What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-22 · 619 added, 668 removed, 1578 unchanged (45% of the section changed)

Financial Statements and Supplementary Data.

Index to Financial Statements and Schedule

Report of Independent Registered Public Accounting Firm

Financial Statements:

Consolidated Balance Sheets at December 31, 2023 and December 31, 2022

Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021

Notes to the Consolidated Financial Statements

Summary of Significant Accounting Policies

Residential Whole Loans

Securities, at Fair Value

Financing Agreements

Other Liabilities

Commitments and Contingencies

Stockholders’ Equity

EPS Calculation

Equity Compensation and Other Benefit Plans

Fair Value of Financial Instruments

Use of Special Purpose Entities and Variable Interest Entities

Segment Reporting

Subsequent Events

Schedule IV - Mortgage Loans on Real Estate

All other financial statement schedules are omitted because the required information is not applicable or deemed not material, or the required information is included in the consolidated financial statements and/or notes thereto.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Assessment of the valuation of residential whole loans, at fair value

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• developing an independent fair value estimate for a sample of performing residential whole loans at fair value based on independently developed valuation models and/or inputs and comparing the results of our estimate of fair value to the Company’s fair value estimate.

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 (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.

These expected credit losses are generally calculated based on the estimated probability of default and loss severity of loans in the portfolio, which involves projecting each loan’s expected cash flows based on their contractual terms, expected prepayments, and estimated default and loss severity rates.

These results were not discounted.

The default and severity rates were estimated based on the following steps:

(i) obtained the Company’s historical experience through an entire economic cycle for each loan type or, to the extent the Company did not have sufficient historical loss experience for a given loan type, publicly available data derived from the historical loss experience of certain banks, which data the Company believes is generally representative of its portfolio, (ii) obtained historical economic data (U.S.

unemployment rates and home price appreciation) over the same period, and (iii) estimated default and severity rates during three distinct future periods based on historical default and severity rates during periods when economic conditions similar to those forecasted were experienced.

The default and severity rates were applied to the estimated amount of loans outstanding during each future period, based on contractual terms and expected prepayments.

Expected prepayments are estimated based on historical experience and current and expected future economic conditions, including market interest rates.

The three periods were as follows:

(i) a one-year forecast of economic conditions based on U.S.

unemployment rates and home price appreciation, followed by (ii) a two-year “reversion” period during which economic conditions (U.S.

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 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.

We identified the assessment of the December 31, 2023 ACL associated with the Company’s non-QM loans and Purchased Credit Deteriorated loans as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the December 31, 2023 ACL for these loans due to significant measurement uncertainty.

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 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.

In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter.

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:

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

• identification and determination of the significant assumptions used in the prepayment, default and loss severity models

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

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

We evaluated the Company’s process to develop the December 31, 2023 ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s ACL methodology for compliance with U.S.

generally accepted accounting principles

• evaluating judgments made by the Company in the continued use and appropriateness of changes made to the prepayment, default and loss severity models by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices

• 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

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

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

• cumulative results of the audit procedures

• qualitative aspects of the Company’s accounting practices

• potential bias in the accounting estimates.

We have served as the Company’s auditor since 2011.

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Net Interest Income $ 202,731 $ 176,479 $ 223,576

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 for Credit Losses $ 185,332 $ 197,643 $ 286,780

Reversal/(Provision) for Credit Losses on Residential Whole Loans $ 3,084 $ 8,853 $ 2,646

Reversal/(Provision) for Credit Losses on Other Assets ( 1,135 ) — ( 28,579 )

Net Interest Income after Reversal/(Provision) for Credit Losses $ 204,680 $ 185,332 $ 197,643

Other Income/(Loss), net:

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Impairment and other net gain/(loss) on securities and other portfolio investments ( 10,869 ) 6,225 ( 25,067 )

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

Net gain/(loss) on real estate owned 3,136 9,392 25,379

Net gain/(loss) on derivatives used for risk management purposes 78,503 3,761 255,179

Net gain/(loss) on securitized debt measured at fair value through earnings ( 64,813 ) ( 99,589 ) 290,639

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 ) — —

Lima One mortgage banking income 32,944 43,384 46,745

Net realized gain/(loss) on residential whole loans held at carrying value 418 ( 1,240 ) —

Other, net 115 11,331 8,623

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Operating and Other Expense $ 170,414 $ 168,004 $ 164,811

Income/(loss) before income taxes $ 119,694 $ 80,442 $ ( 232,432 )

Provision for/(benefit from) income taxes $ 443 $ 278 $ ( 851 )

Net Income/(Loss) $ 119,251 $ 80,164 $ ( 231,581 )

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2023

(In Thousands,

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Preferred Stock

6.5 % Series C Fixed-to-Floating Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Preferred Stock

7.5 % Series B Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Preferred Stock

6.5 % Series C Fixed-to-Floating Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Common Stock Additional Paid-in Capital Accumulated

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Balance at December 31, 2024 8,000 $ 80 11,000 $ 110 102,083 $ 1,021 $ 3,711,046 $ ( 1,879,941 ) $ 9,476 $ 1,841,792

For the Year Ended December 31, 2022

(In Thousands,

Except Per Share Amounts) Preferred Stock

6.5 % Series C Fixed-to-Floating Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Preferred Stock

7.5 % Series B Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Preferred Stock

6.5 % Series C Fixed-to-Floating Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Common Stock Additional Paid-in Capital Accumulated

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Balance at December 31, 2022 8,000 $ 80 11,000 $ 110 101,802 $ 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 — — — — 172 1 ( 7 ) — — ( 6 )

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

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2021

(In Thousands,

Except Per Share Amounts) Preferred Stock

6.5 % Series C Fixed-to-Floating Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Preferred Stock

7.5 % Series B Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Preferred Stock

6.5 % Series C Fixed-to-Floating Cumulative Redeemable - Liquidation Preference $ 25.00 per Share

Common Stock Additional Paid-in Capital Accumulated

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Balance at December 31, 2021 8,000 $ 80 11,000 $ 110 108,138 $ 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 8,000 $ 80 11,000 $ 110 101,802 $ 1,018 $ 3,684,291 $ ( 1,717,991 ) $ 21,341 $ 1,988,849

(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.

(1) For the year ended December 31, 2024, includes approximately $ 1.5 million ( 129,949 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.

For the year ended December 31, 2023, includes approximately $ 0.6 million ( 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.

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

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Net (gain)/loss on derivatives used for risk management purposes ( 2,478 ) 93,828 ( 247,898 )

Net margin received/(paid) for derivatives used for risk management purposes ( 35,643 ) 214,754 574

Net (gain)/loss on securitized debt measured at fair value through earnings 51,975 86,402 ( 290,639 )

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

Net margin received/(paid) for derivatives used for risk management purposes 723 ( 35,643 ) 214,754

Net other non-cash (gains)/losses included in net income 69,267 31,719 31,370

(Increase)/decrease in other assets 25,132 ( 80,930 ) 25,482

Increase/(decrease) in other liabilities ( 8,543 ) 62,961 ( 12,114 )

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

Net cash provided by/(used in) operating activities $ 200,120 $ 108,739 $ 355,349

Cash Flows From Investing Activities:

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Principal payments on residential whole loans and loan related investments 2,202,207 1,445,759 1,878,802

Increase in cash balances resulting from Lima One purchase transaction, net — — 6,121

Purchases of securities ( 869,149 ) ( 588,915 ) —

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Other investing activities 121,820 ( 11,121 ) 9,450

Net cash used in investing activities

Net cash provided by/(used in) investing activities

$ ( 424,597 ) $ ( 1,549,590 ) $ ( 1,115,928 )

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Proceeds from borrowings under other collateralized financing agreements 2,984,706 3,503,400 3,676,510

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

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 )

Payments made for other collateralized financing agreement related costs ( 7,457 ) ( 12,593 ) ( 16,390 )

Redemption and repurchase of convertible senior notes ( 209,558 ) ( 20,228 ) —

Proceeds from issuance of senior notes 182,676 — —

Payments made for settlements and unwinds of Swaps ( 27,530 ) — —

Proceeds from issuances of common stock, net of expenses ( 81 ) ( 7 ) 1,183

Payments made for the repurchase of common stock ( 1,491 ) — ( 102,311 )

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

Dividends paid on common stock and dividend equivalents ( 143,871 ) ( 143,103 ) ( 184,035 )

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

Net cash provided by/(used in) financing activities $ 337,578 $ 1,434,981 $ 850,213

Net increase/(decrease) in cash, cash equivalents and restricted cash $ 113,101 $ ( 5,870 ) $ 89,634

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Supplemental Disclosure of Cash Flow Information

Interest paid $ 418,135 $ 239,185 $ 116,966

Cash paid for interest $ 516,224 $ 418,135 $ 239,185

Non-cash Investing and Financing Activities:

Transfer from residential whole loans to real estate owned $ 103,666 $ 84,662 $ 82,911

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

Transfer from commercial loans to real estate owned $ 15,217 $ 22,716 $ —

Dividends and dividend equivalents declared and unpaid $ 36,039 $ 35,789 $ 35,769

Right-of-use lease asset and lease liability $ — $ — $ 40,893

Repayment of Lima One preferred stock in connection with the Lima One transaction $ — $ — $ 22,030

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

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(a) Basis of Presentation and Consolidation

On April 4, 2022, the Company effected a one-for-four reverse stock split of its issued and outstanding shares of common

stock (the “Reverse Stock Split”).

Accordingly, all share and per share data included in these consolidated financial statements

and notes thereto have been adjusted retroactively to reflect the impact of the Reverse Stock Split .

On April 4, 2022, the Company effected a one-for-four reverse stock split of its issued and outstanding shares of common stock (the “Reverse Stock Split”).

Accordingly, all share and per share data included in these consolidated financial statements and notes thereto have been adjusted retroactively to reflect the impact of the Reverse Stock Split .

The accompanying consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with U.S.

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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), 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).

impairment, valuation allowances and loss allowances on residential whole loans (see Note 3), certain securities designated as available-for-sale (“AFS”) (see Note 4), 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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Certain prior period amounts have been reclassified to conform to the current period presentation.

On July 1, 2021, the Company completed the acquisition of Lima One Holdings, LLC, the parent company of Lima One Capital, LLC (collectively referred to as “Lima One”), a leading nationwide originator and servicer of business purpose loans (“BPLs”).

Lima One’s financial results are consolidated with MFA’s results from that date.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(b) Residential Whole Loans (including Residential Whole Loans transferred to consolidated VIEs)

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 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.

Residential whole loans included in the Company’s consolidated balance sheets are primarily comprised of pools of fixed- and adjustable-rate residential mortgage loans acquired through consolidated trusts in secondary market transactions or originated by our indirect wholly owned subsidiary, Lima One Capital, LLC (together with its parent company, Lima One Holdings, LLC, “Lima One”).

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

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.

All other loans purchased prior to the second quarter of 2021 were typically held at carrying value.

Starting in the second quarter of 2021, the Company began to elect the fair value option for all loans originated or acquired.

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

Consequently, the Company is not permitted to retroactively apply fair value accounting to loans held at carrying value acquired in periods prior to the second quarter of 2021.

The Company’s residential whole loans pledged as collateral against financing agreements are included in the consolidated balance sheets with amounts pledged disclosed in Note 6.

Purchases and sales of residential whole loans that are subject to an extended period of due diligence that crosses a reporting date are recorded in the Company’s balance sheet at amounts reflecting management’s current estimate of assets that will be acquired or disposed at the closing of the transaction.

This estimate is subject to revision at the closing of the transaction, pending the outcome of due diligence performed prior to closing.

Residential whole loans purchased under flow arrangements with loan origination partners are generally recorded at the transaction settlement date.

Recorded amounts of residential whole loans for which the closing of the purchase transaction is yet to occur are not eligible to be pledged as collateral against any financing agreement until the closing of the purchase transaction.

Interest income, credit related losses and changes in the fair value of loans held at fair value are recorded post settlement for acquired loans and until transaction settlement for sold loans (see Notes 3, 6, 13 and 14).

Purchased Performing Loans

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 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).

Interest income on Purchased Performing Loans acquired at par is accrued based on each loan’s current interest bearing balance and current interest rate.

Interest income on such loans acquired at a premium/discount to par is recorded each period based on the contractual coupon net of any amortization of premium or accretion of discount, adjusted for actual prepayment activity.

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 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 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.

Effective January 1, 2024, purchases and sales of residential whole loans are recorded on the settlement date.

As of December 31, 2023, approximately $ 103.7 million of purchased residential whole loans, at fair value were recorded on the consolidated balance sheet and settled after period-end.

The Company’s residential whole loans are primarily comprised of:

MFA FINANCIAL, INC.

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December 31, 2024

accruals are resumed when the loan becomes contractually current.

properties made to non-occupant borrowers that generally intend to rehabilitate or construct residential housing and then refinance or sell the properties (“Single-family transitional loans”), (iii) short-term business purpose loans collateralized by multifamily properties, typically with a loan balance below $ 10 million, made to non-occupant borrowers that generally intend to moderately rehabilitate or stabilize and then refinance or sell the properties (“Multifamily transitional loans”) (collectively with Single-family transitional loans, “Transitional loans”, also sometimes referred to as “Rehabilitation loans” or “Fix and Flip loans”), (iv) business purpose loans to finance (or refinance) non-owner occupied one-to-four family residential properties that are rented to one or more tenants (“Single-family rental loans” and, collectively with Transitional loans, “Business purpose loans”), (v) loans primarily secured by residential real estate that were generally either non-performing or re-performing at acquisition (“Legacy RPL/NPL loans”) and (vi) loans on investor properties that conform to the standards for purchase by a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (“Agency eligible investor loans”, which are included in “Other loans”).

Residential Whole loans are initially recorded at their purchase price (or amount funded for originated loans).

Interest income is accrued based on each loan’s current interest bearing balance and current interest rate.

Interest income on loans acquired at a premium/discount to par is recorded each period based on the contractual coupon net of any amortization of premium or accretion of discount, adjusted for actual prepayment activity.

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

For 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 credit 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.

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.

For nonaccrual loans, interest income is recorded when interest payments are received.

Interest 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.

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Expected losses are generally calculated based on the estimated probability of default and loss severity of loans in the portfolio, which involves projecting each loan’s expected cash flows based on their contractual terms, expected prepayments, and estimated default and loss severity rates.

The results were not discounted.

The expected losses in these projected cash flows are not discounted.

The default and severity rates were estimated based on the following steps:

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The Company may apply qualitative adjustments to these results as further described in Note 3.

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, 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

The Company has elected to account for these loans as credit deteriorated as they have experienced a deterioration in credit quality since origination and prior to our purchase and were acquired at discounted prices that reflect, in part, the impaired credit history of the borrower.

For certain loans where foreclosure has been deemed to be probable, loss estimates are based on whether the value of the

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

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, although certain modeling factors have been refined over time and the data utilized has, in some cases, been updated to better align with actual and expected loss experiences.

Certain Legacy RPL/NPL loans acquired by the Company for which the Company did not elect the fair value option are accounted for as credit deteriorated as they have experienced a deterioration in credit quality since origination and prior to our purchase and were acquired at discounted prices that reflect, in part, the impaired credit history of the borrower.

Substantially all of these loans have previously experienced payment delinquencies and the amount owed may exceed the value of the property pledged as collateral.

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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.

These credit deteriorated loans 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 accretion/amortization of the difference between their cost basis and unpaid principal balance (“UPB”), subject to the Company’s nonaccrual policy.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Loans Held-for-Sale

1 unchanged sentence

Residential Whole Loans at Fair Value

Certain of the Company’s residential whole loans are presented at fair value on its consolidated balance sheets as a result of a fair value election made at the time of acquisition.

Prior to the second quarter of 2021, this accounting election was made primarily on Purchased Non-performing Loans.

Starting in the second quarter of 2021, the Company made the fair value election on all loan acquisitions, which, to date, have been comprised exclusively of Purchased Performing Loans including loans originated by Lima One since its consolidation.

Certain of the Company’s residential whole loans are presented at fair value on its consolidated balance sheets as a result of a fair value election made at the time of acquisition or origination.

The Company generally considers accounting for these loans at fair value to be more reflective of the expected pattern of returns from these loans under current economic conditions.

15 unchanged sentences

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.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

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.

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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 .

5 unchanged sentences

Adjustments to premium amortization are made for actual prepayment activity.

Premiums and discounts associated with MBS not 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 based upon current expected future cash flows.

Any adjustment to yield is made on a prospective basis.

Determination of Fair Value for Securities

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As a result, the timing and amount of losses constitute material estimates that are susceptible to significant change (see Note 4).

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Balance Sheet Presentation

6 unchanged sentences

At December 31, 2024 and December 31, 2023, the Company had cash and cash equivalents of $ 338.9 million and $ 318.0 million, respectively.

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.

At December 31, 2024 and December 31, 2023, the Company had $ 217.8 million and $ 151.3 million, respectively, 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.

In addition, deposits in FDIC insured accounts generally exceed insured limits (see Notes 6 and 13).

(e) Restricted Cash

Restricted cash primarily represents the Company’s cash collections held in connection with certain of the Company’s financing agreements, Swaps and/or loan servicing activities that are not available to the Company for general corporate purposes.

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.

Restricted cash primarily represents the Company’s cash collections held in connection with certain of the Company’s financing agreements, Swaps, consolidated securitization trusts and/or loan servicing activities that are not available to the Company for general corporate purposes.

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

The Company had aggregate restricted cash of $ 262.4 million and $ 170.2 million at December 31, 2024 and December 31, 2023, respectively (see Notes 5(e), 6 and 13).

7 unchanged sentences

REO represents real estate acquired by the Company, including through foreclosure, deed in lieu of foreclosure, or purchased in connection with the acquisition of residential whole loans.

REO acquired through foreclosure or deed in lieu of foreclosure is initially recorded at fair value less estimated selling costs.

Generally, REO acquired through foreclosure or deed in lieu of foreclosure is initially recorded at fair value less estimated selling costs.

REO acquired in connection with the acquisition of residential whole loans is initially recorded at its purchase price.

1 unchanged sentence

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).

Certain multifamily REO properties and Commercial properties held within unconsolidated VIEs acquired by the Company are not immediately available for sale because we generally intend to stabilize the operations at such properties.

Therefore, each property is measured at fair value at acquisition and then depreciated over the expected useful life.

The amounts reported in the balance sheet at any given period represent the amortized cost of the property until there is a planned sale, at which point the carrying value would be updated to fair value less estimated selling costs.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

(h) Leases and Depreciation

6 unchanged sentences

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

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Multifamily REO properties have estimated useful lives of 30 years at the time of acquisition and Commercial properties held within unconsolidated VIEs have estimated useful lives of 39 years.

(i) Loan Securitization and Other Debt Issuance Costs

Loan securitization related costs are costs associated with the issuance of beneficial interests by consolidated VIEs and incurred by the Company in connection with various financing transactions completed by the Company.

These costs may include underwriting, rating agency, legal, accounting and other fees.

These costs may include underwriting, rating agency, legal, accounting, diligence, bank and other fees.

Such costs, which reflect deferred charges (unless the debt is recorded at fair value, as discussed below), are included on the Company’s consolidated balance sheets as a direct deduction from the corresponding debt liability.

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To the extent that the Company has elected the fair value option for the related debt liability, these costs are expensed at the closing of the transaction.

(j) Financing Agreements

(j) Mortgage servicing rights (“MSRs”)

MSRs represent the contractual right to service residential mortgage loans.

The Company generally recognizes MSRs created through the sale of loans it originates.

Under the accounting guidance for transfers and servicing, the Company initially measures a mortgage servicing asset that qualifies for separate recognition at fair value on the date of transfer.

The Company has elected to record its investments at fair value in order to provide users of the financial statements with better information regarding the effects of prepayment risk and other market factors on MSRs.

Under this election, the Company records a valuation adjustment on its MSRs on a quarterly basis to recognize the changes in fair value in net income.

MSRs are aggregated into pools as applicable;

each pool of MSRs is accounted for in the aggregate.

Income from MSRs, other than valuation adjustments, is recorded in Lima One mortgage banking income;

valuation adjustments are recorded in Impairment and other net gain/(loss) on securities and other portfolio investments.

Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the MSRs.

(k) Financing Agreements

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.

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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, 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

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

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.

4 unchanged sentences

The Company has elected the fair value option on certain of its financing agreements.

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.

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

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

(l) 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.

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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

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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.

Specifically, the uncertainty regarding the achievement of the market condition was reflected in the grant date fair value 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”)

(m) 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.

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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.

This calculation involves adding back the periodic interest expense associated with the Convertible Senior Notes to the numerator and by adding the shares that would be issued in an assumed conversion (regardless of whether the conversion option is in or out of the money) to the denominator for the purposes of calculating diluted EPS (see Note 11).

(m) Comprehensive Income/(Loss)

The Company’s comprehensive income/(loss) available to common stock and participating securities includes net income, the change in net unrealized gains/(losses) on its AFS securities and derivative hedging instruments (to the extent that such changes are not recorded in earnings), adjusted by realized net gains/(losses) reclassified out of AOCI for sold AFS securities and terminated hedging relationships, as well as the portion of unrealized gains/(losses) on its financing agreements held at fair value related to instrument-specific credit risk, and is reduced by dividends declared on the Company’s preferred stock and issuance costs of redeemed preferred stock.

(n) Derivative Financial Instruments

In addition, the Company’s 6.25 % Convertible Senior Notes due 2024 (the “Convertible Senior Notes”) were included in the calculation of diluted EPS if the assumed conversion into common shares was dilutive, using the “if-converted” method until their maturity and repayment in full.

This calculation involved adding back the periodic interest expense associated with the Convertible Senior Notes to the numerator and by adding the shares that would have been issued in an assumed conversion (regardless of whether the conversion option is in or out of the money) to the denominator for the purposes of calculating diluted EPS (see Note 11).

(n) Comprehensive Income/(Loss)

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

instrument-specific credit risk, and is reduced by dividends declared on the Company’s preferred stock and issuance costs of redeemed preferred stock.

(o) Derivative Financial Instruments

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

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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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(o) Fair Value Measurements and the Fair Value Option for Financial Assets and Financial Liabilities

(p) Fair Value Measurements and the Fair Value Option for Financial Assets and Financial Liabilities

The Company’s presentation of fair value for its financial assets and liabilities is determined within a framework that stipulates that the fair value of a financial asset or liability is an exchange price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability.

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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).

(p) Variable Interest Entities

(q) Variable Interest Entities

An entity is referred to as a VIE if it meets at least one of the following criteria:

8 unchanged sentences

In determining the accounting treatment to be applied to these transactions, the Company concluded that the entities used to facilitate these transactions are VIEs and that they should be consolidated.

If the Company had determined that consolidation was not required, it would have then assessed whether the transfers of the underlying assets would qualify as sales or should be accounted for as secured financings under GAAP (see Note 14).

If the Company had determined that

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

consolidation was not required, it would have then assessed whether the transfers of the underlying assets would qualify as sales or should be accounted for as secured financings under GAAP (see Note 14).

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

The Company also has investments in certain VIEs, in which it is not considered to be the primary beneficiary and which are therefore not consolidated, but the VIEs are considered equity method investments.

Each of these VIEs own a commercial property upon which the Company has foreclosed, as further described in Note 5.

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

Offering costs related to the issuance of preferred stock are recorded as a reduction in Additional paid-in capital, a component of Stockholders’ Equity, at the time such preferred stock is issued.

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.

( s ) Contingencies

Lima One had reached an agreement, or was in the process of reaching an 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.

However, this lease agreement was terminated prior to commencement and primarily all of the incentives will, therefore, require renegotiation.

These incentives were generally recognized when there was reasonable assurance that the incentive would be received and that the Company would comply with the conditions specified in the related agreement.

These incentives were expected to 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, 2024.

(t) New Accounting Standards and Interpretations

As of December 31, 2024, there were no new accounting standards or interpretations adopted by the Company that had a material effect on its consolidated financial statements in 2024.

MFA FINANCIAL, INC.

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December 31, 2024

( 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

2 unchanged sentences

Starting in the second quarter of 2021, the Company elected the fair value option for all loan acquisitions, including loans originated by Lima One subsequent to its acquisition by the Company.

Prior to the second quarter of 2021, the fair value option was typically elected only for Purchased Non-performing Loans.

Prior to the second quarter of 2021, the fair value option was typically elected only for loans that were 60 days or more days delinquent at purchase.

The following table presents the components of the Company’s Residential whole loans, and the accounting model designated at December 31, 2024 and 2023:

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(Dollars in Thousands) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

Purchased Performing Loans:

Non-QM loans $ 843,884 $ 987,282 $ 2,961,693 $ 2,372,548 $ 3,805,577 $ 3,359,830

Transitional loans (1)

Business purpose loans:

Single-family transitional loans (1)

$ 22,430 $ 35,467 $ 1,078,425 $ 1,157,732 $ 1,100,855 $ 1,193,199

Multifamily transitional loans — — 938,926 1,168,297 938,926 1,168,297

Single-family rental loans (2)

108,203 172,213 1,248,197 1,462,583 1,356,400 1,634,796

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

Agency eligible investor loans — — 55,779 51,094 55,779 51,094

Total Purchased Performing Loans $ 1,120,509 $ 1,356,235 $ 6,806,084 $ 4,931,415 $ 7,926,593 $ 6,287,650

Purchased Credit Deteriorated Loans $ 429,726 $ 470,294 $ — $ — $ 429,726 $ 470,294

Total Business purpose loans $ 130,633 $ 207,680 $ 3,265,548 $ 3,788,612 $ 3,396,181 $ 3,996,292

Non-QM loans 722,392 843,884 3,568,694 2,961,693 4,291,086 3,805,577

Legacy RPL/NPL loans $ 457,654 $ 498,671 $ 624,895 $ 705,424 $ 1,082,549 $ 1,204,095

Other loans $ — $ — $ 52,073 $ 55,779 $ 52,073 $ 55,779

Allowance for Credit Losses $ ( 10,665 ) $ ( 20,451 ) $ — $ — $ ( 10,665 ) $ ( 20,451 )

Purchased Non-Performing Loans $ — $ — $ 705,424 $ 796,109 $ 705,424 $ 796,109

Total Residential whole loans $ 1,300,014 $ 1,529,784 $ 7,511,210 $ 7,511,508 $ 8,811,224 $ 9,041,292

Number of loans 5,582 6,326 18,588 19,075 24,170 25,401

(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.

(1) Includes $ 442.4 million and $ 471.1 million of loans collateralized by new construction projects at origination as of December 31, 2024 and December 31, 2023, respectively.

(2) As of December 31, 2024, no loans were held-for-sale and as of December 31, 2023, $ 13.6 million of held-for sale loans were included in the carrying value.

For the year ended December 31, 2024, the Company recorded a $ 0.5 million gain on these loans resulting from their sale.

MFA FINANCIAL, INC.

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December 31, 2024

The following table presents additional information regarding the Company’s Residential whole loans at December 31, 2023 and 2022:

The following tables presents additional information regarding the Company’s Residential whole loans:

December 31, 2024

Fair Value / Carrying Value Unpaid Principal Balance (“UPB”) Weighted Average Coupon (2)

Weighted Average Term to Maturity (Months) Weighted Average LTV Ratio (3)

Unpaid Principal Balance (“UPB”)

Weighted Average Coupon (1)

Weighted Average Term to Maturity (Months)

Weighted Average LTV Ratio (2)

Weighted Average Original FICO (3)

Aging by UPB 60+ Delinquency %

Aging by UPB 60+ Days Past Due %

Past Due Days

(Dollars In Thousands) Current 30-59 60-89 90+

Purchased Performing Loans:

Non-QM loans (5)

Business Purpose Loans:

Single-family transitional (4)

$ 1,099,466 $ 1,099,700 $ 1,106,631 10.44 % 5 67 % 750 $ 957,266 $ 33,393 $ 15,964 $ 100,008 10.5 %

Transitional loans (1)

Multifamily transitional (4)

938,926 938,926 976,964 9.17 % 6 64 % 751 870,525 20,815 — 85,624 8.8

Single-family rental loans 1,630,442 1,729,923 6.30 320 70 738 1,636,810 12,543 12,314 68,256 4.7

Seasoned performing loans 68,924 75,715 4.58 143 28 725 72,126 1,045 235 2,309 3.4

Agency eligible investor loans 55,779 66,830 3.44 332 66 758 65,094 1,508 — 228 0.3

Total Purchased Performing Loans $ 7,814,106 $ 8,175,387 6.86 % 240 3.8 %

Purchased Credit Deteriorated Loans $ 418,109 $ 506,828 4.83 % 267 59 % N/A $ 379,970 $ 44,731 $ 12,814 $ 69,313 16.2 %

Purchased Non-Performing Loans $ 705,424 $ 772,737 5.21 % 270 62 % N/A $ 444,491 $ 96,464 $ 31,560 $ 200,222 30.0 %

Single-family rental 1,356,034 1,355,965 1,416,705 6.36 % 321 68 % 739 1,346,312 15,661 5,445 49,287 3.9

Total Business purpose loans

$ 3,394,426 $ 3,394,591 $ 3,500,300 8.43 % 67 % $ 3,174,103 $ 69,869 $ 21,409 $ 234,919 7.3

Non-QM loans 4,288,961 4,258,298 4,408,660 6.50 % 339 64 % 735 4,114,436 124,765 50,619 118,840 3.8

Legacy RPL/NPL loans 1,075,764 1,090,991 1,222,258 5.15 % 253 55 % 647 831,844 129,081 45,074 216,259 21.4 %

Other loans 52,073 52,073 63,614 3.44 % 320 65 % 758 62,998 616 — — — %

Residential whole loans, total or weighted average $ 8,811,224 $ 8,795,953 $ 9,194,832 7.06 % 64 % $ 8,183,381 $ 324,331 $ 117,102 $ 570,018 7.5 %

December 31, 2023

Fair Value / Carrying Value Unpaid Principal Balance (“UPB”) Weighted Average Coupon (2)

Weighted Average Term to Maturity (Months) Weighted Average LTV Ratio (3)

Unpaid Principal Balance (“UPB”)

Weighted Average Coupon (1)

Weighted Average Term to Maturity (Months)

Weighted Average LTV Ratio (2)

Weighted Average Original FICO (3)

Aging by UPB 60+ Delinquency %

Aging by UPB 60+ Days Past Due %

Past Due Days

(Dollars In Thousands) Current 30-59 60-89 90+

Purchased Performing Loans:

Business Purpose Loans:

Single-family transitional (4)

$ 1,190,612 $ 1,191,715 $ 1,197,346 10.01 % 7 66 % 747 $ 1,070,759 $ 27,246 $ 17,004 $ 82,337 8.3 %

Multifamily transitional (4)

1,168,297 1,168,297 1,170,775 8.41 % 14 63 % 747 1,116,402 33,778 9,614 10,981 1.8

Single-family rental 1,630,442 1,628,734 1,729,923 6.30 % 320 70 % 738 1,636,810 12,543 12,314 68,256 4.7

Total Business purpose loans

$ 3,989,351 $ 3,988,746 $ 4,098,044 7.99 % 67 % $ 3,823,971 $ 73,567 $ 38,932 $ 161,574 4.9

Non-QM loans (5)

Transitional loans (1)

3,700,052 3,644,261 3,934,798 5.78 % 344 65 % 735 3,732,327 98,017 29,587 74,867 2.7

Single-family rental loans 1,375,297 1,485,967 5.74 324 69 737 1,442,095 8,431 7,978 27,463 2.4

Seasoned performing loans 82,884 90,843 3.31 151 30 714 84,514 993 937 4,399 5.9

Agency eligible investor loans 51,094 61,816 3.44 344 68 757 61,816 — — — —

Total Purchased Performing Loans $ 6,273,743 $ 6,741,786 5.78 % 271 3.1 %

Purchased Credit Deteriorated Loans $ 448,887 $ 554,907 4.66 % 277 63 % N/A $ 403,042 $ 48,107 $ 16,270 $ 87,488 18.7 %

Purchased Non-Performing Loans $ 796,109 $ 884,257 5.01 % 277 68 % N/A $ 444,045 $ 89,623 $ 40,554 $ 310,035 39.6 %

Legacy RPL/NPL loans 1,192,457 1,213,199 1,355,280 5.03 % 262 59 % 648 896,587 142,240 44,609 271,844 23.3 %

Other loans 55,779 55,779 66,830 3.44 % 332 66 % 758 65,094 1,508 — 228 0.3

Residential whole loans, total or weighted average $ 8,937,639 $ 8,901,985 $ 9,454,952 6.04 % 65 % $ 8,517,979 $ 315,332 $ 113,128 $ 508,513 6.6 %

(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 %.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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

2 unchanged sentences

(2) 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 $ 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.

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

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

(4) For Single-family and Multifamily 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 Single-family transitional loans, totaling $ 445.6 million and $ 332.5 million at December 31, 2024 and December 31, 2023, respectively, and certain Multifamily transitional loans, totaling $ 252.1 million and $ 218.8 million at December 31, 2024 and December 31, 2023, respectively, an after repaired valuation was not available.

For these loans, the weighted average LTV is calculated based on the current unpaid principal balance and the as-is value of the collateral securing the related loan.

(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.

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.

1 unchanged sentence

December 31, 2024

Sales of Residential Whole Loans

During 2024, Residential whole loans with an unpaid principal balance of $ 692.8 million were sold, realizing losses, before the impact of economic hedging and the reversal of previously recognized unrealized losses, of $ 42.0 million.

Upon sale, the Company reversed $ 47.1 million of previously recognized unrealized losses, resulting in a net gain on sale of $ 5.1 million.

Upon sale, the Company reversed $ 28.0 million of previously recognized unrealized losses, resulting in a net gain on sale of $ 1.7 million.

Allowance for Credit Losses

1 unchanged sentence

For the Year Ended December 31, 2024

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

(In Thousands)

Single-family transitional loans (1)(2)

Single-family rental loans

Seasoned Performing Loans Purchased Credit Deteriorated Loans (3)

Legacy RPL/NPL loans (3)

Allowance for credit losses at December 31, 2023

$ 2,587 $ 4,355 $ 1,871 $ 11,638 $ 20,451

Current provision/(reversal)

2 unchanged sentences

Allowance for credit losses at March 31, 2024

$ 1,699 $ 4,642 $ 1,681 $ 11,590 $ 19,612

Current provision/(reversal) ( 317 ) 978 ( 326 ) ( 1,414 ) ( 1,079 )

1 unchanged sentence

Allowance for credit losses at June 30, 2024

$ 1,301 $ 609 $ 1,355 $ 10,006 $ 13,271

Current provision/(reversal) 48 205 387 ( 2,582 ) ( 1,942 )

1 unchanged sentence

Allowance for credit losses at September 30, 2024

$ 1,168 $ 375 $ 1,742 $ 7,372 $ 10,657

Current provision/(reversal) 379 184 383 ( 548 ) 398

2 unchanged sentences

$ 1,389 $ 366 $ 2,125 $ 6,785 $ 10,665

For the Year Ended December 31, 2022

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

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

Year Ended December 31, 2023

(Dollars In Thousands) Single-family transitional loans (1)(2)

Single-family rental loans

Legacy RPL/NPL loans (3)

Allowance for credit losses at December 31, 2022

2 unchanged sentences

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

Allowance for credit and valuation losses at March 31, 2022

Allowance for credit losses at March 31, 2023

$ 3,626 $ 1,340 $ 7,145 $ 20,951 $ 33,062

11 unchanged sentences

$ 2,587 $ 4,355 $ 1,871 $ 11,638 $ 20,451

(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.

(1) In connection with Single-family transitional loans at carrying value, the Company had unfunded commitments of $ 1.6 million and $ 2.5 million as of December 31, 2024 and 2023, respectively, with an allowance for credit losses of $ 0 and $ 0 at December 31, 2024 and 2023, respectively.

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

1 unchanged sentence

(3) Includes $ 34.2 million and $ 53.0 million of loans that were assessed for credit losses based on a collateral dependent methodology as of December 31, 2024 and 2023, respectively.

(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

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

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.

The Company’s estimates of credit losses reflected the Company’s expectation that the performance of its portfolio might 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.

The amortized cost basis of Purchased Credit Deteriorated Loans on nonaccrual status as of December 31, 2023 and December 31, 2022 was $ 66.5 million and $ 80.5 million, respectively.

The fair value of Purchased Non-performing Loans on nonaccrual status as of December 31, 2023 and December 31, 2022 was $ 315.4 million and $ 413.1 million, respectively.

The carrying value of Residential whole loans on nonaccrual status as of December 31, 2024 and December 31, 2023 was $ 638.3 million and $ 624.1 million, respectively.

During the year ended December 31, 2024, the Company recognized $ 11.9 million of interest income on loans on nonaccrual status, including $ 7.9 million on its portfolio of loans which were non-performing at acquisition.

At December 31, 2024 and December 31, 2023, there were approximately $ 38.7 million and $ 51.6 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.

During the year ended December 31, 2024, the Company granted three loan modifications in its carrying value loan portfolio which gave borrowers term extensions.

The average increase in weighted average life was 31 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

As of December 31, 2024, the carrying value of these loans were approximately $ 0.2 million.

As of December 31, 2024, one of these modifications was delinquent for more than 90 days.

The following table presents certain additional credit-related information regarding our Residential whole loans, at carrying value:

1 unchanged sentence

(Dollars In Thousands) 2024 - 2022 2021 2020 Prior Total

LTV <= 80% (1)

$ — $ — $ 43,610 $ 167,368 $ 395,894 $ 217,863 $ 824,735

LTV > 80% (1)

— — 1,391 10,420 3,960 3,377 19,148

Total Non-QM loans $ — $ — $ 45,001 $ 177,788 $ 399,854 $ 221,240 $ 843,883

Year Ended December 31, 2023 Gross write-offs

$ — $ — $ — $ 71 $ 25 $ 110 $ 206

Transitional loans

LTV <= 80% (1)

$ — $ — $ 504 $ 3,915 $ 21,086 $ 7,782 $ 33,287

LTV > 80% (1)

— — — — 2,180 — 2,180

Total Transitional loans $ — $ — $ 504 $ 3,915 $ 23,266 $ 7,782 $ 35,467

Year Ended December 31, 2023 Gross write-offs

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

Single-family rental loans

Business purpose loans

LTV <= 80% (1)

2 unchanged sentences

— 98 2,096 4,193 6,387

Total Single-family rental loans $ — $ — $ 11,234 $ 20,339 $ 103,383 $ 37,257 $ 172,213

Year Ended December 31, 2023 Gross write-offs

Total Business purpose loans

$ — $ 6,708 $ 17,964 $ 105,961 $ 130,633

Seasoned performing loans

Twelve Months Ended December 31, 2024 Gross write-offs $ — $ 12 $ 523 $ 5,885 $ 6,420

LTV <= 80% (1)

2 unchanged sentences

— 1,916 5,023 4,116 11,055

Total Seasoned performing loans $ — $ — $ — $ — $ — $ 68,945 $ 68,945

Year Ended December 31, 2023 Gross write-offs

Total Non-QM loans

$ — $ 40,090 $ 159,282 $ 523,020 $ 722,392

Purchased credit deteriorated loans

Twelve Months Ended December 31, 2024 Gross write-offs $ — $ — $ — $ — $ —

Legacy RPL/NPL loans

LTV <= 80% (1)

2 unchanged sentences

— — — 50,533 50,533

Total Purchased credit deteriorated loans $ — $ — $ — $ — $ — $ 429,726 $ 429,726

Year Ended December 31, 2023 Gross write-offs

Total Legacy RPL/NPL loans

$ — $ — $ — $ 457,654 $ 457,654

Twelve Months Ended December 31, 2024 Gross write-offs $ — $ — $ — $ 284 $ 284

Total LTV <= 80% (1)

3 unchanged sentences

Total Residential whole loans, at carrying value

Year Ended December 31, 2023 Total Gross write-offs

$ — $ 46,798 $ 177,246 $ 1,086,635 $ 1,310,679

Twelve Months Ended December 31, 2024 Total Gross write-offs $ — $ 12 $ 523 $ 6,169 $ 6,704

(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.

For certain Transitional loans, totaling $ 551.3 million at December 31, 2023, 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 % at December 31, 2023.

Certain low value loans secured by vacant lots are categorized as LTV > 80%.

For Single-family and Multifamily 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 Single-family transitional loans, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

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

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

The following table presents vintage information regarding our Residential whole loans, at fair value:

Fair Value by Origination Year

(In Thousands)

2024 2023 2022 2021 2020 Prior Total

Single-family transitional loans $ 544,540 $ 388,789 $ 123,455 $ 21,592 $ — $ 48 $ 1,078,425

Multifamily transitional loans 88,914 449,353 279,280 121,379 — — 938,926

Single-family rental loans 93,459 241,114 540,650 365,128 7,709 137 1,248,197

Non-QM loans 1,085,020 687,051 578,230 1,185,343 226 32,824 3,568,694

Legacy RPL/NPL loans — — — — — 624,896 624,895

Other loans — — — 52,073 — — 52,073

Total Residential whole loans, at fair value $ 1,811,933 $ 1,766,307 $ 1,521,615 $ 1,745,515 $ 7,935 $ 657,905 $ 7,511,210

The following table presents realized credit losses, net of recoveries, on liquidated residential whole loans or residential whole loans that were transferred to REO, recognized in Other, net:

For the Year Ended December 31,

(In Thousands)

2024 2023 2022

Single-family transitional loans ( 2,775 ) 462 867

Multifamily transitional loans ( 5,465 ) 46 ( 6 )

Single-family rental loans ( 2,347 ) 214 342

Non-QM loans ( 65 ) 962 72

Legacy RPL/NPL loans ( 858 ) ( 2,491 ) ( 3,266 )

Other loans — — —

Total Residential whole loans

( 11,510 ) ( 807 ) ( 1,991 )

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The following tables present certain information regarding the LTVs of the Company’s Residential whole loans that are 60 days or more delinquent:

1 unchanged sentence

(Dollars In Thousands) Carrying Value / Fair Value UPB LTV (1)

Purchased Performing Loans

Non-QM loans $ 102,252 $ 104,454 63.9 %

Transitional loans 113,772 119,936 65.1 %

Business purpose loans:

Single-family transitional loans $ 109,221 $ 115,972 79 %

Multifamily transitional loans 56,970 85,624 79 %

Single-family rental loans 42,995 54,732 99 %

Seasoned performing loans 2,520 2,544 33.6 %

Agency eligible investor loans 188 228 73.4 %

Total Purchased Performing Loans $ 284,391 $ 307,732

Purchased Credit Deteriorated Loans $ 66,089 $ 82,127 64.3 %

Purchased Non-Performing Loans $ 222,319 $ 231,782 70.7 %

Total Business purpose loans 209,186 256,328

Non-QM loans 166,299 169,459 66 %

Legacy RPL/NPL loans $ 240,356 $ 261,333 63 %

Other loans $ — $ — — %

Total Residential whole loans $ 615,841 $ 687,120

1 unchanged sentence

(Dollars In Thousands) Carrying Value / Fair Value UPB LTV (1)

Purchased Performing Loans

Non-QM loans $ 61,812 $ 61,719 67.9 %

Transitional loans 73,266 74,180 68.1 %

Business purpose loans:

Single-family transitional loans $ 93,960 $ 99,341 66 %

Multifamily transitional loans 19,812 20,595 63 %

Single-family rental loans 65,659 80,570 109 %

Seasoned performing loans 4,127 4,399 42.2 %

Agency eligible investor loans — — — %

Total Purchased Performing Loans $ 166,671 $ 167,761

Purchased Credit Deteriorated Loans $ 69,402 $ 87,488 74.8 %

Purchased Non-Performing Loans $ 296,697 $ 310,035 76.9 %

Total Business purpose loans 179,431 200,506

Non-QM loans 102,252 104,454 64 %

Legacy RPL/NPL loans $ 290,928 $ 316,453 69 %

Other loans $ 188 $ 228 73 %

Total Residential whole loans $ 572,799 $ 621,641

For certain Transitional loans, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

For certain Single-family transitional loans, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

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.

The following tables present the components of interest income on the Company’s Residential whole loans:

Held at Carrying Value Held at Fair Value Total

For the Year Ended December 31, For the Year Ended December 31, For the Year Ended December 31,

(In Thousands) 2024 2023 2022 2024 2023 2022 2024 2023 2022

Business purpose loans:

Single-family transitional loans

$ 1,230 $ 1,346 $ 7,810 $ 112,249 $ 82,377 $ 67,714 $ 113,479 $ 83,723 $ 75,524

Multifamily transitional loans

— — — 94,443 65,706 — 94,443 65,706 —

Single-family rental loans

8,864 11,167 15,314 95,258 82,974 53,661 104,122 94,141 68,975

Total Business purpose loans

$ 10,094 $ 12,513 $ 23,124 $ 301,950 $ 231,057 $ 121,375 $ 312,044 $ 243,570 $ 144,499

$ 43,227 $ 47,471 $ 51,359 $ 192,735 $ 145,856 $ 98,384 $ 235,962 $ 193,327 $ 149,743

Legacy RPL/NPL loans

$ 31,241 $ 34,150 $ 38,100 $ 52,298 $ 62,464 $ 78,520 $ 83,539 $ 96,614 $ 116,620

$ — $ — $ — $ 2,011 $ 4,372 $ 30,361 $ 2,011 $ 4,372 $ 30,361

Total Residential whole loans

$ 84,562 $ 94,134 $ 112,583 $ 548,994 $ 443,749 $ 328,640 $ 633,556 $ 537,883 $ 441,223

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

The following tables present the components of interest income on the Company’s Residential whole loans for the years ended December 31, 2023, 2022 and 2021:

Held at Carrying Value Held at Fair Value Total

For the Year Ended December 31, For the Year Ended December 31, For the Year Ended December 31,

The following table presents the components of Net gain/(loss) on residential whole loans measured at fair value through earnings :

For the Year Ended December 31,

(In Thousands) 2024 2023 2022

Purchased Performing Loans:

Non-QM loans $ 47,471 $ 51,359 $ 75,517 $ 145,856 $ 98,384 $ 21,431 $ 193,327 $ 149,743 $ 96,948

Transitional loans 1,346 7,810 22,424 148,083 67,714 10,705 149,429 75,524 33,129

Business purpose loans:

Single-family transitional loans $ ( 2,031 ) $ 468 $ ( 7,747 )

Multifamily transitional loans ( 35,890 ) 5,807 ( 10,699 )

Single-family rental loans

29,359 17,117 ( 133,663 )

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

Agency eligible investor loans — — — 4,372 30,361 11,667 4,372 30,361 11,667

Total Purchased Performing Loans $ 64,488 $ 79,156 $ 129,488 $ 381,285 $ 250,120 $ 53,109 $ 445,773 $ 329,276 $ 182,597

Purchased Credit Deteriorated Loans $ 29,646 $ 33,427 $ 40,130 $ — $ — $ — $ 29,646 $ 33,427 $ 40,130

Purchased Non-Performing Loans $ — $ — $ — $ 62,464 $ 78,520 $ 80,741 $ 62,464 $ 78,520 $ 80,741

Total Business purpose loans $ ( 8,562 ) $ 23,392 $ ( 152,109 )

Non-QM loans 65,717 56,871 ( 399,216 )

Legacy RPL/NPL loans ( 10,830 ) 7,841 ( 117,574 )

Other loans ( 331 ) 1,746 ( 197,863 )

Total Residential whole loans

$ 45,994 $ 89,850 $ ( 866,762 )

Securities, at Fair Value

1 unchanged sentence

Government, such as Ginnie Mae.

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

The following table presents certain information regarding the composition of our Agency MBS portfolio :

December 31, 2024

14 unchanged sentences

Total $ 1,403,891 100.2 % 99.2 % $ 1,392,635 11 9.2 %

(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

(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.

Term Notes Backed by MSR Collateral

1 unchanged sentence

Payment of principal and interest on these term notes is considered to be largely dependent on cash flows generated by the underlying MSRs, as this impacts the cash flows available to the SPV that issued the term notes.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

At December 31, 2024, these term notes had an amortized cost of $ 50.6 million, gross unrealized gains of approximately $ 3.9 million, a weighted average yield of 14.0 % and a weighted average term to maturity of 0.83 years.

14 unchanged sentences

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

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following tables present certain information about the Company’s Agency MBS and other Securities, at December 31, 2024 and 2023:

30 unchanged sentences

Amounts disclosed at December 31, 2023 includes 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 gross unrealized gains of approximately $ 2.3 million and no gross unrealized losses at December 31, 2023.

(4) Amounts disclosed at December 31, 2024 include Non-Agency MBS with a fair value of $ 22.6 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.

Such securities had approximately $ 0.5 million gross unrealized gains and $ 0.5 million gross unrealized losses at December 31, 2024.

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 no gross unrealized gains and no gross unrealized losses 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.

Such securities had $ 0.5 million gross unrealized gains and $ 0.1 million gross unrealized losses at December 31, 2023.

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

Sales of Residential Mortgage Securities

During the year ended December 31, 2024, the Company sold a CRT security for approximately $ 16.0 million, realizing a gain of $ 7.3 million.

During the year ended December 31, 2024, the Company sold MSR securities for approximately $ 29.6 million, realizing gains of $ 2.7 million.

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 .

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

3 unchanged sentences

Net unrealized gain/(loss) on securities $ ( 16,194 ) $ 7,341 $ ( 3,230 )

Net realized gain from the sale of securities 908 84 —

Net realized gain/(loss) from the sale of securities 9,992 908 84

Total Impairment and other net gain/(loss) on securities $ ( 6,202 ) $ 8,249 $ ( 3,146 )

Net unrealized gain/(loss) on other portfolio investments $ ( 4,761 ) $ 6,180 $ ( 21,921 )

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

Net realized gain/(loss) on other portfolio investments 94 ( 5,869 ) —

Reversal of impairment/(impairment) other portfolio investments

— ( 2,335 ) —

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

Total Impairment and other net gain/(loss) on securities and other portfolio investments $ ( 10,869 ) $ 6,225 $ ( 25,067 )

(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.

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 through earnings related to its MBS for the years ended December 31, 2023, 2022 and 2021.

There were no gross unrealized losses on the Company’s AFS securities (whose changes in fair value are recorded through OCI) at December 31, 2024.

There were no allowances for credit losses recorded with respect to the Company’s AFS securities for any of the periods presented.

The Company did not recognize an allowance for credit losses through earnings related to its AFS securities for the years ended December 31, 2024, 2023 and 2022.

Impact of AFS Securities on AOCI

The following table presents the impact of the Company’s AFS securities on its AOCI for the years ended December 31, 2023, 2022 and 2021:

The following table presents the impact of the Company’s AFS securities (whose changes in fair value are recorded through OCI) on its AOCI for the years ended December 31, 2024, 2023 and 2022:

For the Year Ended December 31,

11 unchanged sentences

Interest Income on Securities, at Fair Value

The following table presents the components of interest income on the Company’s Securities, at fair value for the years ended December 31, 2023, 2022 and 2021:

The following table presents the components of interest income on the Company’s Securities, at fair value:

For the Year Ended December 31,

2 unchanged sentences

Effective yield adjustment (1)(2)

( 238 ) ( 146 ) —

Interest income $ 43,585 $ 20,530 $ —

1 unchanged sentence

Effective yield adjustment (1)(2)

191 3,143 13,265

Interest income $ 7,928 $ 8,319 $ 7,936

8 unchanged sentences

The net yield may be based on management’s estimates of the amount and timing of future cash flows or in the instrument’s contractual cash flows, depending on the relevant accounting standards.

(3) Includes accretion income recognized due to the impact of redemptions of certain securities that had been previously purchased at a discount of $ 8.8 million during the year ended December 31, 2021.

(4) Includes $ 7.8 million and $ 20.5 million of accretion income recognized during the years ended December 31, 2022 and 2021, respectively, due to the impact of the redemption at par of MSR-related assets that had been held at amortized cost basis below par due to an impairment charge recorded in the first quarter of 2020.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(3) Includes $ 7.8 million of accretion income recognized during the year ended December 31, 2022, due to the impact of the redemption at par of MSR-related assets that had been held at amortized cost basis below par due to an impairment charge recorded in the first quarter of 2020.

The following table presents the components of the Company’s Other assets at December 31, 2024 and 2023:

(In Thousands) December 31, 2024 December 31, 2023

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

REO 130,854 110,174

12 unchanged sentences

(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).

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

(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.

At December 31, 2022, the Company had 388 REO properties with an aggregate carrying value of $ 130.6 million.

The below table summarizes the aggregate carrying value of REO properties by loan source prior to foreclosure proceeding or from completion of a deed-in-lieu of foreclosure or similar legal agreement.

(Dollars In Thousands)

December 31, 2024 December 31, 2023

Business purpose loans $ 71,090 $ 28,328

Non-QM loans 1,278 3,374

Legacy RPL/NPL loans 58,486 78,472

Total $ 130,854 $ 110,174

Number of properties 416 300

At December 31, 2024, $ 130.7 million of residential real estate property was held by the Company that was acquired either through a completed foreclosure proceeding or from completion of a deed-in-lieu of foreclosure or similar legal agreement.

13 unchanged sentences

Number of properties 416 300

(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.

(1) The Company recognized $( 6.7 ) million and $ 0.4 million, respectively, on Residential whole loans in Other Income/(Loss), net associated with the transfer of loans to REO for the years ended December 31, 2024 and December 31, 2023.

(2) During the year ended December 31, 2024, the Company sold 257 REO properties for consideration of $ 85.3 million, realizing net gains of approximately $ 10.5 million.

1 unchanged sentence

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

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

In December 2023, 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.

In the third quarter of 2024, the Company received 75 % and 49 % interests, respectively, in two additional VIEs through foreclosure of a multifamily property and a senior living facility underlying delinquent commercial mortgage loans.

Each of these entities was determined to be a VIE but the Company was not determined to be the primary beneficiary;

as a result, the investments in the entities are considered equity method investments.

During 2024, the Company recorded a $ 0.1 million loss based on updated valuations of the property acquired in 2023, which the Company sold in December 2024.

Each entity accounts for its respective commercial REO property similarly to the manner in which the Company accounts for its residential REO.

The entities generally do not own any other significant assets or carry any significant liabilities, except that two entities contain properties encumbered by third-party financing.

The property acquired in 2023 was considered held-for-sale, while the properties foreclosed in 2024 are considered held-for-investment.

( b ) Goodwill and Intangible Assets

1 unchanged sentence

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.

The amortization period for each of the finite lived intangible assets and the activity for the years ended December 31, 2023, 2022 and 2021 is summarized in the table below:

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

December 31, 2021

December 31, 2022

December 31, 2023

Carrying Value at

In 2024, the Company changed its annual goodwill impairment assessment date from November 30 to October 1.

No impairment has been recorded since the goodwill was initially recognized.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Amortization Period (Years) (1)

The amortization period for each of the finite lived intangible assets and the activity for the years ended December 31, 2024, 2023 and 2022 is summarized in the table below:

(Dollars in Thousands) Carrying Value at December 31, 2021 Amortization Year Ended December 31, 2022 Amortization Year Ended December 31, 2023 Amortization Year Ended December 31, 2024 Carrying Value at December 31, 2024 Amortization Period (Years) (1)

Trademarks / Trade Names $ 3,800 $ ( 400 ) $ ( 400 ) $ ( 400 ) $ 2,600 10

3 unchanged sentences

Total Identified Intangibles $ 21,400 $ ( 9,200 ) $ ( 4,200 ) $ ( 3,200 ) $ 4,800

(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 .

( c ) Capital Contributions Made to Loan Origination Partners

1 unchanged sentence

At December 31, 2024, the carrying value of these investments (including adjustments for impairments or mark-to-market changes) was $ 16.8 million, including $ 1.7 million of common equity (including partnership interests) and $ 15.1 million of preferred equity.

During the year ended December 31, 2024, there were no impairment charges recorded by the Company on its investment in loan origination partners.

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.

During the year ended December 2022, the Company recorded an impairment charge against 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.

This impairment charge was recorded in Provision for credit losses on other assets in the consolidated statement of operations.

Further, for the year ended December 31, 2022, the Company recorded a valuation adjustment of $ 21.9 million against its investment in a loan origination partner that is accounted for at fair value through earnings.

During the year ended December 31, 2021, the Company reversed $ 10.0 million of previously recorded impairment as two of the Company’s preferred equity investments were repaid in full.

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 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.

Prior to December 31, 2024, the Company had elected to account for certain of these investments pursuant to the fair value option, where changes in estimated fair value were recorded on the statement of operations.

Such changes in estimated fair value resulted in gains/(losses) being recorded of $( 3.0 ) million, $ 6.4 million and $( 21.9 ) million during 2024, 2023, and 2022 respectively.

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

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

2 unchanged sentences

At the end of each reporting period, or earlier if circumstances warrant, the Company evaluates whether the nature of its interests and other involvement with the investee entity requires the Company to apply equity method accounting or consolidate the results of the investee entity with the Company’s financial results.

On July 1, 2021, the Company completed the acquisition of certain ownership interests in Lima One, which resulted in the Company owning all of Lima One’s outstanding ownership interests (see Note 15).

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

( 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 $ —

The Company owns two 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.

Each of the participations is 75 % of the total UPB of the related loans and the remaining interest in each loan was retained by the originator of such loan.

The commercial mortgage loans are collateralized by one multifamily property and one office property.

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

The Company has received interests in three of the previously underlying properties, as further described above under “Commercial REO.”

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The following table presents certain additional information about the Company’s commercial mortgage loans:

(Dollars In Thousands) Fair Value / Carrying Value UPB Weighted Average Coupon Weighted Average Term to Maturity (Months) UPB 60+ Days Delinquent Weighted Average LTV Ratio

Commercial Loans - December 31, 2024 $ 7,435 $ 9,385 11.48 % 0 $ 4,875 82 %

Commercial Loans - December 31, 2023 $ 51,426 $ 51,602 13.18 % 2 $ 3,521 66 %

(e) Derivative Instruments

3 unchanged sentences

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:

The following table presents the assets pledged as collateral against the Company’s Swaps:

(In Thousands) December 31,

1 unchanged sentence

Agency MBS, at fair value

$ 44,411 $ 41,179

Restricted Cash 16,567 22,880

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

At December 31, 2024, 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 118 months.

11 unchanged sentences

Within 30 days

450,000 1.16 % 4.49 % $ — — % — %

Over 30 days to 3 months 100,000 1.65 4.49 100,000 1.49 5.38

6 unchanged sentences

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 72 months

545,150 3.42 4.49 292,650 4.32 5.38

Total Swaps $ 3,313,750 2.20 % 4.49 % $ 3,277,260 1.85 % 5.38 %

2 unchanged sentences

This rate adjusts daily based on SOFR.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Impact of Derivative Instruments on Earnings

7 unchanged sentences

Net price alignment expense on margin collateral received ( 9,217 ) ( 11,697 ) ( 2,762 )

Realized gain/(loss) on terminated swaps

( 27,530 ) — —

Net gain on TBA short positions

7 unchanged sentences

December 31, 2024

(In Thousands) Collateral Unpaid Principal Balance Fair Value/Carrying Value (1)

(Dollars In Thousands)

Collateral Unpaid Principal Balance Fair Value/Carrying Value (1)

Weighted Average Cost of Funding (2)

1 unchanged sentence

Agreements with mark-to-market collateral provisions Residential whole loans and REO

$ 1,321,584 $ 1,321,043 7.27 % 7.9

Agreements with mark-to-market collateral provisions Securities 1,279,007 1,279,007 5.47 % 0.2

1 unchanged sentence

Agreements with non-mark-to-market collateral provisions Residential whole loans and REO

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

577,231 576,774 7.82 % 10.4

Securitized debt Residential whole loans

5,891,815 5,794,977 4.82 % See Note 14

Convertible senior notes Unsecured — — 6.84 %

8.875 % Senior Notes due 2029

Unsecured 115,000 111,270 9.83 % 49.5

9.00 % Senior Notes due 2029

Unsecured 75,000 72,390 9.91 % 55.5

Impact of net Swap carry ( 1.24 ) %

2 unchanged sentences

December 31, 2023

(In Thousands) Collateral Unpaid Principal Balance Fair Value/Carrying Value (1)

(Dollars In Thousands)

Collateral Unpaid Principal Balance Fair Value/Carrying Value (1)

Weighted Average Cost of Funding (2)

1 unchanged sentence

Agreements with mark-to-market collateral provisions Residential whole loans and REO

$ 1,738,543 $ 1,737,651 7.23 % 11.8

Agreements with mark-to-market collateral provisions Securities 622,603 622,603 5.75 % 0.2

1 unchanged sentence

Agreements with non-mark-to-market collateral provisions Residential whole loans and REO

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

1,217,671 1,216,697 7.71 % 20.6

Securitized debt Residential whole loans

4,894,746 4,750,805 4.00 % See Note 14

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

8 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.

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

(2) Weighted average cost of funding reflects year-to-date interest expense (inclusive of the amortization of deferred financing costs) 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.

10 unchanged sentences

Agreements with mark-to-market collateral provisions Residential whole loans

$ 559,339 $ 47,011 $ 389,220 $ 326,014 $ 1,321,584

Agreements with mark-to-market collateral provisions Securities 1,279,007 — — — 1,279,007

1 unchanged sentence

Agreements with non-mark-to-market collateral provisions Residential whole loans

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

23,267 — 533,559 20,405 577,231

(1) $ 1.7 billion 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 $ 326.0 million outstanding.

4 unchanged sentences

Mark-to-market financing agreements secured by residential whole loans (1)

$ 1,295,653 $ 1,712,489

Fair value of residential whole loans pledged as collateral under financing agreements $ 1,608,344 $ 2,204,239

9 unchanged sentences

55.71 % 49.39 %

(1) Includes an aggregate of $ 394.9 million and $ 327.2 million of mark-to-market financing collateralized by Non-Agency MBS with a fair value of $ 506.6 million and $ 465.6 million obtained in connection with the Company’s loan securitization transactions that are eliminated in consolidation as of December 31, 2024 and December 31, 2023, respectively.

(2) Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following table presents information with respect to the Company’s financing agreements with non-mark-to-market collateral provisions and associated assets pledged as collateral at December 31, 2024 and 2023:

7 unchanged sentences

Weighted average haircut on real estate owned — % — %

In addition, the Company had aggregate restricted cash held in connection with its financing agreements of $ 19.0 million and $ 16.0 million at December 31, 2023 and 2022, respectively.

In addition, the Company had aggregate restricted cash held in connection with its financing agreements, including securitized debt, of $ 32.1 million and $ 19.0 million at December 31, 2024 and 2023, respectively.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The following table presents repricing information (excluding the impact of associated derivative hedging instruments, if any) about the Company’s financing agreements that have non-mark-to-market collateral provisions as well as those that have mark-to-market collateral provisions, at December 31, 2024 and 2023:

10 unchanged sentences

Convertible Senior Notes

On June 3, 2019, the Company issued $ 230.0 million in aggregate principal amount of its Convertible Senior Notes in an underwritten public offering, including an additional $ 30.0 million issued pursuant to the exercise of the underwriters’ option to purchase additional Convertible Senior Notes.

In June 2019, the Company issued $ 230.0 million in aggregate principal amount of its Convertible Senior Notes in an underwritten public offering.

The total net proceeds the Company received from the offering were approximately $ 223.3 million, after deducting offering expenses and the underwriting discount.

The Convertible Senior Notes bear interest at a fixed rate of 6.25 % per year, paid semiannually on June 15 and December 15 of each year commencing December 15, 2019 and will mature on June 15, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms.

The Convertible Senior Notes are convertible at the option of the holders at any time until the close of business on the business day immediately preceding the maturity date into shares of the Company’s common stock based on a conversion rate of 31.4346 shares (which reflects an adjustment resulting from the Company’s Reverse Stock Split) of the Company’s common stock for each $ 1,000 principal amount of the Convertible Senior Notes, which is equivalent to a conversion price of approximately $ 31.81 per share of common stock.

The Convertible Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 6.94 %.

The Company does not have the right to redeem the Convertible Senior Notes prior to maturity, except to the extent necessary to preserve its status as a REIT, in which case the Company may redeem the Convertible Senior Notes, in whole or in part, at a redemption price equal to the principal amount redeemed plus accrued and unpaid interest.

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

The Convertible Senior Notes bore interest at a fixed rate of 6.25 % per year.

The Convertible Senior Notes were convertible at the option of the holders at any time until the close of business on the business day immediately preceding the maturity date into shares of the Company’s common stock based on a conversion rate of 31.4346 shares (which reflected an adjustment resulting from the Company’s Reverse Stock Split) of the Company’s common stock for each $ 1,000 principal amount of the Convertible Senior Notes, which is equivalent to a conversion price of approximately $ 31.81 per share of common stock.

The Convertible Senior Notes had an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 6.94 %.

During the three months ended June 30, 2024, the Convertible Senior Notes matured and the Company repaid the then remaining outstanding amount in full.

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

During the three months ended March 31, 2024, the Company repurchased $ 39.9 million principal amount of its Convertible Senior Notes for $ 39.8 million and recorded a loss of $ 0.1 million to Other Income/(Loss), net on the consolidated statement of operations.

During the year ended December 31, 2023, the Company repurchased $ 20.4 million principal amount of the Convertible Senior Notes for $ 20.2 million and recorded a gain of $ 0.1 million to Other Income/(Loss), net on the consolidated statement of operations.

8.875 % Senior Notes due 2029 (“ 8.875 % Senior Notes”)

In January 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.

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 offering expenses, were approximately $ 110.6 million.

The 8.875 % Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 9.83 %.

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

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.

9.00 % Senior Notes due 2029 (“ 9.00 % Senior Notes”)

On April 17, 2024, the Company completed the issuance of $ 75.0 million in aggregate principal amount of its 9.00 % Senior Notes in an underwritten public offering.

The 9.00 % Senior Notes are senior unsecured obligations of the Company and bear interest at a rate equal to 9.00 % per year, payable in cash quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on August 15, 2024, and are expected to mature on August 15, 2029, unless earlier redeemed.

The Company may redeem the 9.00 % Senior Notes in whole or in part at any time at the Company’s option on or after August 15, 2026, at a redemption price equal to 100 % of the outstanding principal amount of the 9.00 % Senior Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

The total net proceeds to the Company from the offering of the 9.00 % Senior Notes, after deducting the underwriter’s discount and commissions and offering expenses, were approximately $ 72.0 million.

The 9.00 % Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 9.94 %.

Both the 8.875 % Senior Notes and the 9.00 % 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 each other and to the Company’s existing and future senior unsecured obligations, if any.

(b) Counterparties

2 unchanged sentences

December 31, 2024

Average Months

to Repricing for

Repurchase Agreements Percent of

Stockholders’ Equity

Counterparty Amount at Risk (1)

Weighted Average Months to Maturity

Percent of Stockholders’ Equity

(Dollars in Thousands)

1 unchanged sentence

Barclays 107,848 4.7 5.86

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.

6 unchanged sentences

Financing Agreements

(In Thousands) Non-Mark-to-Market (1)

(In Thousands) Securitized

Non-Mark-to-Market (1)

Mark-to-Market (1)

Securitized Total

Residential whole loans, at carrying value $ 55,056 $ 318,762 $ 1,170,268 $ 1,544,086

Residential whole loans, at fair value 1,458,848 1,414,912 4,526,461 7,400,221

Residential whole loans (2)

$ 6,886,776 $ 740,260 $ 1,107,079 $ 8,734,115

Securities, at fair value — — 1,352,918 1,352,918

4 unchanged sentences

Financing Agreements

(In Thousands) Non-Mark-to-Market (1)

(In Thousands) Securitized

Non-Mark-to-Market (1)

Mark-to-Market (1)

Securitized Total

Residential whole loans, at carrying value $ 215,993 $ 284,683 $ 1,314,104 $ 1,814,780

Residential whole loans, at fair value 1,095,556 2,164,158 2,720,757 5,980,471

Residential whole loans (2)

$ 5,696,729 $ 1,513,904 $ 1,733,674 $ 8,944,307

Securities, at fair value — — 689,818 689,818

3 unchanged sentences

(1) An aggregate of $ 27.1 million and $ 36.4 million of accrued interest on those assets pledged against non-mark-to-market and mark-to-market financings agreements had also been pledged as of December 31, 2024 and 2023, respectively.

(2) Includes an aggregate of $ 394.9 million and $ 327.2 million of mark-to-market financing collateralized by Non-Agency MBS with a fair value of $ 506.6 million and $ 465.6 million obtained in connection with the Company’s loan securitization transactions that are eliminated in consolidation as of December 31, 2024 and December 31, 2023, respectively.

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

5 unchanged sentences

In the Company’s consolidated balance sheets, all balances associated with repurchase agreements are presented on a gross basis.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Other Liabilities

7 unchanged sentences

Total Other Liabilities $ 412,351 $ 336,030

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The Company has elected to be taxed as a REIT under the provisions of the Internal Revenue Code of 1986, as amended, (the “Code”), and the corresponding provisions of state law.

16 unchanged sentences

As of the date of this filing, the Company’s tax returns for tax years 2021 through 2023 are open to examination.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The tax effects of temporary differences that give rise to significant portions of net deferred tax assets (“DTAs”) recorded at the Company’s domestic TRS entities at December 31, 2024 and 2023 are presented in the following table:

7 unchanged sentences

Net deferred tax assets $ — $ —

Realization of the Company’s DTAs at December 31, 2023 is dependent on several factors, including generating sufficient taxable income prior to the expiration of net operating loss (“NOL”) carryforwards and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards.

Realization of the Company’s DTAs at December 31, 2024 is dependent on several factors, including generating sufficient taxable income to utilize net operating loss (“NOL”) carryforwards and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards.

The Company determines the extent to which realization of the deferred assets is not expected to be more likely than not and establishes a valuation allowance accordingly.

No net deferred tax benefit was recorded by the Company for the years ended December 31, 2024 and 2023, related to the net taxable losses in TRS entities, since a valuation allowance for the full amount of the associated deferred tax asset at the ends of those periods was recognized as its recovery was not considered more likely than not.

The related NOL carryforwards generated prior to 2018 will begin to expire in 2037;

those generated in 2018 and later can be carried forward indefinitely, until fully utilized.

The related NOL carryforwards can be carried forward indefinitely, until fully utilized.

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.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

At December 31, 2024, the Company’s federal NOL carryforward from prior years was $ 360.4 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.

The income tax provision (benefit) is included in Other general and administrative expense in the Company’s consolidated statements of operations.

The following table summarizes the Company’s income tax provision/(benefit) primarily recorded at the Company’s domestic TRS entities for the years ended December 31, 2024, 2023, and 2022:

12 unchanged sentences

$ 443 $ 278 $ ( 851 )

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following is a reconciliation of the statutory federal tax rate to the Company’s effective tax rate at December 31, 2024, 2023, and 2022:

8 unchanged sentences

Effective tax rate 0.3 % 0.3 % 0.5 %

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Commitments and Contingencies

1 unchanged sentence

The Company’s primary lease commitment relates to its corporate headquarters.

For the year ended December 31, 2023, the Company recorded an expense of approximately $ 5.2 million in connection with this lease.

For the years ended December 31, 2024, 2023, and 2022 the Company recorded an expense in connection with this lease of approximately $ 5.4 million, $ 5.2 million, and $ 5.0 million, respectively.

The original term specified in this lease is approximately fifteen years with a termination date of December 2036 and an option to renew for an additional five years .

7 unchanged sentences

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.

Additionally, in December 2024, Lima One executed a lease agreement on new office space in Greenville, South Carolina for an 8.5 -year term.

The Company expects the average annual lease rental expense to be approximately $ 2.4 million, which is not included in the table above.

Lima One expects to relocate to the space in the latter half of 2025.

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

1 unchanged sentence

As of December 31, 2024, the Company was not aware of any material unsettled repurchase claims that would require a reserve (see Note 14).

At December 31, 2024, the Company had unfunded commitments in connection with its Single-family and Multifamily transitional loans of $ 320.9 million and $ 58.5 million, respectively (see Note 3).

These commitments are subject to certain conditions that the respective borrowers must meet before funding is required.

In addition, from time to time, Lima One makes short-term commitments to originate mortgage loans;

such commitments were not significant at December 31, 2024.

(d) Guarantee

In connection with one of its investments in a loan origination partner, the Company has guaranteed up to $ 42.5 million of such investee’s warehouse financing.

As of December 31, 2024, the Company has no t recorded a liability in connection with this guarantee.

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

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

12 unchanged sentences

2024 November 20, 2024 December 3, 2024 December 31, 2024 $ 0.46875

August 17, 2023 September 5, 2023 September 29, 2023 0.46875

August 16, 2024 August 30, 2024 September 30, 2024 0.46875

May 21, 2024 June 5, 2024 June 28, 2024 0.46875

8 unchanged sentences

February 17, 2022 March 1, 2022 March 31, 2022 0.46875

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

6.50 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”)

2 unchanged sentences

The total net proceeds the Company received from the offering were approximately $ 266.0 million, after deducting offering expenses and the underwriting discount.

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.

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.

In March 2022, Congress enacted a federal statute that provides a safe harbor for those, like the calculation agent, that are contractually responsible for determining LIBOR replacements under certain circumstances, which the Company expects will apply to the Series C Preferred Stock.

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.

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 after 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.

In light of the discontinuance of the publication of three-month LIBOR after June 2023, and pursuant to the Adjustable Interest Rate (LIBOR) Act and the Federal Reserve’s final rules promulgated thereunder, the three-month CME Term SOFR (Secured Overnight Financing Rate) has replaced

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

three-month LIBOR as the successor base rate and will include an additional spread adjustment of 0.26161 % per year based on recommendation from the Alternative Reference Rate Committee.

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 66.67 % of the outstanding shares of Series C Preferred Stock.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following table presents cash dividends declared by the Company on its Series C Preferred Stock from January 1, 2022 through December 31, 2024:

2 unchanged sentences

2024 November 20, 2024 December 3, 2024 December 31, 2024 $ 0.40625

August 17, 2023 September 5, 2023 September 29, 2023 0.40625

August 16, 2024 August 30, 2024 September 30, 2024 0.40625

May 21, 2024 June 5, 2024 June 28, 2024 0.40625

16 unchanged sentences

2024 December 11, 2024 December 31, 2024 January 31, 2025 $ 0.35 (1)

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

September 12, 2024 September 27, 2024 October 31, 2024 0.35

June 11, 2024 June 28, 2024 July 31, 2024 0.35

1 unchanged sentence

2023 December 13, 2023 December 29, 2023 January 31, 2024 0.35 (2)

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

September 20, 2023 October 2, 2023 October 31, 2023 0.35

June 15, 2023 June 30, 2023 July 31, 2023 0.35

9 unchanged sentences

For more information see the Company’s 2024 Dividend Tax Information on its website.

(3) The $ 0.44 per share dividend declared on March 11, 2022, has been adjusted to reflect the Reverse Stock Split;

the amount actually paid in respect of such dividend was $ 0.11 per share, which was based on the pre-split number of shares held by stockholders at the record date for such dividend (March 22, 2022).

(4) The $ 0.44 , $ 0.40 , $ 0.40 and $ 0.30 per share dividend amounts for the three months ended December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, 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 $ 0.11 , $ 0.10 , $ 0.10 and $ 0.075 per share, respectively, which were based on the pre-split number of shares held by stockholders at the record dates for such dividends (December 31, 2021, September 30, 2021, June 30, 2021, and March 31, 2021, respectively).

(3) 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.

1 unchanged sentence

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

(4) The $ 0.44 per share dividend declared on March 11, 2022, has been adjusted to reflect the Reverse Stock Split;

In general, the Company’s common stock dividends have been characterized as ordinary income to its stockholders for income tax purposes.

3 unchanged sentences

For the year ended December 31, 2022, the portion of the Company’s common stock dividends paid during the year deemed to be a return of capital was $ 1.76 per share of common stock.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

3 unchanged sentences

At December 31, 2024, 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, 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.

During the years ended December 31, 2024, 2023 and 2022, the Company issued 0 , 6,666 and 80,027 shares of common stock through the DRSPP, raising net proceeds of approximately $ 0 , $ 74,000 and $ 1.2 million, respectively.

From the inception of the DRSPP in September 2003 through December 31, 2024, the Company issued 8,848,219 shares pursuant to the DRSPP, raising net proceeds of $ 290.8 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.

The timing and extent to which the Company repurchases its shares 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.

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”)).

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, 2024

(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:

(d) At-the-Market Offering Program

On February 29, 2024, the Company entered into a distribution agreement pursuant to the terms of which the Company may offer and sell shares of its common stock having an aggregate gross sales price of up to $ 300.0 million, from time to time, through various sales agents in transactions deemed to be “at-the-market” offerings under federal securities laws (the “ATM Program”).

The Company did not sell any shares of common stock through the ATM Program during the year ended December 31, 2024.

(e) Stock Repurchase Program

On February 29, 2024, the Company announced its Board had authorized a new $ 200 million stock repurchase program with respect to the Company’s common stock, which will be in effect through the end of 2025.

The Company’s prior stock repurchase program, which was adopted in March 2022, had authorized the repurchase of up to $ 250 million of common stock and expired on December 31, 2023, with approximately $ 202.5 million remaining available at the date of expiration.

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

The Company did not repurchase any shares of its common stock during the years ended December 31, 2024 and 2023.

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

(f) Accumulated Other Comprehensive Income/(Loss)

The following tables present changes in the balances of each component of the Company’s AOCI:

For the Year Ended December 31, 2024

(In Thousands) Net Unrealized

Gain/(Loss) on

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

(In Thousands) Net Unrealized Gain/(Loss) on AFS Securities

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

Balance at beginning of period $ 17,698 $ — $ 17,698

6 unchanged sentences

For the Year Ended December 31, 2023

(In Thousands) Net Unrealized

Gain/(Loss) on

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

(In Thousands) Net Unrealized Gain/(Loss) on 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)

2 unchanged sentences

For the Year Ended December 31, 2022

(In Thousands) Net Unrealized

Gain/(Loss) on

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

(In Thousands) Net Unrealized Gain/(Loss) on AFS Securities

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

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

37 unchanged sentences

$ 0.82 $ 0.46 $ ( 2.57 )

(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 continue to have a dilutive impact on future EPS.

(1) At December 31, 2024 and 2023, the Company had approximately 324,000 and 223,000 equity instruments outstanding that were excluded from the calculation of diluted EPS for the years ended December 31, 2024 and 2023, respectively, as they were determined to be anti-dilutive.

These equity instruments reflect RSUs (based on current estimate of expected share settlement amount) with a weighted average grant date fair value of $ 10.94 and $ 8.00 , respectively.

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

During the year ended December 31, 2024, the Convertible Senior Notes were determined to be anti-dilutive and were excluded from the calculation of diluted EPS under the “if-converted” method.

Under this method, the periodic interest expense for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether the conversion option is in or out of the money) are included in the denominator for the purpose of calculating diluted EPS.

The Convertible Senior Notes may have a dilutive impact on future EPS.

Equity Compensation and Other Benefit Plans

4 unchanged sentences

At December 31, 2024, approximately 4.2 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 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

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

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

Company’s common stock.

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

Restricted Stock Units

1 unchanged sentence

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, 2024 are designated to be settled in shares of the Company’s common stock.

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.

All holders of RSUs outstanding at December 31, 2024 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 of 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, 2024 and 2023, the Company had unrecognized compensation expense of $ 6.3 million and $ 9.2 million, respectively, related to RSUs.

The unrecognized compensation expense at December 31, 2024 is expected to be recognized over a weighted average period of 1.7 years.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following table presents information with respect to the Company’s RSUs during the years ended December 31, 2024, 2023 and 2022:

For the Year Ended December 31, 2024

Condition Weighted

Fair Value Per Share

Conditions Weighted

RSUs With Service Condition

Weighted Average Grant Date Fair Value Per Share

RSUs With Market and Service Conditions

Weighted Average Grant Date Fair Value Per Share

Total Weighted Average Grant Date Fair Value Per Share

Outstanding at beginning of year:

7 unchanged sentences

For the Year Ended December 31, 2023

Condition Weighted

Conditions Weighted

RSUs With Service Condition

Weighted Average Grant Date Fair Value Per Share

RSUs With Market and Service Conditions

Weighted Average Grant Date Fair Value Per Share

Total Weighted Average Grant Date Fair Value Per Share

Outstanding at beginning of year:

6 unchanged sentences

RSUs unvested at end of year 684,464 $ 12.52 1,307,728 $ 10.11 1,992,192 $ 10.94

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

For the Year Ended December 31, 2022

Condition Weighted

Conditions Weighted

RSUs With Service Condition

Weighted Average Grant Date Fair Value Per Share

RSUs With Market and Service Conditions

Weighted Average Grant Date Fair Value Per Share

Total Weighted Average Grant Date Fair Value Per Share

Outstanding at beginning of year:

2 unchanged sentences

Settled ( 66,125 ) 29.56 ( 40,268 ) 31.36 ( 106,393 ) 30.24

Cancelled/forfeited ( 21,106 ) 17.63 ( 108,342 ) 22.49 ( 129,448 ) 21.70

Outstanding at end of year 921,308 $ 18.63 1,138,495 $ 15.76 2,059,803 $ 17.04

4 unchanged sentences

(i) a weighted average volatility estimate of approximately 35.55 %, 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 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

the awards, respectively.

and (ii) a weighted average risk-free rate of 3.91 % 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 94,333 awards with a service condition only was estimated based on the closing price of the Company’s common stock at the grant date of $ 10.76 .

4 unchanged sentences

In determining the fair value for 1,517,675 of these awards granted in 2023, 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;

(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 4.12 % 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 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 381,397 RSUs with market and service conditions granted in 2022 are subject to a one-year post-vesting holding requirement.

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.

1 unchanged sentence

(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-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;

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.

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

1 unchanged sentence

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.

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.

Restricted Stock

3 unchanged sentences

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 Equity Plan, and they are paid typically in cash or other consideration at such times and in accordance with such rules, as the Compensation Committee of the Board shall determine in its discretion.

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 awards of approximately $ 463,000 , $ 659,000 , and $ 566,000 during the years ended December 31, 2023, 2022 and 2021, respectively.

Dividend equivalent payments are generally charged to Stockholders’ Equity when common stock dividends are declared to the extent that

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

such equivalents are expected to vest.

The Company made dividend equivalent payments associated with RSU awards of approximately $ 2.4 million, $ 463,000 , and $ 659,000 during the years ended December 31, 2024, 2023 and 2022, respectively.

In addition, no dividend equivalents rights awarded as separate instruments were granted during the years ended December 31, 2024, 2023 and 2022.

4 unchanged sentences

RSUs $ 13,883 $ 15,035 $ 11,338

Restricted shares of common stock — — —

Total $ 13,883 $ 15,035 $ 11,338

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(b) Deferred Compensation Plans

7 unchanged sentences

The Company’s liability for stock units in the Deferred Plans is based on the market price of the Company’s common stock at the measurement date.

The following table presents the Company’s expenses related to its Deferred Plans for the years ended December 31, 2023, 2022 and 2021:

The following table presents the Company’s expenses (reversal) related to its Deferred Plans for the years ended December 31, 2024, 2023 and 2022:

For the Year Ended December 31,

3 unchanged sentences

The Company distributed cash of approximately $ 77,000 , $ 374,000 , and $ 53,000 to the participants of the Deferred Plans during the years ended December 31, 2024, 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 following table presents the aggregate amount of income deferred by participants of the Deferred Plans through December 31, 2024 and 2023 that had not been distributed and the Company’s associated liability for such deferrals at December 31, 2024 and 2023:

December 31, 2024 December 31, 2023

(In Thousands) Undistributed

Liability Under

Deferred Plans Undistributed

Liability Under

Deferred Plans

(In Thousands) Undistributed Income Deferred (1)

Liability Under Deferred Plans

Undistributed Income Deferred (1)

Liability Under Deferred Plans

Non-employee directors $ 2,734 $ 2,561 $ 2,611 $ 2,404

1 unchanged sentence

(1) Represents the cumulative amounts that were deferred by participants through December 31, 2024 and 2023, which had not been distributed through such respective date.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

4 unchanged sentences

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, 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

For the years ended December 31, 2024, 2023 and 2022, the Company recognized expenses for matching contributions of $ 1.4 million, $ 1.3 million and $ 1.3 million, respectively.

Fair Value of Financial Instruments

15 unchanged sentences

however, the Company determined that the market inputs used in valuing its Agency eligible investor loans were sufficiently observable to be classified as Level 2.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Securities, at Fair Value

7 unchanged sentences

Accordingly, these securities are classified as Level 2 in the fair value hierarchy.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Term Notes Backed by MSR Collateral

16 unchanged sentences

Accordingly, the Company’s securitized debt is classified as Level 2 in the fair value hierarchy.

MFA FINANCIAL, INC.

1 unchanged sentence

December 31, 2024

The Company receives prices from pricing services to validate the fair value of the Swaps.

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.

65 unchanged sentences

December 31, 2024

(Dollars in Thousands) Fair Value (1)

Valuation Technique Unobservable Input Weighted Average (2)

Purchased Non-Performing Loans $ 537,528 Discounted cash flow Discount rate 6.8 % 6.2 - 10.2 %

Prepayment rate 9.7 % 0.0 - 38.9 %

Default rate 2.1 % 0.0 - 39.5 %

Loss severity 9.7 % 0.0 - 100.0 %

$ 167,324 Liquidation model Discount rate 8.0 % 8.0 - 8.0 %

Annual change in home prices 4.6 % ( 0.4 )- 12.7 %

Liquidation timeline

(in years) 2.1 0.1 - 4.5

Current value of underlying properties (3)

$ 831 $ 24 -$ 4,720

Total $ 704,852

December 31, 2022

(Dollars in Thousands) Fair Value (1)

Fair Value (1)

Valuation Technique Unobservable Input Weighted Average (2)

Purchased Non-Performing Loans $ 546,675 Discounted cash flow Discount rate 7.0 % 6.3 - 10.0 %

$ 7,070,535 Discounted cash flow Discount rate 7.6 % 6.2 % 20.0 %

Prepayment rate 13.7 % — % 58.3 %

6 unchanged sentences

$ 618 $ 21 $ 8,500

Total $ 795,894

(1) Excludes approximately $ 572,000 and $ 215,000 of loans for which management considers the purchase price continues to reflect the fair value of such loans at December 31, 2023 and 2022, respectively.

(1) Excludes approximately $ 44.9 million of Residential whole loans, at fair value, with a UPB of $ 78.2 million, which were marked-to-market, but not based on a model, at December 31, 2024.

(2) Amounts are weighted based on the fair value of the underlying loan.

(3) The simple average value of the properties underlying residential whole loans held at fair value valued via a liquidation model was approximately $ 494,000 and $ 457,000 as of December 31, 2023 and 2022, respectively.

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

(3) Amounts represent simple average values of the properties underlying residential whole loans held at fair value.

December 31, 2023

(Dollars in Thousands) Fair Value (1)

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 %

$ 7,045,862 Discounted cash flow Discount rate 7.9 % 6.2 % 29.2 %

Prepayment rate 10.1 % — % 46.4 %

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Annual change in home prices 3.7 % ( 0.4 ) % 12.7 %

Liquidation timeline

1.6 0.8 - 3.9

Liquidation timeline (in years)

Current value of underlying properties (3)

Total $ 6,646,651

December 31, 2022

(Dollars in Thousands) Fair Value Valuation Technique Unobservable Input Weighted Average (1)

Purchased Performing Loans $ 4,857,587 Discounted cash flow Discount rate 7.6 % 5.6 - 22.7 %

Prepayment rate 7.9 % 0.0 - 44.8 %

Default rate 0.8 % 0.0 - 19.4 %

Loss severity 7.3 % 0.0 - 100.0 %

$ 22,734 Liquidation model Discount rate 7.8 % 7.8 %- 7.8 %

Annual change in home prices 3.2 % ( 1.0 )%- 10.7 %

Liquidation timeline

$ 531 $ 24 $ 5,500

Current value of underlying properties $ 1,319 $ 50 -$ 2,850

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.

(1) Excludes approximately $ 14.7 million of Residential whole loans, at fair value, with a UPB of $ 15.9 million, which were marked-to-market, but not based on a model at December 31, 2023 and approximately $ 103.7 million of Residential whole loans, at fair value for which the closing of the purchase transaction had not occurred as of that period end.

(2) Amounts are weighted based on the fair value of the underlying loan.

(3) Amounts represent simple average values of the properties underlying residential whole loans held at fair value.

Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in the fair value of residential whole loans.

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The following table presents the carrying values and estimated fair values of the Company’s financial instruments at December 31, 2024 and 2023:

(In Thousands)

December 31, 2024 December 31, 2024 December 31, 2023

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Value Estimated Fair Value

(In Thousands)

Financial Assets:

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Convertible senior notes 2 — — 208,989 209,065

(1) Carrying value of securitized debt, Convertible Senior Notes, and certain repurchase agreements is net of associated debt issuance costs.

8.875 % Senior Notes

2 111,270 115,720 — —

9.00 % Senior Notes

2 72,390 75,218 — —

(1) Carrying value of securitized debt, Convertible Senior Notes, 8.875 % Senior Notes, 9.00 % 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, 2024 and 2023, the Company recorded REO with an aggregate estimated fair value, less estimated cost to sell, of $ 103.7 million and $ 84.7 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.

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 upon acquisition, of which the Company’s 75 % interest was $ 25.7 million.

In the first quarter of 2024, this Commercial REO property’s estimated fair value, less estimated cost to sell, was updated to $ 33.3 million, of which the Company’s 75 % interest was $ 25.0 million.

In the second quarter of 2024, this Commercial REO property’s estimated fair value, less estimated cost to sell, was updated to $ 33.1 million, of which the Company’s 75 % interest was $ 24.8 million.

Further, during the third quarter of 2024, the Company recognized at fair value two properties considered Commercial REO (see Note 5) at $ 28.4 million and $ 40.0 million, of which the Company’s 75 % and 49 % interests were $ 10.3 million and $ 8.2 million (net of related third-party financing), respectively.

The Company classifies fair value measurements of REO as Level 3 in the fair value hierarchy.

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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.

In connection with the Lima One transaction, all of Lima One’s assets and liabilities were recorded at their estimated fair value.

MFA FINANCIAL, INC.

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The Company has entered into several financing transactions that resulted in the Company consolidating as VIEs the SPEs that were created to facilitate these transactions.

See Note 2(p) for a discussion of the accounting policies applied to the consolidation of VIEs and transfers of financial assets in connection with financing transactions.

See Note 2(q) for a discussion of the accounting policies applied to the consolidation of VIEs and transfers of financial assets in connection with financing transactions.

The Company has engaged in loan securitizations primarily for the purpose of obtaining improved overall financing terms as well as non-recourse financing on a portion of its residential whole loan portfolio.

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The Senior Bonds issued by the Company during the years ended December 31, 2024 and 2023 are included in Financing agreements on the Company’s consolidated balance sheets (see Note 6).

During the three months ended June 30, 2024, the Company liquidated one SPE (which had been formed in 2021) and repaid the remaining $ 68.1 million of outstanding Senior Bonds issued by such SPE.

During the three months ended September 30, 2024, the Company redeemed one SPE (which had been formed in 2022) and repaid the remaining $ 176.3 million of outstanding Senior Bonds issued by such SPE.

As of December 31, 2024 and 2023, as a result of the transactions described above, securitized loans of approximately $ 6.9 billion and $ 5.7 billion are included in Residential whole loans and REO with a carrying value of approximately $ 26.9 million and $ 33.3 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

As of December 31, 2024

MFA FINANCIAL, INC.

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December 31, 2024

$ 3.4 billion, respectively.

and 2023, the aggregate carrying value of Senior Bonds issued by consolidated VIEs was $ 5.8 billion and $ 4.8 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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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)

Included on the Company’s consolidated balance sheets as of December 31, 2023 and 2022 are a total of $ 9.0 billion and $ 7.5 billion, respectively, of residential whole loans.

These assets, excluding certain loans originated and held by Lima One, and certain of the Company’s REO assets, are directly owned by certain trusts established by the Company to acquire the loans and entities established in connection with the Company’s loan securitization transactions.

The Company has assessed that these entities are required to be consolidated (see Notes 3 and 5(a)).

The Company also has interests in certain entities which are deemed to be VIEs which hold commercial property (see Note 5).

The Company’s maximum exposure to loss with respect to these entities is their carrying value, which aggregated $ 18.4 million at December 31, 2024.

In addition, as a result of the sale of certain redemption rights in 2022, the SPE’s that held previously securitized Agency eligible investor loans were deconsolidated from the Company’s financial statements, as the Company concluded that it was no longer the primary beneficiary of those SPE’s.

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Accordingly, no significant additional gains or losses were recorded on de-recognition.

Residential Whole Loans and REO (including Residential Whole Loans and REO transferred to consolidated VIEs)

Included on the Company’s consolidated balance sheets as of December 31, 2024 and 2023 are a total of $ 8.8 billion and $ 9.0 billion, respectively, of residential whole loans.

The Company has assessed that these entities are required to be consolidated (see Notes 3 and 5(a)).

Segment Reporting

At December 31, 2024, 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 (see 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 senior notes (see Note 6), securitization issuance costs, and preferred stock dividends.

The Company’s segments are managed by its “chief operating decision maker” or “CODM” as defined under GAAP;

the Company’s CODM is its Chief Executive Officer.

The CODM utilizes the segment reporting as part of their analysis of relative segment performance in deciding where to focus resources to enhance the Company’s future performance.

MFA FINANCIAL, INC.

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The following tables summarize segment financial information, which in total reconciles to the same data for the Company as a whole:

(Dollars in Thousands) Mortgage-Related Assets Lima One Corporate Total

(In Thousands)

Mortgage-Related Assets Lima One Corporate Total

Year Ended December 31, 2024

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Net Interest Income/(Expense) $ 118,904 $ 91,494 $ ( 7,667 ) $ 202,731

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

Reversal/(Provision) for Credit Losses on Residential Whole Loans 3,084 — — 3,084

Reversal/(Provision) for Credit Losses on Other Assets ( 1,135 ) — — ( 1,135 )

Net Interest Income/(Expense) after Reversal/(Provision) for Credit Losses $ 120,853 $ 91,494 $ ( 7,667 ) $ 204,680

Net gain/(loss) on residential whole loans measured at fair value through earnings $ 55,428 $ ( 9,434 ) $ — $ 45,994

Impairment and other net gain/(loss) on securities and other portfolio investments ( 7,976 ) 94 ( 2,987 ) ( 10,869 )

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 )

Net gain/(loss) on real estate owned 4,876 ( 1,740 ) — 3,136

Net gain/(loss) on derivatives used for risk management purposes 58,238 20,265 — 78,503

Net gain/(loss) on securitized debt measured at fair value through earnings ( 39,238 ) ( 25,575 ) — ( 64,813 )

Lima One mortgage banking income — 32,944 — 32,944

Net realized gain/(loss) on residential whole loans held at carrying value 418 — — 418

Other, net 1,326 ( 2,997 ) 1,786 115

Total Other Income/(Loss), net $ 27,423 $ 36,452 $ ( 761 ) $ 63,114

Other Income/(Loss), net $ 73,072 $ 13,557 $ ( 1,201 ) $ 85,428

Compensation and benefits $ — $ 42,885 $ 44,769 $ 87,654

General and administrative expenses 214 17,537 26,396 44,147

Other general and administrative expense 190 19,977 24,087 44,254

Loan servicing, financing and other related costs 18,873 2,857 13,576 35,306

Amortization of intangible assets — 3,200 — 3,200

Income/(loss) before income taxes $ 174,862 $ 36,132 $ ( 91,300 ) $ 119,694

Provision for/(benefit from) income taxes $ — $ — $ 443 $ 443

Net Income/(Loss) $ 174,862 $ 36,132 $ ( 91,743 ) $ 119,251

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Net Interest Income/(Expense) $ 121,151 $ 58,238 $ ( 2,910 ) $ 176,479

Reversal of Provision/(Provision) for Credit Losses on Residential Whole Loans $ 2,842 $ ( 196 ) $ — $ 2,646

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

Reversal/(Provision) for Credit Losses on Residential Whole Loans $ 8,539 $ 314 $ — $ 8,853

Reversal/(Provision) for Credit Losses on Other Assets — — — —

Net Interest Income/(Expense) after Reversal/(Provision) for Credit Losses $ 129,690 $ 58,552 $ ( 2,910 ) $ 185,332

Net gain/(loss) on residential whole loans measured at fair value through earnings $ 69,486 $ 20,364 $ — $ 89,850

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

Impairment and other net gain/(loss) on securities and other portfolio investments 8,073 — ( 1,848 ) 6,225

Net gain/(loss) on real estate owned 9,274 118 — 9,392

Net gain/(loss) on derivatives used for risk management purposes 839 2,922 — 3,761

Net gain on securitized debt measured at fair value through earnings 231,176 59,463 — 290,639

Lima One - origination, servicing and other fee income — 46,745 — 46,745

Net gain/(loss) on securitized debt measured at fair value through earnings ( 66,969 ) ( 32,620 ) — ( 99,589 )

Lima One mortgage banking income — 43,384 — 43,384

Net realized gain/(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 $ ( 254,407 ) $ 7,260 $ ( 18,117 ) $ ( 265,264 )

Other Income/(Loss), net $ 27,423 $ 36,452 $ ( 761 ) $ 63,114

Compensation and benefits $ — $ 44,827 $ 40,972 $ 85,799

General and administrative expenses — 13,944 21,194 35,138

Other general and administrative expense 214 17,537 26,118 43,869

Loan servicing, financing and other related costs 20,100 1,515 12,521 34,136

Amortization of intangible assets — 4,200 — 4,200

Income/(loss) before income taxes $ 136,799 $ 26,925 $ ( 83,282 ) $ 80,442

Provision for/(benefit from) income taxes $ — $ — $ 278 $ 278

Net Income/(Loss) $ 136,799 $ 26,925 $ ( 83,560 ) $ 80,164

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Reversal of Provision/(Provision) for Credit Losses on Residential Whole Loans 2,842 ( 196 ) — 2,646

Provision for Credit Losses on Other Assets

— — ( 28,579 ) ( 28,579 )

Net Interest Income/(Expense) after Reversal of Provision/(Provision) for Credit Losses $ 191,628 $ 45,830 $ ( 39,815 ) $ 197,643

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Net gain on securitized debt measured at fair value through earnings 231,176 59,463 — 290,639

Lima One - origination, servicing and other fee income — 22,600 — 22,600

Lima One mortgage banking income

— 46,745 — 46,745

Other, net 4,282 537 3,804 8,623

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Amortization of intangible assets — 9,200 — 9,200

Income/(loss) before income taxes $ ( 88,163 ) $ ( 10,402 ) $ ( 133,867 ) $ ( 232,432 )

Provision for/(benefit from) income taxes — 13 ( 864 ) ( 851 )

Net Income/(Loss)

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Lima One Segment

On July 1, 2021, the Company completed the acquisition from affiliates of Magnetar Capital of their ownership interests in Lima One Holdings, LLC, the parent company of Lima One Capital, LLC (collectively, “Lima One”), a leading originator and servicer of business purpose loans.

In connection with this transaction, the Company also acquired from certain members of management of Lima One their ownership interests in Lima One Holdings, LLC.

With the completion of these transactions (collectively, “the transaction”), the Company acquired the remaining approximately 57 % of the common equity interests of Lima One that it did not previously own, for cash consideration of $ 57.3 million and $ 4.7 million of restricted stock unit awards issued to certain members of the Lima One management team.

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 was accounted for under the purchase method of accounting.

Under purchase accounting, the purchase

MFA FINANCIAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

consideration to acquire Lima One is defined as the cash paid to acquire the approximately 57 % of the common equity interests not previously owned and the estimated fair value of the previously owned approximately 43 % common equity interest.

Further, under purchase accounting, the Company was required to revalue the previously owned common equity interest to fair value.

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/(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.

The restricted stock awards issued are not included in the purchase consideration as it was determined that they should be accounted for as compensation expense for post-combination services.

Additionally, concurrent with the closing of the transaction, the Company injected additional capital that facilitated the repayment by Lima One of $ 47.4 million of outstanding preferred equity interests, of which $ 22.0 million were held by the Company prior to closing.

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/(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.

The Company performed an allocation of the purchase consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on their estimated fair values using the information available at the acquisition date.

The excess of the purchase consideration over the net assets acquired of $ 61.1 million was allocated to goodwill.

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 (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.

Associated financing economics are equal to the results of direct financings of Lima One-related residential whole loans and REO plus allocations of the results of financings which include Lima One related residential whole loans and REO as part of their collateral, based on the relative carrying values of the financed assets.

Associated hedging economics are equal to allocations of the Company’s overall hedging results based on the relative estimated duration of each asset class hedged and the relative fair values of assets within each asset class.

Mortgage-Related Assets Segment

This segment is comprised of the remainder of the Company’s investments (including any related taxes and the economics of associated financing and hedging instruments).

Associated hedging economics are equal to allocations of the

MFA FINANCIAL, INC.

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December 31, 2024

Subsequent Events

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 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.

Company’s overall hedging results based on the relative estimated duration of each asset class hedged and the relative fair values of assets within each asset class.

Mortgage-Related Assets Segment

This segment is comprised of the remainder of the Company’s investments (including any related taxes and the economics of associated financing and hedging instruments).

Schedule IV - Mortgage Loans on Real Estate

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(1) Excludes an allowance for loan losses of $ 10.7 million at December 31, 2024.

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 $ 3.3 billion.

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Additions during period:

Purchases $ 2,986,617

Purchases and originations

Premium amortization/discount accretion, net 2,250

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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