MFA Financial Inc ((MFA)) has held its Q3 earnings call. Read on for the main highlights of the call.
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MFA Financial’s recent earnings call painted a mixed picture, highlighting both strategic progress and ongoing challenges. The company showcased advancements in capital deployment, expense reduction, and growth at Lima One, yet faced hurdles such as a decline in distributable earnings and credit losses. While efforts to enhance return on equity (ROE) and earnings are underway, the immediate financial impact remains tempered by these challenges.
Total Economic Return
MFA Financial reported a total economic return of 2.6% for the third quarter of 2025. This return reflects the company’s ability to generate value for shareholders despite the challenging economic environment.
Capital Deployment and Liquidity Strategy
The company expressed increased confidence in deploying excess liquidity into target asset classes, notably Agency MBS. Plans are in place to invest $100 million of excess cash into higher ROE assets, signaling a strategic move to enhance future earnings.
Lima One Origination Growth
Lima One, a subsidiary of MFA Financial, originated $260 million in business purpose loans during the quarter, marking a 20% increase from the previous quarter. This growth underscores Lima One’s expanding footprint and contribution to the company’s overall performance.
Expense Reduction Initiatives
MFA Financial achieved an 11% reduction in general and administrative expenses year-to-date compared to the previous year. The company continues to target further reductions in run-rate G&A expenses by 7% to 10%, demonstrating a commitment to operational efficiency.
Nonperforming Loan Resolution
The company made significant strides in resolving nonperforming loans, reducing delinquent loans from $86 million to $47 million in 2025. Additionally, the multifamily transitional loan portfolio has been halved compared to the previous year, indicating effective risk management.
Decline in Distributable Earnings
Distributable earnings for the third quarter were approximately $21 million, or $0.20 per share, down from $0.24 per share in the second quarter. This decline was primarily due to credit losses on the loan portfolio, highlighting ongoing challenges in maintaining earnings levels.
Nonrecurring Income Impact
Net interest income experienced a modest decline due to the nonrecurring acceleration of discount accretion from the redemption of MSR-related assets in the previous quarter. This factor contributed to the pressure on overall earnings.
Pressure on Distributable Earnings
MFA Financial anticipates continued pressure on distributable earnings in the near term, driven by ongoing credit losses and the gap between distributable earnings and common dividend levels.
Forward-Looking Guidance
Looking ahead, MFA Financial plans to enhance earnings and ROE through increased capital deployment, expense reductions, and resolving nonperforming loans. The company aims to resume multifamily lending in early 2026, having paused it to refine underwriting guidelines. Additionally, the company repurchased approximately 500,000 shares of common stock at a 27% discount to economic book value, reflecting confidence in its valuation.
In conclusion, MFA Financial’s earnings call highlighted a balanced narrative of strategic progress and financial challenges. While the company is making strides in capital deployment and expense management, it continues to grapple with credit losses impacting distributable earnings. Investors will be keenly watching the company’s efforts to enhance ROE and navigate the current economic landscape.