MFA Financial, Inc. Announces Second Quarter 2021 Financial Results
MFA Financial reported a net income of $58.5 million, or $0.13 per share, for Q2 2021. The cash dividend increased by 33% to $0.10 per share. GAAP book value was $4.65 and economic book value rose to $5.12. Net interest income surged 16% to $59 million, with interest expense down 15%. MFA completed significant securitizations, lowering funding rates by about 200 bps. The acquisition of Lima One is expected to enhance business purpose loan capabilities.
- Net income of $58.5 million for Q2 2021
- 33% increase in cash dividend to $0.10 per share
- 16% rise in net interest income to $59 million
- Successful securitizations lowering funding rates by 200 bps
- Acquisition of Lima One to enhance BPL capabilities
- Quarterly loan purchase activity still recovering post-COVID
NEW YORK, Aug. 5, 2021 /PRNewswire/ -- MFA Financial, Inc. (NYSE:MFA) today provided its financial results for the second quarter ended June 30, 2021.
Second Quarter 2021 financial results update:
- MFA generated second quarter net income of
$58.5 million , or$0.13 per common share. - MFA paid a regular cash dividend for the second quarter of
$0.10 per share of common stock on July 30, 2021, an increase of33% over the first quarter dividend paid to common shareholders. - GAAP book value at June 30, 2021 was
$4.65 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 held at carrying value for GAAP reporting, was$5.12 per common share at quarter-end. - Our portfolio of residential mortgage assets delivered solid second quarter earnings and stable book value despite a volatile market for residential mortgage assets.
- Net interest income increased on a sequential quarter basis by over
16% to$59.0 million as we continued to execute on initiatives to lower the cost of financing our investments with more durable forms of borrowing. Interest expense decreased approximately15% quarter over quarter. For the second quarter, the net interest spread generated by our interest bearing portfolio increased to3.02% . - Two securitizations were completed during the quarter. These included a securitization of
$394 million of Non-QM loans, with$371 million of bonds sold at a blended cost of1.37% , lowering the funding rate on these loans by approximately 200 bps. In addition, we completed a securitization of$473 million of previously securitized and other re-performing loans, with$435 million of bonds sold at a blended cost of1.30% , lowering the funding rate on these loans by approximately 85 bps. - Loan purchase activity of
$857 million approached levels last achieved in the first quarter of 2020, with acquisitions including approximately$375 million of Non-QM and$175 million of Business Purpose loans. In addition, we purchased over$300 million of "Agency eligible investor loans", which are residential mortgage loans on investor properties that conform to the standards for purchase by a federally chartered corporation, such as the Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). This purchase activity exceeded portfolio run-off, resulting in net loan portfolio growth of approximately$360 million .
Commenting on the second quarter 2021 results, Craig Knutson, MFA's CEO and President, said, "MFA had a very solid second quarter of 2021, as our portfolio performed well and our ongoing efforts to use securitizations to term out and lower our funding costs drove financial results. We earned
Mr. Knutson added, "Our second quarter results were driven by strong portfolio performance, with lower loan balances and improving mortgage credit leading to a release of CECL reserves of
Mr. Knutson continued, "We also took advantage of a strong housing market to continue to reduce our REO portfolio, selling 139 properties for aggregate proceeds of
Q2 2021 Portfolio Activity
MFA's residential mortgage investment portfolio increased by
At June 30, 2021, our investments in residential whole loans totaled
For the second quarter, a reversal of the provision for credit losses 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 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 second quarter, net gains of
In addition, as of the end of the quarter, we held approximately
At the end of the second quarter, MFA held approximately
General and Administrative and other expenses
For the three months ended June 30, 2021, MFA's costs for compensation and benefits and other general and administrative expenses were
Stock Repurchase Program
On November 2, 2020, MFA's Board of Directors authorized a share repurchase program under which MFA may repurchase up to
MFA expects to fund the share repurchases from current cash balances and future investment portfolio run-off. The Company currently has approximately 440.9 million shares of common stock outstanding.
The following table presents MFA's asset allocation as of June 30, 2021, and the second quarter 2021 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 June 30, 2021 | Purchased | Purchased | Purchased | Securities, at | Real Estate | Other, | Total | |||||||||||||||||||||
($ in Millions) | ||||||||||||||||||||||||||||
Fair Value/Carrying Value | $ | 3,802 | $ | 581 | $ | 1,168 | $ | 303 | $ | 205 | $ | 1,027 | $ | 7,086 | ||||||||||||||
Payable for Unsettled Purchases | (131) | — | — | — | — | — | (131) | |||||||||||||||||||||
Financing Agreements with non- | (419) | (136) | (232) | — | (8) | — | (795) | |||||||||||||||||||||
Financing Agreements with mark-to- | (929) | (105) | (139) | (178) | (10) | — | (1,361) | |||||||||||||||||||||
Less Securitized Debt | (1,397) | (232) | (391) | — | (26) | — | (2,046) | |||||||||||||||||||||
Less Convertible Senior Notes | — | — | — | — | — | (226) | (226) | |||||||||||||||||||||
Net Equity Allocated | $ | 926 | $ | 108 | $ | 406 | $ | 125 | $ | 161 | $ | 801 | $ | 2,527 | ||||||||||||||
Debt/Net Equity Ratio (4) | 3.1x | 4.4x | 1.9x | 1.4x | 0.3x | 1.8x | ||||||||||||||||||||||
For the Quarter Ended June 30, 2021 | ||||||||||||||||||||||||||||
Yield on Average Interest Earning Assets (5)(6) | 7.98 | N/A | ||||||||||||||||||||||||||
Less Average Cost of Funds (7) | (2.09) | (2.39) | (2.71) | (1.81) | (3.15) | (2.49) | ||||||||||||||||||||||
Net Interest Rate Spread | 5.27 | (3.15)% | ||||||||||||||||||||||||||
(1) | Includes |
(2) | At June 30, 2021, 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 June 30, 2021, 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. |
The following table presents the activity for our residential mortgage asset portfolio for the three months ended June 30, 2021:
Table 2 - Investment Portfolio Activity Q2 2021
(In Millions) | March 31, 2021 | Runoff (1) | Acquisitions | Other (2) | June 30, 2021 | Change | ||||||||||||||||||
Residential whole loans and REO | $ | 5,409 | $ | (538) | $ | 857 | $ | 28 | $ | 5,756 | $ | 347 | ||||||||||||
Securities, at fair value | 351 | (52) | — | 4 | 303 | (48) | ||||||||||||||||||
Totals | $ | 5,760 | $ | (590) | $ | 857 | $ | 32 | $ | 6,059 | $ | 299 | ||||||||||||
(1) | Primarily includes principal repayments and sales of REO. |
(2) | Primarily includes changes in fair value, draws on previously originated Rehabilitation loans, and changes in the allowance for credit losses. |
The following tables present information on our investments in residential whole loans.
Residential Whole Loans at June 30, 2021 and December 31, 2020:
Table 3 - Portfolio composition
Held at Carrying Value | Held at Fair Value | Total | ||||||||||||||||||||||
(Dollars In Thousands) | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | ||||||||||||||||||
Purchased Performing Loans: | ||||||||||||||||||||||||
Non-QM loans | $ | 1,960,855 | $ | 2,357,185 | $ | 479,859 | $ | — | $ | 2,440,714 | $ | 2,357,185 | ||||||||||||
Rehabilitation loans | 364,463 | 581,801 | 68,234 | — | 432,697 | 581,801 | ||||||||||||||||||
Single-family rental loans | 417,544 | 446,374 | 109,685 | — | 527,229 | 446,374 | ||||||||||||||||||
Seasoned performing loans | 118,366 | 136,264 | — | — | 118,366 | 136,264 | ||||||||||||||||||
Agency eligible investor loans | — | — | 308,626 | — | 308,626 | — | ||||||||||||||||||
Total Purchased Performing Loans | $ | 2,861,228 | $ | 3,521,624 | $ | 966,404 | $ | — | $ | 3,827,632 | $ | 3,521,624 | ||||||||||||
Purchased Credit Deteriorated Loans | $ | 609,157 | $ | 673,708 | $ | — | $ | — | $ | 609,157 | $ | 673,708 | ||||||||||||
Allowance for Credit Losses | $ | (54,261) | $ | (86,833) | $ | — | $ | — | $ | (54,261) | $ | (86,833) | ||||||||||||
Purchased Non-Performing Loans | $ | — | $ | — | $ | 1,168,451 | $ | 1,216,902 | $ | 1,168,451 | $ | 1,216,902 | ||||||||||||
Total Residential Whole Loans | $ | 3,416,124 | $ | 4,108,499 | $ | 2,134,855 | $ | 1,216,902 | $ | 5,550,979 | $ | 5,325,401 | ||||||||||||
Number of loans | 11,434 | 13,112 | 7,158 | 5,622 | 18,592 | 18,734 | ||||||||||||||||||
Table 4 - Yields and average balances
For the Three-Month Period Ended | |||||||||||||||||||||||||||||||||
(Dollars in Thousands) | June 30, 2021 | March 31, 2021 | June 30, 2020 | ||||||||||||||||||||||||||||||
Interest | Average | Average | Interest | Average | Average | Interest | Average | Average | |||||||||||||||||||||||||
Purchased Performing Loans: | |||||||||||||||||||||||||||||||||
Non-QM loans | $ | 21,968 | $ | 2,327,256 | $ | 22,189 | $ | 2,315,890 | $ | 37,259 | $ | 3,061,828 | |||||||||||||||||||||
Rehabilitation loans | 7,329 | 454,939 | 6,668 | 540,550 | 13,312 | 929,921 | |||||||||||||||||||||||||||
Single-family rental loans | 6,906 | 479,233 | 7,081 | 447,585 | 7,268 | 500,846 | |||||||||||||||||||||||||||
Seasoned performing loans | 1,540 | 125,056 | 1,990 | 132,897 | 2,253 | 160,695 | |||||||||||||||||||||||||||
Agency eligible investor loans | 262 | 32,114 | — | — | —% | — | — | —% | |||||||||||||||||||||||||
Total Purchased Performing Loans | 38,005 | 3,418,598 | 37,928 | 3,436,922 | 60,092 | 4,653,290 | |||||||||||||||||||||||||||
Purchased Credit Deteriorated Loans | 11,303 | 630,217 | 8,290 | 662,924 | 9,335 | 736,225 | |||||||||||||||||||||||||||
Purchased Non-Performing Loans | 19,708 | 987,860 | 18,320 | 1,027,491 | 15,410 | 1,137,097 | |||||||||||||||||||||||||||
Total Residential whole loans | $ | 69,016 | $ | 5,036,675 | $ | 64,538 | $ | 5,127,337 | $ | 84,837 | $ | 6,526,612 | |||||||||||||||||||||
Table 5 - Net Interest Spread
For the Three-Month Period Ended | |||||||||
June 30, 2021 | March 31, 2021 | June 30, 2020 | |||||||
Purchased Performing Loans | |||||||||
Net Yield (1) | |||||||||
Cost of Funding (2) | |||||||||
Net Interest Spread (3) | (1.17)% | ||||||||
Purchased Credit Deteriorated Loans | |||||||||
Net Yield (1) | |||||||||
Cost of Funding (2) | |||||||||
Net Interest Spread (3) | (0.96)% | ||||||||
Purchased Non-Performing Loans | |||||||||
Net Yield (1) | |||||||||
Cost of Funding (2) | |||||||||
Net Interest Spread (3) | (0.13)% | ||||||||
Total Residential Whole Loans | |||||||||
Net Yield (1) | |||||||||
Cost of Funding (2) | |||||||||
Net Interest Spread (3) | (0.95)% | ||||||||
(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 for the quarter ended June 30, 2020 includes the impact of amortization of |
(3) | Reflects the difference between the net yield on average Residential whole loans and average cost of funds on Residential whole 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:
Six Months Ended June 30, 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 | $ | 14,545 | $ | 13,668 | $ | 2,746 | $ | 66 | $ | 32,219 | $ | 63,244 | ||||||||||||
Current provision/(reversal) | (2,416) | (1,809) | (386) | (9) | (3,963) | (8,583) | ||||||||||||||||||
Write-offs | (37) | (255) | — | — | (108) | (400) | ||||||||||||||||||
Allowance for credit losses at June 30, 2021 | $ | 12,092 | $ | 11,604 | $ | 2,360 | $ | 57 | $ | 28,148 | $ | 54,261 | ||||||||||||
Six Months Ended June 30, 2020 | ||||||||||||||||||||||||
(Dollars In Thousands) | Non-QM | Rehabilitation | Single-family | Seasoned | Purchased | Totals | ||||||||||||||||||
Allowance for credit losses at | $ | 388 | $ | 2,331 | $ | 62 | $ | — | $ | 244 | $ | 3,025 | ||||||||||||
Transition adjustment on adoption of ASU 2016-13 (4) | 6,904 | 517 | 754 | 19 | 62,361 | 70,555 | ||||||||||||||||||
Current provision | 26,358 | 33,213 | 6,615 | 230 | 8,481 | 74,897 | ||||||||||||||||||
Write-offs | — | (428) | — | — | (219) | (647) | ||||||||||||||||||
Valuation adjustment on loans held for sale | 70,181 | — | — | — | — | 70,181 | ||||||||||||||||||
Allowance for credit and valuation losses at | $ | 103,831 | $ | 35,633 | $ | 7,431 | $ | 249 | $ | 70,867 | $ | 218,011 | ||||||||||||
Current provision/(reversal) | (2,297) | (5,213) | (500) | (25) | (2,579) | (10,614) | ||||||||||||||||||
Write-offs | — | (420) | — | — | (207) | (627) | ||||||||||||||||||
Valuation adjustment on loans held for sale | (70,181) | — | — | — | — | (70,181) | ||||||||||||||||||
Allowance for credit losses at June 30, 2020 | $ | 31,353 | $ | 30,000 | $ | 6,931 | $ | 224 | $ | 68,081 | $ | 136,589 | ||||||||||||
(1) | In connection with purchased Rehabilitation loans, the Company had unfunded commitments of |
(2) | Includes |
(3) | Includes |
(4) | Of the |
Table 7 - Credit related metrics/Residential Whole Loans at Carrying Value
June 30, 2021 | ||||||||||||||||||||||||||||||||||||||
Carrying | Amortized | Unpaid | Weighted | Weighted | Weighted | Weighted | Aging by Amortized Cost Basis | |||||||||||||||||||||||||||||||
Past Due Days | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | Current | 30-59 | 60-89 | 90+ | ||||||||||||||||||||||||||||||||||
Purchased Performing | ||||||||||||||||||||||||||||||||||||||
Non-QM loans (4) | $ | 1,948,763 | $ | 1,960,855 | $ | 1,908,905 | 347 | 712 | $ | 1,725,889 | $ | 58,059 | $ | 36,856 | $ | 140,051 | ||||||||||||||||||||||
Rehabilitation loans (4) | 352,859 | 364,463 | 364,463 | 7.21 | 5 | 65 | 723 | 226,865 | 17,150 | 11,506 | 108,942 | |||||||||||||||||||||||||||
Single-family rental loans (4) | 415,184 | 417,544 | 413,060 | 6.29 | 322 | 69 | 730 | 386,091 | 5,858 | 3,000 | 22,595 | |||||||||||||||||||||||||||
Seasoned performing loans (4) | 118,309 | 118,366 | 129,536 | 2.96 | 167 | 39 | 722 | 107,762 | 943 | 538 | 9,123 | |||||||||||||||||||||||||||
Purchased Credit Deteriorated Loans (4)(5) | 581,009 | 609,157 | 712,102 | 4.54 | 284 | 71 | N/A | N/M | N/M | N/M | 105,487 | |||||||||||||||||||||||||||
Residential whole loans, | $ | 3,416,124 | $ | 3,470,385 | $ | 3,528,066 | 289 | |||||||||||||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
Carrying | Amortized | Unpaid | Weighted | Weighted | Weighted | Weighted | Aging by Amortized Cost Basis | |||||||||||||||||||||||||||||||
Past Due Days | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | Current | 30-59 | 60-89 | 90+ | ||||||||||||||||||||||||||||||||||
Purchased Performing | ||||||||||||||||||||||||||||||||||||||
Non-QM loans (4) | $ | 2,336,117 | $ | 2,357,185 | $ | 2,294,086 | 351 | 712 | $ | 2,099,134 | $ | 73,163 | $ | 36,501 | $ | 148,387 | ||||||||||||||||||||||
Rehabilitation loans (4) | 563,430 | 581,801 | 581,801 | 7.29 | 3 | 63 | 719 | 390,706 | 29,315 | 25,433 | 136,347 | |||||||||||||||||||||||||||
Single-family rental loans (4) | 442,456 | 446,374 | 442,208 | 6.32 | 324 | 70 | 730 | 415,386 | 6,652 | 3,948 | 20,388 | |||||||||||||||||||||||||||
Seasoned performing loans (4) | 136,157 | 136,264 | 149,004 | 3.30 | 171 | 40 | 723 | 124,877 | 2,186 | 1,170 | 8,031 | |||||||||||||||||||||||||||
Purchased Credit | 630,339 | 673,708 | 782,319 | 4.46 | 287 | 76 | N/A | N/M | N/M | N/M | 119,621 | |||||||||||||||||||||||||||
Residential whole loans, | $ | 4,108,499 | $ | 4,195,332 | $ | 4,249,418 | 282 | |||||||||||||||||||||||||||||||
(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) | At June 30, 2021 and December 31, 2020, the difference between the Carrying Value and Amortized Cost Basis represents the related allowance for credit losses. |
(5) | Purchased Credit Deteriorated Loans tend to be characterized by varying performance of the underlying borrowers over time, including loans where multiple months of payments are received in a period to bring the loan to current status, followed by months where no payments are received. Accordingly, delinquency information is presented only for loans that are more than 90 days delinquent. |
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:
June 30, 2021 | |||||||||||
(Dollars In Thousands) | Carrying Value / | UPB | LTV (1) | ||||||||
Residential whole loans, at carrying value | |||||||||||
Purchased credit deteriorated loans | $ | 105,487 | $ | 128,147 | |||||||
Non-QM loans | $ | 140,051 | $ | 137,252 | |||||||
Rehabilitation loans | $ | 108,942 | $ | 108,942 | |||||||
Single-family rental loans | $ | 22,595 | $ | 22,595 | |||||||
Seasoned performing loans | $ | 9,123 | $ | 9,792 | |||||||
Total Residential whole loans, at carrying value | $ | 386,198 | $ | 406,728 | |||||||
Residential whole loans, at fair value | |||||||||||
Purchased non-performing loans | $ | 510,611 | $ | 527,572 | |||||||
Purchased performing loans | $ | 2,974 | $ | 3,003 | |||||||
Total Residential whole loans, at fair value | $ | 513,585 | $ | 530,575 | |||||||
December 31, 2020 | |||||||||||
(Dollars In Thousands) | Carrying Value / | UPB | LTV (1) | ||||||||
Residential whole loans, at carrying value | |||||||||||
Purchased credit deteriorated loans | $ | 119,621 | $ | 145,028 | |||||||
Non-QM loans | $ | 148,387 | $ | 144,681 | |||||||
Rehabilitation loans | $ | 136,347 | $ | 136,347 | |||||||
Single-family rental loans | $ | 20,388 | $ | 20,233 | |||||||
Seasoned performing loans | $ | 8,031 | $ | 8,823 | |||||||
Total Residential whole loans, at carrying value | $ | 432,774 | $ | 455,112 | |||||||
Residential whole loans, at fair value | |||||||||||
Purchased non-performing loans | $ | 571,729 | $ | 625,621 | |||||||
Purchased performing loans | $ | — | $ | — | —% | ||||||
Total Residential whole loans, at fair value | $ | 571,729 | $ | 625,621 | |||||||
(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 - Net gain/(loss) on residential whole loans measured at fair value through earnings
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In Thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net unrealized gains/(losses) | $ | 6,226 | $ | 2,010 | $ | 38,313 | $ | (72,546) | ||||||||
Other Income (1) | (205) | 2,900 | (803) | 2,147 | ||||||||||||
Total | $ | 6,021 | $ | 4,910 | $ | 37,510 | $ | (70,399) | ||||||||
(1) | Primarily includes cash payments received from private mortgage insurance on liquidated loans and losses on liquidations of non-performing loans. |
Webcast
MFA Financial, Inc. plans to host a live audio webcast of its investor conference call on Thursday, August 5, 2021, at 10:00 a.m. (Eastern Time) to discuss its second quarter 2021 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: risks related to the COVID-19 pandemic, including the pandemic's effect on the general economy and our business, financial position and results of operations (including, among other potential effects, increased delinquencies and greater than expected losses in our whole loan portfolio); 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 of MFA's recently-completed acquisition of Lima One Holdings, LLC, and the ongoing operation thereof (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 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.
(In Thousands Except Per Share Amounts) | June 30, | December 31, | ||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Residential whole loans, net ( | $ | 5,550,979 | $ | 5,325,401 | ||||
Securities, at fair value | 302,835 | 399,999 | ||||||
Cash and cash equivalents | 906,409 | 814,354 | ||||||
Restricted cash | 8,839 | 7,165 | ||||||
Other assets | 439,347 | 385,381 | ||||||
Total Assets | 7,208,409 | 6,932,300 | ||||||
Liabilities: | ||||||||
Financing agreements ( | 4,428,791 | 4,336,976 | ||||||
Other liabilities | 253,081 | 70,522 | ||||||
Total Liabilities | 4,681,872 | 4,407,498 | ||||||
Stockholders' Equity: | ||||||||
Preferred stock, | 80 | 80 | ||||||
Preferred stock, | 110 | 110 | ||||||
Common stock, and outstanding, respectively | 4,408 | 4,517 | ||||||
Additional paid-in capital, in excess of par | 3,804,830 | 3,848,129 | ||||||
Accumulated deficit | (1,347,466) | (1,405,327) | ||||||
Accumulated other comprehensive income | 64,575 | 77,293 | ||||||
Total Stockholders' Equity | 2,526,537 | 2,524,802 | ||||||
Total Liabilities and Stockholders' Equity | 7,208,409 | 6,932,300 | ||||||
(1) | Includes approximately |
MFA FINANCIAL, INC. | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In Thousands, Except Per Share Amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
(Unaudited) | ||||||||||||||||
Interest Income: | ||||||||||||||||
Residential whole loans | $ | 69,016 | $ | 84,837 | $ | 133,554 | $ | 190,872 | ||||||||
Securities, at fair value | 15,345 | 14,716 | 31,804 | 73,297 | ||||||||||||
Other interest-earning assets | 108 | 3,165 | 108 | 6,072 | ||||||||||||
Cash and cash equivalent investments | 59 | 60 | 113 | 546 | ||||||||||||
Interest Income | $ | 84,528 | $ | 102,778 | $ | 165,579 | $ | 270,787 | ||||||||
Interest Expense: | ||||||||||||||||
Asset-backed and other collateralized financing arrangements | $ | 21,640 | $ | 82,085 | $ | 47,691 | $ | 159,945 | ||||||||
Other interest expense | 3,915 | 5,906 | 7,934 | 11,805 | ||||||||||||
Interest Expense | $ | 25,555 | $ | 87,991 | $ | 55,625 | $ | 171,750 | ||||||||
Net Interest Income | $ | 58,973 | $ | 14,787 | $ | 109,954 | $ | 99,037 | ||||||||
Reversal/(Provision) for credit and valuation losses on residential whole loans | $ | 8,867 | $ | 85,377 | $ | 31,617 | $ | (65,334) | ||||||||
Net Interest Income after Provision for Credit and Valuation Losses | $ | 67,840 | $ | 100,164 | $ | 141,571 | $ | 33,703 | ||||||||
Other Income, net: | ||||||||||||||||
Impairment and other losses on securities available-for-sale and other assets | $ | — | $ | (5,094) | $ | — | $ | (424,745) | ||||||||
Net realized gain/(loss) on sales of securities and residential whole loans | — | 49,485 | — | (188,895) | ||||||||||||
Net unrealized gain/(loss) on securities measured at fair value through earnings | 1,374 | 64,438 | 1,475 | (13,523) | ||||||||||||
Net gain/(loss) on residential whole loans measured at fair value through earnings | 6,021 | 4,910 | 37,510 | (70,399) | ||||||||||||
Loss on terminated swaps previously designated as hedges for accounting purposes | — | (49,857) | — | (49,857) | ||||||||||||
Net gain/(loss) on real estate owned | 5,125 | (4,199) | 7,885 | (5,684) | ||||||||||||
Other, net | 9,127 | 1,264 | 9,096 | 738 | ||||||||||||
Other Income/(Loss), net | $ | 21,647 | $ | 60,947 | $ | 55,966 | $ | (752,365) | ||||||||
Operating and Other Expense: | ||||||||||||||||
Compensation and benefits | $ | 8,886 | $ | 8,578 | $ | 17,323 | $ | 17,477 | ||||||||
Other general and administrative expense | 7,887 | 7,652 | 14,679 | 12,227 | ||||||||||||
Loan servicing, financing and other related costs | 6,000 | 8,337 | 13,299 | 19,617 | ||||||||||||
Costs associated with restructuring/forbearance agreement | — | 39,966 | — | $ | 44,434 | |||||||||||
Operating and Other Expense | $ | 22,773 | $ | 64,533 | $ | 45,301 | $ | 93,755 | ||||||||
Net Income/(Loss) | $ | 66,714 | $ | 96,578 | $ | 152,236 | $ | (812,417) | ||||||||
Less Preferred Stock Dividend Requirement | $ | 8,219 | $ | 8,144 | $ | 16,438 | 13,359 | |||||||||
Net Income/(Loss) Available to Common Stock and Participating Securities | $ | 58,495 | $ | 88,434 | $ | 135,798 | $ | (825,776) | ||||||||
Basic Earnings/(Loss) per Common Share | $ | 0.13 | $ | 0.19 | $ | 0.30 | $ | (1.82) | ||||||||
Diluted Earnings/(Loss) per Common Share | $ | 0.13 | $ | 0.19 | $ | 0.30 | $ | (1.82) | ||||||||
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 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 loans. This adjustment is also reflected in our end of period stockholders' equity in the table below. 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 assets, 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 for the quarterly periods below:
(In Millions, Except Per Share Amounts) | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | |||||||||||||||
GAAP Total Stockholders' Equity | $ | 2,526.5 | $ | 2,542.3 | $ | 2,524.8 | $ | 2,565.7 | $ | 2,521.1 | ||||||||||
Preferred Stock, liquidation preference | (475.0) | (475.0) | (475.0) | (475.0) | (475.0) | |||||||||||||||
GAAP Stockholders' Equity for book value per common share | 2,051.5 | 2,067.3 | 2,049.8 | 2,090.7 | 2,046.1 | |||||||||||||||
Adjustments: | ||||||||||||||||||||
Fair value adjustment to Residential whole loans, at carrying | 206.2 | 203.0 | 173.9 | 141.1 | (25.3) | |||||||||||||||
Stockholders' Equity including fair value adjustment to | $ | 2,257.7 | $ | 2,270.3 | $ | 2,223.7 | $ | 2,231.8 | $ | 2,020.8 | ||||||||||
GAAP book value per common share | $ | 4.65 | $ | 4.63 | $ | 4.54 | $ | 4.61 | $ | 4.51 | ||||||||||
Economic book value per common share | $ | 5.12 | $ | 5.09 | $ | 4.92 | $ | 4.92 | $ | 4.46 | ||||||||||
Number of shares of common stock outstanding | 440.8 | 446.1 | 451.7 | 453.3 | 453.2 | |||||||||||||||
Category: Earnings
INVESTOR CONTACT: | |
212-207-6488 | |
MEDIA CONTACT: | Abernathy MacGregor |
Tom Johnson | |
212-371-5999 |
View original content:https://www.prnewswire.com/news-releases/mfa-financial-inc-announces-second-quarter-2021-financial-results-301348903.html
SOURCE MFA Financial, Inc.
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