MFA Financial, Inc. Announces First Quarter 2022 Financial Results
MFA Financial, Inc. reported a GAAP loss of $(91.1) million or ($0.86) per share for Q1 2022. Despite this, Distributable Earnings were $66.0 million or $0.62 per share. The GAAP book value per share decreased to $17.84, while Economic book value fell to $18.81. The company experienced net interest income of $63.1 million, with a net interest spread of 1.96%. MFA completed two securitizations totaling $1.08 billion during the quarter, enhancing liquidity. The CEO acknowledged the challenges posed by rising interest rates but noted the company's proactive risk management measures.
- Distributable Earnings of $66.0 million or $0.62 per share.
- Completed two securitizations totaling $1.08 billion, enhancing liquidity.
- Increased interest income from residential whole loans by 10% sequentially.
- GAAP loss of $(91.1) million or ($0.86) per share.
- GAAP book value decreased by 6.7% to $17.84 per share.
- Economic book value declined by 8.6% to $18.81 per share.
NEW YORK, May 4, 2022 /PRNewswire/ -- MFA Financial, Inc. (NYSE:MFA) today provided its financial results for the first quarter ended March 31, 2022.
First Quarter 2022 financial results update:
- MFA generated a GAAP loss for the first quarter of
$(91.1) million , or ($0.86) per common share1. Distributable Earnings, a non-GAAP financial measure, which adjusts GAAP earnings by removing unrealized gains and losses, primarily on residential mortgage investments, associated financing liabilities and hedges that are accounted for at fair value through earnings, as well as certain non-cash expenses and securitization-related transaction costs, was$66.0 million , or$0.62 per common share. - GAAP book value at March 31, 2022 was
$17.84 per common share, while Economic book value, a non-GAAP financial measure of MFA's financial position that adjusts GAAP book value by the amount of unrealized market value changes in residential whole loans and securitized debt held at carrying value for GAAP reporting, was$18.81 per common share at quarter-end. - Rapid increases in interest rates, combined with wider spreads, resulted in losses on our residential whole loans that are measured at fair value through earnings of
$288.4 million . This was partially offset by net gains of$158.2 million on derivatives used for risk management purposes and on securitized debt measured at fair value through earnings. - Net interest income for the first quarter was
$63.1 million . Interest income from residential whole loans increased10% over the immediately prior quarter to$99.5 million . This increase was largely offset by a$9.0 million decline in interest income from residential mortgage securities, as the prior quarter included the impact of the early repayment of an MSR bond. Interest expense was$7.6 million higher than the immediately prior quarter, consistent with the rising rate environment, which impacted both repurchase agreement funding and securitization execution. For the first quarter, the overall net interest spread generated by all of our interest-bearing assets, including the carrying cost associated with swaps used for economic hedging purposes, was1.96% . - During the quarter, we completed two securitizations of Non-QM loans totaling
$569.9 million , with a weighted average coupon of bonds sold of4.05% , providing longer term, non-recourse, non-mark-to-market financing and$142.2 million of additional liquidity. Subsequent to quarter end, we completed two securitizations of Business Purpose loans, totaling$509.5 million , including our first securitization of approximately$250.0 million of Rehabilitation loans. - Loan acquisition activity of
$1.2 billion , resulted in net portfolio growth for the quarter of approximately$330 million . During the quarter we acquired, or committed to acquire, approximately$615 million of Non-QM loans. At Lima One, funded originations of Business Purpose loans were more than$525 million (over$660 million maximum loan amount inclusive of undrawn amounts), reflecting record volumes for the third consecutive quarter. In addition, draws funded during the quarter on Rehabilitation loans were$63.1 million . - On April 29, 2022, MFA paid a regular cash dividend for the first quarter of
$0.11 per share of common stock (based on the number of shares held by stockholders at the record date (March 22, 2022) and before giving effect to the 1-for-4 reverse stock split effected on April 4, 2022).
1 | Except as otherwise noted, for all periods presented all per share amounts and common shares outstanding have been adjusted to reflect the Company's 1-for-4 reverse stock split which was effected following the close of business on April 4, 2022. |
Commenting on the first quarter 2022, Craig Knutson, MFA's CEO and President said, "The first quarter of 2022 was an extremely challenging period for fixed income investors, and exceptionally so for mortgage investors, including MFA. The magnitude of rate sell-off, particularly in the short end of the yield curve, was the most dramatic witnessed in over 30 years, eclipsing even the rate increases in early 1994. We proactively addressed this challenge by taking steps to further hedge our exposure to interest rate risk, as well as bolster our cash position. Specifically, we added
Mr. Knutson added "During the quarter our cash position increased by more than
Mr. Knutson continued, "We have introduced a new non-GAAP metric, Distributable Earnings, to provide a measure of earnings that primarily eliminates non-cash, unrealized gains and losses that impact our GAAP earnings. For the first quarter of 2022, MFA's Distributable Earnings were
Q1 2022 Portfolio Activity
MFA's residential mortgage investment portfolio increased by approximately
At March 31, 2022, our investments in residential whole loans totaled
Lima One had a third consecutive quarter of record origination volumes, funding more than
For the first quarter, a reversal of the provision for credit losses of
Early in the first quarter we increased our position in interest rate swaps to a notional amount of
Our Purchased Non-performing Loans and certain of our Purchased Performing Loans are measured at fair value as a result of the election of the fair value option at acquisition, with changes in the fair value and other non-interest related income from these loans recorded in Other income, net each period. For the first quarter, net losses of
We also continued to take advantage of a strong housing market to reduce our REO portfolio, selling 135 properties in the first quarter for aggregate proceeds of
At the end of the first quarter, MFA held approximately
General and Administrative and other expenses
For the three months ended March 31, 2022, MFA's costs for compensation and benefits and other general and administrative expenses were
Stock Repurchase Program
On March 11, 2022, the Company's Board authorized a stock repurchase program under which the Company may repurchase up to
The following table presents MFA's asset allocation as of March 31, 2022, and the first quarter 2022 yield on average interest-earning assets, average cost of funds and net interest rate spread for the various asset types.
Table 1 - Asset Allocation
At March 31, 2022 | Purchased | Purchased | Purchased | Securities, at | Real Estate Owned | Other, | Total | |||||||
(Dollars in Millions) | ||||||||||||||
Fair Value/Carrying Value | $ 6,777 | $ 497 | $ 988 | $ 250 | $ 146 | $ 1,049 | $ 9,707 | |||||||
Payable for Unsettled Purchases | (29) | — | — | — | — | (300) | (329) | |||||||
Financing Agreements with Non-mark-to-market Collateral Provisions | (668) | (118) | (203) | — | (12) | — | (1,001) | |||||||
Financing Agreements with Mark-to-market Collateral Provisions | (2,528) | (105) | (136) | (159) | (13) | — | (2,941) | |||||||
Less Securitized Debt | (2,353) | (184) | (301) | — | (21) | — | (2,859) | |||||||
Less Convertible Senior Notes | — | — | — | — | — | (228) | (228) | |||||||
Net Equity Allocated | $ 1,199 | $ 90 | $ 348 | $ 91 | $ 100 | $ 521 | $ 2,349 | |||||||
Debt/Net Equity Ratio (4) | 4.7 x | 4.5 x | 1.8 x | 1.7 x | 0.5 x | 3.1 x | ||||||||
For the Quarter Ended March 31, 2022 | ||||||||||||||
Yield on Average Interest Earning Assets (5) | 4.18 % | 6.79 % | 9.82 % | 10.13 % | N/A | 4.86 % | ||||||||
Less Average Cost of Funds (6) | (2.74) | (2.88) | (3.09) | (1.72) | (2.91) | (2.90) | ||||||||
Net Interest Rate Spread | 1.44 % | 3.91 % | 6.73 % | 8.41 % | (2.91) % | 1.96 % | ||||||||
(1) | Includes |
(2) | At March 31, 2022, the total fair value of these loans is estimated to be approximately |
(3) | Includes |
(4) | Total Debt/Net Equity ratio represents the sum of borrowings under our financing agreements noted above as a multiple of net equity allocated. |
(5) | Yields reported on our interest earning assets are calculated based on the interest income recorded and the average amortized cost for the quarter of the respective asset. At March 31, 2022, the amortized cost of our securities, at fair value, was |
(6) | Average cost of funds includes interest on financing agreements, Convertible Senior Notes and securitized debt. Cost of funding also includes the impact of the net carrying cost (the amount by which swap interest expense paid exceeds swap interest income received) on our Swaps. While we have not elected hedge accounting treatment for Swaps and accordingly the net carrying cost is not presented in interest expense in our consolidated statement of operations, we believe it is appropriate to allocate the net carrying cost to the cost of funding to reflect the economic impact of our interest rate swap agreements (or Swaps) on the funding costs shown in the table above. For the quarter ended March 31, 2022, this increased the overall funding cost by 35 basis points for our Residential whole loans, 33 basis points for our Purchased Performing Loans, 56 basis points for our Purchased Credit Deteriorated Loans, and 39 basis points for our Purchased Non-Performing Loans. |
The following table presents the activity for our residential mortgage asset portfolio for the three months ended March 31, 2022:
Table 2 - Investment Portfolio Activity Q1 2022
(In Millions) | December 31, 2021 | Runoff (1) | Acquisitions (2) | Other (3) | March 31, 2022 | Change | ||||||
Residential whole loans and REO | $ 8,069 | $ (582) | $ 1,207 | $ (287) | $ 8,407 | $ 338 | ||||||
Securities, at fair value | 257 | (1) | — | (6) | 250 | (7) | ||||||
Totals | $ 8,326 | $ (583) | $ 1,207 | $ (293) | $ 8,657 | $ 331 |
(1) | Primarily includes principal repayments and sales of REO. |
(2) | Includes draws on previously originated Rehabilitation loans. |
(3) | Primarily includes changes in fair value and changes in the allowance for credit losses. |
The following tables present information on our investments in residential whole loans.
Residential Whole Loans at March 31, 2022 and December 31, 2021:
Table 3 - Portfolio composition
Held at Carrying Value | Held at Fair Value | Total | ||||||||||
(Dollars in Thousands) | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||||
Purchased Performing Loans: | ||||||||||||
Non-QM loans | $ 1,265,731 | $ 2,391,632 | $ 3,657,363 | |||||||||
Rehabilitation loans | 154,508 | 217,315 | 735,849 | 517,530 | 890,357 | 734,845 | ||||||
Single-family rental loans | 283,090 | 331,808 | 870,407 | 619,415 | 1,153,497 | 951,223 | ||||||
Seasoned performing loans | 98,269 | 102,041 | — | — | 98,269 | 102,041 | ||||||
Agency eligible investor loans | — | — | 991,633 | 1,082,765 | 991,633 | 1,082,765 | ||||||
Total Purchased Performing Loans | $ 1,801,598 | $ 4,989,521 | $ 6,791,119 | |||||||||
Purchased Credit Deteriorated Loans | $ 518,450 | $ 547,772 | $ — | $ — | $ 518,450 | $ 547,772 | ||||||
Allowance for Credit Losses | $ (35,457) | $ (39,447) | $ — | $ — | $ (35,457) | $ (39,447) | ||||||
Purchased Non-Performing Loans | $ — | $ — | $ 987,794 | $ 987,794 | ||||||||
Total Residential Whole Loans | $ 2,284,591 | $ 5,977,315 | $ 8,261,906 | |||||||||
Number of loans | 8,506 | 9,361 | 16,706 | 14,734 | 25,212 | 24,095 | ||||||
Table 4 - Yields and average balances
For the Three-Month Period Ended | ||||||||||||||||||
(Dollars in Thousands) | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||
Interest | Average | Average | Interest | Average | Average | Interest | Average | Average | ||||||||||
Purchased Performing Loans: | ||||||||||||||||||
Non-QM loans | $ 32,952 | $ 3,658,912 | $ 22,189 | $ 2,315,890 | ||||||||||||||
Rehabilitation loans | 14,861 | 814,055 | 9,214 | 652,663 | 6,668 | 540,549 | ||||||||||||
Single-family rental loans | 13,325 | 1,024,731 | 10,684 | 828,183 | 7,081 | 447,585 | ||||||||||||
Seasoned performing loans | 1,010 | 100,032 | 1,423 | 106,065 | 1,991 | 132,897 | ||||||||||||
Agency eligible investor loans | 7,583 | 1,075,013 | 8,046 | 1,065,062 | — | — | — % | |||||||||||
Total Purchased Performing Loans | 69,731 | 6,672,743 | 58,269 | 5,654,617 | 37,929 | 3,436,921 | ||||||||||||
Purchased Credit Deteriorated Loans | 9,009 | 530,828 | 10,033 | 561,262 | 8,290 | 662,924 | ||||||||||||
Purchased Non-Performing Loans | 20,726 | 844,206 | 22,010 | 895,472 | 18,319 | 1,027,491 | ||||||||||||
Total Residential whole loans | $ 99,466 | $ 8,047,777 | $ 64,538 | $ 5,127,336 | ||||||||||||||
Table 5 - Net Interest Spread
For the Three-Month Period Ended | ||||||
March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||
Purchased Performing Loans | ||||||
Net Yield (1) | ||||||
Cost of Funding (2) | ||||||
Net Interest Spread | ||||||
Purchased Credit Deteriorated Loans | ||||||
Net Yield (1) | ||||||
Cost of Funding (2) | ||||||
Net Interest Spread | ||||||
Purchased Non-Performing Loans | ||||||
Net Yield (1) | ||||||
Cost of Funding (2) | ||||||
Net Interest Spread | ||||||
Total Residential Whole Loans | ||||||
Net Yield (1) | ||||||
Cost of Funding (2) | ||||||
Net Interest Spread | ||||||
(1) | Reflects annualized interest income on Residential whole loans divided by average amortized cost of Residential whole loans. Excludes servicing costs. |
(2) | Reflects annualized interest expense divided by average balance of repurchase agreements, agreements with non-mark-to-market collateral provisions, and securitized debt. Cost of funding shown in the table above for the quarterly periods ended March 31, 2022 and December 31, 2021 includes the impact of the net carrying cost (the amount by which swap interest expense paid exceeds swap interest income received) on our Swaps. While we have not elected hedge accounting treatment for Swaps and accordingly the net carrying cost is not presented in interest expense in our consolidated statement of operations, we believe it is appropriate to allocate the net carrying cost to the cost of funding to reflect the economic impact of our Swaps on the funding costs shown in the table above. For the quarter ended March 31, 2022, this increased the overall funding cost by 35 basis points for our Residential whole loans, 33 basis points for our Purchased Performing Loans, 56 basis points for our Purchased Credit Deteriorated Loans, and 39 basis points for our Purchased Non-Performing Loans. For the quarter ended December 31, 2021, this increased the overall funding cost by 5 basis points for our Residential whole loans, 5 basis points for our Purchased Performing Loans, 9 basis points for our Purchased Credit Deteriorated Loans, and 2 basis points for our Purchased Non-Performing Loans. |
Table 6 - Allowance for Credit Losses
The following table presents a roll-forward of the allowance for credit losses on the Company's Residential Whole Loans, at Carrying Value:
Three Months Ended March 31, 2022 | ||||||||||||
(Dollars In Thousands) | Non-QM | Rehabilitation | Single-family | Seasoned | Purchased | Totals | ||||||
Allowance for credit losses at | $ 8,289 | $ 6,881 | $ 1,451 | $ 46 | $ 22,780 | $ 39,447 | ||||||
Current provision | (909) | (1,460) | (122) | (1) | (975) | (3,467) | ||||||
Write-offs | (51) | (219) | (27) | — | (226) | (523) | ||||||
Allowance for credit losses at March | $ 7,329 | $ 5,202 | $ 1,302 | $ 45 | $ 21,579 | $ 35,457 | ||||||
Three Months Ended March 31, 2021 | ||||||||||||
(Dollars In Thousands) | Non-QM | Rehabilitation | Single-family | Seasoned | Purchased | Totals | ||||||
Allowance for credit losses at | $ 21,068 | $ 18,371 | $ 3,918 | $ 107 | $ 43,369 | $ 86,833 | ||||||
Current provision | (6,523) | (3,700) | (1,172) | (41) | (10,936) | (22,372) | ||||||
Write-offs | — | (1,003) | — | — | (214) | (1,217) | ||||||
Allowance for credit losses at March | $ 14,545 | $ 13,668 | $ 2,746 | $ 66 | $ 32,219 | $ 63,244 | ||||||
(1) | In connection with purchased Rehabilitation loans at carrying value, the Company had unfunded commitments of |
(2) | Includes |
(3) | Includes |
Table 7 - Credit related metrics/Residential Whole Loans
March 31, 2022
Fair Value / | Unpaid | Weighted | Weighted | Weighted | Weighted | Aging by UPB | ||||||||||||||
Past Due Days | ||||||||||||||||||||
(Dollars In Thousands) | Current | 30-59 | 60-89 | 90+ | ||||||||||||||||
Purchased Performing Loans: | ||||||||||||||||||||
Non-QM loans (4) | $ 3,621,124 | $ 3,670,937 | 356 | 733 | $ 3,431,011 | $ 90,126 | ||||||||||||||
Rehabilitation loans | 885,155 | 886,942 | 7.11 | 12 | 67 | 740 | 783,366 | 14,118 | 3,178 | 86,280 | ||||||||||
Single-family rental loans | 1,152,195 | 1,168,778 | 5.26 | 324 | 70 | 735 | 1,133,996 | 13,436 | 547 | 20,799 | ||||||||||
Seasoned performing loans | 98,224 | 107,624 | 2.71 | 159 | 36 | 722 | 98,569 | 634 | 97 | 8,324 | ||||||||||
Agency eligible investor loans | 991,633 | 1,034,815 | 3.40 | 351 | 62 | 767 | 1,026,214 | 7,595 | 814 | 192 | ||||||||||
Total Purchased Performing Loans | 6,748,331 | $ 6,869,096 | 302 | |||||||||||||||||
Purchased Credit Deteriorated Loans | $ 496,871 | $ 610,651 | 280 | N/A | 428,302 | 51,517 | 18,942 | 111,890 | ||||||||||||
Purchased Non-Performing Loans | $ 987,794 | $ 1,017,658 | 280 | N/A | $ 464,770 | $ 85,856 | $ 426,578 | |||||||||||||
Residential whole loans, total or weighted | $ 8,232,996 | $ 8,497,405 | 298 | |||||||||||||||||
December 31, 2021
Fair Value / | Unpaid | Weighted | Weighted | Weighted | Weighted | Aging by UPB | ||||||||||||||
Past Due Days | ||||||||||||||||||||
(Dollars In Thousands) | Current | 30-59 | 60-89 | 90+ | ||||||||||||||||
Purchased Performing Loans: | ||||||||||||||||||||
Non-QM loans | $ 3,453,242 | $ 3,361,164 | 355 | 731 | $ 77,581 | $ 94,755 | ||||||||||||||
Rehabilitation loans | 727,964 | 731,154 | 7.18 | 11 | 67 | 735 | 616,733 | 5,834 | 5,553 | 103,034 | ||||||||||
Single-family rental loans | 949,772 | 924,498 | 5.46 | 329 | 70 | 732 | 898,166 | 2,150 | 695 | 23,487 | ||||||||||
Seasoned performing loans | 101,995 | 111,710 | 2.76 | 162 | 37 | 722 | 102,047 | 938 | 481 | 8,244 | ||||||||||
Agency eligible investor loans | 1,082,765 | 1,060,486 | 3.40 | 354 | 62 | 767 | 1,039,257 | 21,229 | — | — | ||||||||||
Total Purchased Performing Loans | $ 6,315,738 | $ 6,189,012 | 307 | |||||||||||||||||
Purchased Credit Deteriorated Loans | $ 524,992 | $ 643,187 | 283 | 69 | N/A | 456,924 | 50,048 | 18,736 | 117,479 | |||||||||||
Purchased Non-Performing Loans | $ 1,072,270 | $ 1,073,544 | 283 | 73 | N/A | 492,481 | 87,041 | 40,876 | 453,146 | |||||||||||
Residential whole loans, total or weighted | $ 7,913,000 | $ 7,905,743 | 301 | |||||||||||||||||
(1) | Weighted average is calculated based on the interest bearing principal balance of each loan within the related category. For loans acquired with servicing rights released by the seller, interest rates included in the calculation do not reflect loan servicing fees. For loans acquired with servicing rights retained by the seller, interest rates included in the calculation are net of servicing fees. |
(2) | LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date. For Rehabilitation loans, the LTV presented is the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated "after repaired" value of the collateral securing the related loan, where available. For certain Rehabilitation loans, totaling |
(3) | Excludes loans for which no Fair Isaac Corporation ("FICO") score is available. |
(4) | Excluded from the table above are approximately |
Table 8 - LTV 90+ Days Delinquencies
The following table presents certain information regarding the Company's Residential whole loans that are 90 days or more delinquent:
March 31, 2022 | ||||||
(Dollars In Thousands) | Carrying Value / Fair | UPB | LTV (1) | |||
Purchased Performing Loans | ||||||
Non-QM loans | $ 91,200 | $ 90,126 | ||||
Rehabilitation loans | $ 86,272 | $ 86,280 | ||||
Single-family rental loans | $ 20,845 | $ 20,799 | ||||
Seasoned performing loans | $ 7,780 | $ 8,324 | ||||
Agency eligible investor loans | $ 180 | $ 192 | ||||
Total Purchased Performing Loans | $ 206,277 | $ 205,721 | ||||
Purchased Credit Deteriorated Loans | $ 90,190 | $ 111,890 | ||||
Purchased Non-Performing Loans | $ 424,871 | $ 426,578 | ||||
Total Residential whole loans | $ 721,338 | $ 744,189 | ||||
December 31, 2021 | ||||||
(Dollars In Thousands) | Carrying Value / Fair | UPB | LTV (1) | |||
Purchased Performing Loans | ||||||
Non-QM loans | $ 96,473 | $ 94,755 | ||||
Rehabilitation loans | $ 103,166 | $ 103,034 | ||||
Single-family rental loans | $ 23,524 | $ 23,487 | ||||
Seasoned performing loans | $ 7,740 | $ 8,244 | ||||
Agency eligible investor loans | $ — | $ — | — % | |||
Total Purchased Performing Loans | $ 230,903 | $ 229,520 | ||||
Purchased Credit Deteriorated Loans | $ 95,899 | $ 117,479 | ||||
Purchased Non-Performing Loans | $ 454,443 | $ 453,146 | ||||
Total Residential whole loans | $ 781,245 | $ 800,145 | ||||
(1) | LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date. For Rehabilitation loans, the LTV presented is the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated "after repaired" value of the collateral securing the related loan, where available. For certain Rehabilitation loans, an after repaired valuation was not obtained and the loan was underwritten based on an "as is" valuation. Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots, for which the LTV ratio is not meaningful. |
Table 9 - Shock Table
The information presented in the following "Shock Table" projects the potential impact of sudden parallel changes in interest rates on the value of our portfolio, including the impact of Swaps and short positions in TBA securities (if any), over the next 12 months based on the assets in our investment portfolio at March 31, 2022. Changes in portfolio value are measured as the percentage change when comparing the projected portfolio value to the base interest rate scenario at March 31, 2022.
Change in Interest Rates | Percentage Change in Portfolio Value | Percentage Change in Equity | ||
+100 Basis Point Increase | (1.49)% | (6.05)% | ||
+ 50 Basis Point Increase | (0.64)% | (2.60)% | ||
Actual at March 31, 2022 | —% | —% | ||
- 50 Basis Point Decrease | ||||
-100 Basis Point Decrease |
Webcast
MFA Financial, Inc. plans to host a live audio webcast of its investor conference call on Wednesday, May 4, 2022, at 10:00 a.m. (Eastern Time) to discuss its first quarter 2022 financial results. The live audio webcast will be accessible to the general public over the internet at http://www.mfafinancial.com through the "Webcasts & Presentations" link on MFA's home page. To listen to the conference call over the internet, please go to the MFA website at least 15 minutes before the call to register and to download and install any needed audio software. Earnings presentation materials will be posted on the MFA website prior to the conference call and an audio replay will be available on the website following the call.
Cautionary Language Regarding Forward-Looking Statements
When used in this press release or other written or oral communications, statements which are not historical in nature, including those containing words such as "will," "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "could," "would," "may," the negative of these words or similar expressions, are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. These forward-looking statements include information about possible or assumed future results with respect to our business, financial condition, liquidity, results of operations, plans and objectives. Statements regarding the following subjects, among others, may be forward-looking: changes in interest rates and the market (i.e., fair) value of MFA's residential whole loans, MBS and other assets; changes in the prepayment rates on residential mortgage assets, an increase of which could result in a reduction of the yield on certain investments in MFA's portfolio and could require MFA to reinvest the proceeds received by it as a result of such prepayments in investments with lower coupons, while a decrease in which could result in an increase in the interest rate duration of certain investments in MFA's portfolio making their valuation more sensitive to changes in interest rates and could result in lower forecasted cash flows; credit risks underlying MFA's assets, including changes in the default rates and management's assumptions regarding default rates on the mortgage loans in MFA's residential whole loan portfolio; MFA's ability to borrow to finance its assets and the terms, including the cost, maturity and other terms, of any such borrowings; implementation of or changes in government regulations or programs affecting MFA's business; MFA's estimates regarding taxable income, the actual amount of which is dependent on a number of factors, including, but not limited to, changes in the amount of interest income and financing costs, the method elected by MFA to accrete the market discount on residential whole loans and the extent of prepayments, realized losses and changes in the composition of MFA's residential whole loan portfolios that may occur during the applicable tax period, including gain or loss on any MBS disposals and whole loan modifications, foreclosures and liquidations; the timing and amount of distributions to stockholders, which are declared and paid at the discretion of MFA's Board and will depend on, among other things, MFA's taxable income, its financial results and overall financial condition and liquidity, maintenance of its REIT qualification and such other factors as MFA's Board deems relevant; MFA's ability to maintain its qualification as a REIT for federal income tax purposes; MFA's ability to maintain its exemption from registration under the Investment Company Act of 1940, as amended (or the "Investment Company Act"), including statements regarding the concept release issued by the Securities and Exchange Commission ("SEC") relating to interpretive issues under the Investment Company Act with respect to the status under the Investment Company Act of certain companies that are engaged in the business of acquiring mortgages and mortgage-related interests; MFA's ability to continue growing its residential whole loan portfolio, which is dependent on, among other things, the supply of loans offered for sale in the market; expected returns on MFA's investments in nonperforming residential whole loans ("NPLs"), which are affected by, among other things, the length of time required to foreclose upon, sell, liquidate or otherwise reach a resolution of the property underlying the NPL, home price values, amounts advanced to carry the asset (e.g., taxes, insurance, maintenance expenses, etc. on the underlying property) and the amount ultimately realized upon resolution of the asset; targeted or expected returns on MFA's investments in recently-originated loans, the performance of which is, similar to MFA's other mortgage loan investments, subject to, among other things, differences in prepayment risk, credit risk and financing cost associated with such investments; risks associated with MFA's investments in MSR-related assets, including servicing, regulatory and economic risks, risks associated with our investments in loan originators, risks associated with investing in real estate assets, including changes in business conditions and the general economy and risks associated with the integration and ongoing operation of Lima One Holdings, LLC (including, without limitation, unanticipated expenditures relating to or liabilities arising from the transaction and/or the inability to obtain, or delays in obtaining, expected benefits (including expected growth in loan origination volumes) from the transaction). These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that MFA files with the SEC, could cause MFA's actual results to differ materially from those projected in any forward-looking statements it makes. All forward-looking statements are based on beliefs, assumptions and expectations of MFA's future performance, taking into account all information currently available. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect MFA. Except as required by law, MFA is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
MFA FINANCIAL, INC. | ||||
(In Thousands, Except Per Share Amounts) | March 31, | December 31, | ||
(unaudited) | ||||
Assets: | ||||
Residential whole loans, net ( | $ 8,261,905 | $ 7,913,000 | ||
Securities, at fair value | 250,171 | 256,685 | ||
Cash and cash equivalents | 410,939 | 304,696 | ||
Restricted cash | 144,600 | 99,751 | ||
Other assets | 857,343 | 565,556 | ||
Total Assets | $ 9,924,958 | $ 9,139,688 | ||
Liabilities: | ||||
Financing agreements ( | $ 7,028,211 | $ 6,378,782 | ||
Other liabilities | 547,792 | 218,058 | ||
Total Liabilities | $ 7,576,003 | $ 6,596,840 | ||
Stockholders' Equity: | ||||
Preferred stock, | $ 80 | $ 80 | ||
Preferred stock, | 110 | 110 | ||
Common stock, and outstanding, respectively | 1,050 | 1,082 | ||
Additional paid-in capital, in excess of par | 3,722,974 | 3,775,482 | ||
Accumulated deficit | (1,417,115) | (1,279,484) | ||
Accumulated other comprehensive income | 41,856 | 45,578 | ||
Total Stockholders' Equity | $ 2,348,955 | $ 2,542,848 | ||
Total Liabilities and Stockholders' Equity | $ 9,924,958 | $ 9,139,688 | ||
(1) | Includes approximately |
MFA FINANCIAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Three Months Ended March 31, | ||||
(In Thousands, Except Per Share Amounts) | 2022 | 2021 | ||
(Unaudited) | (Unaudited) | |||
Interest Income: | ||||
Residential whole loans | $ 99,466 | $ 64,538 | ||
Securities, at fair value | 5,275 | 16,459 | ||
Other interest-earning assets | 1,506 | — | ||
Cash and cash equivalent investments | 102 | 54 | ||
Interest Income | $ 106,349 | $ 81,051 | ||
Interest Expense: | ||||
Asset-backed and other collateralized financing arrangements | $ 39,365 | $ 26,050 | ||
Other interest expense | 3,931 | 4,020 | ||
Interest Expense | $ 43,296 | $ 30,070 | ||
Net Interest Income | $ 63,053 | $ 50,981 | ||
Reversal of Provision for Credit Losses on Residential Whole Loans | $ 3,511 | $ 22,750 | ||
Net Interest Income after Reversal of Provision for Credit Losses | $ 66,564 | $ 73,731 | ||
Other Income, net: | ||||
Net mark-to-market and other net (loss)/gain on residential whole loans measured at fair value | $ (288,375) | $ 31,490 | ||
Net gains on derivatives used for risk management purposes | 94,101 | — | ||
Net mark-to-market on Securitized debt measured at fair value | 64,117 | (1,011) | ||
Net gain on real estate owned | 8,732 | 2,440 | ||
Lima One - origination, servicing and other fee income | 14,494 | — | ||
Other, net | (585) | 1,400 | ||
Other (Loss)/Income, net | $ (107,516) | $ 34,319 | ||
Operating and Other Expense: | ||||
Compensation and benefits | $ 19,556 | $ 8,437 | ||
Other general and administrative expense | 8,697 | 6,792 | ||
Loan servicing, financing and other related costs | 10,401 | 7,299 | ||
Amortization of intangible assets | 3,300 | — | ||
Operating and Other Expense | $ 41,954 | $ 22,528 | ||
Net (Loss)/Income | $ (82,906) | $ 85,522 | ||
Less Preferred Stock Dividend Requirement | $ 8,219 | $ 8,219 | ||
Net (Loss)/Income Available to Common Stock and Participating Securities | $ (91,125) | $ 77,303 | ||
Basic (Loss)/Earnings per Common Share | $ (0.86) | $ 0.68 | ||
Diluted (Loss)/Earnings per Common Share | $ (0.86) | $ 0.67 | ||
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. Distributable earnings is determined by adjusting GAAP net income/(loss) by removing certain unrealized gains and losses, primarily on residential mortgage investments, associated debt, and hedges that are, in each case, accounted for at fair value through earnings, as well as certain non-cash expenses and securitization-related transaction costs. Management believes that the adjustments made to GAAP earnings result in the removal of (i) income or expenses that are driven by changes in market valuations and are not reflective of the longer term performance of our investment portfolio, (ii) certain non-cash expenses, and (iii) expense items required to be recognized solely due to the election of the fair value option on certain related residential mortgage assets and associated liabilities. Distributable earnings is one of the factors that our Board of Directors considers when evaluating distributions to our shareholders. Accordingly, we believe that the adjustments to compute Distributable earnings specified below provide investors and analysts with additional information to evaluate our financial results.
Distributable earnings should be used in conjunction with results presented in accordance with GAAP. Distributable earnings does not represent and should not be considered as a substitute for net income or cash flows from operating activities, each as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.
The following table provides a reconciliation of our GAAP net (loss)/income used in the calculation of basic EPS to our non-GAAP Distributable earnings for the quarters ended March 31, 2022 and 2021:
Quarter Ended | ||||||||||
(In Thousands, Except Per Share Amounts) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||
GAAP Net (loss)/income used in the calculation of Basic EPS | $ (91,266) | $ 35,734 | $ 123,858 | $ 58,290 | $ 77,029 | |||||
Adjustments: | ||||||||||
Unrealized gains and losses on: | ||||||||||
Residential whole loans held at fair value | 287,935 | 42,564 | (20,494) | (6,226) | (32,088) | |||||
Securities held at fair value | 2,934 | 364 | (494) | (1,374) | (100) | |||||
Interest rate swaps | (80,753) | (71) | — | — | — | |||||
Securitized debt held at fair value | (62,855) | (6,137) | (857) | 232 | (7,629) | |||||
Investments in loan origination partners | 780 | (23,956) | (48,933) | — | — | |||||
Expense items: | ||||||||||
Amortization of intangible assets | 3,300 | 3,300 | 3,300 | — | — | |||||
Equity based compensation | 2,645 | 2,306 | 2,306 | 2,744 | 1,688 | |||||
Deferred taxes | — | — | — | — | — | |||||
Securitization-related transaction costs | 3,233 | 5,178 | — | — | 2 | |||||
Total adjustments | 157,219 | 23,548 | (65,172) | (4,624) | (38,127) | |||||
Distributable earnings | $ 65,953 | $ 59,282 | $ 58,686 | $ 53,666 | $ 38,902 | |||||
GAAP (loss)/earnings per basic common share | $ (0.86) | $ 0.33 | $ 1.12 | $ 0.53 | $ 0.68 | |||||
Distributable earnings per basic common share | $ 0.62 | $ 0.54 | $ 0.53 | $ 0.49 | $ 0.34 | |||||
Weighted average common shares for basic earnings per share | 106,568 | 109,468 | 110,222 | 110,383 | 112,784 | |||||
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. To calculate our Economic book value, our portfolios of Residential whole loans and securitized debt held at carrying value are adjusted to their fair value, rather than the carrying value that is required to be reported under the GAAP accounting model applied to these financial instruments. These adjustments are also reflected in the table below in our end of period stockholders' equity. Management considers that Economic book value provides investors with a useful supplemental measure to evaluate our financial position as it reflects the impact of fair value changes for all of our residential mortgage investments and certain associated financing arrangements, irrespective of the accounting model applied for GAAP reporting purposes. Economic book value does not represent and should not be considered as a substitute for Stockholders' Equity, as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.
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) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||
GAAP Total Stockholders' Equity | $ 2,349.0 | $ 2,542.8 | $ 2,601.1 | $ 2,526.5 | $ 2,542.3 | |||||
Preferred Stock, liquidation preference | (475.0) | (475.0) | (475.0) | (475.0) | (475.0) | |||||
GAAP Stockholders' Equity for book value per common share | 1,874.0 | 2,067.8 | 2,126.1 | 2,051.5 | 2,067.3 | |||||
Adjustments: | ||||||||||
Fair value adjustment to Residential whole loans, at carrying value | 54.0 | 153.5 | 198.8 | 206.2 | 203.0 | |||||
Fair value adjustment to Securitized debt, at carrying value (1) | 47.7 | 4.3 | (8.0) | (8.9) | (3.6) | |||||
Stockholders' Equity including fair value adjustments to Residential | $ 1,975.7 | $ 2,225.6 | $ 2,316.9 | $ 2,248.8 | $ 2,266.7 | |||||
GAAP book value per common share | $ 17.84 | $ 19.12 | $ 19.29 | $ 18.62 | $ 18.54 | |||||
Economic book value per common share (1) | $ 18.81 | $ 20.58 | $ 21.02 | $ 20.41 | $ 20.32 | |||||
Number of shares of common stock outstanding | 105.0 | 108.1 | 110.2 | 110.2 | 111.5 | |||||
(1) | Economic book value per common share for periods prior to December 31, 2021 have been restated to include the impact of fair value changes in securitized debt held at carrying value. |
INVESTOR CONTACT: | InvestorRelations@mfafinancial.com |
212-207-6488 | |
www.mfafinancial.com | |
MEDIA CONTACT: | Abernathy MacGregor |
Tom Johnson | |
212-371-5999 |
Category: Earnings
View original content:https://www.prnewswire.com/news-releases/mfa-financial-inc-announces-first-quarter-2022-financial-results-301539246.html
SOURCE MFA Financial, Inc.
FAQ
What were MFA Financial's Q1 2022 earnings results?
How did MFA Financial's GAAP book value change in Q1 2022?
What impact did interest rates have on MFA Financial in Q1 2022?
Did MFA Financial increase its interest income in Q1 2022?
