What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-24 · 498 added, 512 removed, 1748 unchanged (37% of the section changed)

70 unchanged sentences

Assessment of the allowance for credit losses on certain residential whole loans held at carrying value

As discussed in Note 2 and 3 to the consolidated financial statements, the Company’s total allowance for credit losses on residential whole loans held at carrying value as of December 31, 2022 was $35.3 million (the December 31, 2022 ACL).

As discussed in Note 2 and 3 to the consolidated financial statements, the Company’s total allowance for credit losses (ACL) on residential whole loans held at carrying value as of December 31, 2023 was $20.5 million (the December 31, 2023 ACL).

The Company estimated the December 31, 2023 ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances, specific to the Company’s loan portfolio segments grouped by shared risk characteristics which include Non-Qualified Mortgages (non-QM loans), Transitional loans, Single-Family Rental loans, Seasoned Performing loans, and Purchased Credit Deteriorated loans.

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unemployment rates and home price appreciation) are projected to revert to historical averages on a straight line basis, followed by (iii) the remaining life of each loan, during which period economic conditions (U.S.

unemployment rates and home price appreciation) are projected to equal historical averages.

The Company forecasts future economic conditions based on forecasts provided by an external preparer of

economic forecasts, as well as its own knowledge of the market and its portfolio.

The Company may considers multiple scenarios and select the one that it believes results in the most reasonable estimate of expected losses.

unemployment rates and home price appreciation) are projected to equal

historical averages.

The Company forecasts future economic conditions based on forecasts provided by an external preparer of economic forecasts, as well as its own knowledge of the market and its portfolio.

The Company may consider multiple scenarios and select the one that it believes results in the most reasonable estimate of expected losses.

The Company may apply qualitative adjustments to these expected loss estimates, which are determined based on a variety of factors, including differences between the Company’s loan portfolio and the loan portfolios represented by data available in regulatory filings of certain banks that are considered to have similar loan portfolios (available proxy data), and differences between current (and expected future) market conditions in comparison to market conditions that occurred in historical periods.

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Specifically, the assessment encompassed the evaluation of the December 31, 2023 ACL methodology, including the methods and models used to estimate the expected prepayments and default and loss severity rates and their significant assumptions.

Such significant assumptions included the reasonable and supportable forecasts, including reversion periods and macroeconomic forecast scenario, and the composition of the publicly available data derived from the historical loss experience of certain banks.

The assessment also included the evaluation of the qualitative factors and their significant assumptions.

Such significant assumptions were sensitive to variation, such that minor changes in the assumption can cause significant changes in the estimates.

Such significant assumptions included the composition of the publicly available data derived from the historical loss experience of certain banks.

The assessment also included an evaluation of the conceptual soundness and performance of the prepayment, default and loss severity models.

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We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the December 31, 2023 ACL estimate, including controls over the:

• development of the ACL methodology

• continued use and appropriateness of changes made to the prepayment, default and loss severity models

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• performance monitoring of the prepayment, default and loss severity models

• continued use and appropriateness of changes made to the qualitative factors, including the significant assumptions used in the measurement of the qualitative factors

• analysis of the ACL results, trends, and ratios.

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• assessing the conceptual soundness and performance testing of the prepayment, default and loss severity models by inspecting the model documentation to determine whether the models are suitable for their intended use

• evaluating the methodology used to develop the economic forecast scenarios and underlying macroeconomic assumptions by comparing it to the Company’s business environment and relevant industry practices

• evaluating the economic forecast scenario selected through comparison to publicly available forecasts

• evaluating the length of the historical experience period and reasonable and supportable forecast periods by comparing them to specific portfolio risk characteristics and trends

• assessing the composition of the publicly available data derived from the historical loss experience of certain banks by comparing to specific portfolio risk characteristics

• evaluating the methodology used to develop the qualitative factors and the effect of those factors on the ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative models.

We also assessed the sufficiency of the audit evidence obtained related to the December 31, 2023 ACL by evaluating the:

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Net Interest Income $ 176,479 $ 223,576 $ 241,917

Reversal of Provision/(Provision) for Credit Losses on Residential Whole Loans $ 2,646 $ 44,863 $ ( 22,381 )

Reversal of Provision for Credit Losses on Residential Whole Loans $ 8,853 $ 2,646 $ 44,863

Provision for Credit Losses on Other Assets — ( 28,579 ) —

Net Interest Income after (Provision)/Reversal of Provision for Credit Losses $ 197,643 $ 286,780 $ 141,693

Other (Loss)/Income, net:

Net (loss)/gain on residential whole loans measured at fair value through earnings ( 866,762 ) 16,243 16,386

Net realized loss on residential whole loans held at carrying value — — ( 273,030 )

Impairment and other net (loss)/gain on securities and other portfolio investments ( 25,067 ) 74,496 ( 350,567 )

Net Interest Income after Provision for Credit Losses $ 185,332 $ 197,643 $ 286,780

Other Income/(Loss), net:

Net gain/(loss) on residential whole loans measured at fair value through earnings $ 89,850 $ ( 866,762 ) $ 16,243

Impairment and other net gain/(loss) on securities and other portfolio investments 6,225 ( 25,067 ) 74,496

Net gain on real estate owned 9,392 25,379 22,838

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Lima One - origination, servicing and other fee income 43,384 46,745 22,600

Net realized loss on residential whole loans held at carrying value ( 1,240 ) — —

Other, net 11,331 8,623 9,647

Other (Loss)/Income, net $ ( 264,590 ) $ 165,103 $ ( 679,569 )

Other Income/(Loss), net $ 63,114 $ ( 265,264 ) $ 162,277

Operating and Other Expense:

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Amortization of intangible assets 4,200 9,200 6,600

Costs associated with restructuring/forbearance agreement — — 44,434

Operating and Other Expense $ 168,282 $ 163,960 $ 120,187

Net (Loss)/Income $ ( 231,581 ) $ 328,870 $ ( 679,390 )

Net Income/(Loss) $ 80,164 $ ( 231,581 ) $ 328,870

Less Preferred Stock Dividend Requirement $ 32,875 $ 32,875 $ 32,875

Net (Loss)/Income Available to Common Stock and Participating Securities $ ( 264,456 ) $ 295,995 $ ( 709,186 )

Basic (Loss)/Earnings per Common Share $ ( 2.57 ) $ 2.66 $ ( 6.28 )

Diluted (Loss)/Earnings per Common Share $ ( 2.57 ) $ 2.63 $ ( 6.28 )

Net Income/(Loss) Available to Common Stock and Participating Securities $ 47,289 $ ( 264,456 ) $ 295,995

Basic Earnings/(Loss) per Common Share $ 0.46 $ ( 2.57 ) $ 2.66

Diluted Earnings/(Loss) per Common Share $ 0.46 $ ( 2.57 ) $ 2.63

The accompanying notes are an integral part of the consolidated financial statements.

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(In Thousands) 2023 2022 2021

Net (loss)/income $ ( 231,581 ) $ 328,870 $ ( 679,390 )

Other Comprehensive (Loss):

Unrealized (losses)/gains on securities available-for-sale ( 25,492 ) ( 32,774 ) 420,281

Net income/(loss) $ 80,164 $ ( 231,581 ) $ 328,870

Other Comprehensive Income/(Loss):

Unrealized gains/(losses) on securities available-for-sale ( 2,873 ) ( 25,492 ) ( 32,774 )

Reclassification adjustment for securities sales included in net income ( 770 ) — —

Reclassification adjustment for impairments included in net income — — ( 344,269 )

Derivative hedging instrument fair value changes, net — — ( 50,127 )

Changes in fair value of financing agreements at fair value due to changes in instrument-specific credit risk — 1,255 1,059

Reclassification adjustment for losses related to hedging instruments included in net income — — 72,802

Other Comprehensive (Loss) ( 24,237 ) ( 31,715 ) ( 292,754 )

Comprehensive (loss)/income before preferred stock dividends $ ( 255,818 ) $ 297,155 $ ( 972,144 )

Other Comprehensive Income/(Loss) ( 3,643 ) ( 24,237 ) ( 31,715 )

Comprehensive Income/(Loss) before preferred stock dividends $ 76,521 $ ( 255,818 ) $ 297,155

Dividends required on preferred stock ( 32,875 ) ( 32,875 ) ( 32,875 )

Comprehensive (Loss)/Income Available to Common Stock and Participating Securities $ ( 288,693 ) $ 264,280 $ ( 1,001,940 )

Comprehensive Income/(Loss) Available to Common Stock and Participating Securities $ 43,646 $ ( 288,693 ) $ 264,280

The accompanying notes are an integral part of the consolidated financial statements.

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Balance at December 31, 2022 11,000 $ 110 8,000 $ 80 101,802 $ 1,018 $ 3,684,291 $ ( 1,717,991 ) $ 21,341 $ 1,988,849

Net loss — — — — — — — ( 231,581 ) — ( 231,581 )

Net income — — — — — — — 80,164 — 80,164

Issuance of common stock, net of expenses

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Change in unrealized losses on securities, net — — — — — — — — ( 3,643 ) ( 3,643 )

Changes in fair value of financing agreements at fair value due to changes in instrument-specific credit risk — — — — — — — — 1,255 1,255

Balance at December 31, 2023 11,000 $ 110 8,000 $ 80 101,916 $ 1,019 $ 3,698,767 $ ( 1,817,759 ) $ 17,698 $ 1,899,915

MFA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2022

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Balance at December 31, 2021 11,000 $ 110 8,000 $ 80 108,138 $ 1,082 $ 3,775,482 $ ( 1,279,484 ) $ 45,578 $ 2,542,848

Net Income — — — — — — — 328,870 — 328,870

Net loss — — — — — — — ( 231,581 ) — ( 231,581 )

Issuance of common stock, net of expenses — — — — 197 1 1,097 — — 1,098

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Balance at December 31, 2022 11,000 $ 110 8,000 $ 80 101,802 $ 1,018 $ 3,684,291 $ ( 1,717,991 ) $ 21,341 $ 1,988,849

MFA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2021

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Balance at December 31, 2020 11,000 $ 110 8,000 $ 80 112,929 $ 1,129 $ 3,851,517 $ ( 1,405,327 ) $ 77,293 $ 2,524,802

Cumulative effect adjustment on adoption of new accounting standard ASU 2016-13

— — — — — — — ( 8,326 ) — ( 8,326 )

Net loss — — — — — — — ( 679,390 ) — ( 679,390 )

Issuance of Series C Preferred Stock, net of expenses 11,000 110 — — — — 265,942 — — 266,052

Net income — — — — — — — 328,870 — 328,870

Issuance of common stock, net of expenses — — — — 288 3 1,829 — — 1,832

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Dividends attributable to dividend equivalents — — — — — — — ( 599 ) — ( 599 )

Change in unrealized losses on MBS, net — — — — — — — — ( 313,115 ) ( 313,115 )

Derivative hedging instruments fair value changes and amortization, net — — — — — — — — 22,675 22,675

Warrants issued and repurchased, net — — — — — — ( 19,608 ) — — ( 19,608 )

Change in unrealized losses on securities, net — — — — — — — — ( 32,774 ) ( 32,774 )

Changes in fair value of financing agreements at fair value due to changes in instrument-specific credit risk — — — — — — — — 1,059 1,059

Balance at December 31, 2021 11,000 $ 110 8,000 $ 80 108,138 $ 1,082 $ 3,775,482 $ ( 1,279,484 ) $ 45,578 $ 2,542,848

(1) For the year ended December 31, 2022, includes approximately $ 1.0 million ( 56,690 shares) surrendered for tax purposes related to equity-based compensation awards.

(1) For the year ended December 31, 2023, includes approximately $ 600,000 ( 58,505 shares) surrendered for tax purposes related to equity-based compensation awards.

For the year ended December 31, 2022, includes approximately $ 1.0 million ( 56,690 shares) surrendered for tax purposes related to equity-based compensation awards.

For the year ended December 31, 2021, includes approximately $ 799,000 ( 53,281 shares) surrendered for tax purposes related to equity-based compensation awards.

The accompanying notes are an integral part of the consolidated financial statements.

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Cash Flows From Operating Activities:

Net (loss)/income $ ( 231,581 ) $ 328,870 $ ( 679,390 )

Adjustments to reconcile net income to net cash provided by operating activities:

Net loss/(gain) on residential whole loans 866,762 ( 12,931 ) 246,419

Impairment and other net loss/(gain) on securities and other portfolio investments, net 25,067 ( 74,602 ) 350,567

Net income/(loss) $ 80,164 $ ( 231,581 ) $ 328,870

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Net (gain)/loss on residential whole loans ( 87,379 ) 866,762 ( 12,931 )

Impairment and other net (gain)/loss on securities and other portfolio investments, net ( 7,058 ) 25,067 ( 74,602 )

Net gain on real estate owned ( 9,512 ) ( 24,473 ) ( 18,772 )

Accretion of purchase discounts and amortization of purchase premiums on residential whole loans and securities, and amortization of terminated hedging instruments ( 27,314 ) ( 59,424 ) 10,949

Accretion of purchase discounts and amortization of purchase premiums on residential whole loans and securities ( 18,968 ) ( 27,314 ) ( 59,424 )

Provision/(reversal of provision) for credit losses on residential whole loans and other assets ( 6,845 ) 25,933 ( 48,355 )

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Net other non-cash losses included in net income 31,719 31,370 31,358

Decrease/(Increase) in other assets 40,077 ( 20,015 ) 39,930

(Decrease)/Increase in other liabilities ( 12,114 ) 14,046 ( 50,803 )

(Increase)/decrease in other assets ( 80,930 ) 25,482 ( 6,475 )

Increase/(decrease) in other liabilities 62,961 ( 12,114 ) 14,046

Net cash provided by operating activities $ 108,739 $ 355,349 $ 137,803

Cash Flows From Investing Activities:

Purchases of residential whole loans, loan related investments and capitalized advances $ ( 3,206,941 ) $ ( 4,516,971 ) $ ( 1,477,320 )

Proceeds from sales of residential whole loans, and residential whole loan repurchases — — 1,510,902

Purchases and origination of residential whole loans, loan related investments and capitalized advances $ ( 2,914,915 ) $ ( 3,206,941 ) $ ( 4,516,971 )

Proceeds from sales of residential whole loans 345,656 — —

Principal payments on residential whole loans and loan related investments 1,445,759 1,878,802 2,012,901

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Principal payments on securities 35,626 53,121 157,297

Purchases of real estate owned and capital improvements ( 978 ) ( 1,338 ) ( 10,198 )

Proceeds from sales of real estate owned 115,026 133,980 187,010

Additions to leasehold improvements, furniture and fixtures ( 300 ) ( 12,048 ) ( 4,862 )

Other investing activities ( 11,121 ) 9,450 ( 30,896 )

Net cash used in investing activities

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Payment made for other collateralized financing agreement related costs ( 12,593 ) ( 16,390 ) ( 7,145 )

Principal payment on redemption of Senior notes — ( 100,000 ) —

Payments made for settlements and unwinds of Swaps designated as hedges — — ( 60,022 )

Proceeds from issuance of series C preferred stock — — 275,000

Payments made for costs related to series C preferred stock issuance — — ( 8,948 )

Redemption of convertible senior notes and Senior Notes ( 20,228 ) — ( 100,000 )

Proceeds from issuances of common stock ( 7 ) 1,183 1,825

Payments made for the repurchase of common stock through the stock repurchase program — ( 102,311 ) ( 85,591 )

Proceeds from the issuance of warrants — — 14,041

Payments made for the repurchase of warrants — — ( 33,650 )

Dividends paid on preferred stock ( 32,875 ) ( 32,875 ) ( 32,875 )

Dividends paid on common stock and dividend equivalents ( 143,103 ) ( 184,035 ) ( 156,140 )

Net cash provided by/(used in) financing activities $ 850,213 $ 1,629,663 $ ( 5,735,049 )

Net increase in cash, cash equivalents and restricted cash $ 89,634 $ ( 417,072 ) $ 686,855

Net cash provided by financing activities $ 1,434,981 $ 850,213 $ 1,629,663

Net increase/(decrease) in cash, cash equivalents and restricted cash $ ( 5,870 ) $ 89,634 $ ( 417,072 )

Cash, cash equivalents and restricted cash at beginning of period $ 494,081 $ 404,447 $ 821,519

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Transfer from residential whole loans to real estate owned $ 84,662 $ 82,911 $ 72,304

Transfer from other interest earning assets (commercial loans) to REO $ 22,716 $ — $ —

Dividends and dividend equivalents declared and unpaid $ 35,789 $ 35,769 $ 47,751

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Receivable for sale of unsettled residential whole loans $ 14,033 $ 275,656 $ —

Payable for purchase of unsettled Agency MBS $ 132,025 $ — $ —

Payable for unsettled investment purchases $ 103,654 $ 132,025 $ —

Deconsolidation of securitized Agency eligible investor loans and related debt $ — $ 490,952 $ —

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Management has made significant estimates in several areas:

impairment, valuation allowances and loss allowances on residential whole loans (see Note 3), mortgage-backed securities (“MBS”), credit risk transfer (“CRT”) securities and mortgage servicing rights (“MSR”)-related assets (collectively, “Securities, at fair value”) (see Note 4) and Other assets (see Note 5), valuation of Securities, at fair value (see Notes 4 and 13), income recognition and valuation of residential whole loans (see Notes 3 and 13), valuation of financing agreements (Notes 6 and 13), and valuation of derivative instruments (see Notes 5(d) and 13).

impairment, valuation allowances and loss allowances on residential whole loans (see Note 3), certain securities designated as available-for-sale (“AFS”) (see Note 4) and certain Other assets (see Note 5), valuation of Securities, at fair value (see Notes 4 and 13), income recognition and valuation of residential whole loans (see Notes 3 and 13), valuation of financing agreements (Notes 6 and 13), and valuation of derivative instruments (see Notes 5(e) and 13).

In addition, estimates are used in the determination of taxable income used in the assessment of REIT compliance and contingent liabilities for related taxes, penalties and interest (see Note 8).

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The accounting model utilized by the Company is determined at the time each loan package is initially acquired.

Prior to the second quarter of 2021, the fair value option was typically elected on loans that were 60 or more days delinquent at purchase (“Purchased Non-performing Loans”).

Purchased Credit Deteriorated Loans acquired prior to the second quarter of 2021, and where the underlying borrower had a delinquency status of less than 60 days at the acquisition date, are typically held at carrying value.

Purchased Performing Loans acquired prior to the second quarter of 2021 are also typically held at carrying value, but the accounting methods for income recognition and determination and measurement of any required credit loss reserves (as discussed below) differ from those used for Purchased Credit Deteriorated Loans held at carrying value.

Starting in the second quarter of 2021, the Company has elected the fair value option for all loans acquired, irrespective of borrower delinquency status at acquisition.

Over time, the Company expects that election of the fair value option should serve to simplify reporting of the results of its loan investment activities as fair value accounting will be used for the majority of loans in the Company’s portfolio.

Prior to the second quarter of 2021, the Company typically elected the fair value option on loans that were 60 or more days delinquent at purchase (“Purchased Non-performing Loans”).

Purchased Credit Deteriorated Loans (i.e., mortgage loans in which the underlying borrower had a delinquency status of less than 60 days at the acquisition date) acquired prior to the second quarter of 2021 are typically held at carrying value.

Purchased Performing Loans (as described below) acquired prior to the second quarter of 2021 are also typically held at carrying value, but the accounting methods for income recognition and determination and measurement of any required credit loss reserves (as discussed below) differ from those used for Purchased Credit Deteriorated Loans held at carrying value.

Starting in the second quarter of 2021, the Company began to elect the fair value option for all loans acquired, irrespective of borrower delinquency status at acquisition.

The accounting model initially applied to loan acquisitions is not permitted to be subsequently changed.

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Acquisitions of Purchased Performing Loans to date (which include loans purchased from third parties or loans originated by Lima One) have been primarily comprised of:

(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 and multi-family properties made to non-occupant borrowers that intend to rehabilitate and sell the properties (“Transitional loans” or “TL”) (also sometimes referred to as “Rehabilitation loans” or “Fix and Flip loans”), (iii) 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”), (iv) 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”), and (v) previously originated loans secured by residential real estate that is generally owner occupied (“Seasoned performing loans”).

(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 and multi-family properties made to non-occupant borrowers that intend to rehabilitate and refinance or sell the properties (“Transitional loans”) (also sometimes referred to as “Rehabilitation loans” or “Fix and Flip loans”), (iii) 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”), (iv) 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”), and (v) previously originated loans secured by residential real estate that is generally owner occupied (“Seasoned performing loans”).

Purchased Performing Loans are initially recorded at their purchase price (or amount funded for originated loans).

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For loans acquired with related servicing rights retained by the seller, interest income is reported net of related serving costs.

For Purchased Performing Loans acquired prior to the second quarter of 2021 and where the fair value option was not elected, an allowance for credit losses is recorded at acquisition, and maintained on an ongoing basis, for all losses expected over the life of the respective loan.

For Purchased Performing Loans acquired prior to the second quarter of 2021 for which the fair value option was not elected, an allowance for credit losses is recorded at acquisition, and maintained on an ongoing basis, for all losses expected over the life of the respective loan.

Any required credit loss allowance would reduce the net carrying value of the loan with a corresponding charge to earnings, and may increase or decrease over time.

Significant judgments are required in determining any allowance for credit loss, including assumptions regarding the loan cash flows expected to be collected, the value of the underlying collateral and the ability of the Company to collect on any other forms of security, such as a personal guaranty provided either by the borrower or an affiliate of the borrower.

Income recognition is suspended, and interest accruals are reversed against income, for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion

Income recognition is suspended, and interest accruals are reversed against income, for loans at the earlier of the date on which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful (i.e., such loans are placed on nonaccrual status).

For nonaccrual loans, interest income is recorded under the cash basis method as interest payments are received.

MFA FINANCIAL, INC.

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DECEMBER 31, 2023

of management, a full recovery of income and principal becomes doubtful (i.e., such loans are placed on nonaccrual status).

For nonaccrual loans, interest income is recorded under the cash basis method as interest payments are received.

Interest accruals are resumed when the loan becomes contractually current.

accruals are resumed when the loan becomes contractually current.

A loan is written off when it is no longer realizable and/or it is legally discharged.

Modified loans are considered “troubled debt restructurings” if the Company grants a concession to a borrower who is experiencing financial difficulty (including the interpretation of this definition set forth in OCC Bulletin 2020-35).

Charge-offs to the allowance for loan losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale;

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For certain loans where foreclosure has been deemed to be probable, loss estimates are based on whether the value of the underlying collateral is sufficient to recover the carrying value of the loan.

This methodology has not changed significantly from the calculation of the allowance for credit losses in prior periods.

This methodology has not changed significantly from the calculation of the allowance for credit losses in prior periods, although certain modeling factors have been refined over time and the proxy data utilized has, in some cases, been updated to better align with actual and expected loss experiences.

Purchased Credit Deteriorated Loans

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The Company believes that amounts paid to acquire these loans represent fair market value at the date of acquisition.

Loans considered credit deteriorated are initially recorded at the purchase price on a net basis, after establishing an initial allowance for credit losses (their initial cost basis is equal to their purchase price plus the initial allowance for credit losses).

Subsequent to acquisition, the gross recorded amount for these loans reflects the initial cost basis, plus accretion of interest income, less principal and interest cash flows received.

Loans considered credit deteriorated are initially recorded at their purchase price on a net basis, after establishing an initial allowance for credit losses (their initial cost basis is equal to their purchase price plus the initial allowance for credit losses).

Subsequent to acquisition, the gross recorded amount for these loans reflects the initial cost basis, plus accretion/amortization of interest income, less principal and interest cash flows received.

Purchased Credit Deteriorated Loans acquired prior to the second quarter of 2021, or where the fair value option was not otherwise elected, are presented on the Company’s consolidated balance sheets at carrying value, which reflects the recorded cost basis reduced by any allowance for credit losses.

Interest income on such loans purchased is recorded each period based on the contractual coupon net of amortization of the difference between their cost basis and unpaid principal balance (“UPB”), subject to the Company’s nonaccrual policy.

Interest income on such loans purchased is recorded each period based on the contractual coupon net of accretion/amortization of the difference between their cost basis and unpaid principal balance (“UPB”), subject to the Company’s nonaccrual policy.

MFA FINANCIAL, INC.

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DECEMBER 31, 2023

Loans Held-for-Sale

For loans for which the fair value option was not elected, once a decision has been made to sell loans previously classified as held for investment, such loans are considered held-for-sale and are carried at the lower of cost or fair value.

Residential Whole Loans at Fair Value

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MSR-Related Assets

The Company has investments in financial instruments whose cash flows are considered to be largely dependent on underlying MSRs that either directly or indirectly act as collateral for the investment.

These financial instruments, which are referred to as MSR-related assets, are discussed in more detail below.

The Company’s MSR-related assets pledged as collateral against repurchase agreements are included in the consolidated balance sheets with the amounts pledged disclosed in Note 6.

Purchases and sales of MSR-related assets are recorded on the trade date (see Notes 4, 6, and 13).

Term Notes Backed by MSR-Related Collateral

The Company has invested in term notes that are issued by special purpose vehicles (“SPV”) that have acquired rights to receive cash flows representing the servicing fees and/or excess servicing spread associated with certain MSRs.

The Company considers payment of principal and interest on these term notes to be largely dependent on the cash flows generated by the underlying MSRs as this impacts the cash flows available to the SPV that issued the term notes.

Credit risk borne by the holders of the term notes is also mitigated by structural credit support in the form of over-collateralization.

Credit support is also provided by a corporate guarantee from the ultimate parent or sponsor of the SPV that is intended to provide for payment of interest and principal to the holders of the term notes should cash flows generated by the underlying MSRs be insufficient.

The Company’s term notes backed by MSR-related collateral are treated as “available-for-sale” (“AFS”) securities and reported at fair value on the Company’s consolidated balance sheets with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive income/(loss) (“AOCI”), a component of Stockholders’ Equity, subject to impairment and loss allowances.

Interest income is recognized on an accrual basis on the Company’s consolidated statements of operations.

The Company’s valuation process for such notes is similar to that used for residential mortgage securities and considers a number of observable market data points, including prices obtained from pricing services, brokers and repurchase agreement counterparties, dialogue with market participants, as well as management’s observations of market activity.

Other factors taken into consideration include estimated changes in fair value of the related underlying MSR collateral, as applicable, and the financial performance of the ultimate parent or sponsoring entity of the issuer, which has provided a guarantee that is intended to provide for payment of interest and principal to the holders of the term notes should cash flows generated by the related underlying MSR collateral be insufficient.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Other Residential Mortgage Securities

The Company has invested in residential MBS that are issued or guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S.

Residential Mortgage Securities

The Company has invested in residential mortgage-backed securities (“MBS”) that are issued or guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S.

Government, such as the Government National Mortgage Association (“Ginnie Mae”) (collectively, “Agency MBS”), and residential MBS that are not guaranteed by any agency of the U.S.

Government or any federally chartered corporation (“Non-Agency MBS”).

In addition, the Company has investments in CRT securities that are issued by or sponsored by Fannie Mae and Freddie Mac.

In addition, the Company has investments in credit risk transfer (“CRT”) securities that are issued by or sponsored by Fannie Mae and Freddie Mac.

The coupon payments on CRT securities are paid by the issuer and the principal payments received are dependent on the performance of loans in either a reference pool or an actual pool of loans.

1 unchanged sentence

As an investor in a CRT security, the Company may incur a principal loss if the performance of the actual or reference pool loans results in either an actual or calculated loss that exceeds the credit enhancement of the security owned by the Company.

Term Notes Backed by Mortgage Servicing Rights (“MSR”) Collateral

Credit risk borne by the holders of the term notes is also mitigated by structural credit support in the form of over-collateralization.

Credit support is also provided by a corporate guarantee from the ultimate parent or sponsor of the SPV that is intended to provide for payment of interest and principal to the holders of the term notes if cash flows generated by the underlying MSRs are insufficient.

Securities that the Company generally intends to hold until maturity, but that it may sell from time to time as part of the overall management of its business, are designated as AFS.

Such securities are carried at their fair value with unrealized gains and losses excluded from earnings (except when an allowance for loan losses is recognized, as discussed below) and reported in AOCI, a component of Stockholders’ Equity.

Such securities, which include term notes backed by MSR collateral and certain CRT securities, are carried at their fair value with unrealized gains and losses excluded from earnings (except when an allowance for loan losses is recognized, as discussed below) and reported in accumulated other comprehensive income/(loss) (“AOCI”), a component of Stockholders’ Equity.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Upon the sale of an AFS security, any unrealized gain or loss is reclassified out of AOCI to earnings as a realized gain or loss using the specific identification method .

The Company has elected the fair value option for its Agency and Non-Agency MBS.

These securities are carried at their fair value with changes in fair value included in earnings for the period and reported in Other Income, net on the Company’s consolidated statements of operations.

In addition, the Company has elected the fair value option for certain of its CRT securities as it considers this method of accounting to more appropriately reflect the risk-sharing structure of these securities.

Such securities are carried at their fair value with changes in fair value included in earnings for the period and reported in Other Income, net on the Company’s consolidated statements of operations.

The Company has elected the fair value option for its Agency and Non-Agency MBS and certain of its CRT securities.

These securities are carried at their fair value with changes in fair value included in earnings for the period and reported in Other Income/(Loss), net on the Company’s consolidated statements of operations.

Revenue Recognition, Premium Amortization and Discount Accretion

Interest income on securities is accrued based on their outstanding principal balance and their contractual terms.

Premiums and discounts associated with Non-Agency MBS assessed as high credit quality at the time of purchase are amortized into interest income over the life of such securities using the effective yield method.

Premiums and discounts associated with MBS assessed as high credit quality at the time of purchase are amortized into interest income over the life of such securities using the effective yield method.

Adjustments to premium amortization are made for actual prepayment activity.

Determination of Fair Value for Residential Mortgage Securities

Determination of Fair Value for Securities

In determining the fair value of the Company’s residential mortgage securities, management considers a number of observable market data points, including prices obtained from pricing services, brokers and repurchase agreement counterparties, dialogue with market participants, as well as management’s observations of market activity (see Note 13).

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

For term notes backed by MSR collateral, other factors taken into consideration include estimated changes in fair value of the related underlying MSR collateral, as applicable, and the financial performance of the ultimate parent or sponsoring entity of the issuer, which has provided a guarantee that is intended to provide for payment of interest and principal to the holders of the term notes if cash flows generated by the related underlying MSR collateral are insufficient.

Allowance for credit losses

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Balance Sheet Presentation

The Company’s residential mortgage securities pledged as collateral against financing agreements and interest rate swap agreements (“Swaps”) are included on the consolidated balance sheets with the fair value of the securities pledged disclosed in Note 6.

The Company’s securities pledged as collateral against financing agreements and interest rate swap agreements (“Swaps”) are included on the consolidated balance sheets with the fair value of the securities pledged disclosed in Notes 6 and 5, respectively.

Purchases and sales of securities are recorded on the trade date.

4 unchanged sentences

At December 31, 2023 and December 31, 2022, the Company had cash and cash equivalents of $ 318.0 million and $ 334.2 million, respectively.

At December 31, 2022, the Company had $ 267.1 million of investments in overnight money market funds, which are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency.

At December 31, 2023, the Company had $ 151.3 million of investments in overnight money market

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

funds, which are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency.

As of December 31, 2022, the Company had $ 267.1 million worth of investments in overnight money market funds.

3 unchanged sentences

Restricted cash may be applied against amounts due to financing agreements and/or Swap counterparties, or may be returned to the Company when the related collateral requirements are exceeded or at the maturity of financing agreements and/or Swaps.

The Company had aggregate restricted cash of $ 159.9 million and $ 99.8 million at December 31, 2022 and December 31, 2021, respectively (see Notes 5(d), 6 and 13).

The Company had aggregate restricted cash of $ 170.2 million and $ 159.9 million at December 31, 2023 and December 31, 2022, respectively (see Notes 5(e), 6 and 13).

(f) Goodwill & Intangible Assets

4 unchanged sentences

Goodwill and intangible assets are included in Other assets on the Company’s consolidated balance sheets.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

(g) Real Estate Owned (“REO”)

3 unchanged sentences

Subsequent to acquisition, REO is reported, at each reporting date, at the lower of the current carrying amount or fair value less estimated selling costs and for presentation purposes is included in Other assets on the Company’s consolidated balance sheets.

Changes in fair value that result in an adjustment to the reported amount of an REO property that has a fair value at or below its carrying amount are reported in Other Income, net on the Company’s consolidated statements of operations.

The Company has acquired certain properties that it holds for investment purposes, including rentals to third parties.

These properties are held at their historical basis less depreciation, and are subject to impairment.

Related rental income and expenses are recorded in Other Income, net (see Note 5).

Changes in fair value that result in an adjustment to the reported amount of an REO property that has a fair value at or below its carrying amount are reported in Other Income/(Loss), net on the Company’s consolidated statements of operations (see Note 5).

(h) Leases and Depreciation

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Furniture, fixtures, computers and related hardware have estimated useful lives ranging from five to fifteen years at the time of purchase.

The building component of real estate held-for-investment is depreciated over 27.5 years.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(i) Loan Securitization and Other Debt Issuance Costs

7 unchanged sentences

(j) Financing Agreements

The Company finances the majority of its residential mortgage assets with financing agreements that include repurchase agreements and other forms of collateralized financing.

The Company finances the majority of its residential mortgage assets with financing agreements that include securitized debt, repurchase agreements and other forms of collateralized financing.

Under repurchase agreements, the Company sells assets to a lender and agrees to repurchase the same assets in the future for a price that is higher than the original sale price.

2 unchanged sentences

Under its repurchase agreements and other forms of collateralized financing, the Company pledges its assets as collateral to secure the borrowing, in an amount which is equal to a specified percentage of the fair value of the pledged collateral, while the Company retains beneficial ownership of the pledged collateral.

At the maturity of a repurchase financing,

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

unless the repurchase financing is renewed with the same counterparty, the Company is required to repay the loan including any accrued interest and concurrently receives back its pledged collateral from the lender.

At the maturity of a repurchase financing, unless the repurchase financing is renewed with the same counterparty, the Company is required to repay the loan including any accrued interest and concurrently receives back its pledged collateral from the lender.

With the consent of the lender, the Company may renew a repurchase financing at the then prevailing financing terms.

5 unchanged sentences

These agreements are reported at their fair value, with changes in fair value being recorded in earnings each period (or other comprehensive income, to the extent the change results from a change in instrument specific credit risk), as further detailed in Note 6.

Financing costs, including “up front” fees paid at inception related to financing agreements at fair value are expensed as incurred.

Interest expense is recorded based on the current interest rate in effect for the related agreement.

Interest expense on such financing agreements is recorded based on the current stated interest rate and outstanding principal balance in effect for the related agreement.

(k) Equity-Based Compensation

Compensation expense for equity-based awards that are subject to vesting conditions, is recognized ratably over the vesting period of such awards, based upon the fair value of such awards at the grant date.

The Company has made annual grants of restricted stock units (“RSUs”), certain of which cliff vest after a three-year period, subject only to continued employment, and others of which cliff vest after a three-year period, subject to both continued employment and the achievement of certain performance criteria based on a formula tied to the Company’s achievement of average total shareholder return (“TSR”) during that three-year period, as well as the TSR of the Company relative to the TSR of a group of peer companies (over the three-year period) selected by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) at the date of grant.

The Company has made annual grants of restricted stock units (“RSUs”) under the Company’s Equity Compensation Plan (the “Equity Plan”), certain of which cliff vest after a three-year period, subject only to continued employment, and others of which cliff vest after a three-year period, subject to both continued employment and the achievement of certain performance criteria based on a formula tied to the Company’s achievement of average total shareholder return (“TSR”) during that three-year period, as well as the TSR of the Company relative to the TSR of a group of peer companies (over the three-year period) selected by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) at the date of grant.

The features in these awards related to the attainment of TSR over a specified period constitute a “market condition,” which impacts the amount of compensation expense recognized for these awards.

Specifically, the uncertainty regarding the achievement of the market condition was reflected in the grant date fair valuation of the RSUs, which is recognized as compensation expense over the relevant vesting period.

The amount of compensation expense recognized is not dependent on whether the market condition was or will be achieved.

The Company makes dividend equivalent payments in connection with certain of its equity-based awards.

A dividend equivalent is a right to receive a distribution equal to the dividend distributions that would be paid on a share of the Company’s common stock.

Dividend equivalents may be granted as a separate instrument or may be a right associated with the grant of another award (e.g., an RSU) under the Company’s Equity Compensation Plan (the “Equity Plan”), and they are paid in cash at such times and in accordance with such rules, terms and conditions, as the Compensation Committee may determine in its discretion.

Dividend equivalent payments are generally charged to Stockholders’ Equity to the extent that the attached equity awards are expected to vest.

Compensation expense is also recognized for dividend equivalent payments to the extent that the equity awards to which such payments relate do not or are not expected to vest and the grantees to whom such payments are made are nonetheless not required to return such dividend equivalent payments to the Company (see Notes 2(l) and 12).

(l) Earnings per Common Share (“EPS”)

Basic EPS is computed using the two-class method, which includes the weighted-average number of shares of common stock outstanding during the period and an estimate of other securities that participate in dividends, such as the Company’s dividend equivalents attached to/associated with RSUs, to arrive at total common equivalent shares.

In applying the two-class method, earnings are allocated to both shares of common stock and estimated securities that participate in dividends based on their respective weighted-average shares outstanding for the period.

For the diluted EPS calculation, common equivalent shares are further adjusted for the effect of RSUs outstanding that are unvested and have dividends that are subject to forfeiture, and for the effect of outstanding warrants, using the treasury stock method.

Under the treasury stock method, common equivalent

Specifically, the uncertainty regarding the

MFA FINANCIAL, INC.

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shares are calculated assuming that all dilutive common stock equivalents are exercised and the proceeds, along with future compensation expenses associated with such instruments (if any), are used to repurchase shares of the Company’s outstanding common stock at the average market price during the reported period.

achievement of the market condition was reflected in the grant date fair valuation of the RSUs, which is recognized as compensation expense over the relevant vesting period.

The amount of compensation expense recognized is not dependent on whether the market condition was or will be achieved.

(l) Earnings per Common Share (“EPS”)

Basic EPS is computed using the two-class method, which includes the weighted-average number of shares of common stock outstanding during the period and an estimate of other securities that participate in dividends, if any, to arrive at total common equivalent shares.

In calculating basic EPS, no adjustment is made to income available to common stockholders for forfeitable dividends or dividend equivalents.

Under the treasury stock method, common equivalent shares are calculated assuming that all dilutive common stock equivalents are exercised and the proceeds, along with future compensation expenses associated with such instruments (if any), are used to repurchase shares of the Company’s outstanding common stock at the average market price during the reported period.

In addition, the Company’s 6.25 % Convertible Senior Notes due 2024 (the “Convertible Senior Notes”) are included in the calculation of diluted EPS if the assumed conversion into common shares is dilutive, using the “if-converted” method.

3 unchanged sentences

(n) Derivative Financial Instruments

The Company may use a variety of derivative instruments to economically hedge a portion of its exposure to market risks, including interest rate risk and prepayment risk.

The Company may use derivative instruments to economically hedge a portion of its exposure to market risks, including interest rate risk and prepayment risk.

The objective of the Company’s risk management strategy is to reduce fluctuations in net book value over a range of interest rate scenarios.

Historically, the Company’s derivative instruments have generally been comprised of Swaps, the majority of which were designated as cash flow hedges against the interest rate risk associated with its borrowings.

The Company documented its risk-management policies, including objectives and strategies, for its hedging activities and the relationship between the hedging instrument and the hedged liability for all Swaps designated as hedging transactions.

The Company assessed, both at the inception of a hedge and on a quarterly basis thereafter, whether or not the hedge was “highly effective.”

During the first quarter of 2020, in response to the turmoil in the financial markets resulting from COVID-19, and given that management no longer considered these transactions to be effective hedges in the then prevailing interest rate environment, the Company terminated all of its then existing Swaps.

Changes in the fair value of the Company’s Swaps previously designated in hedging transactions were recorded in OCI provided that the hedge remained effective.

Periodic payments accrued in connection with Swaps designated as hedges were included in interest expense and treated as an operating cash flow.

The Company discontinued hedge accounting for the terminated Swaps as it determined that it was no longer probable that the forecasted transactions would occur.

The Company has entered into Swaps that were not designated as hedges for accounting purposes.

Changes in the fair value of the Company’s Swaps not designated in hedging transactions are recorded in Other income, net on the Company’s consolidated statements of operations.

Swaps are carried on the Company’s consolidated balance sheets at fair value, in Other assets, if their fair value is positive, or in Other liabilities, if their fair value is negative (see Notes 5(d), 6 and 13).

The Company has entered into Swaps that are not designated as hedges for accounting purposes.

Changes in the fair value of the Company’s Swaps not designated in hedging transactions are recorded in Other Income/(Loss), net on the Company’s consolidated statements of operations.

To Be Announced (“TBA”) Securities

The Company has entered into transactions to take short positions in TBA securities in connection with the management of interest rate and other market risks associated with purchases of Agency eligible investor loans.

During 2021 and 2022, the Company entered into transactions to take short positions in TBA securities in connection with the management of interest rate and other market risks associated with purchases of Agency eligible investor loans.

As the Company did not intend to physically settle its transactions in TBA securities, they were required to be accounted for as derivative financial instruments.

The Company did not apply hedge accounting to its TBA securities.

Accordingly, TBA securities were recorded on the Company’s balance sheets at fair value, with realized and unrealized changes in fair value each period recorded in Other income, net in the Company’s consolidated statements of operations.

Accordingly, TBA securities were recorded on the Company’s balance sheets at fair value, with realized and unrealized changes in fair value each period recorded in Other Income/(Loss), net in the Company’s consolidated statements of operations.

MFA FINANCIAL, INC.

7 unchanged sentences

In addition to the financial instruments that it is required to report at fair value, the Company has elected the fair value option for certain of its financial assets and liabilities at the time of acquisition or issuance.

Subsequent changes in the fair value of these financial instruments are generally reported in Other income, net, in the Company’s consolidated statements of operations.

Subsequent changes in the fair value of these financial instruments are generally reported in Other Income/(Loss), net, in the Company’s consolidated statements of operations.

A decision to elect the fair value option for an eligible financial instrument, which may be made on an instrument by instrument basis, is irrevocable (see Notes 2(b), 2(c), 3, 4, and 13).

12 unchanged sentences

The Company also includes on its consolidated balance sheets certain financial assets and liabilities that are acquired/issued by trusts and/or other special purpose entities that have been evaluated as being required to be consolidated by the Company under the applicable accounting guidance.

The Company has an investment in a VIE, in which it is not considered to be the primary beneficiary and therefore is not consolidated, but is considered an equity method investment.

The VIE owns a newly constructed industrial property as further described in Note 5.

(q) Offering Costs Related to Issuance and Redemption of Preferred Stock

1 unchanged sentence

On redemption of preferred stock, any excess of the fair value of the consideration transferred to the holders of the preferred stock over the carrying amount of the preferred stock in the Company’s consolidated balance sheets is included in the determination of Net Income Available to Common Stock and Participating Securities in the calculation of EPS.

(r) New Accounting Standards and Interpretations

Accounting Standards Adopted in 2022

As of December 31, 2022, there were no new accounting standards or interpretations adopted by the Company that had a material effect on its consolidated financial statements in 2022.

MFA FINANCIAL, INC.

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( r ) Contingencies

Lima One has reached agreement, or is in the process of reaching agreement, on certain state and local governmental incentives, in connection with its agreement to lease new office space for its headquarters in Greenville, SC based on certain anticipated capital expenditures and anticipated job creation.

These incentives are generally recognized when there is reasonable assurance that the incentive will be received and that the Company will comply with the conditions specified in the related agreement.

These incentives have commitment terms of up to ten years and may be subject to clawback if the commitments are not fulfilled.

No material amounts related to any incentives have been recognized through December 31, 2023.

(s) New Accounting Standards and Interpretations

As of December 31, 2023, there were no new accounting standards or interpretations adopted by the Company that had a material effect on its consolidated financial statements in 2023.

Residential Whole Loans

11 unchanged sentences

Single-family rental loans (2)

172,213 210,833 1,462,583 1,165,741 1,634,796 1,376,574

Seasoned performing loans 68,945 82,932 — — 68,945 82,932

6 unchanged sentences

Number of loans 6,326 7,126 19,075 16,717 25,401 23,843

(1) As of December 31, 2022 includes $ 784.9 million of loans collateralized by one-to-four family residential properties and $ 632.3 million of loans collateralized by multi-family properties.

As of December 31, 2021, includes $ 521.0 million of loans collateralized by one-to-four family residential properties and $ 213.9 million of loans collateralized by multi-family properties.

(1) As of December 31, 2023 includes $ 1.2 billion of loans collateralized by one-to-four family residential properties, including $ 471.1 million of loans collateralized by new construction projects at origination, and $ 1.2 billion of Transitional loans collateralized by multi-family properties.

As of December 31, 2022, includes $ 784.9 million of loans collateralized by one-to-four family residential properties, including $ 283.1 million of loans collateralized by new construction projects at origination, and $ 632.3 million of Transitional loans collateralized by multi-family properties.

(2) As of December 31, 2023, includes held-for-sale loans with a carrying value of $ 13.6 million.

For the 12 months ended December 31, 2023, the Company recorded a $ 1.2 million loss on these loans resulting from adjusting their carrying value to the lower of cost or fair value.

MFA FINANCIAL, INC.

11 unchanged sentences

Non-QM loans (5)

$ 3,700,052 $ 3,934,798 5.78 % 344 65 % 735 $ 3,732,327 $ 98,017 $ 29,587 $ 74,867 2.7 %

Transitional loans (1)

25 unchanged sentences

Residential whole loans, total or weighted average $ 7,518,739 $ 8,180,950 5.64 % 272 8.1 %

(1) As of December 31, 2022 Transitional loans includes $ 632.3 million of loans collateralized by multi-family properties with a weighted average term to maturity of 18 months and a weighted average LTV ratio of 73 %.

(1) As of December 31, 2023 Transitional loans includes $ 1.2 billion of loans collateralized by multi-family properties with a weighted average term to maturity of 14 months and a weighted average LTV ratio of 63 %.

As of December 31, 2022, Transitional loans includes $ 632.3 million of loans collateralized by multi-family properties with a weighted average term to maturity of 18 months and a weighted average LTV ratio of 64 %.

(2) Weighted average is calculated based on the interest bearing principal balance of each loan within the related category.

For loans acquired with servicing rights released by the seller, interest rates included in the calculation do not reflect loan servicing fees.

For loans acquired with servicing rights retained by the seller, interest rates included in the calculation are net of servicing fees.

MFA FINANCIAL, INC.

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(2) Weighted average is calculated based on the interest bearing principal balance of each loan within the related category.

For loans acquired with servicing rights released by the seller, interest rates included in the calculation do not reflect loan servicing fees.

For loans acquired with servicing rights retained by the seller, interest rates included in the calculation are net of servicing fees.

(3) LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date.

For Transitional loans, the LTV presented is the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan, where available.

For certain Transitional loans, totaling $ 223.2 million and $ 137.3 million at December 31, 2022 and 2021, respectively, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

The weighted average LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 70 % and 71 % at December 31, 2022 and 2021, respectively.

For certain Transitional loans, totaling $ 551.3 million and $ 223.2 million at December 31, 2023 and December 31, 2022, respectively, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

The weighted average LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 68 % and 70 % at December 31, 2023 and December 31, 2022, respectively.

Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots, for which the LTV ratio is not meaningful.

60+ LTV has been calculated on a consistent basis.

(4) Excludes loans for which no Fair Isaac Corporation (“FICO”) score is available.

(5) Excluded from the table above are approximately $ 103.7 million of Residential whole loans, at fair value for which the closing of the purchase transaction had not occurred as of December 31, 2023.

During 2022, Agency eligible investor loans with an unpaid principal balance of $ 337.8 million were sold, realizing losses, before the impact of economic hedging gains and the reversal of previously recognized unrealized losses of $ 72.3 million.

No Residential whole loans were sold during 2021.

During 2020, $ 1.8 billion of Non-QM loans were sold, realizing losses of $ 273.0 million, and Purchased Non-Performing loans with an aggregate unpaid principal of $ 24.1 million were sold, realizing net losses of approximately $ 800,000 .

In addition, in 2022, the Agency eligible investor loan securitizations were deconsolidated from the Company’s financial statements which resulted in the de-recognition of Agency eligible investor loans with an unpaid principal balance of $ 598.0 million (see Note 14 for further discussion).

In addition, during 2022, the Agency eligible investor loan securitizations were deconsolidated from the Company’s financial statements which resulted in the de-recognition of Agency eligible investor loans with an unpaid principal balance of $ 598.0 million.

During 2023, Non-QM loans with an unpaid principal balance of $ 101.2 million were sold, realizing losses, before the impact of economic hedging gains and the reversal of previously recognized unrealized losses, of $ 26.4 million.

MFA FINANCIAL, INC.

5 unchanged sentences

(Dollars In Thousands) Non-QM Loans Transitional Loans (1)(2)

Single-family Rental Loans Seasoned Performing Loans Purchased Credit Deteriorated Loans (3)

Single-family Rental Loans (4)

Seasoned Performing Loans Purchased Credit Deteriorated Loans (3)

Allowance for credit losses at December 31, 2022 $ 7,359 $ 5,223 $ 1,277 $ 48 $ 21,407 $ 35,314

Current provision ( 909 ) ( 1,460 ) ( 122 ) ( 1 ) ( 975 ) ( 3,467 )

Current provision/(reversal)

( 214 ) 406 514 ( 2 ) ( 389 ) 315

Write-offs — ( 2,003 ) ( 451 ) — ( 113 ) ( 2,567 )

9 unchanged sentences

Allowance for credit losses at December 31, 2023

$ 1,871 $ 2,587 $ 4,354 $ 21 $ 11,617 $ 20,451

For the Year Ended December 31, 2022

2 unchanged sentences

Allowance for credit losses at December 31, 2021

$ 8,289 $ 6,881 $ 1,451 $ 46 $ 22,780 $ 39,447

Current provision ( 909 ) ( 1,460 ) ( 122 ) ( 1 ) ( 975 ) ( 3,467 )

1 unchanged sentence

Allowance for credit and valuation losses at March 31, 2022

$ 7,329 $ 5,202 $ 1,302 $ 45 $ 21,579 $ 35,457

Current provision/(reversal) ( 199 ) ( 23 ) 174 1 1,877 1,830

1 unchanged sentence

Allowance for credit losses at June 30, 2022

$ 7,130 $ 5,061 $ 1,292 $ 46 $ 23,398 $ 36,927

Current provision/(reversal) ( 242 ) 583 83 3 120 547

1 unchanged sentence

Allowance for credit losses at September 30, 2022

$ 6,888 $ 5,530 $ 1,314 $ 49 $ 23,411 $ 37,192

Current provision/(reversal) 471 ( 13 ) ( 37 ) ( 1 ) ( 1,996 ) ( 1,576 )

1 unchanged sentence

Allowance for credit losses at December 31, 2022

(1) In connection with purchased Transitional loans at carrying value, the Company had unfunded commitments of $ 8.0 million and $ 18.5 million as of December 31, 2022 and 2021, respectively, with an allowance for credit losses of $ 29,000 and $ 205,000 at December 31, 2022 and 2021, respectively.

$ 7,359 $ 5,223 $ 1,277 $ 48 $ 21,407 $ 35,314

(1) In connection with Transitional loans at carrying value, the Company had unfunded commitments of $ 2.5 million and $ 8.0 million as of December 31, 2023 and 2022, respectively, with an allowance for credit losses of $ 0 and $ 29,000 at December 31, 2023 and 2022, respectively.

Such allowance is included in “Other liabilities” in the Company’s consolidated balance sheets (see Note 7).

1 unchanged sentence

(3) Includes $ 53.0 million and $ 48.5 million of loans that were assessed for credit losses based on a collateral dependent methodology as of December 31, 2023 and 2022, respectively.

The Company adopted the accounting standard addressing the measurement of credit losses on financial instruments (“CECL”) on January 1, 2020.

The anticipated impact of the COVID-19 pandemic on expected economic conditions, including forecasted unemployment, home price appreciation, and prepayment rates, for the short to medium term resulted in significantly increased estimates of credit losses recorded under CECL for the first quarter of 2020 for residential whole loans held at carrying value.

Since the end of the first quarter of 2020, primarily as a result of generally more stable markets and an ongoing

(4) Includes $ 10.6 million of loans that were assessed for credit losses based on a collateral dependent methodology as of December 31, 2023.

Prior to December 31, 2023, the Company’s estimates of expected losses that form the basis of the Allowance for Credit Losses included certain qualitative adjustments which had the effect of increasing expected loss estimates.

These qualitative adjustments were determined based on a variety of factors, including differences between the Company’s loan portfolio and the loan portfolios represented by data available in regulatory filings of certain banks that are considered to have similar loan portfolios (available proxy data), and differences between current (and expected future) market conditions in comparison to

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economic recovery, the Company has made subsequent revisions to certain macroeconomic assumptions, including its estimates related to future rates of unemployment and home price appreciation, and has made adjustments to the quantitative model outputs for relevant qualitative factors.

The net impact of these assumption revisions and qualitative adjustments, as well as reductions in balances subject to CECL, has resulted in a reversal of a portion of the allowance for loan loss since the end of the first quarter of 2020.

The Company’s estimates of expected losses that form the basis of the Allowance for Credit Losses include certain qualitative adjustments which have the effect of increasing expected loss estimates.

Such differences include uncertainty with respect to the ongoing impact of the COVID-19 pandemic, anticipated inflation and increasing market interest rates, and heightened political uncertainty.

The Company’s estimates of credit losses reflect the Company’s expectation that the performance of its portfolio will experience higher delinquencies and defaults compared to the performance in historical periods of portfolios included in the available proxy data.

Estimates of credit losses under CECL are highly sensitive to changes in assumptions and current economic conditions have increased the difficulty of accurately forecasting future conditions.

market conditions that occurred in historical periods.

Such differences included uncertainty with respect to any residual impact of the COVID-19 pandemic, anticipated inflation and increasing market interest rates, and heightened political uncertainty.

The Company’s estimates of credit losses reflect the Company’s expectation that the performance of its portfolio may experience higher delinquencies and defaults compared to the performance in historical periods of portfolios included in the available proxy data.

During 2023, the Company eliminated its qualitative adjustment and made updates to certain of its modeling assumptions which, in addition to a reduction in loan balances subject to allowances, caused a reduction in the overall allowance.

Estimates of credit losses under credit losses on financial instruments (“ CECL”) are highly sensitive to changes in assumptions and current economic conditions have increased the difficulty of accurately forecasting future conditions.

The amortized cost basis of Purchased Performing Loans on nonaccrual status as of December 31, 2023 and December 31, 2022 was $ 266.9 million and $ 195.1 million, respectively.

3 unchanged sentences

At December 31, 2023 and December 31, 2022, there were approximately $ 51.6 million and $ 71.7 million, respectively, of loans held at carrying value on nonaccrual status that did not have an associated allowance for credit losses because they were determined to be collateral dependent and the estimated fair value of the related collateral exceeded the carrying value of each loan, respectively.

During the year ended December 31, 2023, the Company granted four loan modifications in its carrying value loan portfolio which gave borrowers term extensions.

The average increase in weighted average life was 23 months.

As of December 31, 2023, the carrying value of these loans were approximately $ 563,000 .

As of December 31, 2023, one of these modifications was delinquent for more than 90 days and three were current.

MFA FINANCIAL, INC.

10 unchanged sentences

Year Ended December 31, 2023 Gross write-offs

$ — $ — $ — $ 71 $ 25 $ 110 $ 206

Transitional loans

5 unchanged sentences

Year Ended December 31, 2023 Gross write-offs

$ — $ — $ 14 $ 47 $ 3,130 $ 1,639 $ 4,830

Single-family rental loans

5 unchanged sentences

Year Ended December 31, 2023 Gross write-offs

$ — $ — $ — $ 160 $ 624 $ — $ 784

Seasoned performing loans

5 unchanged sentences

Year Ended December 31, 2023 Gross write-offs

$ — $ — $ — $ — $ — $ — $ —

Purchased credit deteriorated loans

5 unchanged sentences

Year Ended December 31, 2023 Gross write-offs

$ — $ — $ — $ — $ — $ 534 $ 534

Total LTV <= 80% (1)

4 unchanged sentences

Year Ended December 31, 2023 Total Gross write-offs

$ — $ — $ 14 $ 278 $ 3,779 $ 2,283 $ 6,354

(1) LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date.

46 unchanged sentences

Single-family rental loans

11,167 15,314 24,863 82,974 53,661 9,306 94,141 68,975 34,169

Seasoned performing loans 4,504 4,673 6,684 — — — 4,504 4,673 6,684

5 unchanged sentences

Securities, at Fair Value

Term Notes Backed by MSR-Related Collateral

Agency MBS are guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S.

Government, such as Ginnie Mae.

The following table presents certain information regarding the composition of our Agency MBS portfolio as of December 31, 2023 :

December 31, 2023

(Dollars in Thousands) Current

Face Weighted

Price Weighted

Value Weighted

(Months) CPR (1)

30-Year Fixed Rate:

5.00 % Coupon

$ 76,360 100.2 % 99.1 % $ 75,650 9 2.4 %

5.50 % Coupon

277,885 100.4 100.7 279,851 11 5.2

6.00 % Coupon

177,842 100.0 101.7 180,841 7 4.2

6.50 % Coupon

22,213 100.1 102.7 22,802 4 1.4

Total $ 554,300 100.3 % 100.9 % $ 559,144 9 4.3 %

(1) Reflects the average of the one month CPR for the number of months the security was held during the most recent three month period.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Term Notes Backed by MSR Collateral

At December 31, 2023 and 2022, the Company had $ 79.9 million and $ 97.9 million, respectively, of term notes issued by SPVs that have acquired rights to receive cash flows representing the servicing fees and/or excess servicing spread associated with certain MSRs.

2 unchanged sentences

At December 31, 2022, the term notes had an amortized cost of $ 86.4 million, gross unrealized gains of approximately $ 11.5 million, a weighted average yield of 14.3 % and a weighted average term to maturity of 0.8 years.

During the three months ended March 31, 2020, the Company recognized an impairment loss related to its term notes of $ 280.8 million based on its intent to sell, or the likelihood it will be required to sell, such notes.

The issuer of the notes had a one -time option to extend the maturity of the notes for an additional two years , subject to satisfaction of certain conditions, which was exercised in October 2023.

The coupon stepped up by 0.75 % at the time of the extension.

CRT Securities

1 unchanged sentence

The coupon payments on CRT securities are paid by the issuer and the principal payments received are dependent on the performance of loans in either a reference pool or an actual pool of loans.

At December 31, 2023 and December 31, 2022, the Company had $ 83.2 million and $ 79.2 million, respectively, of CRT securities.

1 unchanged sentence

The Company pledges a portion of its CRT securities as collateral against its borrowings under repurchase agreements (see Note 6).

Non-Agency MBS

Non-Agency MBS are primarily secured by pools of residential mortgages, which are not guaranteed by an agency of the U.S.

Government or any federally chartered corporation.

At December 31, 2023, and December 31, 2022, the Company had $ 23.8 million and $ 24.6 million, respectively, of Non-Agency MBS.

These securities were acquired on the de-consolidation of certain trusts that held previously securitized Agency Eligible investor loans.

MFA FINANCIAL, INC.

1 unchanged sentence

DECEMBER 31, 2023

Agency and Non-Agency MBS

The Company’s MBS are comprised of Agency MBS and Non-Agency MBS.

Agency MBS are guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S.

Government, such as Ginnie Mae.

Non-Agency MBS:

The Company’s Non-Agency MBS are primarily secured by pools of residential mortgages, which are not guaranteed by an agency of the U.S.

Government or any federally chartered corporation.

The following tables present certain information about the Company’s Agency, Non-Agency and CRT securities at December 31, 2022 and 2021:

The following tables present certain information about the Company’s Agency MBS and other Securities, at December 31, 2023 and 2022:

December 31, 2023

6 unchanged sentences

Gain/(Loss) Fair

Agency MBS $ 554,300 $ 1,824 $ ( 500 ) $ — $ 555,624 $ 4,355 $ ( 835 ) $ 3,520 $ 559,144

Other Securities (2)(3)(4)

193,102 19,686 ( 5,637 ) ( 40,514 ) 166,637 20,437 ( 128 ) 20,309 186,946

Total residential mortgage securities (2)(3)(4)

8 unchanged sentences

Gain/(Loss) Fair Value

Agency MBS $ 131,165 $ 860 $ — $ — $ 132,025 $ — $ ( 325 ) $ ( 325 ) $ 131,700

Other Securities (2)(3)(4)

215,649 18,344 ( 6,272 ) ( 46,332 ) 181,389 21,473 ( 1,198 ) 20,275 201,664

Total residential mortgage securities (2)(3)(4)

3 unchanged sentences

(3) Amounts disclosed at December 31, 2023 include CRT securities with a fair value of $ 51.2 million for which the fair value option has been elected.

Such securities had gross unrealized gains of approximately $ 131,000 and gross unrealized losses of approximately $ 1.2 million at December 31, 2022.

Such securities had approximately $ 2.3 million gross unrealized gains and no gross unrealized losses at December 31, 2023.

Amounts disclosed at December 31, 2022 includes CRT securities with a fair value of $ 48.6 million for which the fair value option has been elected.

Such securities had gross unrealized gains of approximately $ 1.8 million and gross unrealized losses of approximately $ 10,000 at December 31, 2021.

Such securities had gross unrealized gains of approximately $ 131,000 and gross unrealized losses of approximately $ 1.2 million at December 31, 2022.

(4) Amounts disclosed at December 31, 2023 include Non-Agency MBS with a fair value of $ 23.8 million for which the fair value option has been elected.

Such securities had $ 474,000 gross unrealized gains and $ 128,000 gross unrealized losses at December 31, 2023.

Amounts disclosed at December 31, 2022 include Non-Agency MBS with a fair value of $ 24.6 million for which the fair value option has been elected.

Such securities had no gross unrealized gains and no gross unrealized losses at December 31, 2022.

(5) Amounts disclosed at December 31, 2022 include Agency MBS with a fair value of $ 131.7 million for which the fair value option has been elected.

Such securities had no gross unrealized gains and gross unrealized losses of approximately $ 325,000 at December 31, 2022 .

Sales of Residential Mortgage Securities

During the year ended December 31, 2023, the Company sold MSR securities for approximately $ 18.2 million, realizing gains of $ 908,000 .

During the year ended December 31, 2022, the Company sold CRT securities for approximately $ 15.7 million, realizing gains of $ 84,000 .

The Company did not sell any of its residential mortgage securities during the year ended December 31, 2021.

MFA FINANCIAL, INC.

1 unchanged sentence

DECEMBER 31, 2023

Impairment and other net (loss)/gain on securities and other portfolio investment s

The following table present the components of Impairment and other net (loss)/gain on securities and other portfolio investments for the years ended December 31, 2022, 2021 and 2020, which is presented in Other income in the consolidated statements of operations:

Impairment and other net gain/(loss) on securities and other portfolio investment s

The following table present the components of Impairment and other net gain/(loss) on securities and other portfolio investments for the years ended December 31, 2023, 2022 and 2021, which is presented in Other Income/(Loss), net in the consolidated statements of operations:

For the Year Ended December 31,

(In Thousands) 2023 2022 2021

Net unrealized (loss)/gain on securities $ ( 3,230 ) $ 1,607 $ ( 10,486 )

Net unrealized gain/(loss) on securities $ 7,341 $ ( 3,230 ) $ 1,607

Net realized gain from the sale of securities 908 84 —

Impairment of securities — — ( 344,269 )

Total Impairment and other net (loss)/gain on securities $ ( 3,146 ) $ 1,607 $ ( 264,347 )

Net unrealized loss on other portfolio investments $ ( 21,921 ) $ — $ —

Total Impairment and other net gain/(loss) on securities $ 8,249 $ ( 3,146 ) $ 1,607

Net unrealized gain/(loss) on other portfolio investments $ 6,180 $ ( 21,921 ) $ —

Net realized loss on other portfolio investments ( 5,869 ) — —

2 unchanged sentences

Gain on investment in Lima One common equity — — 38,933

Total Impairment and other net (loss)/gain on securities and other portfolio investments $ ( 25,067 ) $ 74,496 $ ( 350,567 )

(1) Includes impairment in 2020 and 2021 related to a preferred equity investment in a loan originator, which was restructured in December 2021 and subsequently assessed as debt for accounting purposes.

Total Impairment and other net gain/(loss) on securities and other portfolio investments $ 6,225 $ ( 25,067 ) $ 74,496

(1) Includes impairment in 2021 related to a preferred equity investment in a loan originator, which was restructured in December 2021 and subsequently assessed as debt for accounting purposes.

Accordingly, subsequent impairments on this investment recorded in 2022 are reflected as “Provision for Credit Losses on Other Assets” in the Company’s consolidated statement of operations.

The following table presents information about the Company’s sales of its securities for the years ended December 31, 2022, 2021 and 2020.

The Company has no continuing involvement with any of the sold securities.

For the Year Ended December 31,

2022 2021 2020

(In Thousands) Sales Proceeds Gains/(Losses) Sales Proceeds Gains/(Losses) Sales Proceeds Gains/(Losses)

Agency MBS $ — $ — $ — $ — $ 1,500,875 $ ( 19,291 )

Non-Agency MBS — — — — 1,318,958 107,999

CRT securities 15,660 84 — — 243,025 ( 27,011 )

MSR-related assets — — — — 711,698 28,711

Total $ 15,660 $ 84 $ — $ — $ 3,774,556 $ 90,408

Unrealized Losses on Residential Mortgage Securities

There were no gross unrealized losses on the Company’s AFS securities at December 31, 2023.

The Company did not recognize an allowance for credit losses (or other than temporary impairment in prior year periods) through earnings related to its MBS for the years ended December 31, 2022 and 2021.

During the three months ended March 31, 2020, the Company recognized an aggregate impairment loss related to its MBS of $ 63.5 million based on its intent to sell, or the likelihood it will be required to sell, certain securities at such time.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The Company did not recognize an allowance for credit losses through earnings related to its MBS for the years ended December 31, 2023, 2022 and 2021.

Impact of AFS Securities on AOCI

4 unchanged sentences

Unrealized gain on AFS securities at beginning of period $ 21,341 $ 46,833 $ 79,607

Unrealized (losses)/gains on securities available-for-sale ( 25,492 ) ( 32,774 ) 420,281

Unrealized gains/(losses) on securities available-for-sale

( 2,873 ) ( 25,492 ) ( 32,774 )

Reclassification adjustment for MBS sales included in net income ( 770 ) — —

Reclassification adjustment for impairment included in net income — — ( 344,269 )

Change in AOCI from AFS securities ( 3,643 ) ( 25,492 ) ( 32,774 )

Balance at end of period $ 17,698 $ 21,341 $ 46,833

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Interest Income on Securities, at Fair Value

2 unchanged sentences

(In Thousands) 2023 2022 2021

Residential Mortgage Securities

Coupon interest $ 20,676 $ — $ —

Effective yield adjustment (1)(2)

Interest income $ 20,529 $ — $ —

Coupon interest $ 8,128 $ 4,793 $ 4,076

Effective yield adjustment (1)(2)(3)

191 3,143 13,265

Interest income $ 8,319 $ 7,936 $ 17,341

MSR-related assets

Term notes backed by MSR collateral

Coupon interest $ 8,423 $ 6,610 $ 7,462

3 unchanged sentences

(1) Includes amortization of premium paid net of accretion of purchase discount.

For Agency MBS, RPL/NPL MBS and the corporate loan secured by MSRs, interest income is recorded at an effective yield, which reflects net premium amortization/accretion based on actual prepayment activity.

Interest income is recorded at an effective yield, which reflects net premium amortization/accretion based on actual prepayment activity.

(2) The effective yield adjustment is the difference between the net income calculated using the net yield less the current coupon yield.

8 unchanged sentences

Receivable for sale of unsettled residential whole loans $ — $ 275,656

130,605 156,223

REO 110,174 130,605

Commercial REO 22,717 —

Goodwill 61,076 61,076

Intangibles, net (1)

12,200 21,400

Capital contributions made to loan origination partners 19,780 28,308

Other interest-earning assets 63,964 57,522

Commercial loans 51,426 61,510

Interest receivable 98,924 68,704

4 unchanged sentences

Total Other Assets $ 497,097 $ 766,221

(1) Includes $ 11.3 million of REO that was held-for-investment at December 31, 2021.

(2) Net of aggregate accumulated amortization of $ 15.8 million and $ 6.6 million as of December 31, 2022 and 2021.

(1) Net of aggregate accumulated amortization of $ 20.0 million and $ 15.8 million as of December 31, 2023 and 2022, respectively.

(2) An estimated incremental borrowing rate of 7.5 % was used in connection with the Company’s primary operating lease (see Notes 2 and 9).

(a) Real Estate Owned

(a) Real Estate Owned and Commercial REO

At December 31, 2023, the Company had 300 REO properties with an aggregate carrying value of $ 110.2 million.

15 unchanged sentences

Number of properties 300 388

(1) Includes a net loss recorded on transfer of approximately $ 1.2 million and $ 700,000 , respectively, for the years ended December 31, 2022 and 2021.

(1) Includes a net loss recorded on transfer of approximately $ 400,000 and $ 1.2 million, respectively, for the years ended December 31, 2023 and December 31, 2022.

(2) During the year ended December 31, 2023, the Company sold 342 REO properties for consideration of $ 114.3 million, realizing net gains of approximately $ 14.4 million.

During the year ended December 31, 2022, the Company sold 416 REO properties for consideration of $ 133.8 million, realizing net gains of approximately $ 28.7 million.

These amounts are included in Other Income, net on the Company’s consolidated statements of operations.

These amounts are included in Other Income/(Loss), net on the Company’s consolidated statements of operations.

MFA FINANCIAL, INC.

1 unchanged sentence

DECEMBER 31, 2023

Commercial REO

The Company received a 75 % interest in an entity which owns a newly constructed industrial property as part of the negotiated settlement of a delinquent commercial mortgage loan.

The entity was determined to be a VIE but the Company was not determined to be the primary beneficiary;

as a result, the investment in the entity is considered an equity method investment.

At the time the Company received this interest, it was valued at $ 22.7 million and the Company recorded a $ 0.3 million gain over the carrying value of the commercial loan.

The entity accounts for this commercial REO similarly to the manner in which the Company accounts for its residential REO.

The entity does not own any other significant assets or carry any significant liabilities and the property is currently vacant and considered held for sale.

( b ) Goodwill and Intangible Assets

On July 1, 2021, the Company completed the acquisition of Lima One (see Note 15).

On July 1, 2021, the Company completed the acquisition of Lima One.

In connection with the acquisition of Lima One, the Company identified and recorded goodwill of $ 61.1 million and finite-lived intangible assets totaling $ 28.0 million.

1 unchanged sentence

(Dollars in Thousands) Acquisition Date July 1, 2021 Amortization

December 31, 2021 Carrying Value at December 31, 2021 Amortization

December 31, 2022 Carrying Value at

December 31, 2022 Amortization Period (Years) (1)

December 31, 2021

December 31, 2022

December 31, 2023

Carrying Value at

December 31, 2023

Amortization Period (Years) (1)

Trademarks / Trade Names $ 4,000 $ ( 200 ) $ ( 400 ) $ ( 400 ) $ 3,000 10

4 unchanged sentences

(1) Amortization is calculated on a straight-line basis over the amortization period, except for Customer Relationships, where amortization is calculated based on expected levels of customer attritio n .

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

( c ) Capital Contributions Made to Loan Origination Partners

1 unchanged sentence

At December 31, 2023, the carrying value of these investments (including adjustments for impairments or mark-to-market changes) was $ 19.8 million, including $ 4.7 million of common equity (including partnership interests) and $ 15.1 million of preferred equity.

During the year ended December 31, 2023, the Company recorded an impairment charge in earnings of $ 2.3 million against the carrying value of its investment in one loan origination partner.

In 2023, the Company sold a preferred equity interest in one loan origination partner, which was recorded at $ 6.6 million, and recorded a gain of $ 0.1 million.

During the year ended December 31, 2022, the Company recorded an impairment charge in earnings of $ 28.6 million against the carrying value of its investment in one loan origination partner, bringing the net carrying value of this investment to zero as of June 30, 2022.

3 unchanged sentences

In addition, the Company recorded a gain of $ 24.0 million related to a preferred equity investment that had been previously impaired and that was required to be revalued during the period, as the investee company completed a capital transaction with an unrelated third party.

The Company did no t record any impairment charges to earnings on investments in loan origination partners during the year ended December 31, 2021.

During the year ended December 31, 2020, the Company recorded impairment charges of $ 65.3 million on investments in certain loan origination partners following an evaluation of the anticipated impact of COVID-19 on economic conditions for the short to medium term.

This activity was recorded in Other income in the consolidated statements of operations.

For certain of the Company’s investments, the interests acquired to date by the Company generally do not have a readily determinable fair value.

The Company did not record any impairment charges to earnings on investments in loan origination partners during the year ended December 31, 2021.

For certain of the Company’s investments, the interests acquired to date by the Company generally do not have a readily

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

determinable fair value.

Consequently, the Company accounts for these interests (including any acquired options and warrants) in loan originators initially at cost.

4 unchanged sentences

Accordingly, the Company consolidated Lima One’s financial results beginning on that date.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

(d) Derivative Instruments

( d) Commercial Mortgage Loans

The Company owns a portfolio of participations in commercial mortgage bridge loans, which are accounted for at fair value under the fair value option, and are classified as Level 3 fair value measurements in the fair value hierarchy.

The participations range from 49 % to 75 % of the total UPB of the related loans;

the remaining interest in each loan was retained by the originator of such loan.

The commercial mortgage loans are predominantly collateralized by multi-family properties;

the collateral also includes one senior living property, one parking, and one office property.

The commercial mortgage loans are generally first liens and bear variable interest rates.

The Company received an interest in one of the underlying properties in the fourth quarter of 2023, as further described above under “Commercial REO.”

The following table presents certain additional information about the Company’s commercial mortgage loans as of December 31, 2023 and December 31, 2022:

(In Thousands) Fair Value / Carrying Value UPB

Weighted Average Coupon Weighted Average Term to Maturity (Months) UPB 60+ Days Delinquent

Commercial Mortgage Loans - December 31, 2023 $ 51,426 $ 51,602 13.18 % 2 $ 3,521

Commercial Mortgage Loans - December 31, 2022

$ 61,510 $ 61,510 11.54 % 10 $ —

(e) Derivative Instruments

The Company’s derivative instruments include Swaps, which are used to economically hedge the interest rate risk associated with certain borrowings.

1 unchanged sentence

At December 31, 2023, none of the Company’s Swaps were designated as hedges for accounting purposes.

In response to the turmoil in the financial markets resulting from COVID-19 experienced during the three months ended March 31, 2020, and given that management no longer considered those transactions to be effective hedges in the then prevailing interest rate environment, the Company unwound all of its then approximately $ 4.1 billion of Swap hedging transactions late in the first quarter of 2020 in order to recover previously posted margin.

Consequently, during the year ended December 31, 2020, the Company concluded that it was appropriate to transfer from AOCI to earnings approximately $ 57.0 million of losses on Swaps that had previously been designated as hedges for accounting purposes, because the hedged transactions were no longer considered probable to occur.

At December 31, 2022 and 2021, the Company had restricted cash pledged as collateral against its Swap contracts of $ 60.8 million and $ 14.4 million, respectively.

Variation margin payments on the Company’s Swaps are treated as a legal settlement of the exposure under the related Swap contract, the effect of which reduces what would have otherwise been reported as the fair value of the Swap, generally to zero.

The following table presents the assets pledged as collateral against the Company’s Swaps at December 31, 2023, and December 31, 2022:

(In Thousands) December 31,

2023 December 31,

Agency MBS, at fair value

Restricted Cash 22,880 60,764

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

At December 31, 2023, the Company had Swaps with an aggregate notional amount of $ 3.3 billion and an average maturity of approximately 38 months with a maximum term of approximately 119 months.

10 unchanged sentences

(Dollars in Thousands)

Within 30 days to 12 months $ — — % — % $ — — % — %

Within 30 days $ — — % — % $ — — % — %

Over 30 days to 3 months 100,000 1.49 5.38 — — —

Over 3 months to 6 months — — — — — —

4 unchanged sentences

Over 48 months to 60 months 24,600 4.28 5.38 1,075,000 1.86 4.30

Over 60 months to 72 months 310,000 2.95 5.38 — — —

Over 72 months to 84 months — — — 310,000 2.95 4.30

Over 84 months 292,650 4.32 5.38 — — —

Total Swaps $ 3,277,260 1.85 % 5.38 % $ 3,160,010 1.69 % 4.30 %

(1) Each maturity category reflects contractual amortization and/or maturity of notional amounts.

(2) Reflects the benchmark variable rate due from the counterparty at the date presented, which rate adjusts daily based on SOFR.

TBA Securities

In order to economically hedge the risks arising from the investments in Agency eligible investor loans, the Company entered into short positions in certain TBA securities.

The Company did not have any open short positions in TBA securities at December 31, 2022.

The table below summarizes open short positions in TBA securities as of December 31, 2021, which had an aggregate value of ($ 1.3 ) million and were included in Other assets/liabilities on the Company’s consolidated balance sheets.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

December 31, 2021

(Dollars in Thousands) Notional Amount Settlement Date

UMBS 2.5 $ 180,000 January 13, 2022

UMBS 2.0 $ 130,000 January 13, 2022

TBA short positions are subject to margining requirements which serve to mitigate counterparty credit risk associated with these transactions.

Open TBA positions are measured at fair value each reporting date, with realized and unrealized changes in the fair value of these positions recorded in Other income, net on the Company’s consolidated statements of operations.

(2) Reflects the benchmark variable rate due from the counterparty at the date presented.

This rate adjusts daily based on SOFR.

Impact of Derivative Instruments on Earnings

The following table present the components of Net gain/(loss) on derivatives used for risk management purposes for the years ended December 31, 2022, 2021 and 2020, which is presented in Other income in the consolidated statements of operations:

The following table present the components of Net gain/(loss) on derivatives used for risk management purposes for the years ended December 31, 2023, 2022 and 2021, which is presented in Other Income/(Loss), net in the consolidated statements of operations:

For the Year Ended December 31,

2 unchanged sentences

Expense on swap fixed pay leg ( 51,400 ) ( 42,353 ) ( 703 )

Unrealized mark-to-market gain 208,712 70 5,708

Unrealized mark-to-market gain/(loss)

( 91,696 ) 208,712 70

Net price alignment expense on margin collateral received ( 11,697 ) ( 2,762 ) —

Loss on unwind of swaps not designated as hedges for accounting purposes — — ( 9,353 )

Loss on terminated swaps designated as hedges for accounting purposes — — ( 57,034 )

Net gain on TBA short positions — 39,187 2,025

1 unchanged sentence

$ 3,761 $ 255,179 $ 1,426

Impact of Derivative Hedging Instruments on AOCI

The following table presents the impact of the Company’s derivative hedging instruments on its AOCI for the years ended December 31, 2022, 2021 and 2020:

For the Year Ended December 31,

(In Thousands) 2022 2021 2020

AOCI from derivative hedging instruments:

Balance at beginning of period $ — $ — $ ( 22,675 )

Net loss on Swaps — — ( 50,127 )

Reclassification adjustment for losses/gains related to hedging instruments included in net income — — 72,802

Balance at end of period $ — $ — $ —

MFA FINANCIAL, INC.

2 unchanged sentences

Financing Agreements

The following tables present the components of the Company’s financing agreements at December 31, 2022 and 2021:

The following tables present the components of, and certain information with respect to, the Company’s Financing agreements at December 31, 2023 and 2022:

December 31, 2023

7 unchanged sentences

Securitized debt Residential Whole Loans 4,894,746 4,750,805 4.00 % See Note 14

Convertible senior notes Unsecured 229,989 227,845 6.94 % See below

Convertible senior notes Unsecured 209,589 208,989 6.94 % 5.5

Impact of net Swap carry ( 1.36 ) %

Total Financing agreements (2)

9 unchanged sentences

Securitized debt Residential Whole Loans 3,586,397 3,357,590 2.99 % See Note 14

Convertible senior notes Unsecured 230,000 226,470 6.94 % See below

Convertible senior notes Unsecured 229,989 227,845 6.94 % 17.5

Impact of net Swap carry ( 0.14 ) %

Total Financing agreements (2)

$ 7,043,944 $ 6,812,086 3.46 %

(1) The Company has both financing agreements held at fair value and financings agreements held at their carrying value (amortized cost basis).

(1) The Company has both financing agreements held at fair value and financing agreements held at their carrying value (amortized cost basis).

Financing agreements held at fair value are reported at estimated fair value each period as a result of the Company’s fair value option election.

2 unchanged sentences

At December 31, 2023, the Company had $ 178.9 million of agreements with mark-to-market collateral provisions held at fair value, $ 469.4 million of agreements with non-mark-to-market collateral provisions held at fair value, and $ 4.0 billion of securitized debt held at fair value, with amortized cost bases of $ 178.9 million, $ 469.4 million, and, $ 4.1 billion respectively.

At December 31, 2021, the Company had the $ 1.3 billion of agreements with mark-to-market collateral provisions held at fair value, $ 628.3 million of agreements with non-mark-to-market collateral provisions held at fair value, and $ 1.3 billion of securitized debt held at fair value, with amortized cost bases of $ 1.3 billion, $ 627.0 million, and $ 1.3 billion, respectively.

At December 31, 2022, the Company had $ 884.5 million of agreements with mark-to-market collateral provisions held at fair value, $ 578.9 million of agreements with non-mark-to-market collateral provisions held at fair value, and $ 2.4 billion of securitized debt held at fair value, with amortized cost bases of $ 884.5 million, $ 578.9 million, and $ 2.6 billion, respectively.

(2) Weighted average cost of funding reflects year-to-date interest expense divided by average balance for the financing agreements.

The cost of funding for the total financing agreements includes the impact of the net carry (the difference between swap interest income received and swap interest expense paid) on the Company’s Swaps.

For the year ended December 31, 2022, this decreased the overall funding cost by 14 basis points, and for the year ended December 31, 2021, this increased the overall funding cost by two basis points.

For the year ended December 31, 2023, this decreased the overall funding cost by 136 basis points, and for the year ended December 31, 2022, this decreased the overall funding cost by 14 basis points.

The Company does not allocate the impact of the net carry by type of financing agreement.

6 unchanged sentences

(In Thousands) Collateral 0-3 Months (1)

3-6 Months (1)

6-12 Months Greater than 12 Months (2)

3 unchanged sentences

Agreements with non-mark-to-market collateral provisions Residential Whole Loans 36,341 10,151 44,342 1,126,837 1,217,671

(1) $ 304.1 million of the mark-to-market agreements ($ 250.9 million and $ 53.2 million included in the 0-3 and 3-6 months categories, respectively) can be terminated by either party.

(2) $ 290.2 million of the mark-to-market agreements (included in the greater than 12 months category) have a one year extension option to September 2024.

(1) $ 945.8 million of the mark-to-market agreements (included in the 0-3 months category) can be terminated by either party.

(2) Amounts presented are based on the assumed exercise of the Company’s unilateral option to extend by one year the maturity of an agreement with mark-to-market collateral provisions with $ 335.2 million outstanding.

The longest maturity date is approximately 33 months.

The following table presents information with respect to the Company’s financing agreements with mark-to-market collateral provisions and associated assets pledged as collateral at December 31, 2023 and 2022:

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December 31, 2023 December 31, 2022

Unpaid Principal Balance Weighted Average Interest Rate Unpaid Principal Balance Weighted Average Interest Rate

Amortized Cost Basis Weighted Average Interest Rate Amortized Cost Basis Weighted Average Interest Rate

Time Until Interest Rate Reset

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During the year ended December 31, 2022, $ 11,000 of convertible senior notes were converted into 345 shares of the Company’s common stock.

In February 2023, the Company’s Board authorized a repurchase program for its Convertible Senior Notes pursuant to which it may repurchase up to $ 100 million of its Convertible Senior Notes.

The convertible notes repurchase program does not require the purchase of any minimum amount of Convertible Senior Notes.

The timing and extent to which the Company may

MFA FINANCIAL, INC.

1 unchanged sentence

DECEMBER 31, 2023

repurchase its Convertible Senior Notes will depend upon, among other things, market conditions, share price, liquidity, regulatory requirements and other factors, and repurchases may be commenced or suspended at any time without prior notice.

During the year ended December 31, 2023, the Company repurchased $ 20.4 million principal amount of the Convertible Senior Notes for $ 20.2 million and recorded a gain of $ 89,000 to Other Income/(Loss), net on the consolidated statement of operations.

At December 31, 2023, the aggregate principal amount of the Company’s Convertible Senior Notes outstanding was $ 209.6 million.

The Convertible Senior Notes are the Company’s senior unsecured obligations and are (i) effectively junior to all of the Company’s secured indebtedness, which includes the Company’s repurchase agreements and other financing arrangements, to the extent of the value of the collateral securing such indebtedness and (ii) equal in right of payment to the Company’s existing and future senior unsecured obligations, if any.

On April 11, 2012, the Company issued $ 100.0 million in aggregate principal amount of its Senior Notes in an underwritten public offering.

On January 6, 2021, the Company redeemed all of its outstanding Senior Notes.

The Senior Notes bore interest at a fixed rate of 8.00 % per year, paid quarterly in arrears on January 15, April 15, July 15 and October 15.

The Senior Notes had an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 8.31 %.

Senior Secured Term Loan Facility

On June 26, 2020, the Company entered into a $ 500 million senior secured term loan facility (the “Term Loan Facility”).

The outstanding balance of the Term Loan Facility was repaid and the Term Loan Facility was terminated prior to December 31, 2020.

(b) Counterparties

7 unchanged sentences

(Dollars in Thousands)

Barclays Bank (3)

BBB/Aa3/A $ 309,463 1 15.6 %

Wells Fargo A+/Aa2/AA- 234,826 1 11.8

Credit Suisse BBB-/Baa2/BBB 192,129 1 9.7

(1) As rated at December 31, 2022 by S&P, Moody’s and Fitch, Inc., respectively.

The counterparty rating presented is the lowest published rating for these entities.

Wells Fargo $ 283,820 1 14.9 %

Barclays 168,512 1 8.9

Churchill 152,409 1 8.0

(1) The amount at risk reflects the difference between (a) the amount loaned to the Company through financing agreements, including interest payable, and (b) the cash and the fair value of the assets pledged by the Company as collateral, including accrued interest receivable on such assets.

(3) Includes amounts at risk with various affiliates of Athene Holding, Ltd., held via participation in a loan syndication administered by Barclays Bank.

MFA FINANCIAL, INC.

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The Company pledges securities or cash as collateral to its counterparties in relation to certain of its financing arrangements.

The Company exchanges collateral with its counterparties based on changes in the fair value, notional amount and term of the associated financing arrangements and Swap contracts, as applicable.

The Company exchanges collateral with its counterparties based on changes in the fair value, notional amount and term of the associated financing arrangements and Swaps, as applicable.

In connection with these margining practices, either the Company or its counterparty may be required to pledge cash or securities as collateral.

When the Company’s pledged collateral exceeds the required margin, the Company may initiate a reverse margin call, at which time the counterparty may either return the excess collateral or provide collateral to the Company in the form of cash or equivalent securities.

The Company’s assets pledged as collateral are also described in Notes 2(e) - Restricted Cash and 5(d) - Derivative Instruments.

The Company’s assets pledged as collateral are also described in Notes 2(e) - Restricted Cash and 5(e) - Derivative Instruments.

Certain of the Company’s financing arrangements and derivative transactions are governed by underlying agreements that generally provide for a right of setoff in the event of default or in the event of a bankruptcy of either party to the transaction.

6 unchanged sentences

(In Thousands) December 31, 2023 December 31, 2022

Payable for purchase of unsettled Agency MBS $ 132,026 $ —

Payable for unsettled investment purchases $ 103,654 $ 132,026

Dividends and dividend equivalents payable 35,789 35,769

11 unchanged sentences

To the extent that the Company incurs interest, penalties or related excise taxes in connection with its tax obligations, including as a result of its assessment of uncertain tax positions, such amounts will be included in Operating and Other Expense on the Company’s consolidated statements of operations.

In addition, the Company has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”).

In addition, the Company has elected to treat certain of its subsidiaries as TRS.

In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.

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The Company’s estimate of net DTAs could change in future periods to the extent that actual or revised estimates of future taxable income change from current expectations.

At December 31, 2022, the Company’s federal NOL carryforward was $ 382.6 million, which may be carried forward indefinitely.

At December 31, 2023, the Company’s federal NOL carryforward from prior years was $ 332.2 million, which may be carried forward indefinitely.

If certain substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of the carryforwards that can be utilized.

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Total current provision/(benefit)

( 21 ) ( 1,046 ) 2,669

Deferred provision/(benefit)

Federal 251 166 —

State 48 29 —

Total deferred provision/(benefit)

Total provision/(benefit)

$ 278 $ ( 851 ) $ 2,669

MFA FINANCIAL, INC.

7 unchanged sentences

Other differences in taxable income/(loss) from GAAP

23.7 % ( 13.0 ) % ( 4.7 ) %

State and local taxes — % — % — %

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The Company recognized total lease expense of $ 6.7 million, $ 6.5 million and $ 4.0 million for the years ended December 31, 2023, 2022 and 2021, respectively, which is included in Other general and administrative expense on the Company’s consolidated statements of operations.

At December 31, 2022, the contractual minimum rental payments (exclusive of possible rent escalation charges and normal recurring charges for maintenance, insurance and taxes) were as follows:

At December 31, 2023, the contractual minimum rental payments (exclusive of possible rent escalation charges and normal recurring charges for maintenance, insurance and taxes) for the Company’s lease commitments were as follows:

Year Ended December 31, Minimum Rental Payments

2 unchanged sentences

Total $ 68,237

Present Value Discount

Total Lease Liability (Note 7)

Additionally, in June 2023, Lima One executed a lease agreement on new office space in Greenville, South Carolina for a thirteen-year term.

The Company expects the average annual lease rental expense to be approximately $ 3.0 million.

Lima One currently expects to relocate to the space in the first fiscal quarter of 2025.

Further, Lima One has the ability to terminate the lease agreement if vertical construction of the building is not started by April 2024.

(b) Representations and Warranties in Connection with Loan Securitization and Other Loan Sale Transactions

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As of December 31, 2023, the Company was not aware of any material unsettled repurchase claims that would require a reserve (see Note 14).

At December 31, 2022, the Company had unfunded commitments of $ 553.4 million in connection with its purchased Transitional loans (see Note 3).

MFA FINANCIAL, INC.

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DECEMBER 31, 2023

(d) Agency MBS Purchase Commitments

At December 31, 2022, the Company had commitments to purchase Agency MBS for $ 132.0 million.

Agency MBS are included in Securities, at fair value on the Company’s consolidated balance sheets, with a liability for the purchase amount included in Other liabilities.

At December 31, 2023, the Company had unfunded commitments of $ 585.8 million in connection with its Transitional loans (see Note 3).

From time to time, Lima One makes short-term commitments to originate mortgage loans;

such commitments were not significant at December 31, 2023.

Stockholders’ Equity

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In addition, certain material and adverse changes to the terms of the Series B Preferred Stock cannot be made without the affirmative vote of holders of at least 66 2/3% of the outstanding shares of Series B Preferred Stock.

As a result of the turmoil in the financial markets resulting from the global COVID-19 pandemic, and in order to preserve liquidity, on March 25, 2020, the Company revoked the previously announced first quarter 2020 quarterly cash dividends on each of the Company's common stock and Series B Preferred Stock.

On July 1, 2020, the Company announced that it had reinstated the payment of dividends on its Series B Preferred Stock and declared a preferred stock dividend of $ 0.9375 per share, payable on July 31, 2020 to Series B Preferred stockholders of record as of July 15, 2020.

The following table presents cash dividends declared by the Company on its Series B Preferred Stock from January 1, 2021 through December 31, 2023:

11 unchanged sentences

August 26, 2021 September 8, 2021 September 30, 2021 0.46875

July 1, 2020 July 15, 2020 July 31, 2020 0.93750

May 24, 2021 June 7, 2021 June 30, 2021 0.46875

February 19, 2021 March 5, 2021 March 31, 2021 0.46875

MFA FINANCIAL, INC.

6 unchanged sentences

The Company’s Series C Preferred Stock is entitled to receive dividends (i) from and including the original issue date to, but excluding, March 31, 2025, at a fixed rate of 6.50 % per year on the $ 25.00 liquidation preference and (ii) from and including March 31, 2025, at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus a spread of 5.345 % per year of the $ 25.00 per share liquidation preference before the Company’s common stock is paid any dividends, and is senior to the Company’s common stock with respect to distributions upon liquidation, dissolution or winding up.

Pursuant to the terms of the Series C Preferred Stock, upon the expected discontinuation of the publication of three-month LIBOR in June 2023, a calculation agent will be appointed to select an industry accepted substitute or successor base rate to the three-month LIBOR rate.

In light of the discontinuance of the publication of three-month LIBOR after June 2023, and pursuant to the terms of the Series C Preferred Stock, the Company will, prior to March 31, 2025, appoint a calculation agent to select an industry accepted substitute or successor base rate to the three-month LIBOR rate.

The calculation agent may also implement changes to the business day convention, the definition of business day, the dividend determination date, the interest rate spread and the method for obtaining the substitute or successor base rate, in a manner that is consistent with industry accepted practices.

1 unchanged sentence

The Federal Reserve is required to promulgate rules under this statute which, once final, the Company expects will affect the selection of an industry accepted substitute or successor base rate under the terms of the Series C Preferred Stock.

Although the Company has not yet appointed a calculation agent and a substitute or successor base rate has not yet been selected, the Company expects that three-month SOFR will be the substitute or successor base rate to three-month LIBOR.

Dividends on the Series C Preferred Stock are payable quarterly in arrears on or about March 31, June 30, September 30 and December 31 of each year.

5 unchanged sentences

In addition, certain material and adverse changes to the terms of the Series C Preferred Stock cannot be made without the affirmative vote of holders of at least 66 2/3% of the outstanding shares of Series C Preferred Stock.

Pursuant to the now-terminated forbearance agreements that the Company had previously entered into in the second quarter of 2020, the Company was prohibited from paying dividends on its Series C Preferred Stock during the forbearance period.

On July 1, 2020, the Company announced that it had reinstated the payment of dividends on its Series C Preferred Stock and declared a preferred stock dividend of $ 0.53264 per share, payable on July 31, 2020 to the Series C Preferred stockholders of record as of July 15, 2020.

Upon payment of this dividend, the Company paid in full all accumulated but previously unpaid dividends on its Series C Preferred Stock.

MFA FINANCIAL, INC.

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August 26, 2021 September 8, 2021 September 30, 2021 0.40625

July 1, 2020 July 15, 2020 July 31, 2020 0.53264

May 24, 2021 June 7, 2021 June 30, 2021 0.40625

February 19, 2021 March 5, 2021 March 31, 2021 0.40625

MFA FINANCIAL, INC.

6 unchanged sentences

2023 December 13, 2023 December 29, 2023 January 31, 2024 $ 0.350 (1)

September 13, 2022 September 30, 2022 October 31, 2022 0.440

September 20, 2023 October 2, 2023 October 31, 2023 0.350

June 15, 2023 June 30, 2023 July 31, 2023 0.350

5 unchanged sentences

2021 December 14, 2021 December 31, 2021 January 31, 2022 $ 0.440 (4)(5)

August 6, 2020 September 30, 2020 October 30, 2020 0.200 (5)

September 15, 2021 September 30, 2021 October 29, 2021 0.400 (4)

June 15, 2021 June 30, 2021 July 30, 2021 0.400 (4)

March 12, 2021 March 31, 2021 April 30, 2021 0.300 (4)

(1) At December 31, 2023, the Company had accrued dividends and dividend equivalents payable of $ 35.8 million related to the common stock dividend declared on December 13, 2023.

This dividend will be subject to taxation in 2023 for the recipient.

This dividend will be treated as a dividend paid in 2024 to the extent of the Company’s earnings and profits in 2024.

(2) At December 31, 2022, the Company had accrued dividends and dividend equivalents payable of $ 35.8 million related to the common stock dividend declared on December 14, 2022.

A portion of this dividend was considered taxable income to the recipient in 2023.

For more information see the Company’s 2023 Dividend Tax Information on its website.

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(5) At December 31, 2021, the Company had accrued dividends and dividend equivalents payable of $ 47.8 million related to the common stock dividend declared on December 14, 2021.

This dividend was considered taxable income to the recipient in 2022.

For more information see the Company’s 2021 Dividend Tax Information on its website

(5) The $ 0.30 and $ .20 per share dividend amounts for the three months ended December 31, 2020 and September 30, 2020, respectively, have been adjusted to reflect the Company’s one-for-four reverse stock split effected on April 4, 2022;

the dividends actually paid in respect of such dividends were $ 0.075 and $ 0.05 per share, respectively, which were based on the pre-split number of shares held by stockholders at the record dates for such dividends (December 30, 2020 and September 30, 2020, respectively).

(6) At December 31, 2020, we had accrued dividends and dividend equivalents payable of $ 34.0 million related to the common stock dividend declared on December 17, 2020.

This dividend was considered taxable income to the recipient in 2021.

A portion of this dividend was considered taxable income to the recipient in 2022.

For more information see the Company’s 2022 Dividend Tax Information on its website.

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At December 31, 2023, approximately 2.0 million shares of common stock remained available for issuance pursuant to the DRSPP shelf registration statement.

During the years ended December 31, 2022, 2021 and 2020, the Company issued 80,027 , 107,925 and 58,909 shares of common stock through the DRSPP, raising net proceeds of approximately $ 1.2 million, $ 1.9 million and $ 1.0 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, the Company issued 6,666 , 80,027 and 107,925 shares of common stock through the DRSPP, raising net proceeds of approximately $ 74,000 , $ 1.2 million and $ 1.9 million, respectively.

From the inception of the DRSPP in September 2003 through December 31, 2023, the Company issued 8,848,219 shares pursuant to the DRSPP, raising net proceeds of $ 290.8 million.

( d) At-the-Market Offering Program

On August 16, 2019, the Company entered into a three-year distribution agreement under the terms of which the Company had the ability to offer and sell shares of its common stock having an aggregate gross sales price of up to $ 400.0 million, from time to time, through various sales agents, pursuant to an at-the-market equity offering program (the “ATM Program”).

During the years ended December 31, 2022, 2021 and 2020, the Company did no t sell any shares of common stock through the ATM Program, and the ATM Program expired in August 2022.

(e) Stock Repurchase Program

On March 11, 2022, the Company’s Board authorized a stock repurchase program under which the Company may repurchase up to $ 250 million of its common stock through the end of 2023.

The Board’s authorization superseded and replaced the authorization under prior stock repurchase program that had been adopted in November 2020, which also authorized the Company to repurchase up to $ 250 million.

(d) Stock Repurchase Program

On March 11, 2022, the Company’s Board authorized a stock repurchase program under which the Company could repurchase up to $ 250 million of its common stock through the end of 2023.

The Board’s authorization superseded and replaced the authorization under a prior stock repurchase program that had been adopted in November 2020, which also authorized the Company to repurchase up to $ 250 million.

The stock repurchase program does not require the purchase of any minimum number of shares.

1 unchanged sentence

Acquisitions under the stock repurchase program may be made in the open market, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws (including, in the Company’s discretion, through the use of one or more plans adopted under Rule 10b5-1 promulgated under the Exchange Act of 1934, as amended (the “Exchange Act”)).

During the years ended December 31, 2022, 2021 and 2020, the Company repurchased 6,476,746 , 5,025,374 and 3,521,420 shares of its common stock through the stock repurchase program at an average cost of $ 15.80 , $ 17.04 and $ 14.44 per share and a total cost of approximately $ 102.1 million, $ 85.6 million and $ 50.8 million, net of fees and commissions paid to the sales agent of approximately $ 161,000 , $ 201,000 and $ 141,000 , respectively.

In addition, as discussed further below, during the year ended December 31, 2020 the Company repurchased 4,398,394 , warrants for $ 33.7 million that were included in the stock repurchase program.

As of December 31, 2022, the Company was permitted to purchase an additional $ 202.5 million of its common stock under the stock repurchase program.

The Company did not repurchase any shares of its common stock during the year ended December 31, 2023.

During the years ended December 31, 2022 and 2021, the Company repurchased 6,476,746 and 5,025,374 shares of its common stock through the stock repurchase program at an average cost of $ 15.80 and $ 17.04 per share and a total cost of approximately $ 102.1 million and $ 85.6 million, net of fees and commissions paid to the sales agent of approximately $ 161,000 and $ 201,000 , respectively.

Upon expiration of the repurchase authorization on December 31, 2023, approximately $ 202.5 million remained unused under the stock repurchase program.

MFA FINANCIAL, INC.

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DECEMBER 31, 2023

On June 15, 2020, the Company entered into an Investment Agreement with Apollo and Athene (together the “Purchasers”), under which the Company agreed to issue to the Purchasers warrants (the “Warrants”) to purchase, in the aggregate, 9,259,777 shares (subject to adjustment in accordance with their terms) of the Company’s common stock.

One half of the Warrants had an exercise price of $ 6.64 per share and the other half had an exercise price of $ 8.32 per share.

The Investment Agreement and the Term Loan Facility (see Note 6) were entered into simultaneously, and the $ 495.0 million of proceeds received were allocated between the debt ($ 481.0 million) and the Warrants ($ 14.0 million).

The amount allocated to the Warrants was recorded in Additional paid-in capital on the Company’s consolidated balance sheets.

During the fourth quarter of 2020, the Company repurchased, for $ 33.7 million, approximately 48 % of the Warrants that were issued to the Purchasers.

The remaining Warrants were exercised by the Purchasers later in the fourth quarter of 2020, resulting in the Company issuing approximately 3.1 million shares of common stock and receiving $ 6.5 million in cash.

(g) Accumulated Other Comprehensive Income/(Loss)

(e) Accumulated Other Comprehensive Income/(Loss)

The following tables present changes in the balances of each component of the Company’s AOCI for the years ended December 31, 2023, 2022 and 2021:

2 unchanged sentences

Gain/(Loss) on

AFS Securities Net

on Swaps Net Unrealized Gain/(Loss) on Financing Agreements (1)

AFS Securities Net Unrealized Gain/(Loss) on Financing Agreements (1)

Balance at beginning of period $ 21,341 $ — $ 21,341

1 unchanged sentence

Amounts reclassified from AOCI

( 770 ) — ( 770 )

Net OCI during the period (2)

4 unchanged sentences

Gain/(Loss) on

AFS Securities Net

on Swaps Net Unrealized Gain/(Loss) on Financing Agreements (1)

AFS Securities Net Unrealized Gain/(Loss) on Financing Agreements (1)

Balance at beginning of period $ 46,833 $ ( 1,255 ) $ 45,578

7 unchanged sentences

Gain/(Loss) on

AFS Securities Net

on Swaps Net Unrealized Gain/(Loss) on Financing Agreements (1)

AFS Securities Net Unrealized Gain/(Loss) on Financing Agreements (1)

Balance at beginning of period $ 79,607 $ ( 2,314 ) $ 77,293

1 unchanged sentence

Amounts reclassified from AOCI

( 733,396 ) 72,802 — ( 660,594 )

Net OCI during the period (2)

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(1) Net Unrealized Gain/(Loss) on Financing Agreements at Fair Value due to changes in instrument-specific credit risk.

(2) See separate table below for details about these reclassifications.

(2) For further information regarding changes in OCI, see the Company’s consolidated statements of comprehensive income/(loss).

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DECEMBER 31, 2023

The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the years ended December 31, 2022, 2021, and 2020:

For the Year Ended December 31,

2022 2021 2020

Details about AOCI Components Amounts Reclassified from AOCI Affected Line Item in the Statement

Where Net Income is Presented

(In Thousands)

AFS Securities:

Realized gain on sale of securities $ — $ — $ ( 389,127 ) Net realized (loss)/gain on sale of securities and residential whole loans

Impairment recognized in earnings — — ( 344,269 ) Other, net

Total AFS Securities $ — $ — $ ( 733,396 )

Swaps designated as cash flow hedges:

Amortization of de-designated hedging instruments — — 72,802 Other, net

Total Swaps designated as cash flow hedges $ — $ — $ 72,802

Total reclassifications for period $ — $ — $ ( 660,594 )

EPS Calculation

The following table presents a reconciliation of the (loss)/earnings and shares used in calculating basic and diluted (loss)/earnings per share for the years ended December 31, 2022, 2021 and 2020:

The following table presents a reconciliation of the earnings/(loss) and shares used in calculating basic and diluted earnings/(loss) per share for the years ended December 31, 2023, 2022 and 2021:

For the Year Ended December 31,

(In Thousands, Except Per Share Amounts) 2023 2022 2021

Basic (Loss)/Earnings per Share:

Net (loss)/income to common stockholders $ ( 231,581 ) $ 328,870 $ ( 679,390 )

Basic Earnings/(Loss) per Share:

Net income/(loss) to common stockholders

$ 80,164 $ ( 231,581 ) $ 328,870

Dividends declared on preferred stock ( 32,875 ) ( 32,875 ) ( 32,875 )

Dividends, dividend equivalents and undistributed earnings allocated to participating securities — ( 627 ) ( 1,044 )

Net (loss)/income to common stockholders - basic $ ( 265,083 ) $ 294,951 $ ( 709,415 )

Net income/(loss) to common stockholders - basic

$ 47,289 $ ( 265,083 ) $ 294,951

Basic weighted average common shares outstanding 102,215 103,153 110,704

Basic (Loss)/Earnings per Share $ ( 2.57 ) $ 2.66 $ ( 6.28 )

Diluted (Loss)/Earnings per Share:

Net (loss)/income to common stockholders - basic $ ( 265,083 ) $ 294,951 $ ( 709,415 )

Basic Earnings/(Loss) per Share

$ 0.46 $ ( 2.57 ) $ 2.66

Diluted Earnings/(Loss) per Share:

Net income/(loss) to common stockholders - basic

$ 47,289 $ ( 265,083 ) $ 294,951

Dividends, dividend equivalents and undistributed earnings allocated to participating securities — — 1,044

Interest expense on Convertible Senior Notes — — 15,668

Net (loss)/income to common stockholders - diluted $ ( 265,083 ) $ 311,663 $ ( 709,415 )

Net income/(loss) to common stockholders - diluted

$ 47,289 $ ( 265,083 ) $ 311,663

Basic weighted average common shares outstanding 102,215 103,153 110,704

3 unchanged sentences

103,578 103,153 118,691

Diluted (Loss)/Earnings per Share $ ( 2.57 ) $ 2.63 $ ( 6.28 )

(1) At December 31, 2022, the Company had approximately 1.7 million equity instruments outstanding that were excluded in the calculation of diluted EPS for the year ended December 31, 2022.

Diluted Earnings/(Loss) per Share

$ 0.46 $ ( 2.57 ) $ 2.63

(1) At December 31, 2023, the Company had approximately 3.8 million equity instruments outstanding that were included in the calculation of diluted EPS for the year ended December 31, 2023.

These equity instruments reflect RSUs (based on current estimate of expected share settlement amount) with a weighted average grant date fair value of $ 11.89 .

These equity instruments may have a dilutive impact on future EPS.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

These equity instruments may continue to have a dilutive impact on future EPS.

During the year ended December 31, 2023, the Convertible Senior Notes were determined to be anti-dilutive and were excluded from the calculation of diluted EPS under the “if-converted” method.

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(a) Equity Compensation Plan

In accordance with the terms of the Company’s Equity Plan, which was adopted by the Company’s stockholders on June 10, 2020 (and which amended and restated the Company’s 2010 Equity Compensation Plan), directors, officers and employees of the Company and any of its subsidiaries and other persons expected to provide significant services for the Company and any of its subsidiaries are eligible to receive grants of stock options (“Options”), restricted stock, RSUs, dividend equivalent rights and other stock-based awards under the Equity Plan.

In accordance with the terms of the Company’s Equity Plan, which was approved by the Company’s stockholders on June 6, 2023 (and which amended and restated the Company’s 2020 Equity Compensation Plan), directors, officers and employees of the Company and any of its subsidiaries and other persons expected to provide significant services for the Company and any of its subsidiaries are eligible to receive grants of stock options (“Options”), restricted stock, RSUs, dividend equivalent rights and other stock-based awards under the Equity Plan.

Subject to certain exceptions, stock-based awards relating to a maximum of 8.5 million shares of common stock may be granted under the Equity Plan;

1 unchanged sentence

At December 31, 2023, approximately 5.3 million shares of common stock remained available for grant in connection with stock-based awards under the Equity Plan.

A participant may generally not receive stock-based awards in excess of 500,000 shares of common stock in any one year and no award may be granted to any person who, assuming exercise of all Options and payment of all awards held by such person, would own or be deemed to own more than 9.8 % of the outstanding shares of the Company’s common stock.

A participant may generally not receive stock-based awards in excess of 2.0 million shares of common stock in any one year and no award may be granted to any person who, assuming exercise of all Options and payment of all awards held by such person, would own or be deemed to own more than 9.8 % of the outstanding shares of the

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Company’s common stock.

Unless previously terminated by the Board, awards may be granted under the Equity Plan until June 6, 2033.

2 unchanged sentences

Although the Equity Plan permits the Company to issue RSUs that can settle in cash, all of the Company’s outstanding RSUs as of December 31, 2023 are designated to be settled in shares of the Company’s common stock.

All RSUs outstanding at December 31, 2022 may be entitled to receive dividend equivalent payments depending on the terms and conditions of the award either in cash at the time dividends are paid by the Company, or for certain time-based and performance-based RSU awards, as a grant of stock at the time such awards are settled.

All holders of RSUs outstanding at December 31, 2023 may be entitled to receive dividend equivalent payments depending on the terms and conditions of the award either in cash at the time dividends are paid by the Company or at the time settlement of the RSU award, or for performance-based RSU awards, as a grant of stock at the time such awards are settled.

At December 31, 2023 and 2022, the Company had unrecognized compensation expense of $ 9.2 million and $ 11.2 million, respectively, related to RSUs.

6 unchanged sentences

Condition Weighted

Fair Value RSUs With

Fair Value Per Share

Conditions Weighted

Fair Value Total

Outstanding at beginning of year:

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Condition Weighted

Fair Value RSUs With

Conditions Weighted

Fair Value Total

Outstanding at beginning of year:

8 unchanged sentences

Condition Weighted

Fair Value RSUs With

Conditions Weighted

Fair Value Total

Outstanding at beginning of year:

2 unchanged sentences

Settled ( 124,497 ) 25.98 ( 102,254 ) 27.62 ( 226,751 ) 26.72

Cancelled/forfeited ( 27,500 ) 30.36 — — ( 27,500 ) 30.36

Outstanding at end of year 712,160 $ 20.22 905,708 $ 17.14 1,617,868 $ 18.50

4 unchanged sentences

(i) a weighted average volatility estimate of approximately 56 %, which was determined considering historic volatility in the price of the Company’s and its peer group companies common stock over the three-year period prior to the grant date and the implied volatility of certain exchange-traded options on the Company’s and peer group companies’ common stock at the grant date;

and (ii) a weighted average risk-free rate of 1.04 % based on the continuously compounded constant maturity treasury rate corresponding to a maturity commensurate with the expected vesting term of the awards, respectively.

The weighted average grant date fair value for the remaining 74,251 awards with a service condition only was estimated

and (ii) a weighted average risk-free rate of 4.12 % based on the continuously compounded constant maturity treasury rate corresponding to a maturity commensurate with the expected vesting term of

MFA FINANCIAL, INC.

1 unchanged sentence

DECEMBER 31, 2023

based on the closing price of the Company’s common stock at the grant date of $ 13.67 .

the awards, respectively.

The weighted average grant date fair value for the remaining 90,388 awards with a service condition only was estimated based on the closing price of the Company’s common stock at the grant date of $ 11.23 .

All of the 997,383 RSUs granted in 2023, the vesting of which is subject to both market and service conditions, are also subject to a one-year post-vesting holding requirement prior to settlement.

To account for the estimated loss of value due to this holding restriction, a discount for lack of marketability is applied after the payout value is determined.

There is no post vesting holding requirement on the 610,680 RSUs granted in 2023 the vesting of which is subject to a service condition only.

(2) The weighted average grant date fair value of these awards require the Company to estimate certain valuation inputs.

In determining the fair value for 603,525 of these awards granted in 2022, the Company applied:

(i) a weighted average volatility estimate of approximately 50 %, which was determined considering historic volatility in the price of the Company’s and its peer group companies’ common stock over the three period prior to the grant date and the implied volatility of certain exchange-traded options on the Company’s and peer group companies’ common stock at the grant date;

The weighted average grant date fair value for the remaining 74,251 awards with a service condition only was estimated based on the closing price of the Company’s common stock at the grant date of $ 13.67 .

All of the 381,397 RSUs with market and service conditions granted in 2022 are subject to a one-year post-vesting holding requirement.

To account for the estimated loss of value due to this holding restriction, a discount for lack of marketability is applied after the payout value is determined.

There is no post vesting holding requirement on the 296,379 RSUs granted in 2022 the vesting of which is subject to a service condition only.

(3) The weighted average grant date fair value of these awards require the Company to estimate certain valuation inputs.

In determining the fair value for 621,312 and 306,134 of these awards granted in 2021, the Company applied:

(i) a weighted average volatility estimate of approximately 48 % and 54 %, which was determined considering historic volatility in the price of the Company’s and its peer group companies’ common stock over the three and 2.5-year period prior to the grant date and the implied volatility of certain exchange-traded options on the Company’s and peer group companies’ common stock at the grant date;

and (ii) a weighted average risk-free rate of 0.17 % and 0.36 % based on the continuously compounded constant maturity treasury rate corresponding to a maturity commensurate with the expected vesting term of the awards, respectively.

(i) a weighted average volatility estimate of approximately 48 % and 54 %, which was determined considering historic volatility in the price of the Company’s and its peer group companies’ common stock over the three-year and 2.5 -year period prior to the grant date and the implied volatility of certain exchange-traded options on the Company’s and peer group companies’ common stock at the grant date;

The weighted average grant date fair value for the remaining 53,991 awards with a service condition only was estimated based on the closing price of the Company’s common stock at the grant date of $ 18.80 .

All of the 602,156 RSUs with market and service conditions granted in 2021 are subject to a one-year post-vesting holding requirement.

To account for the estimated loss of value due to this holding restriction, a discount for lack of marketability is applied after the payout value is determined.

There are no post vesting conditions on the 379,281 RSUs with service conditions granted in 2021.

(3) The weighted average grant date fair value of these awards require the Company to estimate certain valuation inputs.

In determining the fair value for 301,186 of these awards granted in 2020, the Company applied:

(i) a weighted average volatility estimate of approximately 14 %, which was determined considering historic volatility in the price of the Company’s and its peer group companies’ common stock over the three-year period prior to the grant date and the implied volatility of certain exchange-traded options on the Company’s and peer group companies’ common stock at the grant date;

and (ii) a weighted average risk-free rate of 1.36 % based on the continuously compounded constant maturity treasury rate corresponding to a maturity commensurate with the expected vesting term of the awards.

The weighted average grant date fair value for the remaining 113,148 and 11,231 awards with a service condition only was estimated based on the closing price of the Company’s common stock at the grant date of $ 9.28 and $ 10.24 , respectively.

There are no post vesting conditions on these awards.

Restricted Stock

At December 31, 2023, 2022 and 2021, the Company did no t have any unvested shares of restricted common stock outstanding, and no restricted shares vested during the years ended December 31, 2023 and 2022, respectively.

The total fair value of restricted shares vested during the year ended December 31, 2020.

was approximately $ 131,000 .

The following table presents information with respect to the Company’s restricted stock for the years ended December 31, 2022, 2021 and 2020:

For the Year Ended December 31,

2022 2021 2020

Stock Weighted

Fair Value (1)

Stock Weighted

Fair Value (1)

Stock Weighted

Fair Value (1)

Outstanding at beginning of year:

— $ — — $ — — $ —

Granted — — — — 19,888 6.60

— — — — ( 19,888 ) 6.60

Cancelled/forfeited — — — — — —

Outstanding at end of year — $ — — $ — — $ —

(1) The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.

(2) All restrictions associated with restricted stock are removed on vesting.

Dividend Equivalents

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Dividend equivalent payments are generally charged to Stockholders’ Equity when common stock dividends are declared to the extent that such equivalents are expected to vest.

The Company made dividend equivalent payments associated with RSU

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

awards of approximately $ 659,000 , $ 566,000 , and $ 367,000 during the years ended December 31, 2022, 2021 and 2020, respectively.

The Company made dividend equivalent payments associated with RSU awards of approximately $ 463,000 , $ 659,000 , and $ 566,000 during the years ended December 31, 2023, 2022 and 2021, respectively.

In addition, no dividend equivalents rights awarded as separate instruments were granted during the years ended December 31, 2023, 2022 and 2021.

6 unchanged sentences

Total $ 15,035 $ 11,338 $ 9,043

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(b) Deferred Compensation Plans

12 unchanged sentences

Total $ 586 $ ( 1,133 ) $ 537

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The Company distributed cash of approximately $ 53,000 to the participants of the Deferred Plans during the year ended December 31, 2022.

The Company distributed cash of approximately $ 374,000 and $ 53,000 to the participants of the Deferred Plans during the years ended December 31, 2023 and 2022, respectively.

The Company did not distribute cash to the participants of the Deferred Plans during the year ended December 31, 2021.

The Company distributed cash of $ 769,400 to the participants of the Deferred Plans during the year ended December 31, 2020.

The following table presents the aggregate amount of income deferred by participants of the Deferred Plans through December 31, 2023 and 2022 that had not been distributed and the Company’s associated liability for such deferrals at December 31, 2023 and 2022:

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The Company has elected to operate the Savings Plan under the applicable safe harbor provisions of the Code, whereby among other things, the Company must make contributions for all participating employees and all matches contributed by the Company immediately vest 100 %.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized expenses for matching contributions of $ 1.3 million, $ 697,000 and $ 480,000 , respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized expenses for matching contributions of $ 1.3 million, $ 1.3 million and $ 697,000 , respectively.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Fair Value of Financial Instruments

6 unchanged sentences

The following describes the valuation methodologies used for the Company’s financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Residential Whole Loans, at Fair Value

8 unchanged sentences

Securities, at Fair Value

Term Notes Backed by MSR-Related Collateral

The Company’s valuation process for term notes backed by MSR-related collateral is similar to that used for other residential mortgage securities and considers a number of observable market data points, including prices obtained from pricing services, brokers and repurchase agreement counterparties, dialogue with market participants, as well as management’s observations of market activity.

Other factors taken into consideration include estimated changes in fair value of the related underlying MSR collateral and, as applicable, the financial performance of the ultimate parent or sponsoring entity of the issuer, which has provided a guarantee that is intended to provide for payment of interest and principal to the holders of the term notes should cash flows generated by the related underlying MSR collateral be insufficient.

Based on its evaluation of the observability of the data used in its fair value estimation process, these assets are classified as Level 2 in the fair value hierarchy.

Other Residential Mortgage Securities (including short positions in TBA securities)

Residential Mortgage Securities

In determining the fair value of the Company’s other residential mortgage securities, management considers a number of observable market data points, including prices obtained from pricing services and brokers as well as dialogue with market participants.

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DECEMBER 31, 2023

Term Notes Backed by MSR Collateral

The Company’s valuation process for term notes backed by MSR collateral is similar to that used for residential mortgage securities and considers a number of observable market data points, including prices obtained from pricing services, brokers and repurchase agreement counterparties, dialogue with market participants, as well as management’s observations of market activity.

Other factors taken into consideration include estimated changes in fair value of the related underlying MSR collateral and, as applicable, the financial performance of the ultimate parent or sponsoring entity of the issuer, which has provided a guarantee that is intended to provide for payment of interest and principal to the holders of the term notes if cash flows generated by the related underlying MSR collateral are insufficient.

Based on its evaluation of the observability of the data used in its fair value estimation process, these assets are classified as Level 2 in the fair value hierarchy.

Financing Agreements, at Fair Value

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Agreements with non-mark-to-market collateral provisions

These agreements are secured, but not subject to margin calls, and their base interest rates reset frequently to market based rates.

These agreements are secured, but not subject to margin calls based on changes in the fair value of the financed residential whole loans.

Such agreements may experience changes in advance rates or collateral eligibility as a result of factors such as changes in the delinquency status of the financed residential whole loans.

As a result, a credit valuation adjustment would only be required if there were a significant decrease in collateral value, and the primary factor in determining their fair value is the credit spread paid over the base rate, which is a non-observable input as it is determined based on negotiations with the counterparty.

1 unchanged sentence

Securitized Debt

In determining the fair value of securitized debt, management considers a number of observable market data points, including prices obtained from pricing services and brokers as well as dialogue with market participants.

Accordingly, the Company’s securitized debt is classified as Level 2 in the fair value hierarchy.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Changes to the valuation methodologies used with respect to the Company’s financial instruments are reviewed by management to ensure any such changes result in appropriate exit price valuations.

4 unchanged sentences

The Company reviews the classification of its financial instruments within the fair value hierarchy on a quarterly basis, and management may conclude that its financial instruments should be reclassified to a different level in the future.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The following tables present the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2023 and 2022, on the consolidated balance sheets by the valuation hierarchy, as previously described:

28 unchanged sentences

Draws 574,839 361,035

Changes in fair value recorded in Net gain on residential whole loans measured at fair value through earnings ( 668,899 ) 16,243

Changes in fair value recorded in Net gain/(loss) on residential whole loans measured at fair value through earnings

114,478 ( 668,899 )

Repayments ( 1,162,471 ) ( 925,773 )

Sales and repurchases ( 10,496 ) ( 2,023 )

Transfer to REO ( 51,296 ) ( 51,005 )

Transfer to Level 2 (1)

Loan sales and repurchases

( 108,657 ) ( 10,496 )

Transfer to REO ( 50,614 ) ( 51,296 )

Balance at end of period $ 7,455,729 $ 5,676,430

(1) The Company determined that the market inputs used in valuing its Agency eligible investor loans were sufficiently observable to be classified as Level 2 beginning in 2021.

The following table presents additional information for the years ended December 31, 2023 and 2022 about the Company’s financing agreements with non-mark-to-market collateral provisions, which are classified as Level 3 and measured at fair value on a recurring basis:

5 unchanged sentences

Payment of principal ( 617,965 ) ( 602,969 )

Change in unrealized gains ( 1,255 ) ( 1,059 )

Change in unrealized losses

Balance at end of period $ 469,424 $ 578,879

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December 31, 2023

(Dollars in Thousands) Fair Value Valuation Technique Unobservable Input Weighted Average (1)

(Dollars in Thousands) Fair Value (1)

Valuation Technique Unobservable Input Weighted Average (2)

Purchased Performing Loans $ 6,522,457 Discounted cash flow Discount rate 8.0 % 6.5 - 29.2 %

20 unchanged sentences

Total $ 4,880,321

(1) Excluded from the table above are approximately $ 103.7 million of Residential whole loans, at fair value for which the closing of the purchase transaction had not occurred as of December 31, 2023.

(2) Amounts are weighted based on the fair value of the underlying loan.

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Convertible senior notes 2 208,989 209,065 227,845 211,015

(1) At December 31, 2021, $ 654.7 million of Agency eligible investor loans were valued based on the observable prices of related securitized debt.

(2) Carrying value of securitized debt, Convertible Senior Notes, Senior Notes and certain repurchase agreements is net of associated debt issuance costs.

(3) Includes securitized debt that is carried at amortized cost basis and fair value.

(1) Carrying value of securitized debt, Convertible Senior Notes, and certain repurchase agreements is net of associated debt issuance costs.

Other Assets Measured at Fair Value on a Nonrecurring Basis

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During the years ended December 31, 2023 and 2022, the Company recorded REO with an aggregate estimated fair value, less estimated cost to sell, of $ 84.7 million and $ 82.9 million, respectively, at the time of foreclosure.

In addition, at December 31, 2023, the Company held one property which is considered Commercial REO (see Note 5) which is accounted for similarly and had an estimated fair value, less estimated cost to sell, of $ 34.2 million at the time of foreclosure, of which the Company’s 75 % interest was $ 25.7 million.

The Company classifies fair value measurements of REO as Level 3 in the fair value hierarchy.

The Company determined to sell certain residential whole loans in the fourth quarter of 2023.

At the time this determination was made, certain of the loans were marked to fair value as their fair value at that time was lower than their carrying value.

The aggregate value of these loans at the time of determination was $ 13.6 million and a loss of $ 1.2 million was recorded.

These loans were classified as Level 3 in the fair value hierarchy.

In addition, on July 1, 2021, in connection with the Lima One transaction (see Note 15), the Company revalued its previously existing investments in Lima One and recorded a gain of $ 38.9 million.

14 unchanged sentences

Loan Securitization Transactions

The following table summarizes the key details of the Company’s loan securitization transactions currently outstanding as of December 31, 2022 and 2021:

The following table summarizes the key details of the Company’s consolidated loan securitization transactions currently outstanding as of December 31, 2023 and 2022:

(Dollars in Thousands) December 31, 2023 December 31, 2022

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(1) Net of $ 1.5 million and $ 2.9 million of deferred financing costs at December 31, 2023 and 2022, respectively.

(2) At December 31, 2022 and 2021, $ 1.9 billion and $ 329.0 million, respectively, of Senior Bonds sold in securitization transactions contained a contractual coupon step-up feature whereby the coupon increases by either 100 , 200 or 300 basis points or more at defined dates ranging from 30 months, up to 48 months from issuance if the bond is not redeemed before such date.

(2) At December 31, 2023 and 2022, $ 3.4 billion and $ 1.9 billion, respectively, of Senior Bonds sold in securitization transactions contained a contractual coupon step-up feature whereby the coupon increases by either 100 , 150 , 200 or 300 basis points or more at defined dates ranging from 24 months, up to 48 months from issuance if the bond is not redeemed before such date.

(3) Provides credit support to the Senior Bonds sold to third-party investors in the securitization transactions.

During the years ended December 31, 2023 and 2022, the Company issued Senior Bonds with a current face of $ 1.8 billion and $ 2.3 billion to third-party investors for proceeds of $ 1.8 billion and $ 2.2 billion, respectively, before offering costs and accrued interest.

The Senior Bonds issued by the Company during the years ended December 31, 2022 and 2021 are included in “Financing agreements, at fair value” (at carrying value) on the Company’s consolidated balance sheets (see Note 6).

The Senior Bonds issued by the Company during the years ended December 31, 2023 and 2022 are included in Financing agreements on the Company’s consolidated balance sheets (see Note 6).

As of December 31, 2023 and 2022, as a result of the transactions described above, securitized loans of approximately $ 5.7 billion and $ 4.0 billion are included in Residential whole loans and REO with a carrying value of approximately $ 33.3 million and $ 36.5 million are included in Other assets on the Company’s consolidated balance sheets, respectively.

As of December 31, 2023 and 2022, the aggregate carrying value of Senior Bonds issued by consolidated VIEs was $ 4.8 billion and

MFA FINANCIAL, INC.

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DECEMBER 31, 2023

December 31, 2022 and 2021, the aggregate carrying value of Senior Bonds issued by consolidated VIEs was $ 3.4 billion and $ 2.7 billion, respectively.

$ 3.4 billion, respectively.

These Senior Bonds are disclosed as Securitized debt and are included in Financing agreements on the Company’s consolidated balance sheets.

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• whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.

Based on its evaluation of the factors discussed above, including its involvement in the purpose and design of the entity, the Company determined that it was required to consolidate each VIE created to facilitate the loan securitization transactions.

Based on its evaluation of the factors discussed above, including maintaining certain rights in each entity including rights to direct loss mitigation activities and its involvement in the purpose and design of the entity, the Company determined that it was required to consolidate each VIE created to facilitate the loan securitization transactions.

The Company also invests in securities issued by SPEs that may be VIEs.

The Company is not the primary beneficiary of these SPEs, because it does not have the power to direct the activities that most significantly impact their economic performance, and therefore does not consolidate them.

For these entities, the Company’s maximum exposure to loss is the amortized cost basis of the securities it owns, and it does not provide any liquidity arrangements, guarantees or other commitments to these entities.

For more information on the Company’s investments in securities, see Note 4.

Residential Whole Loans and REO (including Residential Whole Loans and REO transferred to consolidated VIEs)

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At December 31, 2023, the Company’s reportable segments include (i) mortgage-related assets and (ii) Lima One.

The Corporate column in the table below primarily consists of corporate cash and related interest income, investments in loan originators and related economics, general and administrative expenses not directly attributable to Lima One, interest expense on unsecured convertible senior notes (Note 6), securitization issuance costs, and preferred stock dividends.

The Corporate column in the table below primarily consists of corporate cash and related interest income, investments in loan originators and related economics, general and administrative expenses not directly attributable to Lima One, interest expense on unsecured convertible senior notes (see Note 6), securitization issuance costs, and preferred stock dividends.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following tables summarize segment financial information, which in total reconciles to the same data for the Company as a whole:

The Company is not presenting comparable segment statements of operations for the year ended December 31, 2020, because the Company did not consolidate Lima One during those periods:

(Dollars in Thousands) Mortgage-Related Assets Lima One Corporate Total

Year Ended December 31, 2023

Interest Income $ 364,081 $ 228,825 $ 12,691 $ 605,597

Interest Expense 249,458 164,059 15,601 429,118

Net Interest Income/(Expense) $ 114,623 $ 64,766 $ ( 2,910 ) $ 176,479

Reversal of Provision/(Provision) for Credit Losses on Residential Whole Loans 8,539 314 — 8,853

Net Interest Income/(Expense) after Reversal of Provision/(Provision) for Credit Losses $ 123,162 $ 65,080 $ ( 2,910 ) $ 185,332

Net gain on residential whole loans measured at fair value through earnings $ 69,486 $ 20,364 $ — $ 89,850

Impairment and other net gain/(loss) on securities and other portfolio investments 8,073 — ( 1,848 ) 6,225

Net gain on real estate owned 9,274 118 — 9,392

Net gain on derivatives used for risk management purposes 839 2,922 — 3,761

Net loss on securitized debt measured at fair value through earnings ( 66,969 ) ( 32,620 ) — ( 99,589 )

Lima One - origination, servicing and other fee income — 43,384 — 43,384

Net realized loss on residential whole loans held at carrying value ( 1,240 ) — — ( 1,240 )

Other, net 7,960 2,284 1,087 11,331

Total Other Income/(Loss), net $ 27,423 $ 36,452 $ ( 761 ) $ 63,114

Compensation and benefits $ — $ 44,827 $ 40,972 $ 85,799

General and administrative expenses 214 17,537 26,396 44,147

Loan servicing, financing, and other related costs 20,100 1,515 12,521 34,136

Amortization of intangible assets — 4,200 — 4,200

Net Income/(Loss) $ 130,271 $ 33,453 $ ( 83,560 ) $ 80,164

Less Preferred Stock Dividend Requirement $ — $ — $ 32,875 $ 32,875

Net Income/(Loss) Available to Common Stock and Participating Securities $ 130,271 $ 33,453 $ ( 116,435 ) $ 47,289

MFA FINANCIAL, INC.

8 unchanged sentences

Provision for Credit Losses on Other Assets

— — ( 28,579 ) ( 28,579 )

Net Interest Income/(Expense) after Reversal of Provision/(Provision) for Credit Losses $ 190,878 $ 46,580 $ ( 39,815 ) $ 197,643

Net loss on residential whole loans measured at fair value through earnings $ ( 730,028 ) $ ( 136,734 ) $ — $ ( 866,762 )

Net gain/(loss) on residential whole loans measured at fair value through earnings $ ( 730,028 ) $ ( 136,734 ) $ — $ ( 866,762 )

Impairment and other net loss on securities and other portfolio investments ( 3,146 ) — ( 21,921 ) ( 25,067 )

Net gain on real estate owned 25,348 31 — 25,379

Net gain on derivatives used for risk management purposes 217,961 37,218 — 255,179

Net gain/(loss) on derivatives used for risk management purposes 217,961 37,218 — 255,179

Net gain on securitized debt measured at fair value through earnings 231,176 59,463 — 290,639

1 unchanged sentence

Other, net 4,282 537 3,804 8,623

Total Other (Loss)/Income, net $ ( 254,407 ) $ 7,260 $ ( 17,443 ) $ ( 264,590 )

General and administrative expenses (including compensation) $ — $ 53,185 $ 59,355 $ 112,540

Total Other Income/(Loss), net $ ( 254,407 ) $ 7,260 $ ( 18,117 ) $ ( 265,264 )

Compensation and benefits $ — $ 39,241 $ 37,487 $ 76,728

General and administrative expenses — 13,944 21,194 35,138

Loan servicing, financing, and other related costs 25,384 1,120 16,390 42,894

Amortization of intangible assets — 9,200 — 9,200

Net Loss $ ( 88,913 ) $ ( 9,665 ) $ ( 133,003 ) $ ( 231,581 )

Net Income/(Loss) $ ( 88,913 ) $ ( 9,665 ) $ ( 133,003 ) $ ( 231,581 )

Less Preferred Stock Dividend Requirement $ — $ — $ 32,875 $ 32,875

Net Loss Available to Common Stock and Participating Securities $ ( 88,913 ) $ ( 9,665 ) $ ( 165,878 ) $ ( 264,456 )

Net Income/(Loss) Available to Common Stock and Participating Securities $ ( 88,913 ) $ ( 9,665 ) $ ( 165,878 ) $ ( 264,456 )

MFA FINANCIAL, INC.

8 unchanged sentences

Net Interest Income/(Expense) after Reversal of Provision/(Provision) for Credit Losses $ 292,939 $ 9,440 $ ( 15,599 ) $ 286,780

Net (loss)/gain on residential whole loans measured at fair value through earnings $ ( 2,719 ) $ 18,962 $ — $ 16,243

Net gain/(loss) on residential whole loans measured at fair value through earnings $ ( 2,719 ) $ 18,962 $ — $ 16,243

Impairment and other net gain on securities and other portfolio investments 1,607 — 72,889 74,496

4 unchanged sentences

Other, net 759 128 8,760 9,647

Total Other Income, net $ 38,458 $ 42,170 $ 84,475 $ 165,103

General and administrative expenses (including compensation) $ — $ 24,140 $ 61,406 $ 85,546

Total Other Income/(Loss), net

$ 38,458 $ 42,170 $ 81,649 $ 162,277

Compensation and benefits $ — $ 18,130 $ 35,687 $ 53,817

General and administrative expenses — 6,010 22,893 28,903

Loan servicing, financing, and other related costs 25,250 436 5,181 30,867

Amortization of intangible assets — 6,600 — 6,600

Net Income $ 306,147 $ 20,434 $ 2,289 $ 328,870

Net Income/(Loss)

$ 306,147 $ 20,434 $ 2,289 $ 328,870

Less Preferred Stock Dividend Requirement $ — $ — $ 32,875 $ 32,875

10 unchanged sentences

As a result of these transactions, the Company gained control of 100 % of the ownership interests in Lima One and was required to consolidate its financial results from that date.

The transaction is accounted for under the purchase method of accounting.

The transaction was accounted for under the purchase method of accounting.

Under purchase accounting, the purchase

5 unchanged sentences

At the time of the revaluation, the previously owned common equity interest had a carrying value of $ 5.6 million (net of a $ 21.0 million impairment charge that was recorded in the first quarter of 2020).

Consequently, the revaluation resulted in the Company recording a gain of $ 38.9 million that is presented in Other income in the Company’s consolidated statement of operations for the year ended December 31, 2021.

Consequently, the revaluation resulted in the Company recording a gain of $ 38.9 million that is presented in Other Income/(Loss), net in the Company’s consolidated statement of operations for the year ended December 31, 2021.

Accordingly, under the purchase method of accounting, the purchase consideration allocated was $ 101.7 million.

2 unchanged sentences

As the Company had previously recorded an impairment write-down on its investment in Lima One’s preferred equity that was repaid in connection with the transaction, the Company recorded a gain of $ 5.0 million to reflect the reversal of this impairment charge.

This gain was recorded in Other Income in the consolidated statements of operations for the year ended December 31, 2021.

This gain was recorded in Other Income/(Loss), net in the consolidated statements of operations for the year ended December 31, 2021.

Further, the Company paid a total of $ 428,000 of acquisition related expenses, which were recorded in Operating and Other Expenses in the consolidated statements of operations for the year ended December 31, 2021.

2 unchanged sentences

The goodwill is attributed to further access and expansion into business purpose loan markets as well as access to an experienced management team and workforce that are expected to continue to provide services to the business.

In addition, the Company identified and recorded finite-lived intangible assets totaling $ 28.0 million (Note 5).

The purchase price allocations are summarized in the table below:

Purchase Price Allocation

(In Thousands)

Acquisition Date July 1, 2021

Purchase Price:

Cash $ 57,255

Equity method investment at fair value 44,465

Total consideration $ 101,720

Allocated to:

Business purpose residential loans, at fair value $ 170,220

Cash and cash equivalents 16,531

Restricted cash 91,394

Other assets 37,107

Goodwill 61,076

Intangible assets 28,000

Total assets acquired $ 404,328

Short term debt, net $ ( 170,908 )

Accrued expenses and other liabilities ( 84,324 )

Total liabilities assumed $ ( 255,232 )

Preferred equity repaid at closing ( 47,376 )

Total net assets acquired $ 101,720

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

In addition, the Company identified and recorded finite-lived intangible assets totaling $ 28.0 million (see Note 5).

The Lima One segment includes the stand-alone mortgage origination and servicing business of Lima One, including related goodwill, intangible assets, and direct expenses, plus Lima One-related residential whole loans and REO (defined as both those owned by Lima One on the acquisition date and those originated by Lima One since the acquisition date) and the economics related thereto (including any related taxes and the economics of associated financing and hedging instruments), all as recorded under GAAP.

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Subsequent Events

Subsequent to quarter end, the Company completed three additional loan securitizations with an aggregate UPB of loans sold of $ 668.2 million.

This included $ 313.7 million of Non-QM loans, $ 203.9 million of Single Family Rental loans and $ 150.6 million of Transitional loans.

Securitization of Business Purpose Loans

Subsequent to quarter end, the Company completed one additional loan securitization with an aggregate UPB of Transitional loans sold of $ 192.5 million.

Issuance of 8.875 % Senior Notes due 2029 (“ 8.875 % Senior Notes”)

On January 11, 2024, the Company completed the issuance of $ 115.0 million in aggregate principal amount of its 8.875 % Senior Notes in an underwritten public offering, including $ 15.0 million issued pursuant to the exercise of the underwriters’ option to purchase additional 8.875 % Senior Notes.

The 8.875 % Senior Notes are senior unsecured obligations of the Company 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.

The Company may redeem the 8.875 % Senior Notes in whole or in part at any time at the Company’s 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 the Company from the offering of the 8.875 % Senior Notes, after deducting the underwriter’s discount and commissions and estimated offering expenses, were approximately $ 110.7 million.

Schedule IV - Mortgage Loans on Real Estate

23 unchanged sentences

(1) Excludes an allowance for loan losses of $ 20.5 million at December 31, 2023.

Also excludes approximately $ 103.7 million of Residential whole loans, at fair value for which the closing of the purchase transaction had not occurred as of December 31, 2023.

(2) The federal income tax basis is approximately $ 4.2 billion.

8 unchanged sentences

Reversal of provision for loan loss 14,863

Changes in fair value recorded in gain/(loss) on loans recorded at fair value 114,065

Deductions during period:

1 unchanged sentence

Loan sales and repurchases ( 94,624 )

Changes in fair value recorded in Net gain/(loss) on residential whole loans measured at fair value through earnings ( 676,076 )

Impairment on carrying value loans

Transfer to REO ( 73,236 )

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data