MFA Financial, Inc. Announces Fourth Quarter and Full Year 2023 Financial Results
- Strong GAAP net income of $81.5 million in Q4 2023.
- Distributable earnings of $49.7 million, or $0.49 per common share in Q4.
- Total stockholder return of 30.7% for the full year 2023.
- GAAP net income of $47.3 million in 2023, up from $(264.5 million) in 2022.
- Distributable earnings of $1.59 per common share in 2023, down from $1.85 per common share in 2022.
- Loan acquisitions of $3.0 billion in 2023, including $2.1 billion of funded originations of business purpose loans.
- Interest income totaled $605.6 million in 2023, up from $482.4 million in 2022.
- MFA closed the year with unrestricted cash of $318.0 million.
- None.
Insights
The recent financial results from MFA Financial, Inc. demonstrate a significant rebound in GAAP net income for the fourth quarter, jumping to $81.5 million from a loss in the previous year. This suggests a robust turnaround in the company's profitability, which is a key metric for investors assessing the company's performance. The increase in asset yield from 5.20% in 2022 to 6.16% in 2023 indicates a higher return on investments, which is particularly positive in the context of the volatile interest rate environment experienced over the past year.
The reported distributable earnings of $1.59 per common share, despite being lower than the previous year's $1.85, still reflect a strong earnings capacity. The steady payment of quarterly dividends at $0.35 per common share throughout 2023 also conveys confidence in the company's cash flow stability and commitment to shareholder returns. The total stockholder return of 30.7% for 2023 is impressive, especially when compared to broader market indices and would likely be viewed favorably by investors seeking capital appreciation.
The strategic focus on high-yielding assets, as evidenced by loan acquisitions and securitizations, positions MFA to benefit from the current credit environment. However, the increase in delinquencies, albeit modest, warrants monitoring as it may signal potential risks in the loan portfolio. The company's proactive risk management strategy, as indicated by the CEO, is crucial in mitigating these risks.
MFA Financial's strategy of acquiring and originating high-coupon residential mortgage loans, particularly business purpose loans, is indicative of a targeted approach to capitalize on specific market segments. The average coupon of 10% on new loans acquired during the quarter is substantially higher than typical residential mortgage rates, suggesting a focus on higher-risk, higher-reward lending strategies.
The company's engagement in multiple securitizations throughout the year, totaling $1.8 billion, aligns with the industry trend of leveraging securitization as a means to manage and diversify risk. These securitizations also provide liquidity and can enhance the company's financial flexibility. The issuance of senior unsecured notes with a relatively high-interest rate of 8.875% could be indicative of market perceptions of higher risk or an aggressive approach to capital raising to support further growth.
Additionally, the company's use of interest rate swaps to manage exposure to interest rate fluctuations is a sophisticated financial strategy that seems to have been beneficial, given the net positive carry reported. The reduction in the net effective duration of the investment portfolio suggests a decreased sensitivity to interest rate changes, which could be a strategic move to mitigate interest rate risk amid uncertain economic conditions.
From a legal perspective, the financial activities and disclosures of MFA Financial, Inc. appear to be in compliance with regulatory standards. The use of non-GAAP financial measures such as distributable earnings and economic book value is common in the industry, provided they are reconciled with GAAP measures and adequately explained, which MFA seems to have done.
The company's active management of its debt portfolio, including the repurchase of convertible notes and the issuance of senior unsecured notes, must adhere to the covenants and terms outlined in the respective indentures. The legal implications of these transactions are typically well-managed through disclosure and compliance procedures. Furthermore, the securitization activities undertaken by MFA require adherence to securities laws and regulations, which govern the offering of securities to investors and the reporting requirements associated with these transactions.
It is also noteworthy that the company's proactive asset management and risk mitigation strategies could minimize potential legal exposures related to loan delinquencies and defaults. The increase in delinquency rates, while modest, should be closely monitored to ensure that it remains within acceptable legal and regulatory thresholds.
Fourth Quarter 2023 Financial Results:
-
MFA generated GAAP net income for the fourth quarter of
$81.5 million $0.80 $0.76 $49.7 million $0.49 -
GAAP book value at December 31, 2023 was
$13.98 $14.57 -
Total economic return was
7.8% for the fourth quarter. -
MFA closed the year with unrestricted cash of
$318.0 million -
MFA paid a regular cash dividend of
$0.35
Full Year 2023 Highlights:
-
MFA delivered a total stockholder return of
30.7% for 2023. -
GAAP net income was
$47.3 million $0.46 $(264.5 million )$(2.57) -
Distributable earnings were
$1.59 $1.85 -
MFA paid quarterly dividends of
$0.35 $1.40 -
Total economic return was
2.7% for 2023. -
Asset yield averaged
6.16% in 2023, up from5.20% in 2022. -
Net interest spread averaged
2.05% in 2023, up from1.74% in 2022. -
Loan acquisitions were
$3.0 billion $2.1 billion $0.9 billion -
MFA added
$456.7 million -
MFA completed eight securitizations in 2023 collateralized by
$2.2 billion $1.4 billion $418.6 million $376.1 million -
Interest income totaled
$605.6 million $482.4 million -
Lima One generated
$43.4 million
“In another historically volatile year, MFA stockholders earned a total return of
Commenting on the quarter, Mr. Knutson stated: “We are pleased to report strong earnings to conclude 2023. Although interest rates and credit spreads remained turbulent during the fourth quarter, we continued to add high-yielding assets to our balance sheet while keeping our funding costs relatively stable. Our total economic return was
Mr. Knutson continued: “We acquired or originated more than
“Our net interest spread and net interest margin both remained healthy at
“We repurchased
Q4 2023 Portfolio Activity
-
Loan acquisitions were
$860.4 million $572.9 million $287.5 million $9.0 billion -
Lima One funded
$417.0 million $594.0 million $155.9 million $10.8 million -
MFA added
$22.3 million $746.1 million -
Asset dispositions included
$78.5 million $18.2 million -
MFA continued to reduce its REO portfolio, selling 71 properties in the fourth quarter for aggregate proceeds of
$22.6 million $2.2 million -
60+ day delinquencies (measured as a percentage of UPB) for Purchased Performing Loans increased to
3.8% from3.1% in the third quarter. Combined Purchased Credit Deteriorated and Purchased Non-Performing 60+ day delinquencies declined to24.5% from25.9% in the third quarter. -
MFA completed two loan securitizations during the quarter, collateralized by
$520.1 million $294.6 million $225.5 million $4.8 billion -
MFA maintained its position in interest rate swaps at a notional amount of approximately
$3.3 billion 1.85% and a weighted average variable receive interest rate of5.38% . - MFA estimates the net effective duration of its investment portfolio at December 31, 2023 declined to 0.91 from 1.05 at September 30, 2023.
- MFA’s Debt/Net Equity Ratio was 4.5x and recourse leverage was 1.7x at December 31, 2023.
Webcast
MFA Financial, Inc. plans to host a live audio webcast of its investor conference call on Thursday, February 22, 2024, at 11:00 a.m. (Eastern Time) to discuss its fourth quarter 2023 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. 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.
About MFA Financial, Inc.
MFA Financial, Inc. (NYSE: MFA) is a leading specialty finance company that invests in residential mortgage loans, residential mortgage-backed securities and other real estate assets. Through its wholly-owned subsidiary, Lima One Capital, MFA also originates and services business purpose loans for real estate investors. MFA has distributed
The following table presents MFA’s asset allocation as of December 31, 2023, and the fourth quarter 2023 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 December 31, 2023 |
|
Purchased Performing Loans (1) |
|
Purchased Credit Deteriorated Loans (2) |
|
Purchased Non-Performing Loans |
|
Securities, at fair value |
|
Real Estate Owned |
|
Other,
|
|
Total |
||||||||||||||
(Dollars in Millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fair Value/Carrying Value |
|
$ |
7,918 |
|
|
$ |
418 |
|
|
$ |
705 |
|
|
$ |
746 |
|
|
$ |
110 |
|
|
$ |
644 |
|
|
$ |
10,541 |
|
Receivable/(Payable) for Unsettled Transactions |
|
|
(104 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(104 |
) |
Financing Agreements with Non-mark-to-market Collateral Provisions |
|
|
(1,217 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,217 |
) |
Financing Agreements with Mark-to-market Collateral Provisions |
|
|
(1,348 |
) |
|
|
(144 |
) |
|
|
(220 |
) |
|
|
(623 |
) |
|
|
(25 |
) |
|
|
— |
|
|
|
(2,360 |
) |
Securitized Debt |
|
|
(4,234 |
) |
|
|
(234 |
) |
|
|
(272 |
) |
|
|
— |
|
|
|
(11 |
) |
|
|
— |
|
|
|
(4,751 |
) |
Convertible Senior Notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(209 |
) |
|
|
(209 |
) |
Net Equity Allocated |
|
$ |
1,015 |
|
|
$ |
40 |
|
|
$ |
213 |
|
|
$ |
123 |
|
|
$ |
74 |
|
|
$ |
435 |
|
|
$ |
1,900 |
|
Debt/Net Equity Ratio (4) |
|
6.7 x |
|
9.5 x |
|
2.3 x |
|
5.1 x |
|
0.5 x |
|
|
|
4.5 x |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
For the Quarter Ended December 31, 2023 |
|
|
|
|
|
|
|
|
||||||||||||||||||||
Yield on Average Interest Earning Assets (5) |
|
|
6.22 |
% |
|
|
6.49 |
% |
|
|
9.65 |
% |
|
|
7.20 |
% |
|
|
N/A |
|
|
|
|
|
6.46 |
% |
||
Less Average Cost of Funds (6) |
|
|
(4.43 |
) |
|
|
(2.68 |
) |
|
|
(3.63 |
) |
|
|
(3.75 |
) |
|
|
(6.03 |
) |
|
|
|
|
(4.33 |
) |
||
Net Interest Rate Spread |
|
|
1.79 |
% |
|
|
3.81 |
% |
|
|
6.02 |
% |
|
|
3.45 |
% |
|
|
(6.03 |
)% |
|
|
|
|
2.13 |
% |
||
(1) |
Includes |
(2) |
At December 31, 2023, the total fair value of these loans is estimated to be |
(3) |
Includes |
(4) |
Total Debt/Net Equity ratio represents the sum of borrowings under our financing agreements 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 December 31, 2023, 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 carry (the difference between swap interest income received and swap interest expense paid) on our interest rate swap agreements (or Swaps). 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. For the quarter ended December 31, 2023, this decreased the overall funding cost by 140 basis points for our overall portfolio, 140 basis points for our Residential whole loans, 142 basis points for our Purchased Performing Loans, 143 basis points for our Purchased Credit Deteriorated Loans, 102 basis points for our Purchased Non-Performing Loans and 206 basis points for our Securities, at fair value. |
The following table presents the activity for our residential mortgage asset portfolio for the three months ended December 31, 2023:
Table 2 - Investment Portfolio Activity Q4 2023 |
|||||||||||||||||||
(In Millions) |
|
September 30, 2023 |
|
Runoff (1) |
|
Acquisitions (2) |
|
Other (3) |
|
December 31, 2023 |
|
Change |
|||||||
Residential whole loans and REO |
|
$ |
8,537 |
|
$ |
(400) |
|
$ |
860 |
|
$ |
154 |
|
$ |
9,151 |
|
$ |
614 |
|
Securities, at fair value |
|
|
724 |
|
|
(8) |
|
|
22 |
|
|
8 |
|
|
746 |
|
|
22 |
|
Totals |
|
$ |
9,261 |
|
$ |
(408) |
|
$ |
882 |
|
$ |
162 |
|
$ |
9,897 |
|
$ |
636 |
|
(1) |
Primarily includes principal repayments and sales of REO. |
(2) |
Includes draws on previously originated Transitional loans. |
(3) |
Primarily includes sales, changes in fair value and changes in the allowance for credit losses. |
The following tables present information on our investments in residential whole loans.
Table 3 - Portfolio composition |
||||||||||||||||||||||
|
|
Held at Carrying Value |
|
Held at Fair Value |
|
Total |
||||||||||||||||
(Dollars in Thousands) |
|
December 31, 2023 |
|
December 31, 2022 |
|
December 31, 2023 |
|
December 31, 2022 |
|
December 31, 2023 |
|
December 31, 2022 |
||||||||||
Purchased Performing Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-QM loans |
|
$ |
843,884 |
|
|
$ |
987,282 |
|
|
$ |
2,961,693 |
|
$ |
2,372,548 |
|
$ |
3,805,577 |
|
|
$ |
3,359,830 |
|
Transitional loans (1) |
|
|
35,467 |
|
|
|
75,188 |
|
|
|
2,326,029 |
|
|
1,342,032 |
|
|
2,361,496 |
|
|
|
1,417,220 |
|
Single-family rental loans |
|
|
172,213 |
|
|
|
210,833 |
|
|
|
1,462,583 |
|
|
1,165,741 |
|
|
1,634,796 |
|
|
|
1,376,574 |
|
Seasoned performing loans |
|
|
68,945 |
|
|
|
82,932 |
|
|
|
— |
|
|
— |
|
|
68,945 |
|
|
|
82,932 |
|
Agency eligible investor loans |
|
|
— |
|
|
|
— |
|
|
|
55,779 |
|
|
51,094 |
|
|
55,779 |
|
|
|
51,094 |
|
Total Purchased Performing Loans |
|
$ |
1,120,509 |
|
|
$ |
1,356,235 |
|
|
$ |
6,806,084 |
|
$ |
4,931,415 |
|
$ |
7,926,593 |
|
|
$ |
6,287,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchased Credit Deteriorated Loans |
|
$ |
429,726 |
|
|
$ |
470,294 |
|
|
$ |
— |
|
$ |
— |
|
$ |
429,726 |
|
|
$ |
470,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowance for Credit Losses |
|
$ |
(20,451 |
) |
|
$ |
(35,314 |
) |
|
$ |
— |
|
$ |
— |
|
$ |
(20,451 |
) |
|
$ |
(35,314 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchased Non-Performing Loans |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
705,424 |
|
$ |
796,109 |
|
$ |
705,424 |
|
|
$ |
796,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Residential Whole Loans |
|
$ |
1,529,784 |
|
|
$ |
1,791,215 |
|
|
$ |
7,511,508 |
|
$ |
5,727,524 |
|
$ |
9,041,292 |
|
|
$ |
7,518,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of loans |
|
|
6,326 |
|
|
|
7,126 |
|
|
|
19,075 |
|
|
16,717 |
|
|
25,401 |
|
|
|
23,843 |
|
(1) |
As of December 31, 2023 includes |
Table 4 - Yields and average balances |
|||||||||||||||||||||||||||
|
|
For the Three-Month Period Ended |
|||||||||||||||||||||||||
(Dollars in Thousands) |
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|||||||||||||||||||||
|
|
Interest |
|
Average Balance |
|
Average Yield |
|
Interest |
|
Average Balance |
|
Average Yield |
|
Interest |
|
Average Balance |
|
Average Yield |
|||||||||
Purchased Performing Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Non-QM loans |
|
$ |
51,997 |
|
$ |
4,111,425 |
|
5.06 |
% |
|
$ |
51,724 |
|
$ |
4,053,924 |
|
5.10 |
% |
|
$ |
41,621 |
|
$ |
3,767,900 |
|
4.42 |
% |
Transitional loans |
|
|
48,358 |
|
|
2,249,974 |
|
8.60 |
% |
|
|
40,223 |
|
|
1,927,533 |
|
8.35 |
% |
|
|
26,134 |
|
|
1,335,471 |
|
7.83 |
% |
Single-family rental loans |
|
|
25,598 |
|
|
1,702,940 |
|
6.01 |
% |
|
|
24,087 |
|
|
1,639,626 |
|
5.88 |
% |
|
|
20,237 |
|
|
1,483,529 |
|
5.46 |
% |
Seasoned performing loans |
|
|
1,191 |
|
|
71,207 |
|
6.69 |
% |
|
|
1,095 |
|
|
74,345 |
|
5.89 |
% |
|
|
1,283 |
|
|
84,876 |
|
6.05 |
% |
Agency eligible investor loans |
|
|
512 |
|
|
69,436 |
|
2.95 |
% |
|
|
486 |
|
|
71,306 |
|
2.73 |
% |
|
|
7,631 |
|
|
1,021,007 |
|
2.99 |
% |
Total Purchased Performing Loans |
|
|
127,656 |
|
|
8,204,982 |
|
6.22 |
% |
|
|
117,615 |
|
|
7,766,734 |
|
6.06 |
% |
|
|
96,906 |
|
|
7,692,783 |
|
5.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Purchased Credit Deteriorated Loans |
|
|
7,051 |
|
|
434,650 |
|
6.49 |
% |
|
|
7,371 |
|
|
444,568 |
|
6.63 |
% |
|
|
7,830 |
|
|
474,971 |
|
6.59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Purchased Non-Performing Loans |
|
|
15,080 |
|
|
624,910 |
|
9.65 |
% |
|
|
15,552 |
|
|
648,959 |
|
9.59 |
% |
|
|
20,252 |
|
|
726,303 |
|
11.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total Residential Whole Loans |
|
$ |
149,787 |
|
$ |
9,264,542 |
|
6.47 |
% |
|
$ |
140,538 |
|
$ |
8,860,261 |
|
6.34 |
% |
|
$ |
124,988 |
|
$ |
8,894,057 |
|
5.62 |
% |
Table 5 - Net Interest Spread |
||||||
|
|
For the Three-Month Period Ended |
||||
|
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
Purchased Performing Loans |
|
|
|
|
|
|
Net Yield (1) |
|
6.22 % |
|
6.06 % |
|
5.04 % |
Cost of Funding (2) |
|
4.43 % |
|
4.23 % |
|
3.70 % |
Net Interest Spread |
|
1.79 % |
|
1.83 % |
|
1.34 % |
|
|
|
|
|
|
|
Purchased Credit Deteriorated Loans |
|
|
|
|
|
|
Net Yield (1) |
|
6.49 % |
|
6.63 % |
|
6.59 % |
Cost of Funding (2) |
|
2.68 % |
|
2.43 % |
|
2.13 % |
Net Interest Spread |
|
3.81 % |
|
4.20 % |
|
4.46 % |
|
|
|
|
|
|
|
Purchased Non-Performing Loans |
|
|
|
|
|
|
Net Yield (1) |
|
9.65 % |
|
9.59 % |
|
11.15 % |
Cost of Funding (2) |
|
3.63 % |
|
3.65 % |
|
3.01 % |
Net Interest Spread |
|
6.02 % |
|
5.94 % |
|
8.14 % |
|
|
|
|
|
|
|
Total Residential Whole Loans |
|
|
|
|
|
|
Net Yield (1) |
|
6.47 % |
|
6.34 % |
|
5.62 % |
Cost of Funding (2) |
|
4.29 % |
|
4.10 % |
|
3.56 % |
Net Interest Spread |
|
2.18 % |
|
2.24 % |
|
2.06 % |
(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 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. 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. For the quarter ended December 31, 2023, this decreased the overall funding cost by 140 basis points for our Residential whole loans, 142 basis points for our Purchased Performing Loans, 143 basis points for our Purchased Credit Deteriorated Loans, and 102 basis points for our Purchased Non-Performing Loans. For the quarter ended September 30, 2023, this decreased the overall funding cost by 143 basis points for our Residential whole loans, 146 basis points for our Purchased Performing Loans, 161 basis points for our Purchased Credit Deteriorated Loans, and 89 basis points for our Purchased Non-Performing Loans. For the quarter ended December 31, 2022, this decreased the overall funding cost by 89 basis points for our Residential whole loans, 87 basis points for our Purchased Performing Loans, 141 basis points for our Purchased Credit Deteriorated Loans, and 76 basis points for our Purchased Non-Performing Loans. |
Table 6 - Credit related metrics/Residential Whole Loans
December 31, 2023
|
|
Fair Value / Carrying Value |
|
Unpaid Principal Balance (“UPB”) |
|
Weighted Average Coupon (2) |
|
Weighted Average Term to Maturity (Months) |
|
Weighted Average LTV Ratio (3) |
|
Weighted Average Original FICO (4) |
|
Aging by UPB |
|
60+
|
|
60+ LTV (3) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Past Due Days |
|
|
||||||||||||||||||||||
(Dollars In Thousands) |
|
|
|
|
|
|
|
Current |
|
|
30-59 |
|
|
60-89 |
|
90+ |
|
|
||||||||||||||||
Purchased Performing Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-QM loans (5) |
|
$ |
3,700,052 |
|
$ |
3,934,798 |
|
5.78 |
% |
|
344 |
|
65 |
% |
|
735 |
|
$ |
3,732,327 |
|
$ |
98,017 |
|
$ |
29,587 |
|
$ |
74,867 |
|
2.7 |
% |
|
63.9 |
% |
Transitional loans (1) |
|
|
2,358,909 |
|
|
2,368,121 |
|
9.22 |
|
|
10 |
|
64 |
|
|
747 |
|
|
2,187,161 |
|
|
61,024 |
|
|
26,618 |
|
|
93,318 |
|
5.1 |
|
|
65.1 |
|
Single-family rental loans |
|
|
1,630,442 |
|
|
1,729,923 |
|
6.30 |
|
|
320 |
|
70 |
|
|
738 |
|
|
1,636,810 |
|
|
12,543 |
|
|
12,314 |
|
|
68,256 |
|
4.7 |
|
|
109.1 |
|
Seasoned performing loans |
|
|
68,924 |
|
|
75,715 |
|
4.58 |
|
|
143 |
|
28 |
|
|
725 |
|
|
72,126 |
|
|
1,045 |
|
|
235 |
|
|
2,309 |
|
3.4 |
|
|
33.6 |
|
Agency eligible investor loans |
|
|
55,779 |
|
|
66,830 |
|
3.44 |
|
|
332 |
|
66 |
|
|
758 |
|
|
65,094 |
|
|
1,508 |
|
|
— |
|
|
228 |
|
0.3 |
|
|
73.4 |
|
Total Purchased Performing Loans |
|
$ |
7,814,106 |
|
$ |
8,175,387 |
|
6.86 |
% |
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8 |
% |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchased Credit Deteriorated Loans |
|
$ |
418,109 |
|
$ |
506,828 |
|
4.83 |
% |
|
267 |
|
59 |
% |
|
N/A |
|
$ |
379,970 |
|
$ |
44,731 |
|
$ |
12,814 |
|
$ |
69,313 |
|
16.2 |
% |
|
64.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchased Non-Performing Loans |
|
$ |
705,424 |
|
$ |
772,737 |
|
5.21 |
% |
|
270 |
|
62 |
% |
|
N/A |
|
$ |
444,491 |
|
$ |
96,464 |
|
$ |
31,560 |
|
$ |
200,222 |
|
30.0 |
% |
|
70.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential whole loans, total or weighted average |
|
$ |
8,937,639 |
|
$ |
9,454,952 |
|
6.04 |
% |
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6.6 |
% |
|
|
||||||
(1) |
As of December 31, 2023 Transitional loans includes |
(2) |
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. |
(3) |
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 Transitional 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 Transitional loans, totaling |
(4) |
Excludes loans for which no Fair Isaac Corporation (“FICO”) score is available. |
(5) |
Excluded from the table above are approximately |
Table 7 - 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 securitized debt, based on the assets in our investment portfolio at December 31, 2023. Changes in portfolio value are measured as the percentage change when comparing the projected portfolio value to the base interest rate scenario at December 31, 2023.
Change in Interest Rates |
|
Percentage Change in Portfolio Value |
|
Percentage Change in Total Stockholders’ Equity |
|
|
|
|
|
+100 Basis Point Increase |
|
(1.17) % |
|
(6.53) % |
+ 50 Basis Point Increase |
|
(0.52) % |
|
(2.92) % |
Actual at December 31, 2023 |
|
— % |
|
— % |
- 50 Basis Point Decrease |
|
0.40 % |
|
2.23 % |
-100 Basis Point Decrease |
|
0.68 % |
|
3.76 % |
MFA FINANCIAL, INC. CONSOLIDATED BALANCE SHEETS |
||||||||
(In Thousands, Except Per Share Amounts) |
|
December 31,
|
|
December 31,
|
||||
|
|
(unaudited) |
|
|
||||
Assets: |
|
|
|
|
||||
Residential whole loans, net ( |
|
$ |
9,041,292 |
|
|
$ |
7,518,739 |
|
Securities, at fair value |
|
|
746,090 |
|
|
|
333,364 |
|
Cash and cash equivalents |
|
|
318,000 |
|
|
|
334,183 |
|
Restricted cash |
|
|
170,211 |
|
|
|
159,898 |
|
Other assets |
|
|
497,097 |
|
|
|
766,221 |
|
Total Assets |
|
$ |
10,772,690 |
|
|
$ |
9,112,405 |
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
||||
Financing agreements ( |
|
$ |
8,536,745 |
|
|
$ |
6,812,086 |
|
Other liabilities |
|
|
336,030 |
|
|
|
311,470 |
|
Total Liabilities |
|
$ |
8,872,775 |
|
|
$ |
7,123,556 |
|
|
|
|
|
|
||||
Stockholders’ Equity: |
|
|
|
|
||||
Preferred stock, |
|
$ |
80 |
|
|
$ |
80 |
|
Preferred stock, |
|
|
110 |
|
|
|
110 |
|
Common stock, and outstanding, respectively |
|
|
1,019 |
|
|
|
1,018 |
|
Additional paid-in capital, in excess of par |
|
|
3,698,767 |
|
|
|
3,684,291 |
|
Accumulated deficit |
|
|
(1,817,759 |
) |
|
|
(1,717,991 |
) |
Accumulated other comprehensive income |
|
|
17,698 |
|
|
|
21,341 |
|
Total Stockholders’ Equity |
|
$ |
1,899,915 |
|
|
$ |
1,988,849 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
10,772,690 |
|
|
$ |
9,112,405 |
|
(1) |
Includes approximately |
MFA FINANCIAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||||
(In Thousands, Except Per Share Amounts) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
||||||||
Interest Income: |
|
|
|
|
|
|
|
|
||||||||
Residential whole loans |
|
$ |
149,787 |
|
|
$ |
124,988 |
|
|
$ |
537,883 |
|
|
$ |
441,223 |
|
Securities, at fair value |
|
|
13,175 |
|
|
|
12,740 |
|
|
|
42,376 |
|
|
|
28,921 |
|
Other interest-earning assets |
|
|
1,467 |
|
|
|
2,366 |
|
|
|
9,027 |
|
|
|
7,437 |
|
Cash and cash equivalent investments |
|
|
5,448 |
|
|
|
2,783 |
|
|
|
16,311 |
|
|
|
4,838 |
|
Interest Income |
|
$ |
169,877 |
|
|
$ |
142,877 |
|
|
$ |
605,597 |
|
|
$ |
482,419 |
|
|
|
|
|
|
|
|
|
|
||||||||
Interest Expense: |
|
|
|
|
|
|
|
|
||||||||
Asset-backed and other collateralized financing arrangements |
|
$ |
119,665 |
|
|
$ |
83,277 |
|
|
$ |
413,517 |
|
|
$ |
243,083 |
|
Other interest expense |
|
|
3,748 |
|
|
|
3,949 |
|
|
|
15,601 |
|
|
|
15,760 |
|
Interest Expense |
|
$ |
123,413 |
|
|
$ |
87,226 |
|
|
$ |
429,118 |
|
|
$ |
258,843 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net Interest Income |
|
$ |
46,464 |
|
|
$ |
55,651 |
|
|
$ |
176,479 |
|
|
$ |
223,576 |
|
|
|
|
|
|
|
|
|
|
||||||||
Reversal of Provision for Credit Losses on Residential Whole Loans |
|
$ |
7,876 |
|
|
$ |
1,540 |
|
|
$ |
8,853 |
|
|
$ |
2,646 |
|
Provision for Credit Losses on Other Assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(28,579 |
) |
Net Interest Income after Provision for Credit Losses |
|
$ |
54,340 |
|
|
$ |
57,191 |
|
|
$ |
185,332 |
|
|
$ |
197,643 |
|
|
|
|
|
|
|
|
|
|
||||||||
Other Income/(Loss), net: |
|
|
|
|
|
|
|
|
||||||||
Net gain/(loss) on residential whole loans measured at fair value through earnings |
|
$ |
224,273 |
|
|
$ |
(68,828 |
) |
|
$ |
89,850 |
|
|
$ |
(866,762 |
) |
Impairment and other net gain/(loss) on securities and other portfolio investments |
|
|
22,024 |
|
|
|
(8,909 |
) |
|
|
6,225 |
|
|
|
(25,067 |
) |
Net gain on real estate owned |
|
|
888 |
|
|
|
5,602 |
|
|
|
9,392 |
|
|
|
25,379 |
|
Net gain/(loss) on derivatives used for risk management purposes |
|
|
(70,342 |
) |
|
|
1,458 |
|
|
|
3,761 |
|
|
|
255,179 |
|
Net gain/(loss) on securitized debt measured at fair value through earnings |
|
|
(111,689 |
) |
|
|
43,091 |
|
|
|
(99,589 |
) |
|
|
290,639 |
|
Lima One - origination, servicing and other fee income |
|
|
10,822 |
|
|
|
9,206 |
|
|
|
43,384 |
|
|
|
46,745 |
|
Net realized loss on residential whole loans held at carrying value |
|
|
(1,240 |
) |
|
|
— |
|
|
|
(1,240 |
) |
|
|
— |
|
Other, net |
|
|
1,407 |
|
|
|
1,866 |
|
|
|
11,331 |
|
|
|
8,623 |
|
Other Income/(Loss), net |
|
$ |
76,143 |
|
|
$ |
(16,514 |
) |
|
$ |
63,114 |
|
|
$ |
(265,264 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Operating and Other Expense: |
|
|
|
|
|
|
|
|
||||||||
Compensation and benefits |
|
$ |
19,347 |
|
|
$ |
17,049 |
|
|
$ |
85,799 |
|
|
$ |
76,728 |
|
Other general and administrative expense |
|
|
12,580 |
|
|
|
7,717 |
|
|
|
44,147 |
|
|
|
35,138 |
|
Loan servicing, financing and other related costs |
|
|
8,010 |
|
|
|
7,901 |
|
|
|
34,136 |
|
|
|
42,894 |
|
Amortization of intangible assets |
|
|
800 |
|
|
|
1,300 |
|
|
|
4,200 |
|
|
|
9,200 |
|
Operating and Other Expense |
|
$ |
40,737 |
|
|
$ |
33,967 |
|
|
$ |
168,282 |
|
|
$ |
163,960 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net Income/(Loss) |
|
$ |
89,746 |
|
|
$ |
6,710 |
|
|
$ |
80,164 |
|
|
$ |
(231,581 |
) |
Less Preferred Stock Dividend Requirement |
|
$ |
8,219 |
|
|
$ |
8,219 |
|
|
$ |
32,875 |
|
|
$ |
32,875 |
|
Net Income/(Loss) Available to Common Stock and Participating Securities |
|
$ |
81,527 |
|
|
$ |
(1,509 |
) |
|
$ |
47,289 |
|
|
$ |
(264,456 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Basic Earnings/(Loss) per Common Share |
|
$ |
0.80 |
|
|
$ |
(0.02 |
) |
|
$ |
0.46 |
|
|
$ |
(2.57 |
) |
Diluted Earnings/(Loss) per Common Share |
|
$ |
0.76 |
|
|
$ |
(0.02 |
) |
|
$ |
0.46 |
|
|
$ |
(2.57 |
) |
Segment Reporting
At December 31, 2023, the Company’s reportable segments include (i) mortgage-related assets and (ii) Lima One. The Corporate column in the table below primarily consists of corporate cash and related interest income, investments in loan originators and related economics, general and administrative expenses not directly attributable to Lima One, interest expense on unsecured convertible senior notes, securitization issuance costs, and preferred stock dividends.
The following tables summarize segment financial information, which in total reconciles to the same data for the Company as a whole:
(Dollars in Thousands) |
|
Mortgage-Related Assets |
|
Lima One |
|
Corporate |
|
Total |
||||||||
Three months ended December 31, 2023 |
|
|
|
|
|
|
|
|
||||||||
Interest Income |
|
$ |
94,495 |
|
|
$ |
71,896 |
|
|
$ |
3,486 |
|
|
$ |
169,877 |
|
Interest Expense |
|
|
68,655 |
|
|
|
51,009 |
|
|
|
3,749 |
|
|
|
123,413 |
|
Net Interest Income/(Expense) |
|
$ |
25,840 |
|
|
$ |
20,887 |
|
|
$ |
(263 |
) |
|
$ |
46,464 |
|
Reversal of Provision for Credit Losses on Residential Whole Loans |
|
|
7,876 |
|
|
|
— |
|
|
|
— |
|
|
|
7,876 |
|
Net Interest Income/(Expense) after Provision for Credit Losses |
|
$ |
33,716 |
|
|
$ |
20,887 |
|
|
$ |
(263 |
) |
|
$ |
54,340 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net gain on residential whole loans measured at fair value through earnings |
|
$ |
170,936 |
|
|
$ |
53,337 |
|
|
$ |
— |
|
|
$ |
224,273 |
|
Impairment and other net gain/(loss) on securities and other portfolio investments |
|
|
22,279 |
|
|
|
— |
|
|
|
(255 |
) |
|
|
22,024 |
|
Net gain on real estate owned |
|
|
795 |
|
|
|
93 |
|
|
|
— |
|
|
|
888 |
|
Net loss on derivatives used for risk management purposes |
|
|
(53,291 |
) |
|
|
(17,051 |
) |
|
|
— |
|
|
|
(70,342 |
) |
Net loss on securitized debt measured at fair value through earnings |
|
|
(76,381 |
) |
|
|
(35,308 |
) |
|
|
— |
|
|
|
(111,689 |
) |
Lima One - origination, servicing and other fee income |
|
|
— |
|
|
|
10,822 |
|
|
|
— |
|
|
|
10,822 |
|
Net realized loss on residential whole loans held at carrying value |
|
|
(1,240 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,240 |
) |
Other, net |
|
|
1,424 |
|
|
|
153 |
|
|
|
(170 |
) |
|
|
1,407 |
|
Total Other Income/(Loss), net |
|
$ |
64,522 |
|
|
$ |
12,046 |
|
|
$ |
(425 |
) |
|
$ |
76,143 |
|
|
|
|
|
|
|
|
|
|
||||||||
Compensation and benefits |
|
$ |
— |
|
|
$ |
11,875 |
|
|
$ |
7,472 |
|
|
$ |
19,347 |
|
General and administrative expenses |
|
|
214 |
|
|
|
5,680 |
|
|
|
6,686 |
|
|
|
12,580 |
|
Loan servicing, financing, and other related costs |
|
|
4,953 |
|
|
|
467 |
|
|
|
2,590 |
|
|
|
8,010 |
|
Amortization of intangible assets |
|
|
— |
|
|
|
800 |
|
|
|
— |
|
|
|
800 |
|
Net Income/(Loss) |
|
$ |
93,071 |
|
|
$ |
14,111 |
|
|
$ |
(17,436 |
) |
|
$ |
89,746 |
|
|
|
|
|
|
|
|
|
|
||||||||
Less Preferred Stock Dividend Requirement |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,219 |
|
|
$ |
8,219 |
|
Net Income/(Loss) Available to Common Stock and Participating Securities |
|
$ |
93,071 |
|
|
$ |
14,111 |
|
|
$ |
(25,655 |
) |
|
$ |
81,527 |
|
(Dollars in Thousands) |
|
Mortgage-Related Assets |
|
Lima One |
|
Corporate |
|
Total |
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
||||
Total Assets |
|
$ |
6,370,237 |
|
$ |
4,000,932 |
|
$ |
401,521 |
|
$ |
10,772,690 |
|
|
|
|
|
|
|
|
|
||||
December 31, 2022 |
|
|
|
|
|
|
|
|
||||
Total Assets |
|
$ |
6,065,557 |
|
$ |
2,618,695 |
|
$ |
428,153 |
|
$ |
9,112,405 |
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, certain realized gains and losses, as well as certain non-cash expenses and securitization-related transaction costs. The transaction costs are primarily comprised of costs only incurred at the time of execution of our securitizations and include costs such as underwriting fees, legal fees, diligence fees, bank fees and other similar transaction related expenses. These costs are all incurred prior to or at the execution of our securitizations and do not recur. Recurring expenses, such as servicing fees, custodial fees, trustee fees and other similar ongoing fees are not excluded from distributable earnings. Management believes that the adjustments made to GAAP earnings result in the removal of (i) income or expenses that 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 income/(loss) used in the calculation of basic EPS to our non-GAAP Distributable earnings for the quarterly periods below:
|
|
Quarter Ended |
||||||||||||||||||
(In Thousands, Except Per Share Amounts) |
|
December 31, 2023 |
|
September 30, 2023 |
|
June 30, 2023 |
|
March 31, 2023 |
|
December 31, 2022 |
||||||||||
GAAP Net income/(loss) used in the calculation of basic EPS |
|
$ |
81,527 |
|
|
$ |
(64,657 |
) |
|
$ |
(34,146 |
) |
|
$ |
64,565 |
|
|
$ |
(1,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrealized and realized gains and losses on: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential whole loans held at fair value |
|
|
(224,272 |
) |
|
|
132,894 |
|
|
|
130,703 |
|
|
|
(129,174 |
) |
|
|
68,828 |
|
Securities held at fair value |
|
|
(21,371 |
) |
|
|
13,439 |
|
|
|
3,698 |
|
|
|
(2,931 |
) |
|
|
383 |
|
Residential whole loans and securities at carrying value |
|
|
332 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest rate swaps |
|
|
97,400 |
|
|
|
(9,433 |
) |
|
|
(37,018 |
) |
|
|
40,747 |
|
|
|
12,725 |
|
Securitized debt held at fair value |
|
|
108,693 |
|
|
|
(40,229 |
) |
|
|
(30,908 |
) |
|
|
48,846 |
|
|
|
(44,988 |
) |
Investments in loan origination partners |
|
|
254 |
|
|
|
722 |
|
|
|
872 |
|
|
|
— |
|
|
|
8,526 |
|
Expense items: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Amortization of intangible assets |
|
|
800 |
|
|
|
800 |
|
|
|
1,300 |
|
|
|
1,300 |
|
|
|
1,300 |
|
Equity based compensation |
|
|
3,635 |
|
|
|
4,447 |
|
|
|
3,932 |
|
|
|
3,020 |
|
|
|
2,480 |
|
Securitization-related transaction costs |
|
|
2,702 |
|
|
|
3,217 |
|
|
|
2,071 |
|
|
|
4,602 |
|
|
|
1,744 |
|
Total adjustments |
|
|
(31,827 |
) |
|
|
105,857 |
|
|
|
74,650 |
|
|
|
(33,590 |
) |
|
|
50,998 |
|
Distributable earnings |
|
$ |
49,700 |
|
|
$ |
41,200 |
|
|
$ |
40,504 |
|
|
$ |
30,975 |
|
|
$ |
49,351 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP earnings/(loss) per basic common share |
|
$ |
0.80 |
|
|
$ |
(0.64 |
) |
|
$ |
(0.34 |
) |
|
$ |
0.63 |
|
|
$ |
(0.02 |
) |
Distributable earnings per basic common share |
|
$ |
0.49 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
0.30 |
|
|
$ |
0.48 |
|
Weighted average common shares for basic earnings per share |
|
|
102,266 |
|
|
|
102,255 |
|
|
|
102,186 |
|
|
|
102,155 |
|
|
|
101,800 |
|
The following table presents our non-GAAP Distributable earnings by segment for the quarterly periods below:
(Dollars in Thousands) |
|
Mortgage-Related Assets |
|
Lima One |
|
Corporate |
|
Total |
||||||||
Three months ended December 31, 2023 |
|
|
|
|
|
|
|
|
||||||||
GAAP Net income/(loss) used in the calculation of basic EPS |
|
$ |
93,071 |
|
|
$ |
14,111 |
|
|
$ |
(25,655 |
) |
|
$ |
81,527 |
|
|
|
|
|
|
|
|
|
|
||||||||
Adjustments: |
|
|
|
|
|
|
|
|
||||||||
Unrealized and realized gains and losses on: |
|
|
|
|
|
|
|
|
||||||||
Residential whole loans held at fair value |
|
|
(170,935 |
) |
|
|
(53,337 |
) |
|
|
— |
|
|
|
(224,272 |
) |
Securities held at fair value |
|
|
(21,371 |
) |
|
|
— |
|
|
|
— |
|
|
|
(21,371 |
) |
Residential whole loans and securities at carrying value |
|
|
332 |
|
|
|
— |
|
|
|
— |
|
|
|
332 |
|
Interest rate swaps |
|
|
72,741 |
|
|
|
24,659 |
|
|
|
— |
|
|
|
97,400 |
|
Securitized debt held at fair value |
|
|
73,779 |
|
|
|
34,914 |
|
|
|
— |
|
|
|
108,693 |
|
Investments in loan origination partners |
|
|
— |
|
|
|
— |
|
|
|
254 |
|
|
|
254 |
|
Expense items: |
|
|
|
|
|
|
|
|
||||||||
Amortization of intangible assets |
|
|
— |
|
|
|
800 |
|
|
|
— |
|
|
|
800 |
|
Equity based compensation |
|
|
— |
|
|
|
132 |
|
|
|
3,503 |
|
|
|
3,635 |
|
Securitization-related transaction costs |
|
|
145 |
|
|
|
— |
|
|
|
2,557 |
|
|
|
2,702 |
|
Total adjustments |
|
$ |
(45,309 |
) |
|
$ |
7,168 |
|
|
$ |
6,314 |
|
|
$ |
(31,827 |
) |
Distributable earnings |
|
$ |
47,762 |
|
|
$ |
21,279 |
|
|
$ |
(19,341 |
) |
|
$ |
49,700 |
|
(Dollars in Thousands) |
|
Mortgage-Related Assets |
|
Lima One |
|
Corporate |
|
Total |
||||||||
Three months ended September 30, 2023 |
|
|
|
|
|
|
|
|
||||||||
GAAP Net income/(loss) used in the calculation of basic EPS |
|
$ |
(33,411 |
) |
|
$ |
(993 |
) |
|
$ |
(30,253 |
) |
|
$ |
(64,657 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Adjustments: |
|
|
|
|
|
|
|
|
||||||||
Unrealized and realized gains and losses on: |
|
|
|
|
|
|
|
|
||||||||
Residential whole loans held at fair value |
|
|
99,500 |
|
|
|
33,394 |
|
|
|
— |
|
|
|
132,894 |
|
Securities held at fair value |
|
|
13,439 |
|
|
|
— |
|
|
|
— |
|
|
|
13,439 |
|
Interest rate swaps |
|
|
(7,098 |
) |
|
|
(2,335 |
) |
|
|
— |
|
|
|
(9,433 |
) |
Securitized debt held at fair value |
|
|
(28,572 |
) |
|
|
(11,657 |
) |
|
|
— |
|
|
|
(40,229 |
) |
Investments in loan origination partners |
|
|
— |
|
|
|
— |
|
|
|
722 |
|
|
|
722 |
|
Expense items: |
|
|
|
|
|
|
|
|
||||||||
Amortization of intangible assets |
|
|
— |
|
|
|
800 |
|
|
|
— |
|
|
|
800 |
|
Equity based compensation |
|
|
— |
|
|
|
131 |
|
|
|
4,316 |
|
|
|
4,447 |
|
Securitization-related transaction costs |
|
|
— |
|
|
|
— |
|
|
|
3,217 |
|
|
|
3,217 |
|
Total adjustments |
|
$ |
77,269 |
|
|
$ |
20,333 |
|
|
$ |
8,255 |
|
|
$ |
105,857 |
|
Distributable earnings |
|
$ |
43,858 |
|
|
$ |
19,340 |
|
|
$ |
(21,998 |
) |
|
$ |
41,200 |
|
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 investment activities, 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) |
|
December 31, 2023 |
|
September 30, 2023 |
|
June 30, 2023 |
|
March 31, 2023 |
|
December 31, 2022 |
||||||||||
GAAP Total Stockholders’ Equity |
|
$ |
1,899.9 |
|
|
$ |
1,848.5 |
|
|
$ |
1,944.8 |
|
|
$ |
2,018.6 |
|
|
$ |
1,988.8 |
|
Preferred Stock, liquidation preference |
|
|
(475.0 |
) |
|
|
(475.0 |
) |
|
|
(475.0 |
) |
|
|
(475.0 |
) |
|
|
(475.0 |
) |
GAAP Stockholders’ Equity for book value per common share |
|
|
1,424.9 |
|
|
|
1,373.5 |
|
|
|
1,469.8 |
|
|
|
1,543.6 |
|
|
|
1,513.8 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Fair value adjustment to Residential whole loans, at carrying value |
|
|
(35.6 |
) |
|
|
(85.3 |
) |
|
|
(58.3 |
) |
|
|
(33.9 |
) |
|
|
(70.2 |
) |
Fair value adjustment to Securitized debt, at carrying value |
|
|
95.6 |
|
|
|
122.5 |
|
|
|
129.8 |
|
|
|
122.4 |
|
|
|
139.7 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Stockholders’ Equity including fair value adjustments to Residential whole loans and Securitized debt held at carrying value (Economic book value) |
|
$ |
1,484.9 |
|
|
$ |
1,410.7 |
|
|
$ |
1,541.3 |
|
|
$ |
1,632.1 |
|
|
$ |
1,583.3 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
GAAP book value per common share |
|
$ |
13.98 |
|
|
$ |
13.48 |
|
|
$ |
14.42 |
|
|
$ |
15.15 |
|
|
$ |
14.87 |
|
Economic book value per common share |
|
$ |
14.57 |
|
|
$ |
13.84 |
|
|
$ |
15.12 |
|
|
$ |
16.02 |
|
|
$ |
15.55 |
|
Number of shares of common stock outstanding |
|
|
101.9 |
|
|
|
101.9 |
|
|
|
101.9 |
|
|
|
101.9 |
|
|
|
101.8 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cautionary Note Regarding Forward-Looking Statements
When used in this press release or other written or oral communications, statements that 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 MFA’s business, financial condition, liquidity, results of operations, plans and objectives. Among the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements that we make are: general economic developments and trends and the performance of the housing, real estate, mortgage finance, broader financial markets; inflation, increases in interest rates and changes in the market (i.e., fair) value of MFA’s residential whole loans, MBS, securitized debt and other assets, as well as changes in the value of MFA’s liabilities accounted for at fair value through earnings; the effectiveness of hedging transactions; 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 its 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 or 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 of Directors 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 of Directors 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; targeted or expected returns on our investments in recently-originated mortgage loans, the performance of which is, similar to our other mortgage loan investments, subject to, among other things, differences in prepayment risk, credit risk and financing costs associated with such investments; risks associated with the ongoing operation of Lima One Holdings, LLC (including, without limitation, unanticipated expenditures relating to or liabilities arising from its operation (including, among other things, a failure to realize management’s assumptions regarding expected growth in business purpose loan (BPL) origination volumes and credit risks underlying BPLs, including changes in the default rates and management’s assumptions regarding default rates on the BPLs originated by Lima One)); 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; risks associated with our 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 generally, including changes in business conditions and the general economy; and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC. These forward-looking statements are based on beliefs, assumptions and expectations of MFA’s future performance, taking into account information currently available. Readers and listeners 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.
Category: Earnings
View source version on businesswire.com: https://www.businesswire.com/news/home/20240220265937/en/
INVESTORS:
InvestorRelations@mfafinancial.com
212-207-6488
www.mfafinancial.com
MEDIA:
H/Advisors Abernathy
Tom Johnson
212-371-5999
Source: MFA Financial, Inc.
FAQ
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