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What changed in MFA FINANCIAL, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MFA FINANCIAL, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+306 added−317 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-20)

Top changes in MFA FINANCIAL, INC.'s 2025 10-K

306 paragraphs added · 317 removed · 256 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAt December 31, 2024, our total investment-related assets were comprised of the following: $8.8 billion, or approximately 83%, of residential whole loans (compared to $9.0 billion, or 90%, at December 31, 2023); $1.5 billion, or 14%, of residential mortgage securities (compared to $746.1 million, or 7%, at December 31, 2023); and $299.5 million, or 3%, of remaining 5 Table of Contents investment-related assets, comprised primarily of REO, capital contributions made to loan origination partners, other interest-earning assets, and loan-related receivables (compared to $327.1 million, or 3% at December 31, 2023).
Biggest changeAt December 31, 2025, our total investment-related assets were comprised of the following: $8.8 billion, or approximately 71%, of residential whole loans (compared to $8.8 billion, or 83%, at December 31, 2024); $3.4 billion, or 27%, of residential mortgage securities (compared to $1.5 billion, or 14%, at December 31, 2024); and $301.2 million, or 2%, of remaining investment-related assets, comprised primarily of REO, capital contributions made to loan origination partners, other interest-earning assets, and loan-related receivables (compared to $299.5 million, or 3% at December 31, 2024). 5 Table of Contents Residential Whole Loans During 2025, we continued to acquire or originate residential whole loans, with the majority of our additions being Non-QM loans.
As a result, we are unable to fully predict at this time how the Dodd-Frank Act, as well as other laws or regulations that may be adopted in the future, will affect our business, results of operations and financial condition, or the environment for repurchase financing and other forms of borrowing, the investing environment for Agency MBS, Non-Agency MBS and/or residential mortgage loans, the securitization industry, interest rate swap agreements (or Swaps) and other derivatives.
As a result, we are unable to fully predict at this time how the Dodd-Frank Act, as well as other laws or regulations that may be adopted in the future, will affect our business, results of operations and financial condition, or the environment for repurchase financing and other forms of borrowing, the investing environment for Agency MBS, Non-Agency MBS and/or residential mortgage loans, the securitization industry, interest rate swap agreements and ERIS swap futures (collectively, “Swaps”) and other derivatives.
Congress may continue to consider legislation that would significantly reform the country’s mortgage finance system, including, among other things, eliminating Freddie Mac and Fannie Mae and replacing them with a single new MBS insurance agency.
Congress and the current presidential administration may continue to consider legislation that would significantly reform the country’s mortgage finance system, including, among other things, eliminating Freddie Mac and Fannie Mae and replacing them with a single new MBS insurance agency.
The existence of these entities, as well as the possibility of additional entities forming in the future, may increase the competition for the acquisition of residential mortgage assets, resulting in higher prices and lower yields on such assets. 6 Table of Contents EMPLOYEES/HUMAN CAPITAL MANAGEMENT At December 31, 2024, we had approximately 348 employees, including 285 employees working in our Lima One subsidiary.
The existence of these entities, as well as the possibility of additional entities forming in the future, may increase the competition for the acquisition of residential mortgage assets, resulting in higher prices and lower yields on such assets. 6 Table of Contents EMPLOYEES/HUMAN CAPITAL MANAGEMENT At December 31, 2025, we had 307 employees, including 250 employees working in our Lima One subsidiary.
At the end of 2024, residential whole loan investments comprised approximately 77% of our assets and 62% of our allocated net equity. During 2025, assuming economic conditions continue to support markets for residential mortgage assets, we expect to continue pursuing investment opportunities primarily focused on residential whole loans as market opportunities arise.
At the end of 2025, residential whole loan investments comprised approximately 68% of our assets and 59% of our allocated net equity. During 2026, assuming economic conditions continue to support markets for residential mortgage assets, we expect to continue pursuing investment opportunities, focused primarily on residential whole loans and Agency MBS as market opportunities arise.
We also own real estate (or REO), which is typically acquired as a result of the foreclosure or other liquidation of delinquent whole loans in connection with our loan investment activities. • Residential mortgage securities, including Agency MBS, Non-Agency MBS, CRT securities and MSR-related assets, which include term notes backed directly or indirectly by MSRs.
We also own real estate (or REO), which is typically acquired as a result of the foreclosure or other liquidation of delinquent whole loans in connection with our loan investment activities. • Residential mortgage securities, including Agency MBS, Non-Agency MBS and CRT securities.
During 2024 we acquired approximately $2.6 billion of residential whole loans. This includes $1.5 billion of loans originated by our wholly-owned subsidiary, Lima One, which has funded more than $6.4 billion of loans since July 2021, when we fully acquired Lima One.
During 2025, we acquired approximately $2.7 billion of residential whole loans. This includes $0.9 billion of loans originated by our wholly-owned subsidiary, Lima One, which has funded more than $7.3 billion of loans since July 2021, when we fully acquired Lima One.
Many details remain unsettled, including the scope and costs of the agencies’ guarantee and their affordable housing mission, some of which could be addressed even in the absence of large-scale reform.
Many details remain unsettled, including the scope and costs of the agencies’ guarantee and their affordable housing mission, some of which could be addressed even in the absence of large-scale reform. On January 2, 2025, the FHFA and the U.S. Treasury Department agreed to again amend the PSPAs between the U.S.
Securities, at Fair Value We invest in residential mortgage securities, including Agency MBS, Non-Agency MBS, CRT securities and MSR-related assets, which include term notes backed directly or indirectly by MSRs. During 2024, we opportunistically added $0.9 billion of Agency MBS. Going forward, we may continue to invest selectively in a range of residential mortgage securities as market opportunities arise.
Securities, at Fair Value We invest in residential mortgage securities, primarily Agency MBS, as well as Non-Agency MBS and CRT securities. During 2025, we opportunistically added $2.1 billion of Agency MBS. Going forward, we may continue to invest selectively in a range of residential mortgage securities as market opportunities arise.
We also own REO property as a result of managing the resolution of non-performing loans. The volume of REO properties increased during the year, as a result of higher resolutions of non-performing loans via foreclosure in 2024.
We also own REO property as a result of managing the resolution of non-performing loans. The aggregate value of REO properties fluctuates based on the timing of resolutions of non-performing loans, valuation adjustments, and ultimate sales or disposal of properties.
Presidential administration; and the potential for recession. We sought to address these challenges by continuing to prioritize liquidity, prudently hedging our exposure to interest rates, and using loan securitizations to replace floating rate recourse mark-to-market financing with fixed rate non-recourse, non-mark-to-market financing. We were incorporated in Maryland on July 24, 1997 and began operations on April 10, 1998.
While market conditions have improved and recession risks have moderated, we have maintained our emphasis on preserving sufficient liquidity, prudently managing our interest rate exposure, and using loan securitizations to minimize our exposure to margin risk. We were incorporated in Maryland on July 24, 1997 and began operations on April 10, 1998.
Removed
We are an internally-managed real estate investment trust (or REIT). 2024 was a volatile year with mixed results for fixed income products, including the residential mortgage assets that we invest in and finance.
Added
We are an internally-managed real estate investment trust (or REIT). 2025 delivered strong fixed income returns as markets benefited from a shift in monetary policy and continued macroeconomic resilience. Credit spreads tightened and the yield curve steepened over the year, with yields on two-year Treasuries declining by 78 basis points while ten-year Treasuries declined by 43 basis points.
Removed
Investors continued to adjust to volatile conditions resulting from a number of macroeconomic challenges, including: monetary policy; the Federal Reserve’s first interest rate cut in four years, and the ongoing uncertainty as to the timing and extent of future rate cuts in light of ongoing inflationary challenges and generally resilient macroeconomic data; geopolitical uncertainty both in the U.S. and abroad; uncertainly with respect to U.S. policy in light of the new U.S.
Added
The Bloomberg US Aggregate Index returned 7.3% for the year, marking its strongest annual performance in five years. We capitalized on these constructive market conditions by accelerating the pace of capital deployment, benefiting from increased price stability and a favorable lending environment.
Removed
Residential Whole Loans During 2024, we continued to acquire or originate residential whole loans, with the majority of our additions for the year originated by Lima One.
Added
Treasury Department and each of the GSEs to establish a methodical process for eventual public input on the termination of conservatorship to minimize disruption to the housing and financial markets.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+12 added−14 removed393 unchanged
Biggest changeShould a Swap counterparty be unable to make required payments pursuant to such Swap, the hedged liability would cease to be hedged for the remaining term of the Swap. In addition, we may be at risk for any collateral held by a hedging counterparty to a Swap, should such counterparty become insolvent or file for bankruptcy.
Biggest changeIn addition, we may be at risk for any collateral held by a hedging counterparty to a Swap, should such counterparty become insolvent or file for bankruptcy. Our hedging transactions, which are intended to limit losses, may actually adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.
Interest rates and conditional prepayment rates (or CPRs) (which are a measure the amount of unscheduled principal prepayment on a loan or security) vary according to the type of investment, conditions in the financial markets, fiscal and monetary policies and domestic and international economic and political conditions, competition and other factors, none of which can be predicted with any certainty or is within our control.
Interest rates and conditional prepayment rates (or CPRs) (which are a measure of the amount of unscheduled principal prepayment on a loan or security) vary according to the type of investment, conditions in the financial markets, fiscal and monetary policies and domestic and international economic and political conditions, competition and other factors, none of which can be predicted with any certainty or is within our control.
Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those in which we have historically invested. These changes could materially adversely affect our 10 Table of Contents financial condition, results of operations, the market price of our common stock or our ability to pay dividends or make distributions.
Furthermore, a change in our asset allocation could result in our making investments in asset 10 Table of Contents categories different from those in which we have historically invested. These changes could materially adversely affect our financial condition, results of operations, the market price of our common stock or our ability to pay dividends or make distributions.
Because certain natural disasters are not typically covered by the standard hazard insurance policies maintained by borrowers (such as hurricanes, earthquakes or certain flooding), or the proceeds payable for losses covered by any such policy are not sufficient to make the related repairs, the affected 11 Table of Contents borrowers may be required to pay for any repairs themselves.
Because certain natural disasters are not typically covered by the standard hazard insurance policies maintained by borrowers (such as hurricanes, earthquakes or certain 11 Table of Contents flooding), or the proceeds payable for losses covered by any such policy are not sufficient to make the related repairs, the affected borrowers may be required to pay for any repairs themselves.
If our residential mortgage investments were liquidated at prices below our amortized cost (i.e., the cost basis) of such assets, we would incur losses, which could materially adversely affect our earnings. • A decline in the market value of our assets may result in margin calls that may force us to sell assets under adverse market conditions, which may materially adversely affect our liquidity and profitability.
If our residential mortgage investments were liquidated at prices below our amortized cost basis (i.e., the cost basis) of such assets, we would incur losses, which could materially adversely affect our earnings. • A decline in the market value of our assets may result in margin calls that may force us to sell assets under adverse market conditions, which may materially adversely affect our liquidity and profitability.
Forced sales, particularly under adverse market conditions, may result in lower sales prices than ordinary market sales made in the normal course of business. If our residential mortgage investments were liquidated at prices below our amortized cost (i.e., the cost basis) of such assets, we would incur losses, which could adversely affect our earnings.
Forced sales, particularly under adverse market conditions, may result in lower sales prices than ordinary market sales made in the normal course of business. If our residential mortgage investments were liquidated at prices below our amortized cost basis (i.e., the cost basis) of such assets, we would incur losses, which could adversely affect our earnings.
If required, there can be no assurance that we will be able to obtain the requisite licenses in a timely manner or at all, or other necessary jurisdictions, which could limit our ability to invest in residential mortgage loans.
If required, there can be no assurance that we will be able to obtain the requisite licenses in a timely manner or at all, or in other necessary jurisdictions, which could limit our ability to invest in residential mortgage loans.
Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends and the reduced corporate tax rate could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the 31 Table of Contents stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.
Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends and the reduced corporate tax rate could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments 31 Table of Contents in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.
Credit and Other Risks Related to Our Investments • Our investments in residential mortgage (including BPLs), residential mortgage securities, commercial mortgage loans and other assets involve credit risk, which could materially adversely affect our results of operations. • We may change our investment strategy, operating policies and/or asset allocations without stockholder consent, which could materially adversely affect our results of operations. • Our investments are subject to changes in credit spreads and other risks. • A significant portion of our residential whole loans and residential mortgage securities are secured by properties in a small number of geographic areas and may be disproportionately affected by adverse climate changes or other adverse events specific to those markets. • We are subject to counterparty risk and may be unable to seek indemnity or require counterparties to repurchase residential whole loans if they breach representations and warranties. • The due diligence we undertake on potential investments may be limited and/or not reveal all of the risks associated with such investments and may not reveal other weaknesses in such assets. • We have experienced and may experience in the future increased volatility in our U.S. generally accepted accounting principles (or GAAP) results of operations. • We have experienced, and may in the future experience, declines in the market value of certain of our investments securities resulting in our recording impairments and other losses. • The use of models in connection with the valuation of our assets subjects us to potential risks in the event that such models are incorrect, misleading or based on incomplete information. • Valuations of some of our assets are subject to inherent uncertainty, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed. • Our investments in residential whole loans are difficult to value and are dependent upon the borrower’s ability to service or refinance their debt. • We may be adversely affected by risks affecting borrowers or the asset or property types in which our investments may be concentrated, as well as from unfavorable changes in the related geographic regions. • Our investments in residential whole loans subject us to servicing-related risks, including foreclosure and liquidation. • The expanding body of federal, state and local regulations and investigations of originators and servicers may increase costs of compliance and the risks of noncompliance. • Our ability to sell REO on terms acceptable to us or at all may be limited. • Our investments in MSR-related assets expose us to additional risks. • Our ownership of Lima One and our investments in mortgage loan originators expose us to additional risks. 8 Table of Contents Prepayment and Reinvestment Risk • Prepayment rates on the mortgage loans underlying certain of our residential mortgage assets may materially adversely affect our profitability or could require us to sell assets in unfavorable market conditions.
Credit and Other Risks Related to Our Investments • Our investments in residential mortgage loans (including BPLs), residential mortgage securities, commercial mortgage loans and other assets involve credit risk, which could materially adversely affect our results of operations. • We may change our investment strategy, operating policies and/or asset allocations without stockholder consent, which could materially adversely affect our results of operations. • Our investments are subject to changes in credit spreads and other risks. • A significant portion of our residential whole loans and residential mortgage securities are secured by properties in a small number of geographic areas and may be disproportionately affected by adverse climate changes or other adverse events specific to those markets. • We are subject to counterparty risk and may be unable to seek indemnity or require counterparties to repurchase residential whole loans if they breach representations and warranties. • The due diligence we undertake on potential investments may be limited and/or not reveal all of the risks associated with such investments and may not reveal other weaknesses in such assets. • We have experienced and may experience in the future increased volatility in our U.S. generally accepted accounting principles (or GAAP) results of operations. • We have experienced, and may in the future experience, declines in the market value of certain of our investment securities resulting in our recording impairments and other losses. • The use of models in connection with the valuation of our assets subjects us to potential risks in the event that such models are incorrect, misleading or based on incomplete information. • Valuations of some of our assets are subject to inherent uncertainty, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed. • Our investments in residential whole loans are difficult to value and are dependent upon the borrower’s ability to service or refinance their debt. • We may be adversely affected by risks affecting borrowers or the asset or property types in which our investments may be concentrated, as well as from unfavorable changes in the related geographic regions. • Our investments in residential whole loans subject us to servicing-related risks, including foreclosure and liquidation. • The expanding body of federal, state and local regulations and investigations of originators and servicers may increase costs of compliance and the risks of noncompliance. • Our ability to sell REO on terms acceptable to us or at all may be limited. • Our ownership of Lima One and our investments in mortgage loan originators expose us to additional risks. 8 Table of Contents Prepayment and Reinvestment Risk • Prepayment rates on the mortgage loans underlying certain of our residential mortgage assets may materially adversely affect our profitability or could require us to sell assets in unfavorable market conditions.
Conversely, if we purchase residential mortgage assets at a discount to par value, and borrowers then prepay the underlying mortgage loans at a slower rate than we expect, the decreased prepayments would result in a lower yield than expected on the asset and/or may result in a decline in the fair value of the asset, which would result in losses if the asset is accounted for at fair value or impairment for an AFS security if the fair value of the security is less than its amortized cost.
Conversely, if we purchase residential mortgage assets at a discount to par value, and borrowers then prepay the underlying mortgage loans at a slower rate than we expect, the decreased prepayments would result in a lower yield than expected on the asset and/or may result in a decline in the fair value of the asset, which would result in losses if the asset is accounted for at fair value or impairment for an AFS security if the fair value of the security is less than its amortized cost basis.
In addition, without our having elected to be subject to Subtitle 8, our charter and bylaws already (1) provide for a classified board, (2) require the affirmative vote of the holders of at least 80% of the votes entitled to be cast in the election of directors for the removal of any director from our Board, which removal will be allowed only for cause and (3) vest in our Board the exclusive power to fix the number of directorships.
Without our having elected to be subject to Subtitle 8, our charter and bylaws already (1) provide for a classified board, (2) require the affirmative vote of the holders of at least 80% of the votes entitled to be cast in the election of directors for the removal of any director from our Board, which removal will be allowed only for cause and (3) vest in our Board the exclusive power to fix the number of directorships.
A decline in the market value of our residential mortgage securities that are accounted for as available-for-sale (or AFS) may require us to recognize impairment against such assets under GAAP. When the fair value of an AFS security is less than its amortized cost at the balance sheet date, the security is considered impaired.
A decline in the market value of our residential mortgage securities that are accounted for as available-for-sale (or AFS) may require us to recognize impairment against such assets under GAAP. When the fair value of an AFS security is less than its amortized cost basis at the balance sheet date, the security is considered impaired.
If we intend to sell an impaired security, or it is more likely than not that we will be required to sell the impaired security before any anticipated recovery, then we must recognize charges to earnings equal to the entire difference between the investment’s amortized cost and its fair value at the balance sheet date.
If we intend to sell an impaired security, or it is more likely than not that we will be required to sell the impaired security before any anticipated recovery, then we must recognize charges to earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.
We operate in a highly regulated industry and continually changing U.S. federal, state and local laws and regulation could materially adversely affect our business, financial condition and results of operations and our ability to pay dividends to our stockholders. Our business is subject to extensive regulation by federal and state governmental authorities, self-regulatory organizations and securities exchanges.
We operate in a highly regulated industry and continually changing U.S. federal, state and local laws and regulations could materially adversely affect our business, financial condition and results of operations and our ability to pay dividends to our stockholders. Our business is subject to extensive regulation by federal and state governmental authorities, self-regulatory organizations and securities exchanges.
For taxable years beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations.
Non-corporate taxpayers may deduct up to 25% (20% for taxable years beginning before January 1, 2026) of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations.
There can be no assurance, however, that the laws and regulations governing the Investment Company Act status of REITs, or guidance from the SEC or its staff regarding the exemption from registration as an investment company on which we rely, will not change in a manner that adversely affects our operations.
There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, or guidance from the SEC or its staff regarding the exemption from registration as an investment company on which we rely, will not change in a manner that adversely affects our operations.
For example, effective March 1, 2021, the General QM Final Rule provided certain changes to the definition of general qualified mortgage loans and the Seasoned QM Final Rule creates a new category of a qualified mortgage, referred to as a “Seasoned QM” loan is eligible to become a Seasoned QM if it is a first-lien, fixed rate loan that meets certain performance requirements over a seasoning period of 36 months, is held in portfolio until the end of the seasoning period by the originating creditor or first purchaser, complies with general restrictions on product features and points and fees, and meets certain underwriting requirements.
For example, effective March 1, 2021, the General QM Final Rule provided certain changes to the definition of general qualified mortgage loans and the Seasoned QM Final Rule creates a new category of a qualified mortgage, referred to as a “Seasoned QM.” A loan is eligible to become a Seasoned QM if it is a first-lien, fixed rate loan that meets certain performance requirements over a seasoning period of 36 months, is held in portfolio until the end of the seasoning period by the originating creditor or first purchaser, complies with general restrictions on product features and points and fees, and meets certain underwriting requirements.
In the past, we have experienced unauthorized access to certain data and information. Our cybersecurity systems and processes that are intended to protect this type of data and information; however, they may not be effective in preventing unauthorized access in the future.
In the past, we have experienced unauthorized access to certain data and information. Our cybersecurity systems and processes are intended to protect this type of data and information; however, they may not be effective in preventing unauthorized access in the future.
Other Business Risks • We are dependent on our executive officers and other key personnel for our success. • We operate in a highly competitive market for investment opportunities. 9 Table of Contents Risks Related to Our Business and Industry General economic developments and trends and the performance of the housing, real estate, mortgage finance, broader financial markets and other factors that are out of our control may adversely affect our business operations.
Other Business Risks • We are dependent on our executive officers and other key personnel for our success. • We operate in a highly competitive market for investment opportunities. • Litigation may adversely affect our business and financial results. 9 Table of Contents Risks Related to Our Business and Industry General economic developments and trends and the performance of the housing, real estate, mortgage finance, broader financial markets and other factors that are out of our control may adversely affect our business operations.
Therefore, a period of high interest rates and flattening or inverted yield curves, such as the conditions experienced during the past few years, which may continue in 2025, presents challenges on our ability to effectively manage the risks associated with our business operations, including interest rate, prepayment, financing, liquidity and credit risks, while maintaining our qualification as a REIT.
Therefore, a period of high interest rates and flattening or inverted yield curves, such as the conditions experienced during the past few years, which may continue in 2026, presents challenges on our ability to effectively manage the risks associated with our business operations, including interest rate, prepayment, financing, liquidity and credit risks, while maintaining our qualification as a REIT.
We expect that our subsidiaries that invest in residential mortgage loans (whether through a consolidated trust or otherwise) will rely upon the exemption from registration as an investment company under the Investment Company Act pursuant to Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally requires that at least 55% of each of these subsidiaries’ assets be comprised of qualifying real estate assets and at least 80% of each of their portfolios be comprised of qualifying real estate assets and real estate-related assets under the Investment Company Act.
We expect that our subsidiaries that invest in residential mortgage loans (whether through a consolidated trust or otherwise) will rely upon the exemption from registration as an investment company under the Investment Company Act pursuant to Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally requires that at least 55% of each of these subsidiaries’ assets be comprised of qualifying real estate assets and at least 80% of each of their portfolios be 24 Table of Contents comprised of qualifying real estate assets and real estate-related assets under the Investment Company Act.
For example, if we are to qualify as a REIT, annually at least 75% of our gross income must come from, among other sources, interest on obligations secured by mortgages on real property or interests in real property, gain from the disposition of real property, including mortgages or interests in real property (other than sales or dispositions of real property, including mortgages on real property, or securities that are treated as mortgages on real property, that we hold primarily for sale to customers in the ordinary course of a trade or business (i.e., prohibited transactions)), dividends or other distributions on, and gains from the disposition of shares in other REITs, commitment fees received for agreements to make real estate loans and certain temporary investment income.
For example, if we are to qualify as a REIT, annually at least 75% of our gross income must come from, among other sources, interest on obligations secured by mortgages on real property or interests 26 Table of Contents in real property, gain from the disposition of real property, including mortgages or interests in real property (other than sales or dispositions of real property, including mortgages on real property, or securities that are treated as mortgages on real property, that we hold primarily for sale to customers in the ordinary course of a trade or business (i.e., prohibited transactions)), dividends or other distributions on, and gains from the disposition of shares in other REITs, commitment fees received for agreements to make real estate loans and certain temporary investment income.
In addition, in the case of mortgage loans secured by rental properties, if tenants who rent their residence from a business purpose loan borrower are unable to make rental payments, are unwilling to make rental payments, or a waiver of the requirement to make rental payments on a timely basis, or at all, is available under the terms of any applicable forbearance or waiver agreement or program (which rental payment forbearance or waiver program may be available as a result of a government-sponsored or government-imposed program or under any such agreement or program a landlord may otherwise offer to tenants), then the value of Business purpose loans we own will likely be impaired, potentially materially.
In addition, in the case of mortgage loans secured by rental properties, if tenants who rent their residence from a business purpose loan borrower are unable to make rental payments, are unwilling to make rental payments, or a waiver of the requirement to make rental payments on a timely basis, or at all, is available under the terms of any applicable forbearance or waiver agreement or program (which rental payment forbearance or waiver program may be available as a result of a government-sponsored or government-imposed program or under any such agreement or program a landlord may otherwise offer to tenants), then the value of 15 Table of Contents Business purpose loans we own will likely be impaired, potentially materially.
Accordingly, defaults in the payment of principal and/or interest on our residential whole loans, residential mortgage securities, MSR-related assets, commercial mortgage bridge loans and other investment assets of less-than-high credit quality could result in our incurring losses of income from, and/or losses in market value relating to, these assets, which could materially adversely affect our results of operations.
Accordingly, defaults in the payment of principal and/or interest on our residential whole loans, residential mortgage securities, commercial mortgage bridge loans and other investment assets of less-than-high credit quality could result in our incurring losses of income from, and/or losses in market value relating to, these assets, which could materially adversely affect our results of operations.
We expect that our investment portfolio in residential whole loans will continue to be our primary asset class in 2025. As an investor in residential whole loans, we are subject to the risk that the underlying borrowers may default or have defaulted on their obligations to make full and timely payments of principal and interest.
We expect that our investment portfolio in residential whole loans will continue to be our primary asset class in 2026. As an investor in residential whole loans, we are subject to the risk that the underlying borrowers may default or have defaulted on their obligations to make full and timely payments of principal and interest.
While the Federal Reserve made three rate cuts in 2024, there is uncertainty as to the timing and extent of future rate cuts in light of ongoing inflationary challenges and generally resilient macroeconomic data. As the Federal Reserve lifts its federal funds target rate, the margin between short and long-term rates could further compress.
While the Federal Reserve made three rate cuts in each of 2024 and 2025, there is uncertainty as to the timing and extent of future rate cuts in light of ongoing inflationary challenges and generally resilient macroeconomic data. As the Federal Reserve lifts its federal funds target rate, the margin between short and long-term rates could further compress.
In lieu of obtaining such licenses, we contribute our acquired residential mortgage loans to one or more trusts in which we or our subsidiaries hold beneficial interests; title to these residential mortgage loans is held by one or more federally-charted banks as trustee, which may be exempt from state licensing requirements.
In lieu of obtaining such licenses, we contribute our acquired residential mortgage loans to one or more trusts in which we or our subsidiaries hold beneficial interests; title to these residential mortgage loans is held by one or more federally chartered banks as trustee, which may be exempt from state licensing requirements.
Such an action could reduce interest income, interest expense and net income, the extent of which would be dependent on the level of reduction in assets and liabilities as well as the sale prices for which the assets were sold. • If a counterparty to our repurchase transactions defaults on its obligation to resell the underlying security back to us at the end of the transaction term or if we default on our obligations under the repurchase agreement, we could incur losses.
Such an action could reduce interest income, interest expense and net income, the extent of 17 Table of Contents which would be dependent on the level of reduction in assets and liabilities as well as the sale prices for which the assets were sold. • If a counterparty to our repurchase transactions defaults on its obligation to resell the underlying security back to us at the end of the transaction term or if we default on our obligations under the repurchase agreement, we could incur losses.
Mortgage servicers may be incented by the federal government to pursue such loan modifications, as well as forbearance plans and other actions intended to prevent foreclosure, even if such loan modifications and other actions are not in the best interests of the beneficial owners of the mortgages.
Mortgage servicers may be incentivized by the federal government to pursue such loan modifications, as well as forbearance plans and other actions intended to prevent foreclosure, even if such loan modifications and other actions are not in the best interests of the beneficial owners of the mortgages.
Should Lima One experience a significant decline in its business and operations or otherwise not be able to respond adequately to managerial, compliance or operational challenges that could have a material adverse impact on our results of operations.
Should Lima One experience a significant decline in its business and operations or otherwise not be able to respond adequately to managerial, compliance or operational challenges, it could have a material adverse impact on our results of operations.
As of December 31, 2024, we had goodwill of $61.1 million, which represents the excess of the fair value of consideration paid over the fair value of net assets acquired in connection with the acquisition of our wholly-owned subsidiary, Lima One.
As of December 31, 2025, we had goodwill of $61.1 million, which represents the excess of the fair value of consideration paid over the fair value of net assets acquired in connection with the acquisition of our wholly-owned subsidiary, Lima One.
These changes, including personnel changes at the applicable regulatory agencies, may alter the nature and scope of oversight affecting the mortgage finance industry generally and particularly the future role of Fannie Mae and Freddie Mac. Our investments in residential whole loans subject us to servicing-related risks, including those associated with foreclosure and liquidation.
These changes, including personnel changes at the applicable regulatory agencies, may alter the nature and scope of oversight affecting the mortgage finance industry generally and particularly the future role of Fannie Mae and Freddie Mac. 13 Table of Contents Our investments in residential whole loans subject us to servicing-related risks, including those associated with foreclosure and liquidation.
Even if we qualify as a REIT for U.S. federal income tax purposes, we may be required to pay certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, excise taxes, state or local income, property and transfer taxes, such as mortgage recording taxes, and other taxes.
Even if we qualify as a REIT for U.S. federal income tax purposes, we may be required to pay certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as 27 Table of Contents a result of a foreclosure, excise taxes, state or local income, property and transfer taxes, such as mortgage recording taxes, and other taxes.
Future increases in the amount by which the collateral value is required to contractually exceed the repurchase transaction loan amount, decreases in the market value of our residential mortgage investments, increases in interest rate volatility and changes in the availability of acceptable financing could cause us to be unable to achieve the amount of leverage we believe to be optimal.
Future increases in the amount by which the collateral value is required to contractually exceed the repurchase transaction loan amount, decreases in the market value of our residential mortgage investments, increases in interest rate volatility and changes 16 Table of Contents in the availability of acceptable financing could cause us to be unable to achieve the amount of leverage we believe to be optimal.
These alternatives could increase our costs or reduce our stockholders’ equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock. 27 Table of Contents Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
These alternatives could increase our costs or reduce our stockholders’ equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock. Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
Credit and Other Risks Related to Our Investments Our investments in residential whole loans (including BPLs), residential mortgage securities, MSR-related assets and commercial mortgage loans involve credit risk, which could materially adversely affect our results of operations.
Credit and Other Risks Related to Our Investments Our investments in residential whole loans (including BPLs), residential mortgage securities and commercial mortgage loans involve credit risk, which could materially adversely affect our results of operations.
We rely on third-party servicers to service and manage the mortgages underlying our residential whole loans. We do not interface with borrowers under the mortgage loans in which we invest or otherwise service the mortgage loans in which we invest. 13 Table of Contents The ultimate returns generated by these investments may depend on the quality of the servicer.
We rely on third-party servicers to service and manage the mortgages underlying our residential whole loans. We do not interface with borrowers under the mortgage loans in which we invest or otherwise service the mortgage loans in which we invest. The ultimate returns generated by these investments may depend on the quality of the servicer.
As a result, discount on securities acquired in the primary or secondary market is included in the determination of taxable income and is not impacted by losses until such losses are incurred. Such differences in 28 Table of Contents accounting for tax and GAAP can lead to significant timing variances in the recognition of income and losses.
As a result, discount on securities acquired in the primary or secondary market is included in the determination of taxable income and is not impacted by losses until such losses are incurred. Such differences in accounting for tax and GAAP can lead to significant timing variances in the recognition of income and losses.
Given our reliance on short-term borrowings to generate interest income and the fact that the yield curve remains relatively flat after the recent inversion ended, or if the Federal Reserve finds itself continuing to fall behind on inflation and more aggressively tightens its current projections, our results of operations, financial condition and business could be materially adversely impacted.
Given our reliance on short-term borrowings to generate interest income and the fact that the yield curve remains relatively flat after the latest inversion ended in 2024, or if the Federal Reserve finds itself continuing to fall behind on inflation and more aggressively tightens its current projections, our results of operations, financial condition and business could be materially adversely impacted.
These risks may increase in the future as we continue to increase our reliance on the internet and use of web-based product offerings and on the use of cybersecurity. We are dependent on information systems and their failure (including in connection with cybersecurity incidents) could significantly disrupt our business.
These risks may increase in the future as we continue to increase our reliance on the internet and use of web-based product offerings and on the use of cybersecurity. 20 Table of Contents We are dependent on information systems and their failure (including in connection with cybersecurity incidents) could significantly disrupt our business.
Such representations and warranties may include, but are not limited to, issues such as the validity of the lien; the absence of delinquent taxes or other liens; the loans’ compliance with all local, state and federal laws and the delivery of all documents required to perfect title to the lien.
Such representations and warranties may include, but 19 Table of Contents are not limited to, issues such as the validity of the lien; the absence of delinquent taxes or other liens; the loans’ compliance with all local, state and federal laws and the delivery of all documents required to perfect title to the lien.
Unpredictable events, such as the COVID-19 pandemic, may create economic shocks, to which federal, state, and local governments respond with new borrower and tenant rights and protections. Certain federal and state regulators continue to consider proposals to apply regulatory prudential standards to nonbank servicers, which may impact how our service providers, including the Servicer, are regulated.
Unpredictable events, such as the COVID-19 pandemic, may create economic shocks, to which federal, state, and local governments respond with new borrower and tenant rights and protections. Certain federal and state regulators continue to consider proposals to apply regulatory prudential standards to nonbank servicers, which may impact how our 22 Table of Contents service providers, including the Servicer, are regulated.
Mortgage loans that are fully and exclusively secured by real property are generally qualifying real estate assets for purposes of the exemption. All or 24 Table of Contents substantially all of our residential mortgage loans are fully and exclusively secured by real property with a loan-to-value ratio of less than 100%.
Mortgage loans that are fully and exclusively secured by real property are generally qualifying real estate assets for purposes of the exemption. All or substantially all of our residential mortgage loans are fully and exclusively secured by real property with a loan-to-value ratio of less than 100%.
The results of our business operations are affected by many factors, a number of which are beyond our control, and primarily depend on, among other things, the level of our net interest income, the market value of our assets and collateral, which is driven by numerous factors, including the supply and demand for residential mortgage assets in the marketplace, our ability to source new investments at appropriate yields, the terms and availability of adequate financing, general economic and real estate conditions (both on a national and local level), the impact of government actions and changes in the U.S. political environment (including as a result of the change in administration), especially in the real estate and mortgage sector, our competition, and the credit performance of our credit sensitive residential mortgage assets.
The results of our business operations are affected by many factors, a number of which are beyond our control, and primarily depend on, among other things, the level of our net interest income, the market value of our assets and collateral, which is driven by numerous factors, including the supply and demand for residential mortgage assets in the marketplace, our ability to source new investments at appropriate yields, the terms and availability of adequate financing, general economic and real estate conditions (on a geopolitical, national and local level), the impact of government actions and changes in the U.S. political environment (including as a result of the continuing impact of the change in administration or a potential prolonged U.S. government shutdown), especially in the real estate and mortgage sector, our competition, and the credit performance of our credit sensitive residential mortgage assets.
Dividends will be declared and paid at the discretion of our Board and will depend on REIT taxable earnings, our financial results and overall financial condition, maintenance of our REIT qualification and such other factors as our Board may deem relevant from time to time.
Dividends will be declared and paid at the discretion of our Board and will depend on REIT taxable earnings, our financial results 28 Table of Contents and overall financial condition, maintenance of our REIT qualification and such other factors as our Board may deem relevant from time to time.
If general interest rates decline at the same time, we would likely 16 Table of Contents not be able to reinvest the proceeds of the prepayments that we receive in assets yielding as much as those yields on the assets that were prepaid.
If general interest rates decline at the same time, we would likely not be able to reinvest the proceeds of the prepayments that we receive in assets yielding as much as those yields on the assets that were prepaid.
As a result, we are subject to the risk that we would not be able to acquire, during the period that 19 Table of Contents any short-term repurchase agreements are available, sufficient eligible assets or securities to maximize the efficiency of a securitization.
As a result, we are subject to the risk that we would not be able to acquire, during the period that any short-term repurchase agreements are available, sufficient eligible assets or securities to maximize the efficiency of a securitization.
Certain jurisdictions require a license to purchase, hold, enforce or sell residential mortgage loans. We currently do not hold any such licenses, and there is no assurance that we will be able to obtain them in a timely manner or at all or, if obtained, that we will be able to maintain them.
Certain jurisdictions require a license to purchase, hold, enforce or sell residential mortgage loans. We currently do not hold any such licenses, and there is no assurance that we will be able to obtain them in a timely manner or at all or, if obtained, that we 23 Table of Contents will be able to maintain them.
In addition, any uncertainty in the 17 Table of Contents global finance market or weak economic conditions in Europe could cause the conditions described above to have a more pronounced effect on our European lending counterparties. • Our profitability may be materially adversely affected by a reduction in our leverage.
In addition, any uncertainty in the global finance market or weak economic conditions in Europe could cause the conditions described above to have a more pronounced effect on our European lending counterparties. • Our profitability may be materially adversely affected by a reduction in our leverage.
The determination of whether we are a REIT requires an analysis of various factual matters and circumstances, some of which may not be totally 26 Table of Contents within our control and some of which involve interpretation.
The determination of whether we are a REIT requires an analysis of various factual matters and circumstances, some of which may not be totally within our control and some of which involve interpretation.
This risk may be more pronounced during times of market volatility and negative economic conditions. Our portfolio of residential whole loans (including BPLs) is by far our largest asset class and represented approximately 77% of our total assets as of December 31, 2024.
This risk may be more pronounced during times of market volatility and negative economic conditions. Our portfolio of residential whole loans (including BPLs) is by far our largest asset class and represented approximately 68% of our total assets as of December 31, 2025.
In general, if the interest expense on our borrowings increases relative to the interest income we earn on our investments, our profitability may be materially adversely affected, including due to the following reasons: 18 Table of Contents • Changes in interest rates, cyclical or otherwise, may materially adversely affect our profitability.
In general, if the interest expense on our borrowings increases relative to the interest income we earn on our investments, our profitability may be materially adversely affected, including due to the following reasons: • Changes in interest rates, cyclical or otherwise, may materially adversely affect our profitability.
In connection with these licenses we would be required to comply with various information reporting and other regulatory requirements to maintain those licenses, and there is no assurance that we will be able to satisfy those 23 Table of Contents requirements on an ongoing basis.
In connection with these licenses we would be required to comply with various information reporting and other regulatory requirements to maintain those licenses, and there is no assurance that we will be able to satisfy those requirements on an ongoing basis.
Also, as a result of this competition, desirable investments may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives. Item 1B. Unresolved Staff Comments.
Also, as a result of this competition, desirable investments may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.
In addition, the impact of a new U.S. Presidential administration may lead to changes in the capital markets and regulatory landscape, including federal supervision and enforcement tools on residential 22 Table of Contents mortgage lenders and servicers, which could result in increased regulatory scrutiny and potentially increased penalties assessed for determinations of non-compliance with applicable requirements.
In addition, the continuing impact of the current U.S. Presidential administration may lead to changes in the capital markets and regulatory landscape, including federal supervision and enforcement tools on residential mortgage lenders and servicers, which could result in increased regulatory scrutiny and potentially increased penalties assessed for determinations of non-compliance with applicable requirements.
In addition, as of December 31, 2024, we had approximately $16.8 million of non-controlling investments in certain loan originators from whom we acquire mortgage loans for investment on a periodic basis. These investments have taken the form of common equity and preferred equity.
In addition, as of December 31, 2025, we had approximately $20.2 million of non-controlling investments in certain loan originators from whom we acquire mortgage loans for investment on a periodic basis. These investments have taken the form of common equity and preferred equity.
Thus, our Board could authorize the issuance of shares of preferred or common stock with terms and conditions that could have the effect of discouraging a takeover or other transaction in which holders of the outstanding shares of our common stock might receive a premium for their shares over the then current market price of our common stock. 33 Table of Contents Future issuances or sales of shares could cause our share price to decline.
Thus, our Board could authorize the issuance of shares of preferred or common stock with terms and conditions that could have the effect of discouraging a takeover or other transaction in which holders 33 Table of Contents of the outstanding shares of our common stock might receive a premium for their shares over the then current market price of our common stock.
Our exposure to defaults by counterparties may be more pronounced during periods of significant volatility in the market conditions for mortgages and mortgage-related assets as well as the broader financial markets. At December 31, 2024, we had greater than 5% stockholders’ equity at risk to the following financing agreement counterparties: Wells Fargo (approximately 9.1%) and Barclays (approximately 5.9%).
Our exposure to defaults by counterparties may be more pronounced during periods of significant volatility in the market conditions for mortgages and mortgage-related assets as well as the broader financial markets. At December 31, 2025, we had greater than 5% stockholders’ equity at risk to the following financing agreement counterparty: Wells Fargo (approximately 7.4%).
Interest rate hedging may fail to protect or could adversely affect us because, among other things: • interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related hedged instrument; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the party owing money in the hedging transaction may default on its obligation to pay. 25 Table of Contents We primarily use Swaps to hedge against future increases in interest rates on our financing agreements.
Interest rate hedging may fail to protect or could adversely affect us because, among other things: • interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related hedged instrument; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the party owing money in the hedging transaction may default on its obligation to pay.
In the event Lima One or one or more of the loan originators in which we have made investments should experience a significant decline in its business and operations or otherwise not be able to respond adequately to managerial, compliance or operational challenges that it may encounter, we may be required to write-down all or a portion of the goodwill relating to Lima One or write down all or a portion of the applicable non-controlling investment, which could have a material adverse impact on our results of operations. 15 Table of Contents Business purpose loans involve a high degree of business and financial risk.
In the event Lima One or one or more of the loan originators in which we have made investments should experience a significant decline in its business and operations or otherwise not be able to respond adequately to managerial, compliance or operational challenges that it may encounter, we may be required to write down all or a portion of the goodwill relating to Lima One or write down all or a portion of the applicable non-controlling investment, which could have a material adverse impact on our results of operations.
Additionally, if the accumulation of cash or reinvestment of significant earnings in our TRSs causes the fair market value of our securities in those entities to exceed 20% of the fair market value of our assets, in each case as determined for REIT asset testing purposes, we would, absent timely responsive action, similarly fail to maintain our qualification as a REIT.
Additionally, if the accumulation of cash or reinvestment of significant earnings in our TRSs causes the fair market value of our securities in those entities to exceed 25% (20% for taxable years beginning before January 1, 2026) of the fair market value of our assets, in each case as determined for REIT asset testing purposes, we would, absent timely responsive action, similarly fail to maintain our qualification as a REIT.
Our investments in residential whole loans may require us to work with our designated third-party mortgage loan servicers to the extent that they engage in workout negotiations or a restructuring with a borrower and/or the possibility of foreclosure. These processes may be lengthy and expensive.
An RPL could become a NPL, which could reduce our earnings. Our investments in residential whole loans may require us to work with our designated third-party mortgage loan servicers to the extent that they engage in workout negotiations or a restructuring with a borrower and/or the possibility of foreclosure. These processes may be lengthy and expensive.
We may be liable for losses suffered by individuals whose personal information is compromised as a result of a breach of the security of the systems that we or third-parties and service providers of ours store this information on, and any such liability could be material.
We may also experience cybersecurity incidents that may remain undetected for an extended period. We may be liable for losses suffered by individuals whose personal information is compromised as a result of a breach of the security of the systems that we or third-parties and service providers of ours store this information on, and any such liability could be material.
Cybersecurity Risks • Maintaining cybersecurity and data security is important to our business and a breach of our cybersecurity or data security could result in serious harm to our reputation. • We are dependent on information systems and their failure could significantly disrupt our business.
Cybersecurity Risks • Maintaining cybersecurity and data security is important to our business and a breach of our cybersecurity or data security could result in serious harm to our reputation. • We are dependent on information systems and their failure could significantly disrupt our business. • We may utilize artificial intelligence, which exposes us to liability and affects our business.
As a result, the timing and amount of impairments recognized in earnings constitute material estimates that are susceptible to significant change. Our investments in MSR-related assets expose us to additional risks.
As a result, the timing and amount of impairments recognized in earnings constitute material estimates that are susceptible to significant change. Our ownership of Lima One and investments in mortgage loan originators expose us to additional risks.
We operate in a highly competitive market for investment opportunities. Our profitability depends, in large part, on our ability to acquire residential mortgage assets or other investments at favorable prices.
We operate in a highly competitive market for investment opportunities and competition may limit our ability to acquire desirable investments, which could materially adversely affect our results of operations. We operate in a highly competitive market for investment opportunities. Our profitability depends, in large part, on our ability to acquire residential mortgage assets or other investments at favorable prices.
Furthermore, because the techniques used to obtain unauthorized access to, or to compromise, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience cybersecurity incidents that may remain undetected for an extended period.
Furthermore, because the techniques used to obtain unauthorized access to, or to compromise, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures, and generative artificial intelligence (“AI”) could intensify these cybersecurity risks.
In addition, mortgage lenders and third-party servicers have voluntarily, pursuant to federal, state or local regulation, or as part of settlements with law enforcement authorities, established loan modification programs relating to loans they hold or service.
For example, various federal, state, and local laws, regulations, orders, and ordinances limiting foreclosure and eviction remedies were enacted during the COVID-19 pandemic. In addition, mortgage lenders and third-party servicers have voluntarily, pursuant to federal, state or local regulation, or as part of settlements with law enforcement authorities, established loan modification programs relating to loans they hold or service.
Cybersecurity incidents could also significantly damage our reputation with existing and prospective loan sellers, borrowers, and third parties with whom we do business. Any publicized security problems affecting our businesses and/or those of such third parties may negatively impact the market perception of our products and discourage market participants from doing business with us.
Any publicized security problems affecting our businesses and/or those of such third parties may negatively impact the market perception of our products and discourage market participants from doing business with us.
Our operations and activities include Business purpose loans originated and serviced by Lima One.
Business purpose loans involve a high degree of business and financial risk. Our operations and activities include Business purpose loans originated and serviced by Lima One.
The declaration, amount and payment of future cash dividends on shares of our common stock are subject to uncertainty due to disruption in the mortgage, housing or related sectors. The declaration, amount and payment of any future dividends on shares of our common stock will be at the sole discretion of our Board.
In addition, future issuances of our common stock may be dilutive to existing stockholders. The authorization, amount and payment of future cash dividends on shares of our common stock are subject to uncertainty due to disruption in the mortgage, housing or related sectors.
Our hedging transactions, which are intended to limit losses, may actually adversely affect our earnings, which could reduce our cash available for distribution to our stockholders. We may enter into hedging instruments that could expose us to contingent liabilities in the future, which could materially adversely affect our results of operations.
We may enter into hedging instruments that could expose us to contingent liabilities in the future, which could materially adversely affect our results of operations.
Investors in residential and commercial mortgage assets assume the risk that the underlying borrowers may default on their obligations to make full and timely payments of principal and interest.
Investors in residential and commercial mortgage assets assume the risk that the underlying borrowers may default on their obligations to make full and timely payments of principal and interest. Under our investment policy, we may invest in residential whole loans, residential mortgage securities, commercial mortgage bridge loans and other investment assets that may be considered to be lower credit quality.
Other issuances of our common stock, such as through equity awards to our employees, could have an adverse effect on the market price of our common stock. In addition, future issuances of our common stock may be dilutive to existing stockholders.
In addition, the sale of these shares could impair our ability to raise capital through a sale of additional equity securities. Other issuances of our common stock, such as through equity awards to our employees, could have an adverse effect on the market price of our common stock.
Government, any federal agency or any federally chartered corporation. Higher-than-expected rates of default and/or higher-than-expected loss severities on the mortgages underlying these investments could adversely affect the value of these assets.
In general, these investments are more exposed to credit risk than Agency MBS because the former are not guaranteed as to principal or interest by the U.S. Government, any federal agency or any federally chartered corporation. Higher-than-expected rates of default and/or higher-than-expected loss severities on the mortgages underlying these investments could adversely affect the value of these assets.
Sales of substantial numbers of shares of our common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of our common stock. In addition, the sale of these shares could impair our ability to raise capital through a sale of additional equity securities.
Future issuances or sales of shares could cause our share price to decline. Sales of substantial numbers of shares of our common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of our common stock.
Our results of operations, financial condition and business could be materially adversely affected if our fair value determinations of these assets are materially higher than could actually be realized in the market. Our investments in residential whole loans are difficult to value and are dependent upon the borrower’s ability to service or refinance their debt.
Our investments in residential whole loans are difficult to value and are dependent upon the borrower’s ability to service or refinance their debt. The inability of the borrower to do so could materially and adversely affect our liquidity and results of operations.
Treasury and the Federal Reserve may be held to maturity and, based on mortgage market conditions, adjustments may be made to these portfolios. The program was reinstated in 2020 in response to the COVID-19 pandemic. This flexibility may adversely affect the pricing and availability of Agency MBS during the remaining term of these portfolios.
Treasury and the Federal Reserve may be held to maturity and, based on mortgage market conditions, adjustments may be made to these portfolios. The program was reinstated in 2020 in response to the COVID-19 pandemic. The Federal Reserve has since concluded this program and started a “runoff” process to reduce holdings which began in June 2022.
Valuations of certain assets may be difficult to obtain or may not be reliable (particularly as related to residential whole loans, as discussed below).
Valuations of certain assets may be difficult to obtain or may not be reliable (particularly as related to residential whole loans, as discussed below). In 12 Table of Contents general, dealers and pricing services heavily disclaim their valuations as such valuations are not intended to be binding bid prices.
Other Business Risks We are dependent on our executive officers and other key personnel for our success, the loss of any of whom may materially adversely affect our business. Our success is dependent upon the efforts, experience, diligence, skill and network of business contacts of our executive officers and other key personnel.
Our success is dependent upon the efforts, experience, diligence, skill and network of business contacts of our executive officers and other key personnel. The departure of any of our executive officers and/or key personnel could have a material adverse effect on our operations and performance.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Information Security Program is part of our risk management program, which is overseen by our Audit Committee (and our Board of Directors more generally), receives updates from our Chief Technology Officer on cybersecurity risks and related matters on a quarterly basis and as otherwise as may be needed.
Biggest changeThe Information Security Program is part of our risk management program, which is overseen by our Audit Committee (and our Board of Directors more generally), and receives updates from our Chief Technology Officer on cybersecurity risks and related matters on a quarterly basis and as otherwise may be needed.
The program defines oversight requirements based on the results of the risk assessment. Critical vendors and service providers are reviewed annually and as otherwise as may be needed.
The program defines oversight requirements based on the results of the risk assessment. Critical vendors and service providers are reviewed annually and as otherwise may be needed.
We follow industry standards for cyber security risk mitigation, including anti-virus/anti-malware protection, detection and response technologies, intelligent logging and event management, regular penetration testing and remediation.
We follow industry standards for cybersecurity risk mitigation, including anti-virus/anti-malware protection, detection and response technologies, intelligent logging and event management, regular penetration testing and remediation.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2024, we expect our future rent expense, for all lease commitments, exclusive of possible rent escalation charges and normal recurring charges for maintenance, insurance and taxes, to range between approximately $7.1 million and $8.0 million per year from 2025 to 2032, approximately $6.7 million in 2033 and approximately $5.4 million from 2034 to 2036. Item 3.
Biggest changeAt December 31, 2025, we expected our approximate future rent expense, for all lease commitments, exclusive of possible rent escalation charges and normal recurring charges for maintenance, insurance and taxes, to be $7.5 million in 2026 through 2031, $8.0 million in 2032 and 2033 and $5.4 million in 2034 through 2036.
Legal Proceedings. There are no material legal proceedings to which we are a party or to which any of our assets are subject. Item 4. Mine Safety Disclosures Not applicable. 36 Table of Contents PART II
There are no material legal proceedings to which we are a party or to which any of our assets are subject. Item 4. Mine Safety Disclosures Not applicable. 36 Table of Contents PART II
Item 2. Properties. Office Leases Our primary lease commitment relates to our corporate headquarters. For the year ended December 31, 2024, we recorded an expense of approximately $5.4 million in c onnection with this lease.
Item 2. Properties. Office Leases Our primary lease commitment relates to our corporate headquarters. For the year ended December 31, 2025, we recorded an expense of approximately $5.3 million in c onnection with this lease.
The original term specified in this lease is approximately 15 years with a termination date of December 2036, and an option to renew for an additional five years. 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 original term specified in this lease is approximately 15 years with a termination date of December 2036, and an option to renew for an additional five years. Additionally, in December 2024, Lima One executed a new office lease for its headquarters in Greenville, South Carolina. Lima One moved into the new office space on July 15, 2025.
Removed
The Company expects the average annual lease rental expense to be approximately $2.4 million. Lima One expects to relocate to the office space in the latter half of 2025.
Added
For the year ended December 31, 2025, the Company recorded an expense in connection with this lease of approximately $2.1 million.
Added
The original term specified in this lease is approximately nine years with a termination date of December 2033 and two options to renew for an additional four years for the first extension and an additional five years for the second extension.
Added
In February 2026, we entered into an agreement with the landlord for our current corporate headquarters to accelerate the contractual expiration of our lease to November 30, 2026. In addition, we have reached an agreement in principle to enter into a ten-year lease for new corporate headquarters space located in New York City.
Added
While we are still evaluating the financial statement impact of these agreements, we currently expect to modify the right-of-use assets and lease obligations, recognize a gain of approximately $1-2 million, and recognize accelerated depreciation expense in 2026 related to the remaining undepreciated tenant improvements at our current corporate headquarters totaling approximately $7 million.
Added
Additionally, we expect to recognize a new right-of-use asset and lease liability and recognize lower rental expense at the expected new corporate headquarters. We expect that in the aggregate, once complete, these actions will result in run-rate annual expense savings of approximately $4 million per year over the next ten years. Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 36 Note 10. Stockholders’ Equity 105 PART II Note 11. EPS Calculation 109 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Note 12. Equity Compensation and Other Benefit Plans 109 Note 13. Fair Value of Financial Instruments 113 Item 6. Reserved 38 Note 14.
Biggest changeItem 4. Mine Safety Disclosures 36 Note 10. Stockholders’ Equity 103 PART II Note 11. EPS Calculation 108 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Note 12. Equity Compensation and Other Benefit Plans 108 Note 13.
Removed
Use of Special Purpose Entities and Variable Interest Entities 119
Added
Fair Value of Financial Instruments 112 Item 6. [R eserve d ] 39 Note 14. Use of Special Purpose Entities and Variable Interest Entities 118

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe table below provides details of dividends on our common stock declared during the years 2024 and 2023: Year Declaration Date Record Date Payment Date Dividend Per Share 2024 December 11, 2024 December 31, 2024 January 31, 2025 $0.35 (1) September 12, 2024 September 27, 2024 October 31, 2024 0.35 June 11, 2024 June 28, 2024 July 31, 2024 0.35 March 7, 2024 March 28, 2024 April 30, 2024 0.35 2023 December 13, 2023 December 29, 2023 January 31, 2024 $0.35 (2) September 20, 2023 October 2, 2023 October 31, 2023 0.35 June 15, 2023 June 30, 2023 July 31, 2023 0.35 March 10, 2023 March 31, 2023 April 28, 2023 0.35 (1) At December 31, 2024, we had accrued dividends and dividend equivalents payable of $36.0 million related to the common stock dividend declared on December 11, 2024.
Biggest changeThe table below provides details of dividends on our common stock declared during the years 2025 and 2024: Year Declaration Date Record Date Payment Date Dividend Per Share 2025 December 11, 2025 December 31, 2025 January 30, 2026 $0.36 (1) September 11, 2025 September 30, 2025 October 31, 2025 0.36 June 12, 2025 June 30, 2025 July 31, 2025 0.36 March 6, 2025 March 31, 2025 April 30, 2025 0.36 2024 December 11, 2024 December 31, 2024 January 31, 2025 $0.35 (2) September 12, 2024 September 27, 2024 October 31, 2024 0.35 June 11, 2024 June 28, 2024 July 31, 2024 0.35 March 7, 2024 March 28, 2024 April 30, 2024 0.35 (1) At December 31, 2025, we had accrued dividends and dividend equivalents payable of $37.1 million related to the common stock dividend declared on December 11, 2025.
Although we may borrow funds to make distributions, cash for such distributions has generally been, and is expected to continue to be, largely generated from our results of our operations.
Although we may borrow funds to make distributions, cash for such distributions has generally been, and is expected to continue to be, largely generated from our results of operations.
(See Part I, Item 1A., “Risk Factors” and Item 7, “Management’s Discussion 37 Table of Contents and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends.) Purchases of Equity Securities 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.
(See Part I, Item 1A., “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends.) 37 Table of Contents Purchases of Equity Securities In February 2024, the Company announced its Board had authorized a $200 million stock repurchase program with respect to the Company’s common stock, which was in effect through the end of 2025.
Dividends No dividends may be paid on our common stock unless full cumulative dividends have been paid on our preferred stock. We have paid full cumulative dividends on our preferred stock on a quarterly basis through December 31, 2024. We have historically declared cash dividends on our common stock on a quarterly basis.
Dividends No dividends may be paid on our common stock unless full cumulative dividends have been paid on our preferred stock. We have paid full cumulative dividends on our preferred stock on a quarterly basis through December 31, 2025. We have historically declared cash dividends on our common stock on a quarterly basis.
However, a portion of our common stock dividends may, from time to time, be characterized as capital gains or return of capital. For the year ended December 31, 2024, the portion of our common stock dividends paid during the year deemed to be a return of capital was $0.5516 per share of common stock.
However, a portion of our common stock dividends may, from time to time, be characterized as capital gains or return of capital. For the year ended December 31, 2025, the portion of our common stock dividends paid during the year deemed to be a return of capital was $0.5800 per share of common stock.
For the year ended December 31, 2023, the portion of our common stock dividends paid during the year deemed to be a return of capital was $0.4108 per share of common stock.
For the year ended December 31, 2024, the portion of our common stock dividends paid during the year deemed to be a return of capital was $0.5516 per share of common stock.
During 2024 and 2023, we declared total cash dividends to holders of our common stock of $142.9 million ($1.40 per share) and $142.7 million ($1.40 per share), respectively. In general, our common stock dividends have been characterized as ordinary income to our stockholders for income tax purposes.
During 2025 and 2024, we declared total cash dividends to holders of our common stock of $147.3 million ($1.44 per share) and $142.9 million ($1.40 per share), respectively. In general, our common stock dividends have been characterized as ordinary income to our stockholders for income tax purposes.
Holders As of February 14, 2025, we had 388 registered holders of our common stock. Such information was obtained through our registrar and transfer agent, based on the results of a broker search; however, the number of beneficial owners of our common stock may exceed this number.
Holders As of February 17, 2026, we had 384 registered holders of our common stock. Such information was obtained through our registrar and transfer agent, based on the results of a broker search; however, the number of beneficial owners of our common stock may exceed this number.
This dividend will be treated as a dividend paid in 2025 to the extent of the Company’s earnings and profits in 2025. (2) At December 31, 2023, we had accrued dividends and dividend equivalents payable of $35.8 million related to the common stock dividend declared on December 13, 2023.
This dividend will be treated as a dividend paid in 2026 to the extent of the Company’s earnings and profits in 2026. (2) At December 31, 2024, we had accrued dividends and dividend equivalents payable of $36.0 million related to the common stock dividend declared on December 11, 2024.
The Company did withhold 129,949 shares (under the terms of grants under our Equity Compensation Plan (or Equity Plan)) during the first quarter of 2024 to satisfy tax and payroll withholding obligations resulting from the vesting and settlement of restricted stock awards and/or restricted stock units (RSUs).
The Company also withheld 493,848 and 129,429 shares (under the terms of grants under our Equity Compensation Plan (or Equity Plan)) during 2025 and 2024, respectively, to satisfy tax and payroll withholding obligations resulting from the vesting and settlement of restricted stock awards and/or restricted stock units (RSUs).
A portion of this dividend was considered taxable income to the recipient in 2024. For more information see the Company’s 2024 Dividend Tax Information on its website. We have not established a minimum payout level for our common stock.
A portion of this dividend was considered taxable income to the recipient in 2025. We have not established a minimum payout level for our common stock.
We did not repurchase any shares of our common stock pursuant to the stock repurchase program during the year ended December 31, 2024.
The Company did not repurchase any shares of its common stock through the stock repurchase program during 2024.
The Company’s prior stock repurchase program, which was adopted in March 2022, had authorized the repurchase of up to $250 million of the Company’s 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.
Approximately $190 million remained available for repurchase under the stock repurchase program upon its expiration. In February 2026, the Company’s Board authorized a new $200 million stock repurchase program with respect to the Company’s common stock, which will be in effect through December 31, 2028. The stock repurchase program does not require the purchase of any minimum number of shares.
Removed
For the year ended December 31, 2022, the portion of our common stock dividends paid during the year deemed to be a return of capital was $1.76 per share of common stock.
Added
During 2025, the Company repurchased 1,026,117 shares of its common stock through the stock repurchase program at an average cost of $9.76 per share and a total cost of approximately $10.0 million, net of fees and commissions paid to the sales agent of approximately $10,000.
Removed
During the year ended 2024, the Company did not issue any shares pursuant to its DRSPP. During the year ended 2023, we issued 6,666 shares of common stock through the DRSPP generating net proceeds of approximately $74,000.
Added
The table below provides detail of the repurchases of common stock by month for the fourth quarter of 2025.
Added
Month Total Number of Shares Purchased Weighted Average Price Paid Per Share (1) Total Number of Shares Repurchased as Part of Publicly Announced Repurchase Program or Employee Plan Approximate Dollar Value that May Yet be Purchased Under the Repurchase Program or Employee Plan October 1-31, 2025: Stock Repurchase Program — $ — — $ 195,000,000 Employee Transactions (2) — — N/A N/A November 1-30, 2025: Stock Repurchase Program 540,652 $ 9.25 540,652 $ 190,000,000 Employee Transactions (2) 4,636 8.97 N/A N/A December 1-31, 2025: Stock Repurchase Program — $ — — $ — Employee Transactions (2) — — N/A N/A (1) Includes brokerage commissions.
Added
(2) The value of shares surrendered upon the settlement of RSUs to meet income tax obligations is based on the closing price per share of our common stock on the date such settlement occurs.
Added
During the years ended 2025 and 2024, the Company did not issue any shares pursuant to its DRSPP, and the DRSPP shelf registration statement expired by its terms on September 27, 2025. 38 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest change(2) Reflects annualized net interest income (including net swap income or expense) divided by average interest-earning assets. 50 Table of Contents The following table presents the components of the net interest spread earned on our Residential whole loans for the quarterly periods presented: Quarter Ended December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Business Purpose Loans Net Yield (1) 7.73 % 7.91 % 7.99 % 7.66 % 7.48 % 7.21 % 6.88 % 6.62 % Cost of Funding (2) 5.59 % 5.65 % 5.80 % 5.67 % 5.55 % 5.34 % 5.01 % 4.81 % Net Interest Spread 2.14 % 2.26 % 2.19 % 1.99 % 1.93 % 1.87 % 1.87 % 1.81 % Non-QM Loans Net Yield (1) 5.63 % 5.47 % 5.49 % 5.39 % 5.06 % 5.10 % 4.69 % 4.64 % Cost of Funding (2) 3.76 % 3.47 % 3.55 % 3.44 % 3.34 % 3.22 % 3.07 % 3.05 % Net Interest Spread 1.87 % 2.00 % 1.94 % 1.95 % 1.72 % 1.88 % 1.62 % 1.59 % Legacy RPL/NPL Loans Net Yield (1) 7.52 % 7.75 % 8.72 % 7.62 % 8.25 % 8.23 % 8.69 % 7.39 % Cost of Funding (2) 4.04 % 4.08 % 3.70 % 3.44 % 3.28 % 3.21 % 2.96 % 3.06 % Net Interest Spread 3.48 % 3.67 % 5.02 % 4.18 % 4.97 % 5.02 % 5.73 % 4.33 % Total Residential Whole Loans Net Yield (1) 6.65 % 6.74 % 6.92 % 6.63 % 6.47 % 6.34 % 6.10 % 5.68 % Cost of Funding (2) 4.50 % 4.45 % 4.54 % 4.43 % 4.29 % 4.10 % 3.83 % 3.82 % Net Interest Spread 2.15 % 2.29 % 2.38 % 2.20 % 2.18 % 2.24 % 2.27 % 1.86 % (1) Reflects annualized interest income on Residential whole loans divided by average amortized cost of Residential whole loans.
Biggest change(2) Reflects annualized net interest income (including net Swap carry) divided by average interest-earning assets. 50 Table of Contents The following table presents the components of the net interest spread earned on our Residential whole loans for the quarterly periods presented: Quarter Ended December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 Non-QM Loans Net Yield (1) 5.96 % 5.95 % 5.79 % 5.78 % 5.63 % 5.47 % 5.49 % 5.39 % Cost of Funding (2) (5.13) % (5.21) % (5.14) % (5.08) % (5.12) % (5.22) % (5.18) % (5.12) % Impact of net Swap carry (3) 0.49 % 0.62 % 0.70 % 0.77 % 1.36 % 1.75 % 1.63 % 1.68 % Net Interest Spread 1.32 % 1.36 % 1.35 % 1.47 % 1.87 % 2.00 % 1.94 % 1.95 % Business Purpose Loans Net Yield (1) 7.50 % 7.88 % 7.99 % 8.09 % 7.73 % 7.91 % 7.99 % 7.66 % Cost of Funding (2) (5.82) % (6.03) % (6.07) % (6.15) % (6.39) % (6.66) % (6.72) % (6.66) % Impact of net Swap carry (3) 0.44 % 0.49 % 0.42 % 0.45 % 0.80 % 1.01 % 0.92 % 0.99 % Net Interest Spread 2.12 % 2.34 % 2.34 % 2.39 % 2.14 % 2.26 % 2.19 % 1.99 % Legacy RPL/NPL Loans Net Yield (1) 7.42 % 8.55 % 8.69 % 7.01 % 7.52 % 7.75 % 8.72 % 7.62 % Cost of Funding (2) (4.29) % (4.32) % (4.29) % (4.24) % (4.23) % (4.64) % (4.77) % (4.51) % Impact of net Swap carry (3) 0.48 % 0.52 % 0.40 % 0.31 % 0.19 % 0.56 % 1.07 % 1.07 % Net Interest Spread 3.61 % 4.75 % 4.80 % 3.08 % 3.48 % 3.67 % 5.02 % 4.18 % Total Residential Whole Loans Net Yield (1) 6.53 % 6.81 % 6.85 % 6.77 % 6.65 % 6.74 % 6.92 % 6.63 % Cost of Funding (2) (5.23) % (5.36) % (5.35) % (5.36) % (5.51) % (5.76) % (5.82) % (5.75) % Impact of net Swap carry (3) 0.48 % 0.58 % 0.58 % 0.60 % 1.01 % 1.31 % 1.28 % 1.32 % Net Interest Spread 1.78 % 2.03 % 2.08 % 2.01 % 2.15 % 2.29 % 2.38 % 2.20 % Securities, at fair value Net Yield (1) 5.56 % 5.79 % 6.60 % 6.07 % 6.05 % 6.48 % 7.03 % 7.24 % Cost of Funding (2) (4.18) % (4.50) % (4.55) % (4.58) % (5.02) % (5.65) % (5.74) % (5.79) % Impact of net Swap carry (3) 0.79 % 1.05 % 1.05 % 1.08 % 1.68 % 1.71 % 1.90 % 1.79 % Net Interest Spread 2.17 % 2.34 % 3.10 % 2.57 % 2.71 % 2.54 % 3.19 % 3.24 % (1) Reflects annualized interest income on Residential whole loans divided by average amortized cost basis of Residential whole loans.
(5) Net interest rate spread reflects the difference between the yield on average interest-earning assets and average cost of funds. (6) Reflects the impact of positive or negative swap carry. Positive swap carry results when income from the receive leg of a swap is greater than the expense on the pay leg.
(5) Net interest rate spread reflects the difference between the yield on average interest-earning assets and average cost of funds. (6) Reflects the impact of positive or negative net Swap carry. Positive net Swap carry results when income from the receive leg of a Swap is greater than the expense on the pay leg.
On February 29, 2024, we entered into a distribution agreement pursuant to which we may offer and sell shares of our common stock having an aggregate gross sales price of up to $300 million, from time to time, through various sales agents in transactions deemed to be “at-the-market” offerings under federal securities laws (or the ATM Program).
On February 29, 2024, we entered into a distribution agreement pursuant to which we may offer and sell shares of our common stock having an aggregate gross sales price of up to $300 million, from time to time, through various sales agents in transactions deemed to be “at-the-market” offerings under federal securities laws (or the Common Stock ATM Program).
For example: a) while our REIT uses fair value accounting for GAAP in some instances, it generally is not used for purposes of determining taxable income; b) impairments generally are not recognized by us for income tax purposes until the asset is written-off or sold; c) capital losses may only be recognized by us to the extent of its capital gains; capital losses in excess of capital gains generally are carried over by us for potential offset against future capital gains; and d) tax hedge gains and losses resulting from the termination of Swaps by us generally are amortized over the remaining term of the Swap. 45 Table of Contents Securitization Generally, securitization transactions for GAAP and tax can be characterized as either sales or financings, depending on transaction type, structure and available elections.
For example: a) while our REIT uses fair value accounting for GAAP in some instances, it generally is not used for purposes of determining taxable income; b) impairments generally are not recognized by us for income tax purposes until the asset is written-off or sold; c) capital losses may only be recognized by us to the extent of our capital gains; capital losses in excess of capital gains generally are carried over by us for potential offset against future capital gains; and d) tax hedge gains and losses resulting from the termination of Swaps by us generally are amortized over the remaining term of the Swap. 45 Table of Contents Securitization Generally, securitization transactions for GAAP and tax can be characterized as either sales or financings, depending on transaction type, structure and available elections.
Our residential whole loans include primarily: (i) loans to finance (or refinance) one-to-four family residential properties that are not considered to meet the definition of a “Qualified Mortgage” in accordance with guidelines adopted by the Consumer Financial Protection Bureau (“Non-QM loans”), (ii) short-term business purpose loans collateralized by residential properties made to non-occupant borrowers that generally intend to rehabilitate or construct residential housing and then refinance or sell the properties (“Single-family transitional loans”), (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 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”) 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”).
Our residential whole loans include primarily: (i) loans to finance (or refinance) one-to-four family residential properties that are not considered to meet the definition of a “Qualified Mortgage” in accordance with guidelines adopted by the Consumer Financial Protection Bureau (“Non-QM loans”), (ii) business purpose loans primarily originated by Lima One, to finance (or refinance) non-owner occupied one-to-four family residential properties that are rented to one or more tenants (“Single-family rental loans”), (iii) short-term business purpose loans primarily originated by Lima One, collateralized by residential properties made to non-occupant borrowers that generally intend to rehabilitate or construct residential housing and then refinance or sell the properties (“Single-family transitional loans”), (iv) short-term business purpose loans primarily originated by Lima One, collateralized by multifamily properties, typically with a loan balance below $10 million, made to non-occupant borrowers that generally intend to rehabilitate or stabilize and then refinance or sell the properties (“Multifamily transitional loans, collectively with Single-family transitional loans, “Transitional loans,” also sometimes referred to as “Rehabilitation loans” or “Fix and Flip loans” and, collectively with Single-family rental loans, “Business purpose loans”), (v) loans primarily secured by residential real estate that were generally either non-performing or re-performing at acquisition (“Legacy RPL/NPL”) and (vi) loans on investor properties that conform to the standards for purchase by a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (“Agency eligible investor loans,” which are included in “Other loans”).
For GAAP reporting purposes, securities purchases and sales are reported on the trade date. Average amortized cost data used to determine yields is calculated based on the settlement date of the associated purchase or sale as interest income is not earned on purchased assets and continues to be earned on sold assets until settlement date.
For GAAP reporting purposes, securities purchases and sales are reported on the trade date. Average amortized cost basis data used to determine yields is calculated based on the settlement date of the associated purchase or sale as interest income is not earned on purchased assets and continues to be earned on sold assets until settlement date.
Conversely, discounts arise when we acquire an MBS or loan at a price below the aggregate principal balance of the mortgages securing the MBS or when we acquire residential whole loans at a price below their unpaid principal balance. Accretable purchase discounts on these investments are accreted to interest income.
Conversely, discounts arise when we acquire an MBS at a price below the aggregate principal balance of the mortgages securing the MBS or when we acquire residential whole loans at a price below their unpaid principal balance. Accretable purchase discounts on these investments are accreted to interest income.
Average yields are derived by dividing interest income by the average amortized cost of the related assets, and average costs are derived by dividing interest expense by the average balance of the related liabilities, for the periods shown. The yields and costs may include premium amortization and discount accretion which are considered adjustments to interest income or expense.
Average yields are derived by dividing interest income by the average amortized cost basis of the related assets, and average costs are derived by dividing interest expense by the average balance of the related liabilities, for the periods shown. The yields and costs may include premium amortization and discount accretion which are considered adjustments to interest income or expense.
Conversely, decreases in interest rates, in general, may over time cause: (i) the interest expense associated with our borrowings to decrease; (ii) the value of certain of our residential mortgage assets and securitized debt, to increase; (iii) coupons on 39 Table of Contents our adjustable-rate assets, on a delayed basis, to lower interest rates; (iv) prepayments on our assets to increase, thereby accelerating the amortization of purchase premiums and the accretion of our purchase discounts, and accelerating the redeployment of our capital to generally lower yielding investments; and (v) the value of our derivative hedging instruments, if any, to decrease.
Conversely, decreases in interest rates, in general, may, over time, cause: (i) the interest expense associated with our borrowings to decrease; (ii) the value of certain of our residential mortgage assets and securitized debt, to increase; (iii) coupons on 40 Table of Contents our adjustable-rate assets, on a delayed basis, to lower interest rates; (iv) prepayments on our assets to increase, thereby accelerating the amortization of purchase premiums and the accretion of our purchase discounts, and accelerating the redeployment of our capital to generally lower yielding investments; and (v) the value of our derivative hedging instruments, if any, to decrease.
Premiums arise when we acquire an MBS or loan at a price in excess of the aggregate principal balance of the mortgages securing the MBS (i.e., par value) or when we acquire residential whole loans at a price in excess of their unpaid principal balance.
Premiums arise when we acquire an MBS at a price in excess of the aggregate principal balance of the mortgages securing the MBS (i.e., par value) or when we acquire residential whole loans at a price in excess of their unpaid principal balance.
Typical supplemental terms and conditions, which differ by lender, may include changes to the margin maintenance requirements, required haircuts (or the percentage amount by which the collateral value is contractually required to exceed the loan amount), purchase price maintenance requirements, requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction and cross default and setoff provisions.
Typical supplemental terms and conditions, which differ by lender, may include changes to the margin maintenance requirements, required haircuts (or the percentage amount by which the collateral value is contractually required to exceed the amount borrowed), purchase price maintenance requirements, requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction and cross default and setoff provisions.
(2) Total Debt/Net Equity ratio represents the sum of borrowings under our financing agreements as a multiple of net equity allocated. 43 Table of Contents Residential Whole Loans The following table presents the contractual maturities of our residential whole loan portfolios at December 31, 2024. Amounts presented do not reflect estimates of prepayments or scheduled amortization.
(2) Total Debt/Net Equity ratio represents the sum of borrowings under our financing agreements as a multiple of net equity allocated. 43 Table of Contents Residential Whole Loans The following table presents the contractual maturities of our residential whole loan portfolios at December 31, 2025. Amounts presented do not reflect estimates of prepayments or scheduled amortization.
(7) Net interest margin reflects net interest income (including net swap income or expense) divided by average interest-earning assets. 49 Table of Contents Rate/Volume Analysis The following table presents the extent to which changes in interest rates (yield/cost) and changes in the volume (average balance) of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated.
(7) Net interest margin reflects net interest income (including net Swap carry) divided by average interest-earning assets. 49 Table of Contents Rate/Volume Analysis The following table presents the extent to which changes in interest rates (yield/cost) and changes in the volume (average balance) of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated.
Item 6. Reserved 38 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K.
Item 6. [Reserved] 39 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K.
We are subject to various financial covenants under our financing agreements, which include minimum liquidity and net worth requirements, net worth decline limitations and maximum debt-to-equity ratios. We were in compliance with all financial covenants as of December 31, 2024.
We are subject to various financial covenants under our financing agreements, which include minimum liquidity and net worth requirements, net worth decline limitations and maximum debt-to-equity ratios. We were in compliance with all financial covenants as of December 31, 2025.
Negative swap carry results when income from the receive leg is less than the expense on the pay leg.
Negative net Swap carry results when income from the receive leg is less than the expense on the pay leg.
(2) Excludes an allowance for credit losses. Our Transitional loans contain various contractual extension features, typically ranging from three to twelve months subject to certain conditions, generally including our consent. Transitional loans are generally only extended if the loan is current and in compliance with various other loan terms.
(2) Excludes an allowance for credit losses. Our Transitional loans contain various contractual extension features, typically ranging from three to twenty-four months subject to certain conditions, generally including our consent. Transitional loans are generally only extended if the loan is current and in compliance with various other loan terms.
During the year ended December 31, 2023, we repurchased $20.4 million principal amount of the Convertible Senior Notes for $20.2 million and recorded a gain of $0.1 million to Other Income/(Loss), net on the consolidated statement of operations. During the three months ended June 30, 2024, the Convertible Senior Notes matured and we repaid the amount in full.
During the year ended December 31, 2023, we repurchased $20.4 million principal amount of the Convertible Senior Notes for $20.2 million and recorded a gain of $0.1 million to Other Income/(Loss), net on the consolidated statement of operations. In June 2024, the Convertible Senior Notes matured and we repaid the amount in full.
The total net proceeds to us 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%.
The total net proceeds to us from the offering of the 9.00% Senior Notes, after deducting the 57 Table of Contents 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%.
For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, the estimated value of the collateral, expected costs and 56 Table of Contents estimated home price levels. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset.
For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, the estimated value of the collateral, expected costs and estimated home price levels. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset.
For additional information regarding the calculation of Distributable earnings and Economic book value per share, including a reconciliation to GAAP Net Income and GAAP book value per share, respectively, refer to “Reconciliation of GAAP and Non-GAAP Financial Measures” below. 2024 Portfolio Activity and impact on financial results At December 31, 2024, our residential mortgage asset portfolio, which includes residential whole loans and REO, and Securities, at fair value, was approximately $10.5 billion compared to $9.9 billion at December 31, 2023.
For additional information regarding the calculation of Distributable earnings and Economic book value per share, including a reconciliation to GAAP Net Income and GAAP book value per share, respectively, refer to “Reconciliation of GAAP and Non-GAAP Financial Measures” below. 2025 Portfolio Activity and impact on financial results At December 31, 2025, our residential mortgage asset portfolio, which includes residential whole loans and REO, and Securities, at fair value, was approximately $12.3 billion compared to $10.5 billion at December 31, 2024.
We continue to closely follow the actions of the Federal Reserve regarding the path and timing of changes in interest rates and the impact such rate changes would be expected to have on levels of inflation, the overall economic environment and our business. Our GAAP book value per common share was $13.39 as of December 31, 2024.
We continue to closely follow the actions of the Federal Reserve regarding the path and timing of changes in interest rates and the impact such rate changes would be expected to have on levels of inflation, the overall economic environment and our business. Our GAAP book value per common share was $13.20 as of December 31, 2025.
For a discussion related to our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7.
For a discussion related to our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7.
Further, changes in credit spreads will also impact the valuation of our residential whole loans and securitized debt, which could result in volatility in GAAP earnings. In addition, our borrowing costs and credit lines are further affected by the type of collateral we pledge and general conditions in the credit market.
Further, changes in spreads will also impact the valuation of our residential mortgage assets and securitized debt, which could result in volatility in GAAP earnings. In addition, our borrowing costs and credit lines are further affected by the type of collateral we pledge and general conditions in the credit market.
(3) Reflects dividends declared per share of common stock divided by earnings per share. The ratio has not been calculated for periods where earnings per share is negative as the calculations are not meaningful. (4) Reflects total average stockholders’ equity divided by total average assets.
(2) Reflects annualized net income divided by average total stockholders’ equity. (3) Reflects dividends declared per share of common stock divided by earnings per share. The ratio has not been calculated for periods where earnings per share is negative as the calculations are not meaningful. (4) Reflects total average stockholders’ equity divided by total average assets.
In addition, at December 31, 2024, we had securitized debt of $5.8 billion in connection with our loan securitization transactions. At December 31, 2023, we had borrowings under asset-backed financing agreements of $3.6 billion, of which $2.9 billion were secured by residential whole loans, $622.6 million were secured by securities and $25.2 million were secured by REO.
At December 31, 2024, we had borrowings under asset-backed financing agreements of $3.2 billion, of which $1.9 billion were secured by residential whole loans, $1.3 billion were secured by securities and $25.4 million were secured by REO. In addition, at December 31, 2024, we had securitized debt of $5.8 billion in connection with our loan securitization transactions.
Provision for Credit Losses on Other Assets For 2024, we recorded a provision for credit losses on Other Assets of $1.1 million, related to an uncollectible receivable from an unrelated third-party servicer.
Provision for Credit Losses on Other Assets For 2025, we had no provision for credit losses on Other Assets. For 2024, we recorded a provision for credit losses on Other Assets of $1.1 million, related to an uncollectible receivable from an unrelated third-party servicer.
At December 31, 2024, we had a total of $1.8 billion of residential whole loans, $1.4 billion of securities and $17.0 million of restricted cash pledged to our financing counterparties, excluding securitized debt. We expect that we will continue to pledge residential mortgage assets as part of certain of our ongoing financing arrangements.
At December 31, 2025, we had a total of $1.2 billion of residential whole loans, $3.1 billion of securities and $4.0 million of restricted cash pledged to our financing counterparties, excluding securitized debt. We expect that we will continue to pledge residential mortgage assets as part of certain of our ongoing financing arrangements.
As a result, the income recognized from securitization and re-securitization transactions may differ for tax and GAAP purposes. Whether our investments are held by our REIT or one of its Taxable REIT Subsidiaries (TRS) We estimate that for 2024, our net TRS taxable income (loss) will be $7.4 million.
As a result, the income recognized from securitization and re-securitization transactions may differ for tax and GAAP purposes. Whether our investments are held by our REIT or one of its Taxable REIT Subsidiaries (TRS) We estimate that for 2025, our net TRS taxable income (loss) will be $(56.0) million.
Given the short duration of our Transitional loans, maturity extensions are a regular occurrence, irrespective of market conditions. At December 31, 2024, approximately 18% of our Multifamily transitional loans and 26% of our Single-family transitional loans held as of period end had been extended.
Given the short duration of our Transitional loans, maturity extensions are a regular occurrence, irrespective of market conditions. At December 31, 2025, approximately 66% of our Multifamily transitional loans and 31% of our Single-family transitional loans held as of period end had been extended.
During the year we generated GAAP earnings per share (or EPS) of $0.83 per basic common share and Distributable earnings, a non-GAAP financial measure that excludes the impact of fair value changes and certain other items, of $1.57 per basic common share.
During the year, we generated GAAP earnings per share (or EPS) of $1.31 per basic common share and Distributable earnings, a non-GAAP financial measure that excludes the impact of fair value changes and certain other items, of $1.00 per basic common share.
Provision for Credit Losses on Residential Whole Loans Held at Carrying Value For 2024, we recorded a reversal of provision for credit losses on residential whole loans held at carrying value of $3.1 million compared to a reversal of provision of $8.9 million for 2023.
Provision for Credit Losses on Residential Whole Loans Held at Carrying Value For 2025, we recorded a provision for credit losses on residential whole loans held at carrying value of $0.9 million compared to a reversal of provision of $3.1 million for 2024.
As of December 31, 2024, we had $2.6 billion of total unpaid principal balance related to asset-backed financing agreements with mark-to-market collateral provisions and $6.5 billion of total unpaid principal balance related to asset-backed financing agreements that do not include mark-to-market collateral provisions.
As of December 31, 2025, we had $4.3 billion of total unpaid principal balance related to asset-backed financing agreements with mark-to-market collateral provisions and $6.5 billion of total unpaid principal balance related to asset-backed financing agreements that do not include mark-to-market collateral provisions.
We selectively invest in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return. We are an internally-managed real estate investment trust. At December 31, 2024, we had total assets of approximately $11.4 billion, of which $8.8 billion, or 77%, represented residential whole loans.
We selectively invest in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return. We are an internally-managed real estate investment trust. At December 31, 2025, we had total assets of approximately $13.0 billion, of which $8.8 billion, or 68%, represented residential whole loans.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (or ASU 2024-03). The amendments in ASU 2024-03 primarily require entities to disclose additional details regarding certain expenses on both an annual and interim basis.
Recent Accounting Standards to Be Adopted in Future Periods In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (or ASU 2024-03). The amendments in ASU 2024-03 primarily require entities to disclose additional details regarding certain expenses on both an annual and interim basis.
(2) Includes draws on previously originated Transitional loans. (3) Primarily includes sales, changes in fair value and changes in the allowance for credit losses. 41 Table of Contents At December 31, 2024, our total recorded investment in residential whole loans and REO was $8.9 billion, or 85.3% of our residential mortgage asset portfolio.
(2) Includes draws on previously originated Transitional loans. (3) Primarily includes sales of residential whole loans and securities, changes in fair value and changes in the allowance for credit losses. 42 Table of Contents At December 31, 2025, our total recorded investment in residential whole loans and REO was $8.9 billion, or 72.7% of our residential mortgage asset portfolio.
We held $7.5 billion and $7.5 billion of residential whole loans, at fair value, at December 31, 2024 and 2023, respectively, which represented 65.8% and 69.7% of our total assets at those dates, respectively.
We held $7.7 billion and $7.5 billion of residential whole loans, at fair value, at December 31, 2025 and 2024, respectively, which represented 59.2% and 65.8% of our total assets at those dates, respectively.
Since the second quarter of 2021 we have elected the fair value option for all loan acquisitions, and 85% our total loan portfolio is measured at fair value through earnings. Included in earnings in Other Income/(Loss), net are net gains on these loans of $46.0 million for the year ended December 31, 2024.
Since the second quarter of 2021 we have elected the fair value option for all loan acquisitions, and 88% of our total loan portfolio is measured at fair value through earnings. Included in earnings in Other Income/(Loss), net are net gains on these loans of $133.7 million for the year ended December 31, 2025.
We have available for issuance an unlimited amount (subject to the terms and limitations of our charter) of common stock, preferred stock, depository shares representing preferred stock, warrants, debt securities, rights and/or units pursuant to our universal shelf registration statement and, at December 31, 2024, we had approximately 2.0 million shares of common stock available for issuance pursuant to our DRSPP shelf registration statement.
We have available for issuance an unlimited amount (subject to the terms and limitations of our charter) of common stock, preferred stock, depository shares representing preferred stock, warrants, debt securities, rights and/or units pursuant to our universal shelf registration statement and, until September 27, 2025, we had approximately 2.0 million shares of common stock available for issuance pursuant to our DRSPP shelf registration statement.
At December 31, 2024 and 2023, we had REO with an aggregate carrying value of $130.9 million and $110.2 million, respectively, which is included in Other assets on our consolidated balance sheets.
At December 31, 2025 and 2024, we had REO with an aggregate carrying value of $135.0 million and $130.9 million, respectively, which is included in Other assets on our consolidated balance sheets.
While we have not elected hedge accounting treatment for Swaps, and accordingly, net carry is not presented in interest expense in our consolidated statement of operations, we believe it is appropriate to allocate net carry to the cost of funding to reflect the economic impact of our Swaps on the funding costs shown in the table above.
While we have not elected hedge accounting treatment for Swaps and, accordingly, net Swap carry is not presented in interest expense in our consolidated statement of operations, we believe it is appropriate to allocate net Swap carry by asset class to reflect the economic impact of our Swaps on the net interest spread shown in the table above.
We held $1.3 billion and $1.5 billion of residential whole loans, at carrying value, at December 31, 2024 and 2023, respectively, which represented 11.4% and 14.2% of our total assets at those dates, respectively.
We held $1.1 billion and $1.3 billion of residential whole loans, at carrying value, at December 31, 2025 and 2024, respectively, which represented 8.4% and 11.4% of our total assets at those dates, respectively.
Tax Considerations Current period estimated taxable income We estimate that for 2024, our REIT taxable income was approximately $119.4 million.
Tax Considerations Current period estimated taxable income We estimate that for 2025, our REIT taxable income was approximately $127.4 million.
Residential whole loans, at fair value recorded valuation changes of $46.0 million, $89.9 million and $866.8 million during the years ended December 31, 2024, 2023, and 2022, respectively.
Residential whole loans, at fair value recorded valuation changes of $133.7 million, $46.0 million and $89.9 million during the years ended December 31, 2025, 2024, and 2023, respectively.
The changes in average interest-earning assets and average interest-bearing liabilities and their related yields and costs are discussed in greater detail below under “Interest Income” and “Interest Expense.” For 2024, our net interest spread and margin (including the impact of swaps) were 2.10% and 2.91%, respectively, compared to a net interest spread and margin (including the impact of swaps) of 2.05% and 2.90%, respectively, for 2023.
The changes in average interest-earning assets and average interest-bearing liabilities and their related yields and costs are discussed in greater detail below under “Interest Income” and “Interest Expense.” For 2025, our net interest spread and margin (including the impact of net Swap carry) were 1.84% and 2.55%, respectively, compared to a net interest spread and margin (including the impact of net Swap carry) of 2.10% and 2.91%, respectively, for 2024.
In addition, for the year ended December 31, 2024, the repayment rate (which includes both scheduled and unscheduled repayments of principal) was 60.6% for our Single-family transitional loans and 24.4% for our Multifamily transitional loans. It is generally our business strategy to hold our residential mortgage assets as long-term investments.
In addition, for the year ended December 31, 2025, the repayment rate (which includes both scheduled and unscheduled repayments of principal) was 67.7% for our Single-family transitional loans and 42.5% for our Multifamily transitional loans. It is generally our business strategy to hold our residential mortgage assets as long-term investments.
Of this amount, $4.3 billion are Non-QM loans, $1.4 billion are Single-family rental loans, $1.1 billion are Single-family transitional loans, $0.9 billion are Multifamily transitional loans and $1.1 billion are Legacy RPL/NPL loans.
Of this amount, $5.3 billion are Non-QM loans, $1.2 billion are Single-family rental loans, $0.7 billion are Single-family transitional loans, $0.5 billion are Multifamily transitional loans and $1.0 billion are Legacy RPL/NPL loans.
Net interest income for 2024 also includes approximately $4.0 million of additional interest income from cash and other interest earning assets compared to 2023. 48 Table of Contents Analysis of Net Interest Income The following table sets forth certain information about the average balances of our assets and liabilities and their related yields and costs for the years ended December 31, 2024 and 2023 .
Net interest income for 2025 also had approximately $11.1 million less interest income from cash and other interest earning assets compared to 2024. 48 Table of Contents Analysis of Net Interest Income The following table sets forth certain information about the average balances of our assets and liabilities and their related yields and costs for the years ended December 31, 2025 and 2024 .
Other non-repurchase 58 Table of Contents agreement financing arrangements also contain provisions governing collateral maintenance. At December 31, 2024, we had unused financing capacity of approximately $3.8 billion across our financing arrangements for all collateral types.
Other non-repurchase agreement financing arrangements also contain provisions governing collateral maintenance. At December 31, 2025, we had unused financing capacity of approximately $3.4 billion across our financing arrangements for all collateral types.
CPRs on our residential mortgage securities and whole loans may differ significantly. For the year ended December 31, 2024, the average CPRs on certain of our loan portfolios were: 10.4% for Non-QM loans, 8.7% for Single-family rental loans, and 8.6% for Legacy RPL/NPL loans.
CPRs on our residential mortgage securities and whole loans may differ significantly. For the year ended December 31, 2025, the average CPRs on certain of our loan portfolios were: 14.3% for Non-QM loans, 10.5% for Single-family rental loans, and 8.1% for Legacy RPL/NPL loans.
At December 31, 2024, our GAAP book value was $13.39 and our Economic book value, a non-GAAP financial measure of our financial position that adjusts GAAP book value by the amount of unrealized mark-to-market gains or losses on our residential whole loans and securitized debt held at carrying value, was $13.93 per common share, each representing decreases of approximately 4% as compared to December 31, 2023.
At December 31, 2025, our GAAP book value was $13.20 and our Economic book value, a non-GAAP financial measure of our financial position that adjusts GAAP book value by the amount of unrealized mark-to-market gains or losses on our residential whole loans and securitized debt held at carrying value, was $13.75 per common share, each down approximately 1% compared to December 31, 2024.
On December 11, 2024, we declared our fourth quarter 2024 dividend on our common stock of $0.35 per share; on January 31, 2025, we paid this dividend, which totaled approximately $36.0 million, including dividend equivalents of approximately $0.3 million. 60 Table of Contents
On December 11, 2025, we declared our fourth quarter 2025 dividend on our common stock of $0.36 per share; on January 30, 2026, we paid this dividend, which totaled approximately $37.1 million, including dividend equivalents of approximately $0.5 million. 60 Table of Contents
Excludes servicing costs. (2) Reflects annualized interest expense divided by average balance of agreements with mark-to-market collateral provisions (repurchase agreements), agreements with non-mark-to-market collateral provisions, and securitized debt. Cost of funding shown in the table above includes the impact of the net carry (the difference between swap interest income received and swap interest expense paid) on our Swaps.
Excludes servicing costs. (2) Reflects annualized interest expense divided by average balance of agreements with mark-to-market collateral provisions (repurchase agreements), agreements with non-mark-to-market collateral provisions, and securitized debt. (3) Reflects the difference between Swap interest income received and Swap interest expense paid on our Swaps.
During the year we declared dividends of $1.40 per common share. For the year, our Lima One subsidiary originated Business purpose loans with a maximum unpaid principal balance of $1.4 billion, a decline from the $2.2 billion originated in 2023.
During the year, we declared dividends totaling $1.44 per common share. For the year, our Lima One subsidiary originated Business purpose loans with a maximum unpaid principal balance of $0.9 billion, a decrease from the $1.4 billion originated in 2024.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the Year Ended December 31, 2023, which was filed with the SEC on February 22, 2024, and is available on the SEC’s website at www.sec.gov and on our website at www.mfafinancial.com.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the Year Ended December 31, 2024, which was filed with the SEC on February 20, 2025, and is available on the SEC’s website at www.sec.gov and on our website at www.mfafinancial.com. 46 Table of Contents Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024 The following table summarizes the changes in our results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024.
This increase primarily reflects an increase in the average amortized cost of the portfolio of $368.5 million due to purchases of Agency MBS, partially offset by a decrease in the net yield on our Securities, at fair value portfolio to 6.59% for 2024, compared to 7.57% for 2023.
This increase primarily reflects a higher average amortized cost basis of the portfolio of $1.1 billion due to purchases of Agency MBS, partially offset by a decrease in the net yield on our Securities, at fair value portfolio to 5.93% for 2025, compared to 6.59% for 2024.
During 2024, we recognized approximately $633.6 million of residential whole loan interest income on our consolidated statements of operations, representing an effective yield of 6.74%, with Single-family transitional loans generating an effective yield of 9.45%, Multifamily transitional loans generating an effective yield of 8.20%, Single-family rental loans generating an effective yield of 6.37%, Non-QM loans generating an effective yield of 5.50% and Legacy RPL/NPL loans generating an effective yield of 7.91%.
During 2025, we recognized approximately $605.6 million of residential whole loan interest income on our consolidated statements of operations, representing an effective yield of 6.74%, with Single-family transitional loans generating an effective yield of 9.48%, Multifamily transitional loans generating an effective yield of 8.54%, Single-family rental loans generating an effective yield of 6.43%, Non-QM loans generating an effective yield of 5.87% and Legacy RPL/NPL loans generating an effective yield of 7.92%.
(2) Excludes an allowance for credit losses of $2.1 million at December 31, 2024. (3) Excludes an allowance for credit losses of $6.8 million at December 31, 2024.
(2) Excludes an allowance for credit losses of $2.0 million at December 31, 2025. (3) Excludes an allowance for credit losses of $6.0 million at December 31, 2025.
(5) Represents the sum of our borrowings under financing agreements and payable for unsettled purchases divided by stockholders’ equity. (6) Represents the sum of our borrowings under financing agreements (excluding securitized debt and other non-recourse debt) and payable for unsettled purchases divided by stockholders’ equity.
(5) Represents the sum of our borrowings under financing agreements and payable for unsettled purchases divided by stockholders’ equity.
The reversal of provision recorded in 2024 primarily reflects the run-off of loans held at carrying value and minor changes to modeling assumptions. The prior period reversal primarily reflects updated modeling assumptions, as well as the run-off of loans held at carrying value, partially offset by the impact of loan charge-offs.
The provision for the current period primarily reflects minor changes to modeling assumptions, partially offset by the run-off of loans held at carrying value. The reversal of provision recorded in 2024 primarily reflects the run-off of loans held at carrying value and minor changes to modeling assumptions.
In February 2023, our Board authorized a repurchase program for its Convertible Senior Notes pursuant to which it could have repurchased up to $100 million of our Convertible Senior Notes.
In February 2023, our Board authorized a repurchase program for our 6.25% Convertible Senior Notes due 2024 (or the Convertible Senior Notes) pursuant to which we could have repurchased up to $100 million of the Convertible Senior Notes.
During 2024, we received $2.2 billion of principal payments on residential whole loans and loan related investments, $654.1 million of proceeds from the sale of residential whole loans, and $86.1 million of proceeds on sales of REO.
During 2025, we received $2.4 billion of principal payments on residential whole loans and loan related investments, $274.9 million of proceeds from the sale of residential whole loans, and $96.4 million of proceeds on sales of REO.
(3) Reflects dividends declared per share of common stock divided by Distributable earnings per share. 55 Table of Contents Reconciliation of GAAP Book Value per Common Share to non-GAAP Economic Book Value per Common Share “Economic book value” is a non-GAAP financial measure of our financial position.
(2) Reflects annualized Distributable earnings before preferred dividends divided by average total stockholders’ equity. (3) Reflects dividends declared per share of common stock divided by Distributable earnings per share. Reconciliation of GAAP Book Value per Common Share to non-GAAP Economic Book Value per Common Share “Economic book value” is a non-GAAP financial measure of our financial position.
The following table provides a reconciliation of our GAAP book value per common share to our non-GAAP Economic book value per common share as of the quarterly periods below: Quarter Ended: (In Millions, Except Per Share Amounts) December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 GAAP Total Stockholders’ Equity $ 1,841.8 $ 1,880.5 $ 1,883.2 $ 1,884.2 $ 1,899.9 $ 1,848.5 $ 1,944.8 $ 2,018.6 Preferred Stock, liquidation preference (475.0) (475.0) (475.0) (475.0) (475.0) (475.0) (475.0) (475.0) GAAP Stockholders’ Equity for book value per common share 1,366.8 1,405.5 1,408.2 1,409.2 1,424.9 1,373.5 1,469.8 1,543.6 Adjustments: Fair value adjustment to Residential whole loans, at carrying value (15.3) 6.7 (26.8) (35.4) (35.6) (85.3) (58.3) (33.9) Fair value adjustment to Securitized debt, at carrying value 70.3 64.3 82.3 88.4 95.6 122.5 129.8 122.4 Stockholders’ Equity including fair value adjustments to Residential whole loans and Securitized debt held at carrying value (Economic book value ) $ 1,421.8 $ 1,476.5 $ 1,463.7 $ 1,462.2 $ 1,484.9 $ 1,410.7 $ 1,541.3 $ 1,632.1 GAAP book value per common share $ 13.39 $ 13.77 $ 13.80 $ 13.80 $ 13.98 $ 13.48 $ 14.42 $ 15.15 Economic book value per common share $ 13.93 $ 14.46 $ 14.34 $ 14.32 $ 14.57 $ 13.84 $ 15.12 $ 16.02 Number of shares of common stock outstanding 102.1 102.1 102.1 102.1 101.9 101.9 101.9 101.9 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements include the accounts of all of our subsidiaries.
The following table provides a reconciliation of our GAAP book value per common share to our non-GAAP Economic book value per common share as of the quarterly periods below: Quarter Ended: (In Millions, Except Per Share Amounts) December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 GAAP Total Stockholders’ Equity $ 1,827.7 $ 1,821.5 $ 1,822.1 $ 1,838.4 $ 1,841.8 $ 1,880.5 $ 1,883.2 $ 1,884.2 Preferred Stock, liquidation preference (485.3) (479.9) (475.0) (475.0) (475.0) (475.0) (475.0) (475.0) GAAP Stockholders’ Equity for book value per common share 1,342.4 1,341.6 1,347.1 1,363.4 1,366.8 1,405.5 1,408.2 1,409.2 Adjustments: Fair value adjustment to Residential whole loans, at carrying value 10.1 8.7 1.8 (6.3) (15.3) 6.7 (26.8) (35.4) Fair value adjustment to Securitized debt, at carrying value 45.7 48.5 57.1 63.1 70.3 64.3 82.3 88.4 Stockholders’ Equity including fair value adjustments to Residential whole loans and Securitized debt held at carrying value (Economic book value) $ 1,398.2 $ 1,398.8 $ 1,406.0 $ 1,420.2 $ 1,421.8 $ 1,476.5 $ 1,463.7 $ 1,462.2 GAAP book value per common share $ 13.20 $ 13.13 $ 13.12 $ 13.28 $ 13.39 $ 13.77 $ 13.80 $ 13.80 Economic book value per common share $ 13.75 $ 13.69 $ 13.69 $ 13.84 $ 13.93 $ 14.46 $ 14.34 $ 14.32 Number of shares of common stock outstanding 101.7 102.2 102.7 102.7 102.1 102.1 102.1 102.1 55 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements include the accounts of all of our subsidiaries.
For additional information regarding our residential whole loan portfolios, including information about delinquency trends, see Note 3 to the consolidated financial statements, included under Item 8 of this Annual Report on Form 10-K. 44 Table of Contents Securities, at Fair Value The following table presents information with respect to our Securities, at fair value at December 31, 2024 and December 31, 2023: (Dollars in Thousands) December 31, 2024 December 31, 2023 Agency MBS Face/Par $ 1,403,891 $ 554,300 Fair Value 1,392,635 559,144 Amortized Cost 1,405,900 555,624 Weighted average yield (1) 5.45 % 5.59 % Weighted average time to maturity 29.1 years 29.3 years Term notes backed by MSR collateral Face/Par $ 55,000 $ 85,000 Fair Value 54,588 79,895 Amortized Cost 50,639 74,184 Weighted average yield (1) 13.95 % 16.96 % Weighted average time to maturity 0.8 years 1.8 years CRT securities Face/Par $ 64,602 $ 79,617 Fair Value 67,642 83,222 Amortized Cost 58,930 68,971 Weighted average yield (1) 9.35 % 10.30 % Weighted average time to maturity 15.0 years 17.9 years Non-Agency MBS Face/Par $ 27,206 $ 28,485 Fair Value 22,648 23,828 Amortized Cost 22,633 23,482 Weighted average yield (1) 5.67 % 5.84 % Weighted average time to maturity 26.8 years 27.8 years (1) Weighted average yield is annualized interest income divided by average amortized cost for Securities, at fair value held at December 31, 2024 and December 31, 2023.
For additional information regarding our residential whole loan portfolios, including information about delinquency trends, see Note 3 to the consolidated financial statements, included under Item 8 of this Annual Report on Form 10-K. 44 Table of Contents Securities, at Fair Value The following table presents information with respect to our Securities, at fair value at December 31, 2025 and December 31, 2024: (Dollars in Thousands) December 31, 2025 December 31, 2024 Agency MBS Face/Par $ 3,256,760 $ 1,403,891 Fair Value 3,303,204 1,392,635 Amortized Cost Basis 3,257,686 1,405,900 Weighted average yield (1) 5.39 % 5.45 % Weighted average time to maturity 29.0 years 29.1 years Term notes backed by MSR collateral Face/Par $ — $ 55,000 Fair Value — 54,588 Amortized Cost Basis — 50,639 Weighted average yield (1) — % 13.95 % Weighted average time to maturity N/A 0.8 years CRT securities Face/Par $ 34,000 $ 64,602 Fair Value 34,945 67,642 Amortized Cost Basis 30,330 58,930 Weighted average yield (1) 17.15 % 9.35 % Weighted average time to maturity 14.1 years 15.0 years Non-Agency MBS Face/Par $ 25,919 $ 27,206 Fair Value 22,131 22,648 Amortized Cost Basis 21,750 22,633 Weighted average yield (1) 5.63 % 5.67 % Weighted average time to maturity 25.8 years 26.8 years (1) Weighted average yield is annualized interest income divided by average amortized cost basis for Securities, at fair value held at December 31, 2025 and December 31, 2024.
The value of securities pledged as collateral fluctuates reflecting changes in: (i) the face (or par) value of our assets; (ii) market interest rates and/or other market conditions; and (iii) the market value of our Swaps. Margin calls and reverse margin calls are satisfied when we pledge or receive additional collateral in the form of additional assets and/or cash.
The value of securities pledged as collateral fluctuates reflecting changes in: (i) the face (or par) value of our assets; (ii) market interest rates and/or other market conditions; and (iii) the market value of our Swaps.
LIQUIDITY AND CAPITAL RESOURCES Our principal sources of cash generally consist of borrowings under repurchase agreements and other collateralized financings, payments of principal and interest we receive on our investment portfolio, cash generated from our operating results and, to the extent such transactions are entered into, proceeds from capital market and structured financing transactions.
We do not expect that the adoption of ASU 2024-03 will have a significant impact on our financial statement disclosures. 56 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Our principal sources of cash generally consist of borrowings under repurchase agreements and other collateralized financings, payments of principal and interest we receive on our investment portfolio, cash generated from our operating results and, to the extent such transactions are entered into, proceeds from capital market and structured financing transactions.
In addition, net interest income for 2024 includes higher net interest income for our Securities, at fair value portfolio of approximately $0.9 million compared to 2023, primarily due higher amounts invested in the securities portfolio, partially offset by an increase in average balance of financing agreements for our securities.
Net interest income for 2025 included approximately $23.3 million of higher net interest income for our Securities, at fair value portfolio compared to 2024, primarily due to higher amounts invested in Agency MBS, partially offset by a related increase in average balance of securities financing agreements.
For 2024, net interest income includes higher net interest income from our residential whole loan portfolio of $27.2 million compared to 2023, primarily due to higher asset yields and higher amounts invested in the loan portfolio, partially offset by an increase in average balance and financing rates for our securitized debt.
In addition, net interest income for 2025 included $12.7 million higher net interest income from our residential whole loan portfolio compared to 2024, primarily due to a decrease in average balances of, and rates on, residential whole loan financing agreements, partially offset by an increase in average balances of, and rates on, our securitized debt and a decrease in amounts invested in the loan portfolio.
Our net interest income, which does not include the benefit of swap carry, increased by $26.3 million, or 14.9%, to $202.7 million from $176.5 million for 2023.
Our net interest income, which does not include the benefit of net Swap carry, increased by $28.4 million, or 14.0%, to $231.1 million from $202.7 million for 2024.
In addition, during 2024, we utilized $869.1 million for acquisitions of securities and received cash proceeds of $45.6 million from sales of securities and other assets and $84.0 million from principal payments on our securities.
In addition, during 2025, we utilized $2.2 billion for acquisitions of securities and received $289.6 million from principal payments on our securities and cash proceeds of $46.8 million from sales of securities and other assets.
Interest income on our Securities, at fair value portfolio for 2024 increased $18.7 million to $61.1 million from $42.4 million for 2023.
Interest Income Interest income on our Securities, at fair value portfolio for 2025 increased $60.1 million to $121.3 million from $61.1 million for 2024.
These expenses increased compared to 2023 by approximately $1.2 million, or 3.4%, primarily due to higher non-recoverable advances and upfront costs on securitization. 53 Table of Contents Selected Financial Ratios The following table presents information regarding certain of our financial ratios at or for the dates presented: At or for the Quarter Ended Return on Average Total Assets (1) Return on Average Total Stockholders’ Equity (2) Dividend Payout Ratio (3) Total Average Stockholders’ Equity to Total Average Assets (4) Leverage Multiple (5) Recourse Leverage Multiple (6) December 31, 2024 0.21 % 1.26 % — 16.41 % 5.0 1.7 September 30, 2024 1.74 10.17 0.92 17.10 4.8 1.8 June 30, 2024 1.52 8.85 1.09 17.14 4.7 1.7 March 31, 2024 0.85 4.69 2.50 18.23 4.6 1.8 December 31, 2023 3.46 19.04 0.44 18.16 4.5 1.7 September 30, 2023 (0.56) (2.96) — 19.10 4.3 2.0 June 30, 2023 (0.27) (1.31) — 20.99 3.9 1.9 March 31, 2023 3.14 14.40 0.56 21.81 3.5 1.6 (1) Reflects annualized net income divided by average total assets.
Selected Financial Ratios The following table presents information regarding certain of our financial ratios at or for the dates presented: At or for the Quarter Ended Return on Average Total Assets (1) Return on Average Total Stockholders’ Equity (2) Dividend Payout Ratio (3) Total Average Stockholders’ Equity to Total Average Assets (4) Leverage Multiple (5) Recourse Leverage Multiple (6) December 31, 2025 1.69 % 11.84 % 0.86 14.31 % 6.0 2.5 September 30, 2025 1.62 10.50 1.00 15.46 5.5 1.9 June 30, 2025 1.14 7.21 1.64 15.86 5.2 1.8 March 31, 2025 1.45 8.91 1.13 16.31 5.1 1.8 December 31, 2024 0.21 1.26 — 16.41 5.0 1.7 September 30, 2024 1.74 10.17 0.92 17.10 4.8 1.8 June 30, 2024 1.52 8.85 1.09 17.14 4.7 1.7 March 31, 2024 0.85 4.69 2.50 18.23 4.6 1.8 (1) Reflects annualized net income divided by average total assets.
Our residential mortgage investments have longer-term contractual maturities than our non-securitization related financing liabilities, and the interest rates we pay on our non-securitization related financings will typically change at a faster pace than the interest rates we earn on our investments. In order to reduce this interest rate risk exposure, we may enter into derivative instruments, which currently include Swaps.
Our residential mortgage investments have longer-term contractual maturities than our non-securitization related financing liabilities, and the interest rates we pay on our non-securitization related financings will typically change at a faster pace than the interest rates we earn on our investments.
The Company did not issue any shares pursuant to its DRSPP during 2024. 57 Table of Contents In January 2024, we completed the issuance of $115.0 million in aggregate principal amount of its 8.875% Senior Notes in an underwritten public offering.
The DRSPP shelf registration statement expired by its terms on September 27, 2025. We did not issue any shares pursuant to the DRSPP during 2025. In January 2024, we completed the issuance of $115.0 million in aggregate principal amount of our 8.875% Senior Notes due 2029 (or the 8.875% Senior Notes) in an underwritten public offering.
During 2024, we paid $143.9 million for cash dividends on our common stock and dividend equivalents and paid cash dividends of $32.9 million on our preferred stock.
During 2025, we paid $148.2 million for cash dividends on our common stock and dividend equivalents and paid cash dividends of $40.3 million on our preferred stock.
Loan acquisition activity of $2.6 billion during 2024 included $991.5 million of Single-family transitional loans (including draws), $1.2 billion of Non-QM loans, $331.7 million of Single-family rental loans and $145.0 million of Multifamily transitional loans (including draws).
Loan acquisition activity of $2.7 billion during 2025 included $655.7 million of Single-family transitional loans (including draws), $1.8 billion of Non-QM loans, $235.4 million of Single-family rental loans and $14.8 million of Multifamily transitional loans (including draws).
Reconciliation of GAAP and Non-GAAP Financial Measures Reconciliation of GAAP Net Income to non-GAAP Distributable Earnings “Distributable earnings” is a non-GAAP financial measure of our operating performance, within the meaning of Regulation G and Item 10(e) of Regulation S-K, as promulgated by the Securities and Exchange Commission.
(6) Represents the sum of our borrowings under financing agreements (excluding securitized debt and other non-recourse debt) and payable for unsettled purchases divided by stockholders’ equity. 53 Table of Contents Reconciliation of GAAP and Non-GAAP Financial Measures Reconciliation of GAAP Net Income to non-GAAP Distributable Earnings “Distributable earnings” is a non-GAAP financial measure of our operating performance, within the meaning of Regulation G and Item 10(e) of Regulation S-K, as promulgated by the Securities and Exchange Commission.
The table below summarizes our margin activity with respect to our repurchase agreement financings and derivative hedging instruments for the quarterly periods presented: Collateral Pledged for Margin Activity Cash and Securities Received for Reverse Margin Net Assets Received/(Pledged) for Margin Activity For the Quarter Ended (1) Fair Value of Securities Pledged Cash Pledged Aggregate Assets Pledged for Margin (In Thousands) December 31, 2024 $ 30,607 $ 30,806 $ 61,413 $ 36,992 $ (24,421) September 30, 2024 7,368 7,076 14,444 15,361 917 June 30, 2024 — 6,795 6,795 17,348 10,553 March 31, 2024 17,379 3,358 20,737 16,514 (4,223) December 31, 2023 10,616 4,085 14,701 23,060 8,359 September 30, 2023 35,690 4,363 40,053 34,846 (5,207) June 30, 2023 5,982 2,909 8,891 5,328 (3,563) March 31, 2023 676 2,965 3,641 6,529 2,888 (1) Excludes variation margin payments on our cleared Swaps which are treated as a legal settlement of the exposure under the Swap contract.
Margin calls and reverse margin calls are satisfied when we pledge or receive additional collateral in the form of additional assets and/or cash. 59 Table of Contents The table below summarizes our margin activity with respect to our repurchase agreement financings and derivative hedging instruments for the quarterly periods presented: Collateral Pledged for Margin Activity Cash and Securities Received for Reverse Margin Net Assets Received/ (Pledged) for Margin Activity For the Quarter Ended (1) Fair Value of Securities Pledged Cash Pledged Aggregate Assets Pledged for Margin (In Thousands) December 31, 2025 $ 118,636 $ 8,661 $ 127,297 $ 122,020 $ (5,277) September 30, 2025 34,529 18,697 53,226 62,671 9,445 June 30, 2025 63,384 10,109 73,493 81,349 7,856 March 31, 2025 15,676 18,471 34,147 37,890 3,743 December 31, 2024 30,607 30,806 61,413 36,992 (24,421) September 30, 2024 7,368 7,076 14,444 15,361 917 June 30, 2024 — 6,795 6,795 17,348 10,553 March 31, 2024 17,379 3,358 20,737 16,514 (4,223) (1) Excludes variation margin payments on our cleared Swaps which are treated as a legal settlement of the exposure under the Swap contract.
In addition, at December 31, 2023, we had securitized debt of $4.8 billion in connection with our loan securitization transactions. During 2024, $0.4 billion was used in our investing activities. We utilized $2.7 billion for acquisitions and origination of residential whole loans, loan related investments and capitalized advances.
During 2025, $1.8 billion was used in our investing activities. We utilized $2.7 billion for acquisitions and origination of residential whole loans, loan related investments and capitalized advances.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Note 15. Segment Reporting 120 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61 Note 16. Subsequent Events 1 Schedule IV - Mortgage Loans on Real Estate 125 Item 8. Financial Statements and Supplementary Data 66
Biggest changeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 40 Note 15. Segment Reporting 119 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61 Note 1 6 . S ubsequent Events 123 Schedule IV - Mortgage Loans on Real Estate 124 Item 8. Financial Statements and Supplementary Data 66

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents certain information about our Residential whole loans at December 31, 2024: Single-family transitional loans Multifamily transitional loans Single-family rental loans Non-QM loans Legacy RPL/NPL loans Loans with an LTV: Loans with an LTV: Loans with an LTV: Loans with an LTV: Loans with an LTV: (Dollars in Thousands) 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% Amortized cost $ 1,028,009 $ 80,179 $ 922,736 $ 55,326 $ 1,400,054 $ 23,277 $ 4,297,995 $ 223,090 $ 881,384 $ 119,911 Unpaid principal balance (UPB) $ 1,026,649 $ 79,983 $ 921,691 $ 55,272 $ 1,393,460 $ 23,245 $ 4,189,790 $ 218,870 $ 1,032,910 $ 189,348 Weighted average coupon (1) 10.5 % 9.7 % 9.2 % 9.1 % 6.4 % 5.5 % 6.5 % 7.0 % 5.2 % 5.0 % Weighted average term to maturity (months) 6 3 7 4 321 322 339 343 245 296 Weighted average LTV (2) 65 % 106 % 63 % 95 % 67 % 159 % 63 % 85 % 46 % 103 % Loans 90+ days delinquent UPB $ 69,044 $ 30,963 $ 53,613 $ 32,011 $ 29,872 $ 19,415 $ 103,638 $ 15,202 $ 165,673 $ 50,587 (1) Weighted average is calculated based on the interest bearing principal balance of each loan within the related category.
Biggest changeThe following table presents certain information about our Residential whole loans as of December 31, 2025: Non-QM loans Single-family rental loans Single-family transitional loans Multifamily transitional loans Legacy RPL/NPL loans Loans with an LTV: Loans with an LTV: Loans with an LTV: Loans with an LTV: Loans with an LTV: (Dollars in Thousands) 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% Amortized cost basis $ 5,207,703 $ 249,274 $ 1,240,640 $ 11,538 $ 680,933 $ 55,803 $ 510,591 $ 25,785 $ 794,943 $ 103,850 Unpaid principal balance (UPB) $ 5,077,245 $ 245,076 $ 1,235,000 $ 11,746 $ 677,325 $ 54,735 $ 506,504 $ 25,300 $ 934,549 $ 163,149 Weighted average coupon (1) 6.7 % 7.5 % 6.3 % 7.4 % 10.3 % 10.3 % 10.2 % 10.0 % 5.1 % 5.0 % Weighted average term to maturity (months) 337 343 312 309 6 1 1 1 237 286 Weighted average LTV (2) 63 % 86 % 66 % 102 % 66 % 124 % 63 % 94 % 46 % 102 % Loans 90+ days delinquent UPB $ 161,231 $ 13,942 $ 20,546 $ 6,685 $ 56,982 $ 24,564 $ 51,708 $ 2,982 $ 132,832 $ 33,799 (1) Weighted average is calculated based on the interest bearing principal balance of each loan within the related category.
Conversely, discounts arise when we acquire an MBS or loan at a price below below their unpaid principal balance. Premiums paid are amortized against interest income and accretable purchase discounts on these investments are accreted to interest income.
Conversely, discounts arise when we acquire an MBS or loan at a price below their unpaid principal balance. Premiums paid are amortized against interest income and accretable purchase discounts on these investments are accreted to interest income.
While use of such derivatives does not extend the maturities of our borrowings under repurchase agreements, they do, in effect, lock in a fixed rate of interest over their term for a corresponding amount of our repurchase agreement financings that are hedged, or otherwise act as a hedge against changes in interest rates. 61 Table of Contents Shock Table The information presented in the following “Shock Table” projects the potential impact of sudden parallel changes in interest rates on our portfolio value, including the impact of Swaps and securitized debt and other fixed rate debt, based on the assets in our investment portfolio at December 31, 2024 and 2023.
While use of such derivatives does not extend the maturities of our borrowings under repurchase agreements, they do, in effect, lock in a fixed rate of interest over their term for a corresponding amount of our repurchase agreement financings that are hedged, or otherwise act as a hedge against changes in interest rates. 61 Table of Contents Shock Table The information presented in the following “Shock Table” projects the potential impact of sudden parallel changes in interest rates on our portfolio value, including the impact of Swaps and securitized debt and other fixed rate debt, based on the assets in our investment portfolio as of December 31, 2025 and 2024.
(2) Change in estimated net portfolio value includes the effect of our interest rate swaps, securitized debt, and other fixed rate debt.
(2) Change in estimated net portfolio value includes the effect of our Swaps, securitized debt, and other fixed rate debt.
Certain assumptions have been made in connection with the calculation of the information set forth in the Shock Table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates at December 31, 2024 and 2023.
Certain assumptions have been made in connection with the calculation of the information set forth in the Shock Table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates as of December 31, 2025 and 2024.
At December 31, 2024, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 1.02, which is the weighted average of 3.48 for our Residential whole loans, 3.72 for our Securities investments, (2.66) for our derivative and other hedging transactions and securitized and other fixed rate debt, and 0.00 for our Other assets and cash and cash equivalents.
As of December 31, 2024, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 1.02, which is the weighted average of 3.48 for our Residential whole loans, 3.72 for our Securities investments, (2.66) for our derivative and other hedging transactions and securitized and other fixed rate debt, and zero for our Other assets and cash and cash equivalents.
Estimated convexity (i.e., the approximate change in duration relative to the change in interest rates) of the portfolio was (0.49), which is the weighted average of (0.50) for our Residential whole loans, zero for our derivative and other hedging transactions and securitized and other fixed rate debt, (1.08) for our Securities investments, and zero for our Other assets and cash and cash equivalents. 62 Table of Contents CREDIT RISK We are exposed to credit risk through our credit sensitive residential mortgage investments, in particular residential whole loans and certain of our securities investments.
Estimated convexity (i.e., the approximate change in duration relative to the change in interest rates) of the portfolio was (0.53), which is the weighted average of (0.53) for our Residential whole loans, zero for our derivative and other hedging transactions and securitized and other fixed rate debt, (0.93) for our Securities investments, and zero for our Other assets and cash and cash equivalents. 62 Table of Contents CREDIT RISK We are exposed to credit risk through our credit sensitive residential mortgage investments, in particular residential whole loans and certain of our securities investments.
Our financing agreements with mark-to-market collateral provisions require us to pledge additional collateral in the event the market value of the assets pledged decreases, in order to maintain the lenders contractually specified collateral cushion, which is measured as the difference between the loan amount and the market value of the asset pledged as collateral.
Our financing agreements with mark-to-market collateral provisions require us to pledge additional collateral in the event the market value of the assets pledged decreases, in order to maintain the lenders’ contractually specified collateral cushion, which is measured as the difference between the amount borrowed and the market value of the asset pledged as collateral.
For certain Multifamily transitional loans, totaling $252.1 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 69%.
For certain Multifamily transitional loans, totaling $121.1 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The LTV of these loans, based on the current unpaid principal balance and the valuation obtained during underwriting, is 67%.
Estimated convexity (i.e., the approximate change in duration relative to the change in interest rates) of the portfolio was (0.53), which is the weighted average of (0.53) for our Residential whole loans, zero for our derivative and other hedging transactions and securitized and other fixed rate debt, (0.93) for our Securities and zero for our Other assets and cash and cash equivalents.
Estimated convexity (i.e., the approximate change in duration relative to the change in interest rates) of the portfolio was (0.72), which is the weighted average of (0.32) for our Residential whole loans, zero for our derivative and other hedging transactions and securitized and other fixed rate debt, (1.97) for our Securities and zero for our Other assets and cash and cash equivalents.
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. 63 Table of Contents The following table presents the five largest geographic concentrations by state of certain of our residential whole loan portfolio and in total at December 31, 2024: Business purpose loans Non-QM loans Legacy RPL/NPL loans All Loans Rank State Percent of UPB State Percent of UPB State Percent of UPB State Percent of UPB 1 FL 11.4% CA 48.3% CA 22.1% CA 27.5% 2 TX 10.8% FL 17.5% NY 16.4% FL 13.7% 3 GA 9.0% TX 5.2% FL 7.4% TX 7.0% 4 NY 6.4% AZ 3.1% NJ 7.1% NY 5.4% 5 NC 5.9% WA 2.5% MD 5.1% GA 4.5% CRT securities We are exposed to potential credit losses from our investments in CRT securities issued by or sponsored by Fannie Mae and Freddie Mac.
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. 63 Table of Contents The following table presents the five largest geographic concentrations by state of certain of our residential whole loan portfolio and in total as of December 31, 2025: Non-QM loans Business purpose loans Legacy RPL/NPL loans All Loans Rank State Percent of UPB State Percent of UPB State Percent of UPB State Percent of UPB 1 CA 44.9% FL 11.7% CA 22.7% CA 30.3% 2 FL 17.8% TX 9.4% NY 16.2% FL 14.7% 3 TX 5.3% GA 9.3% FL 7.3% TX 6.1% 4 AZ 3.1% NC 6.3% NJ 6.8% NY 4.5% 5 GA 2.3% OH 5.3% MD 5.1% GA 4.2% CRT Securities We are exposed to potential credit losses from our investments in CRT securities issued by or sponsored by Fannie Mae and Freddie Mac.
All changes in value are measured as the percentage change from the projected portfolio value under the base interest rate scenario at December 31, 2024 and 2023.
All changes in value are measured as the percentage change from the projected portfolio value under the base interest rate scenario as of December 31, 2025 and 2024.
For certain Single-family transitional loans, totaling $445.6 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 73%.
For certain Single-family transitional loans, totaling $270.9 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The LTV of these loans. based on the current unpaid principal balance and the valuation obtained during underwriting, is 78%.
Further, when liquidity tightens, our repurchase agreement counterparties may increase our collateral cushion (or margin) requirements on new financings, including repurchase agreement borrowings that we roll with the same counterparty, reducing our ability to use leverage. At December 31, 2024, we had access to various sources of liquidity, including $338.9 million of cash and cash equivalents.
Further, when liquidity tightens, our repurchase agreement counterparties may increase our collateral cushion (or margin) requirements on new financings, including repurchase agreement borrowings that we roll with the same counterparty, reducing our ability to use leverage. As of December 31, 2025, we had access to various sources of liquidity, including $213.2 million of cash and cash equivalents.
Our sources of liquidity do not include restricted cash. In addition, at December 31, 2024, we had unencumbered residential whole loans and Agency MBS of $87.8 million and $75.0 million, respectively. 64 Table of Contents PREPAYMENT RISK Premiums arise when we acquire an MBS or loan at a price in excess of their unpaid principal balance.
Our sources of liquidity do not include restricted cash. In addition, as of December 31, 2025, we had unencumbered residential whole loans and Agency MBS of $55.7 million and $218.6 million, respectively. 64 Table of Contents PREPAYMENT RISK Premiums arise when we acquire an MBS or loan at a price in excess of their unpaid principal balance.
At December 31, 2023, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 0.91, which is the weighted average of 3.36 for our Residential whole loans, 2.45 for our Securities investments, (2.70) for our derivative and other hedging transactions and securitized and other fixed rate debt, and 0.01 for our Other assets and cash and cash equivalents.
As of December 31, 2025, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 0.98, which is the weighted average of 3.23 for our Residential whole loans, 3.32 for our Securities investments, (2.49) for our derivative and other hedging transactions and securitized and other fixed rate debt, and zero for our Other assets and cash and cash equivalents.
LIQUIDITY RISK The primary liquidity risk we face arises from financing long-maturity assets with shorter-term borrowings primarily in the form of repurchase agreement financings. We pledge residential mortgage assets and cash to secure our financing agreements.
Consequently, changes in credit spreads can result in volatility in our financial results and reported book value. LIQUIDITY RISK The primary liquidity risk we face arises from financing long-maturity assets with shorter-term borrowings primarily in the form of repurchase agreement financings. We pledge residential mortgage assets and cash to secure our financing agreements.
December 31, 2024 Change in Interest Rates Change in Estimated Net Portfolio Value (1)(2) Percentage Change in Net Portfolio Value Percentage Change in Total Stockholders’ Equity (Dollars in Thousands) +100 Basis Point Increase $ (145,759) (1.28) % (7.91) % + 50 Basis Point Increase $ (65,291) (0.57) % (3.54) % Actual at December 31, 2024 $ — — % — % - 50 Basis Point Decrease $ 50,113 0.44 % 2.72 % -100 Basis Point Decrease $ 85,049 0.75 % 4.62 % December 31, 2023 Change in Interest Rates Change in Estimated Net Portfolio Value (1)(2) Percentage Change in Net Portfolio Value Percentage Change in Total Stockholders’ Equity (Dollars in Thousands) +100 Basis Point Increase $ (124,116) (1.17) % (6.53) % + 50 Basis Point Increase $ (55,474) (0.52) % (2.92) % Actual at December 31, 2023 $ — — % — % - 50 Basis Point Decrease $ 42,307 0.40 % 2.23 % -100 Basis Point Decrease $ 71,446 0.68 % 3.76 % (1) Assets in our portfolio include residential whole loans and REO, securities, other portfolio investments, goodwill, intangibles, receivables, and cash and cash equivalents and restricted cash.
December 31, 2025 Change in Interest Rates Change in Estimated Net Portfolio Value (1)(2) Percentage Change in Net Portfolio Value Percentage Change in Total Stockholders' Equity (Dollars in Thousands) +100 Basis Point Increase $ (175,109) (1.35) % (9.58) % + 50 Basis Point Increase $ (75,763) (0.58) % (4.15) % Actual as of December 31, 2025 $ — — % — % - 50 Basis Point Decrease $ 52,179 0.40 % 2.85 % -100 Basis Point Decrease $ 80,774 0.62 % 4.42 % December 31, 2024 Change in Interest Rates Change in Estimated Net Portfolio Value (1)(2) Percentage Change in Net Portfolio Value Percentage Change in Total Stockholders' Equity (Dollars in Thousands) +100 Basis Point Increase $ (145,759) (1.28) % (7.91) % + 50 Basis Point Increase $ (65,291) (0.57) % (3.54) % Actual as of December 31, 2024 $ — — % — % - 50 Basis Point Decrease $ 50,113 0.44 % 2.72 % -100 Basis Point Decrease $ 85,049 0.75 % 4.62 % (1) Assets in our portfolio include residential whole loans and REO, securities, other portfolio investments, goodwill, intangibles, receivables, and cash and cash equivalents and restricted cash.
Widening credit spreads would result in higher yields being required by investors in financial instruments. Credit spread widening generally results in lower values of the financial instruments we hold at that time, but will generally result in a higher yield on future investments with similar credit risk.
Credit spread widening generally results in lower values of the financial instruments we hold at that time, but will generally result in a higher yield on future investments with similar credit risk. It is possible that the credit spreads on our assets and liabilities, including hedges, will not always move in tandem.
Credit Spread Risk Credit spreads measure the additional yield demanded by investors in financial instruments based on the credit risk associated with an instrument relative to benchmark interest rates. They are impacted by the available supply and demand for instruments with various levels of credit risk.
We assess the credit risk associated with our investments in CRT securities by assessing the current and expected future performance of the associated loan pool. Credit Spread Risk Credit spreads measure the additional yield demanded by investors in financial instruments based on the credit risk associated with an instrument relative to benchmark interest rates.
Removed
We assess the credit risk associated with our investments in CRT securities by assessing the current and expected future performance of the associated loan pool.
Added
They are impacted by the available supply and demand for instruments with various levels of credit risk. Widening credit spreads would result in higher yields being required by investors in financial instruments.
Removed
Term Notes Backed by MSR Collateral We have invested in certain term notes that are issued by special purpose vehicles (or SPVs) that have acquired rights to receive cash flows representing the servicing fees and/or excess servicing spread associated with certain MSRs.
Removed
Payment of principal and interest on these term notes is considered by us 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.
Removed
Credit risk borne by the holders of the term notes is also mitigated by structural credit support in the form of over-collateralization.
Removed
In addition, credit support is also provided by a corporate guarantee from the ultimate parent or sponsor of the SPV that is intended to provide for payment of interest and principal to the holders of the term notes if cash flows generated by the underlying MSRs are insufficient.
Removed
It is possible that the credit spreads on our assets and liabilities, including hedges, will not always move in tandem. Consequently, changes in credit spreads can result in volatility in our financial results and reported book value.

Other MFAN 10-K year-over-year comparisons