Executive Summary

Q1 2020 was dominated by COVID-19 market dislocation, margin calls (~$800M in two weeks), asset sales, and elevated impairments, resulting in a GAAP net loss of $908.995M and diluted EPS of -$2.02; GAAP book value fell to $4.34 per share and economic book value to $4.09 .
Management negotiated successive forbearance agreements (Apr 10, Apr 27, Jun 1) to stabilize liquidity; repurchase obligations fell ~35% since Apr 10 to ~$3.8B as of May 29 via asset sales and margin call payoff .
Strategic capital solution announced mid-June: $500M senior secured notes and >$2B in term, non‑mark‑to‑market financing with Apollo/Athene and dealers; pro forma ~60%+ financing non‑mark‑to‑market, reducing margin-call risk and enabling securitizations .
Dividends on common and preferred were suspended for Q1 and Q2 to preserve liquidity and due to forbearance covenants; management aims to meet REIT distribution requirements and resume preferred/common dividends when feasible .

What Went Well and What Went Wrong

What Went Well

Negotiated three forbearance agreements that “provided time to manage our balance sheet and liquidity” and source third-party capital; lenders were repaid in full upon exit .
Announced a strategic partnership with Apollo/Athene: $500M notes, ~$1.65B committed term non‑mark‑to‑market facility for loans, warrants for 7.5% of common; expected to materially improve durability of funding and enable securitizations .
Asset sales executed at materially better prices than late-March prints; April non‑agency/CRT/MSR sales generated over $150M gains versus March 31 marks, mitigating book value erosion .

What Went Wrong

Severe market stress triggered ~$800M margin calls in mid/late March; inability to meet all margin calls led to forbearance and suspension of dividends .
Large P&L charges: $419.7M impairments on securities/MSR-related assets, $238.4M realized losses on securities/loans, $77.961M unrealized losses on securities at fair value, and $150.827M CECL/valuation provisions, driving a $908.995M net loss .
MSR-related term notes required a $280.8M impairment given intent/need to sell; swaps were unwound with $71.2M losses held in AOCI, increasing interest expense and reducing earnings capacity near term .

Financial Results

Income Statement (YoY comparison)

Metric	Q1 2019	Q1 2020
Interest Income ($USD Millions)	$140.952	$145.460
Net Interest Income ($USD Millions)	$61.926	$61.701
Provision for Credit/Valuation Losses ($USD Millions)	$0.805	$150.827
Impairment & Other Losses on Securities/Other Assets ($USD Millions)	$0.000	$419.651
Net Realized (Loss)/Gain on Sales ($USD Millions)	$24.609	$(238.380)
Net (Loss)/Income ($USD Millions)	$88.857	$(908.995)
Diluted EPS ($USD)	$0.19	$(2.02)

Key P&L Drivers (Q1 2020 detail)

Component	Q1 2020
Non‑QM loans sold ($USD Millions)	$659.9; realized loss $145.8
Securities sales proceeds / net loss ($USD Millions)	$1,265.2 / $(68.0)
CRT sales proceeds / net loss ($USD Millions)	$35.6 / $(2.0)
Operating & Other Expense ($USD Millions)	$29.106

Balance Sheet & Portfolio Composition

Metric	Dec 31, 2019	Mar 31, 2020
Total Assets ($USD Millions)	$13,567.364	$11,130.337
Total Liabilities ($USD Millions)	$10,183.412	$8,689.662
Stockholders’ Equity ($USD Millions)	$3,383.952	$2,440.675
Repurchase Agreements ($USD Millions)	$9,139.821	$7,768.180
Cash & Cash Equivalents ($USD Millions)	$70.629	$116.465
Restricted Cash ($USD Millions)	$64.035	$216.902
GAAP Book Value per Share ($USD)	—	$4.34 (as of Mar 31, 2020)
Economic Book Value per Share ($USD)	—	$4.09 (as of Mar 31, 2020)

Residential Whole Loans (carrying value)

Component ($USD Millions)	Dec 31, 2019	Mar 31, 2020
Non‑QM (incl. held-for-sale)	$3,707.245	$3,538.725
Rehabilitation (Fix & Flip)	$1,026.097	$978.965
Single‑Family Rental	$460.742	$506.352
Seasoned Performing	$176.569	$165.592
Purchased Credit Deteriorated	$698.717	$744.408
Total Residential Whole Loans (carrying value)	$6,069.370	$5,934.042
Allowance for Credit/Valuation Losses	$(3.025)	$(218.011)

Securities & MSR-Related Assets (fair value)

Asset ($USD Millions)	Dec 31, 2019	Mar 31, 2020
Agency MBS	$1,664.582	$553.413
Non‑Agency MBS	$2,063.529	$1,119.940
CRT Securities	$255.408	$254.101
MSR‑Related Term Notes (amortized cost)	$1,200+ amortized cost; fair value not separately listed	$706.6 amortized cost; impairment $280.8

Liquidity & Financing KPIs

KPI	Value
Repurchase Obligations (May 29)	~$3.8B
Reduction in Repo Obligations since Apr 10	~35%
Cash balances (Apr 24)	$430.9M (incl. $143.8M with repo counterparties)
Cash balances (Apr 9)	$423.4M total; $225.3M unrestricted pre-forbearance
Margin calls in mid/late March	~$800M (weeks of Mar 16 & 23)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Common Dividend	Q1 2020	Not specified	Suspended to preserve liquidity and due to forbearance restrictions	Lowered
Preferred Dividend (Series B/C)	Q1 2020	Contractual payouts	Suspended in Q1; Q2 also suspended under forbearance; dividends accrue without interest	Lowered
REIT Distribution/Tax	2020	N/A	Management targets minimum distributions to maintain REIT status; estimated Q1 2020 REIT taxable income ~$0.10/share and ~$0.05/share undistributed from 2019	Policy clarified

Note: No formal revenue/margin/OpEx guidance provided; management focused on liquidity, durable financing, and securitization pipeline .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2020)	Trend
Forbearance & Liquidity	Prior quarter transcripts unavailable due to retrieval error; see forward context: multiple forbearance extensions, exit June 26 with lenders repaid	Three forbearance agreements (Apr 10, Apr 27, Jun 1); asset sales to reduce repo, manage margin calls	Improving funding stability
Durable Financing	—; forward context: secured term non‑mark‑to‑market debt >80% of borrowings post June 26, cost ~3.6% excl. senior loan	Plan for term non‑mark‑to‑market lines and securitizations; underlevering daily mark‑to‑market repo to create margin cushion	Transition to resilient funding
Securitization	—; forward context: AAA spreads ~125–150 over swaps, compelling execution; programmatic issuance planned	Non‑QM securitization was days away in mid‑March; intent to proceed post-stabilization	Pipeline resuming
Dividends/REIT Tax	—; forward context: resumption of preferred and initiation of $0.05 common dividend by Q3/Q4 2020	Q1/Q2 dividends suspended; taxable income obligations outlined	Recovery plan
Credit & CECL	—; forward context: reserves adjusted with macro assumptions; delinquency migration monitored	CECL/valuation provisions of $150.8M; allowance rose to $218.0M; 60+ DPD buckets monitored	Elevated but stabilizing assumptions

Management Commentary

“These critical efforts have been comprised primarily of three things; one, forbearance; two, balance sheet and liquidity management; and three, sourcing third party capital… forbearance agreements have provided us with the time to manage our balance sheet and liquidity… Many of our asset sales… generated over $150 million of realized gains versus March 31 marks” – Craig Knutson, CEO .
“We have entered into an agreement with Apollo and Athene to raise $500 million… and a committed term borrowing facility with Barclays of approximately $1.65 billion… Pro forma… approximately 60% of the company's financing will be in the form of non-mark-to-market funding” – Craig Knutson .
“Our first quarter financial results… resulted in a loss of $914 million or $2.02 per share. Book value decreased to $4.34 per share… economic book value decreased to $4.09” – Craig Knutson .
“MFA received almost $800 million in margin calls during the weeks of March 16th and March 23rd… we announced on March 24th that we had not met margin calls… and initiated forbearance discussions” – Craig Knutson .

Q&A Highlights

Incremental cost of non‑mark‑to‑market facilities: “slightly more expensive… advance rates are lower… we’ll provide more robust disclosure on cost structure on the Q2 call” – CEO .
Investment dry powder post-transactions: “hundreds of millions of dollars” – CEO .
Leverage outlook: “likely within the twos… securitization provides different type of leverage” – CEO .
Dividends: common dividend likely after catching up preferred; guidance suggests re-establishment in second half if feasible – CEO .
Securitization timing and stack: targeting below-AAA tranches; pools ready; one to two days from pricing in March – CEO .
CECL methodology and reserve migration: macro assumptions adjusted; collateral-dependent analysis for 60+ day delinquents – CFO .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2020 EPS and revenue was unavailable due to API request limit constraints during retrieval. As a result, no estimate comparison is presented here. If needed, we can refresh and add this section once SPGI access is restored.

Key Takeaways for Investors

Q1 loss was driven by extraordinary market stress and conscious de‑risking (impairments, CECL provisions, asset sales); the operational pivot has likely reduced future margin‑call risk materially .
Pro forma funding mix moves toward term, non‑mark‑to‑market debt (and securitization), enhancing durability; under‑levered repo provides margin cushion in remaining mark‑to‑market exposure .
Securitization market for Non‑QM appears open with competitive spreads; MFA’s pipeline and committed purchasers (Athene) are catalysts for spread capture and funding cost reduction .
Dividends suspended in Q1/Q2; management intends to meet REIT distribution requirements and resume preferred payments first, with common distributions potentially later as liquidity normalizes .
Near‑term trading: stock likely sensitive to updates on securitization execution, financing costs, delinquency migration under CECL, and dividend resumption timelines .
Medium‑term thesis: a re‑shaped portfolio (94% whole loans) financed with durable structures positions MFA to rebuild earnings power and book value as markets stabilize; asset selection and loss mitigation remain critical .

Notes on Sources and Availability

Earnings press release (8‑K Item 2.02): June 3, 2020 filing with extended forbearance/dividend update .
Q1 2020 10‑Q: detailed financials for quarter ended March 31, 2020 .
Q1 2020 earnings call transcript: June 16, 2020 .
April 13 and April 29 8‑K company updates/second forbearance, liquidity/cash figures .

Where prior quarter transcripts were unavailable due to document retrieval errors, we used forward Q2 2020 call context for trend orientation .

MFA FINANCIAL, INC. (MFA)·Q1 2020 Earnings Summary