 2024-03 is effective for public business entities for fiscal years beginning after December 15, 2026. Early adoption is permitted. We do not expect that the adoption of ASU 2024-03 will have a significant impact on our financial statement disclosures.

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LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of cash generally consist of borrowings under repurchase agreements and other collateralized financings, payments of principal and interest we receive on our investment portfolio, cash generated from our operating results and, to the extent such transactions are entered into, proceeds from capital market and structured financing transactions. Our most significant uses of cash are generally to pay principal and interest on our financing transactions, to purchase and originate residential mortgage assets, to make dividend payments on our capital stock, to fund our operations, to meet margin calls and to make other investments that we consider appropriate.

We seek to employ a diverse capital raising strategy under which we may issue capital stock and other types of securities. To the extent we raise additional funds through capital market transactions, we currently anticipate using the net proceeds from such transactions to acquire additional residential mortgage-related assets, consistent with our investment policy, and for working capital, which may include, among other things, the repayment of our financing transactions. There can be no assurance, however, that we will be able to access the capital markets at any particular time or on any particular terms. We have available for issuance an unlimited amount (subject to the terms and limitations of our charter) of common stock, preferred stock, depository shares representing preferred stock, warrants, debt securities, rights and/or units pursuant to our universal shelf registration statement and, until September 27, 2025, we had approximately 2.0 million shares of common stock available for issuance pursuant to our DRSPP shelf registration statement. The DRSPP shelf registration statement expired by its terms on September 27, 2025. We did not issue any shares pursuant to the DRSPP during 2025.

In January 2024, we completed the issuance of $115.0 million in aggregate principal amount of our 8.875% Senior Notes due 2029 (or the 8.875% Senior Notes) in an underwritten public offering. The 8.875% Senior Notes are our senior unsecured obligations and bear interest at a rate equal to 8.875% per year, payable in cash quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on May 15, 2024, and are expected to mature on February 15, 2029, unless earlier redeemed. We may redeem the 8.875% Senior Notes in whole or in part at any time at our option on or after February 15, 2026, at a redemption price equal to 100% of the outstanding principal amount of the 8.875% Senior Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. The total net proceeds to us from the offering of the 8.875% Senior Notes, after deducting the underwriter’s discount and commissions and offering expenses, were approximately $110.6 million. The 8.875% Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 9.83%.

On August 15, 2025, we entered into a distribution agreement pursuant to the terms of which we may, from time to time, offer and sell shares of our Series B Preferred Stock and/or our Series C Preferred Stock having an aggregate gross sales price of up to $100.0 million, through various sales agents in transactions deemed to be “at-the-market” offerings under federal securities laws (or the Preferred Stock ATM Program). We sold an aggregate of approximately 411,000 shares of preferred stock through the Preferred Stock ATM Program during 2025 for gross sales proceeds of approximately $9.5 million. As of December 31, 2025, approximately $90.5 million remained available under the current authorization for the Preferred Stock ATM Program.

On February 29, 2024, we entered into a distribution agreement pursuant to which we may offer and sell shares of our common stock having an aggregate gross sales price of up to $300 million, from time to time, through various sales agents in transactions deemed to be “at-the-market” offerings under federal securities laws (or the Common Stock ATM Program). On August 15, 2025, this agreement was terminated and a new distribution agreement with substantially the same terms was executed. During 2025, we did not sell any shares of common stock through the Common Stock ATM Program. At December 31, 2025, $300 million remained available under the Common Stock ATM Program.

In February 2024, we announced our Board had authorized a $200 million stock repurchase program with respect to our common stock, which was in effect through the end of 2025. Approximately $190 million remained available for repurchase under the stock repurchase program upon its expiration. Refer to Part II, Item 5 for further information about the stock repurchase program. During 2025, we repurchased 1,026,117 shares of our common stock through the stock repurchase program at an average cost of $9.76 per share and a total cost of approximately $10.0 million, net of fees and commissions paid to the sales agent of approximately $10,000. In February 2026, our Board authorized a new $200 million stock repurchase program with respect to the Company’s common stock, which will be in effect through December 31, 2028.

In April 2024, we completed the issuance of $75.0 million in aggregate principal amount of our 9.00% Senior Notes due 2029 (or the 9.00% Senior Notes) in an underwritten public offering. The 9.00% Senior Notes are our senior unsecured obligations and bear interest at a rate equal to 9.00% per year, payable in cash quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on August 15, 2024, and are expected to mature on August 15, 2029, unless earlier redeemed. We may redeem the 9.00% Senior Notes in whole or in part at any time at our option on or after August 15, 2026, at a redemption price equal to 100% of the outstanding principal amount of the 9.00% Senior Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. The total net proceeds to us from the offering of the 9.00% Senior Notes, after deducting the

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underwriter’s discount and commissions and offering expenses, were approximately $72.0 million. The 9.00% Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 9.94%.

In February 2023, our Board authorized a repurchase program for our 6.25% Convertible Senior Notes due 2024 (or the Convertible Senior Notes) pursuant to which we could have repurchased up to $100 million of the Convertible Senior Notes. During the three months ended March 31, 2024, we repurchased $39.9 million principal amount of our Convertible Senior Notes for $39.8 million and recorded a loss of $0.1 million to Other Income/(Loss), net on the consolidated statement of operations. During the year ended December 31, 2023, we repurchased $20.4 million principal amount of the Convertible Senior Notes for $20.2 million and recorded a gain of $0.1 million to Other Income/(Loss), net on the consolidated statement of operations. In June 2024, the Convertible Senior Notes matured and we repaid the amount in full.

Financing Agreements

Our borrowings under financing agreements include a combination of shorter term and longer arrangements. Certain of these arrangements are collateralized directly by our residential mortgage investments or otherwise have recourse to us, while securitized debt financing is non-recourse financing. Further, certain of our financing agreements contain terms that allow the lender to make margin calls on us based on changes in the value of the underlying collateral securing the borrowing. As of December 31, 2025, we had $4.3 billion of total unpaid principal balance related to asset-backed financing agreements with mark-to-market collateral provisions and $6.5 billion of total unpaid principal balance related to asset-backed financing agreements that do not include mark-to-market collateral provisions. Repurchase agreements and other forms of collateralized financing are uncommitted and renewable at the discretion of our lenders and, as such, our lenders could determine to reduce or terminate our access to future borrowings at virtually any time. The terms of the repurchase transaction borrowings under our master repurchase agreements, as such terms relate to repayment, margin requirements and the segregation of all securities that are the subject of repurchase transactions, generally conform to the terms contained in the standard master repurchase agreement published by the Securities Industry and Financial Markets Association (or SIFMA) or the global master repurchase agreement published by SIFMA and the International Capital Market Association. In addition, each lender typically requires that we include supplemental terms and conditions to the standard master repurchase agreement. Typical supplemental terms and conditions, which differ by lender, may include changes to the margin maintenance requirements, required haircuts (or the percentage amount by which the collateral value is contractually required to exceed the amount borrowed), purchase price maintenance requirements, requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction and cross default and setoff provisions. Other non-repurchase agreement financing arrangements also contain provisions governing collateral maintenance. At December 31, 2025, we had unused financing capacity of approximately $3.4 billion across our financing arrangements for all collateral types.

Margin calls are typically determined by our counterparties based on their assessment of changes in the fair value of the underlying collateral and in accordance with the agreed upon haircuts specified in the transaction confirmation with the counterparty. We address margin call requests in accordance with the required terms specified in the applicable agreement and such requests are typically satisfied by posting additional cash or collateral on the same business day. We review margin calls made by counterparties and assess them for reasonableness by comparing the counterparty valuation against our valuation determination. When we believe that a margin call is unnecessary because our assessment of collateral value differs from the counterparty valuation, we typically hold discussions with the counterparty and attempt to resolve the matter. If this is not successful, we will look to resolve the dispute based on the remedies available to us under the terms of the repurchase agreement, which in some instances may include the engagement of a third-party to review collateral valuations. For certain other agreements that do not include such provisions, we could resolve the matter by substituting collateral as permitted in accordance with the agreement or otherwise request the counterparty to return the collateral in exchange for cash to unwind the financing. For additional information regarding our various types of financing arrangements, including those with non-mark-to-market terms and the haircuts for those agreements with mark-to-market collateral provisions, see Note 6 to the consolidated financial statements, included under Item 8 of this Annual Report on Form 10-K.

At December 31, 2025, we had a total of $1.2 billion of residential whole loans, $3.1 billion of securities and $4.0 million of restricted cash pledged to our financing counterparties, excluding securitized debt. We expect that we will continue to pledge residential mortgage assets as part of certain of our ongoing financing arrangements. When the value of our residential mortgage assets pledged as collateral experiences rapid decreases, margin calls under our financing arrangements could materially increase, causing an adverse change in our liquidity position. Additionally, if one or more of our financing counterparties choose not to provide ongoing funding, our ability to finance our long-maturity assets would decline or otherwise become available on possibly less advantageous terms. Further, when liquidity tightens, our counterparties to our short term arrangements with mark-to-market collateral provisions may increase their required collateral cushion (or margin) requirements on new financings, including financings that we roll with the same counterparty, thereby reducing our ability to use leverage. Access to financing may also be negatively impacted by ongoing volatility in financial markets, thereby potentially adversely impacting our current or future lenders’ ability or willingness to provide us with financing. In addition, there is no assurance that favorable market conditions will exist to permit us to consummate additional securitization transactions if we determine to seek that form of financing.

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Our ability to meet future margin calls will be affected by our ability to use cash or obtain financing from unpledged collateral, the amount of which can vary based on the market value of such collateral, our cash position and margin requirements. Our cash position fluctuates based on the timing of our operating, investing and financing activities and is managed based on our anticipated cash needs. (See “Interest Rate Risk” included under Item 7A. of this Annual Report on Form 10-K and our Consolidated Statements of Cash Flows, included under Item 8 of this Annual Report on Form 10-K.)

The table below presents certain information about our borrowings under asset-backed financing agreements and securitized debt:

(1)The information presented in the table above excludes Senior notes and Other secured financing (Note 6).

Cash Flows and Liquidity for the Year Ended December 31, 2025

Our cash, cash equivalents and restricted cash decreased by $214.6 million during 2025, reflecting: $1.8 billion used in our investing activities, $1.5 billion provided by our financing activities and $76.2 million provided by our operating activities.

At December 31, 2025, our debt-to-equity multiple was 6.0 times compared to 5.0 times at December 31, 2024. Our recourse leverage multiple at December 31, 2025 was 2.5 times compared to 1.7 times at December 31, 2024. At December 31, 2025, we had borrowings under asset-backed financing agreements of $4.4 billion, of which $1.4 billion were secured by residential whole loans, $3.0 billion were secured by securities and $23.3 million were secured by REO. In addition, at December 31, 2025, we had securitized debt of $6.3 billion in connection with our loan securitization transactions. At December 31, 2024, we had borrowings under asset-backed financing agreements of $3.2 billion, of which $1.9 billion were secured by residential whole loans, $1.3 billion were secured by securities and $25.4 million were secured by REO. In addition, at December 31, 2024, we had securitized debt of $5.8 billion in connection with our loan securitization transactions.

During 2025, $1.8 billion was used in our investing activities. We utilized $2.7 billion for acquisitions and origination of residential whole loans, loan related investments and capitalized advances. During 2025, we received $2.4 billion of principal payments on residential whole loans and loan related investments, $274.9 million of proceeds from the sale of residential whole loans, and $96.4 million of proceeds on sales of REO. In addition, during 2025, we utilized $2.2 billion for acquisitions of securities and received $289.6 million from principal payments on our securities and cash proceeds of $46.8 million from sales of securities and other assets.

In connection with our repurchase agreement financings and Swaps, we routinely receive margin calls from our counterparties and make margin calls (“reverse margin calls”) to our counterparties. Margin calls and reverse margin calls, which requirements vary over time, may occur daily between us and any of our counterparties when the value of collateral pledged changes from the amount contractually required. The value of securities pledged as collateral fluctuates reflecting changes in: (i) the face (or par) value of our assets; (ii) market interest rates and/or other market conditions; and (iii) the market value of our Swaps. Margin calls and reverse margin calls are satisfied when we pledge or receive additional collateral in the form of additional assets and/or cash.

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The table below summarizes our margin activity with respect to our repurchase agreement financings and derivative hedging instruments for the quarterly periods presented:

(1)Excludes variation margin payments on our cleared Swaps which are treated as a legal settlement of the exposure under the Swap contract.

We are subject to various financial covenants under our financing agreements, which include minimum liquidity and net worth requirements, net worth decline limitations and maximum debt-to-equity ratios. We were in compliance with all financial covenants as of December 31, 2025.

During 2025, we paid $148.2 million for cash dividends on our common stock and dividend equivalents and paid cash dividends of $40.3 million on our preferred stock. On December 11, 2025, we declared our fourth quarter 2025 dividend on our common stock of $0.36 per share; on January 30, 2026, we paid this dividend, which totaled approximately $37.1 million, including dividend equivalents of approximately $0.5 million.

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