MFA Financial Q2 Earnings Call Highlights

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Sat, August 8, 2026 at 9:03 PM GMT+3 6 min read

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Key Points

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Book value remained stable in Q2, with GAAP book value at $12.71 per share and economic book value at $13.20; MFA maintained its $0.36 dividend and generated a 2.6% total economic return.
Distributable earnings fell to $0.12 per share because of $24.5 million in realized credit losses tied to resolving roughly $200 million of delinquent assets. Management expects losses to remain elevated in Q3 before declining toward year-end and into early 2027.
The investment portfolio grew to approximately $13 billion, while delinquency rates improved and Lima One originations surged 44% sequentially to $316 million, supported by stronger technology, underwriting and sales capabilities.

MFA Financial (NYSE:MFA) reported second-quarter 2026 results marked by stable book value, portfolio growth and accelerated resolution of delinquent loans, while realized credit losses continued to weigh on distributable earnings.

Chief Executive Officer Craig Knutson said the company delivered a 2.6% total economic return for the quarter and maintained its common dividend at $0.36 per share. Economic book value was essentially unchanged during the period, even as market conditions included higher interest rates and a flatter Treasury yield curve.

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"We are converting unproductive assets back into earning capital," Knutson said of the company's efforts to resolve delinquent loans. "We're doing it faster."

Book Value, Earnings and Expenses

Chief Financial Officer Michael Roper said GAAP book value at June 30 was $12.71 per share, while economic book value was $13.20 per share, both effectively unchanged from the end of the first quarter.

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GAAP net income totaled approximately $46.8 million, or $0.35 per basic common share. Net interest income, including TBA dollar roll income, rose modestly to $59.6 million from $59.2 million in the first quarter. Mortgage banking income at Lima One increased to $8.4 million as origination activity expanded.

Distributable earnings were $12.2 million, or $0.12 per share, reflecting $24.5 million of realized credit losses on fair-value loans as MFA resolved about $200 million of previously delinquent assets. Roper said distributable earnings recognize losses at the time assets are resolved, whereas the related economics had already been reflected in earlier GAAP results and book value marks.

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Excluding realized credit losses, distributable earnings were $36.7 million, or $0.35 per share, compared with $0.34 per share in the prior quarter. Roper noted that first-quarter results included about $0.03 per share of a nonrecurring gain related to the early termination of the lease at MFA's former corporate headquarters. Excluding that item, distributable earnings before realized credit losses increased by $0.04 per share sequentially.

General and administrative expenses totaled $31.2 million, including roughly $5 million of accelerated non-cash depreciation associated with the former headquarters. Those assets are now fully depreciated. MFA expects quarterly run-rate G&A expenses of approximately $26 million to $27 million for the rest of 2026, down more than $6 million from the company's 2024 quarterly average of $33 million.

Subsequent to quarter-end, Roper said MFA estimated its economic book value had declined about 2%, driven by higher market interest rates and modestly wider spreads.

Portfolio Expansion and Credit Resolution

MFA's investment portfolio ended the quarter at approximately $13 billion, up from $12.5 billion at March 31 and roughly 20% above its level a year earlier. Growth was concentrated in agency mortgage-backed securities, which Chief Investment Officer Bryan Wulfsohn said remain an attractive complement to the company's credit assets.

The Non-QM portfolio remained MFA's largest asset class at $5.7 billion. The company acquired $462 million of Non-QM loans with an average coupon of 6.9% and loan-to-value ratio of 67%.
MFA issued its 24th Non-QM securitization, selling nearly $300 million of bonds at an average cost of just over 5.5%.
The company purchased more than $700 million of agency bonds, growing the agency portfolio to $4.1 billion.
MFA also increased its TBA position by nearly $500 million and said it may continue rolling the position if market conditions remain favorable.

Wulfsohn said MFA added $1.6 billion of target assets during the quarter at expected returns on equity in the mid-teens. The company also re-securitized more than $500 million of single-family rental loans after calling three previous issuances, unlocking $48 million of cash and financing capacity while reducing mark-to-market recourse leverage.

The company's 60-plus-day loan delinquency rate declined to 7.0% from 7.8% in the first quarter. MFA resolved approximately $65 million of delinquent legacy multifamily loans, reducing that portfolio to $360 million, less than half its size a year earlier. Multifamily transitional loans represented 2% of the investment portfolio at quarter-end.

During the question-and-answer session, Wulfsohn said MFA expects to resolve the remaining legacy multifamily portfolio over "a few quarters." He said the material credit losses associated with those assets are expected primarily in the next quarter.

Roper said realized credit losses are expected to remain elevated in the third quarter, though below the second-quarter level, before moderating significantly toward year-end and during the first half of 2027. He said MFA expects distributable earnings to begin reconverging with its common dividend as credit losses return to more normalized levels.

Lima One Originations Gain Momentum

Lima One origination volume increased 44% from the first quarter to $316 million. That total included $220 million of new short-term transitional loans and $96 million of 30-year rental loans.

Wulfsohn said the company has focused more on ground-up construction financing because of opportunities for investors in higher-priced housing markets, in addition to bridge lending. He said recent Lima One loan vintages have shown meaningfully better delinquency performance than earlier production.

MFA attributed the increase in activity to investments in technology, changes to underwriting processes and a rebuilt sales force. Wulfsohn said Lima One's pipeline had reached levels not seen since 2024 and that submissions were strong in July. While he expects further growth in the third quarter, he cautioned that the increase may not match the sequential jump reported in the second quarter because of seasonal factors.

MFA also repurchased more than 500,000 common shares during the quarter at what Knutson described as a significant discount to economic book value. The repurchases were funded largely through preferred-stock issuance under the company's at-the-market program.

About MFA Financial (NYSE:MFA)

MFA Financial, Inc, headquartered in New York City, is a real estate investment trust that specializes in investing in residential mortgage loans and mortgage-related securities. The company's primary objective is to generate attractive risk-adjusted returns through net interest income and capital appreciation. As a mortgage REIT, MFA Financial focuses on constructing a diversified portfolio of agency and non-agency residential mortgage assets, leveraging its expertise in acquiring, financing and servicing mortgage products.

MFA Financial's investment portfolio encompasses a wide range of mortgage instruments, including adjustable-rate and fixed-rate mortgage loans, interest-only securities, and agency mortgage-backed securities guaranteed by government-sponsored entities.

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