Company: MFAN
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001055160-25-000013
Chunk: 203

Company: MFA FINANCIAL, INC.
Filing Date: 2025-08-06
Form: 10-Q
Item: Part I, Item 1
Chunk 203
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 under the Swap contract.

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 June 30, 2025.

During the six months ended June 30, 2025, we paid $73.3 million for cash dividends on our common stock and dividend equivalents and paid cash dividends of $18.8 million on our preferred stock. On March 6, 2025, we declared our second quarter 2025 dividend on our common stock of $0.36 per share; on July 31, 2025, we paid this dividend, which totaled approximately $37.5 million, including dividend equivalents of approximately $0.5 million.  

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

We seek to manage our risks related to interest rates, liquidity, prepayment speeds, market value and the credit quality of our assets while, at the same time, seeking to provide an opportunity to stockholders to realize attractive total returns through ownership of our capital stock.  While we do not seek to avoid risk, we seek, consistent with our investment policies, to:  assume risk that can be quantified based on management’s judgment and experience and actively manage such risk; earn sufficient returns to justify the taking of such risks; and maintain capital levels consistent with the risks that we undertake.

Interest Rate Risk 

We are exposed to interest rate risk on our residential mortgage assets, as well as on our liabilities.  Changes in interest rates can affect our net interest income and the fair value of our assets and liabilities. 

In general, when interest rates change, borrowing costs on our financing agreements will change more quickly than the yield on our assets.  In a rising interest rate environment, the borrowing costs may increase faster than the interest income on our assets, thereby reducing our net income.  In order to mitigate compression in net income based on such interest rate movements, we may use Swaps or other derivatives to lock in a portion of the net interest spread between assets and liabilities or otherwise hedge interest rate risk.

When interest rates change, the fair value of our residential mortgage assets could change at a different rate than the fair value of our liabilities.  We measure the sensitivity of our portfolio to changes in interest rates by estimating the duration of our assets and liabilities.  Duration is the approximate percentage change in fair value for a 100