MFA Financial, Inc. (NYSE:MFA) today provided its financial
results for the second quarter ended June 30, 2024:
- MFA generated GAAP net income for the second quarter of $33.7
million, or $0.32 per basic and diluted common share.
- Distributable earnings, a non-GAAP financial measure, were
$45.6 million, or $0.44 per basic common share. MFA paid a regular
cash dividend of $0.35 per common share on July 31, 2024.
- GAAP book value at June 30, 2024 was $13.80 per common share.
Economic book value, a non-GAAP financial measure, was $14.34 per
common share.
- Total economic return was 2.6% for the second quarter.
- Net interest spread averaged 2.16% and net interest margin was
3.01%.
- MFA closed the quarter with unrestricted cash of $289.4
million.
Commenting on the quarter, Craig Knutson, MFA’s CEO and
President, stated: “We are pleased to announce strong results for
what was yet another volatile quarter in the fixed income and
mortgage markets. We generated Distributable earnings of $0.44 per
share and our Economic book value rose to $14.34 per share. We
continued to execute our strategy of acquiring residential mortgage
assets at attractive levels. During the quarter, we purchased or
originated $688 million residential mortgage loans with an average
coupon of 9.6%. We also added $176 million of Agency MBS.”
Mr. Knutson continued: “On the liability side, we repaid the
remaining $170 million balance of our maturing convertible notes
and issued $75 million of 9.00% senior unsecured notes due in
August 2029. We completed two securitizations collateralized by
$557 million of Non-QM and Transitional loans. We also securitized
$303 million of primarily re-performing loans subsequent to
quarter-end. Finally, we once again benefited from our $3.3 billion
interest rate swap position, which generated a net positive carry
of $29 million.”
Q2 2024 Portfolio Activity
- Loan acquisitions were $688.2 million, including $422.1 million
of funded originations of business purpose loans (including draws
on Transitional loans) and $266.1 million of Non-QM loan
acquisitions, bringing MFA’s residential whole loan balance to $9.2
billion.
- Lima One funded $270.0 million of new business purpose loans
with a maximum loan amount of $412.3 million. Further, $152.2
million of draws were funded on previously originated Transitional
loans. Lima One generated $7.6 million of origination, servicing,
and other fee income.
- MFA added $175.5 million of Agency MBS during the quarter,
bringing its total Securities portfolio to $863.3 million.
- Asset dispositions included $12.4 million UPB of single-family
rental (SFR) loans and $26.9 million of MSR-related securities. MFA
also continued to reduce its REO portfolio, selling 63 properties
in the second quarter for aggregate proceeds of $25.6 million.
- 60+ day delinquencies (measured as a percentage of UPB) for
MFA’s residential loan portfolio declined to 6.5% from 6.9% in the
first quarter.
- MFA completed two loan securitizations during the quarter,
collateralized by $365.2 million UPB of Non-QM loans and $191.8
million UPB of Transitional loans, bringing its total securitized
debt to approximately $5.0 billion.
- MFA increased its position in interest rate swaps to a notional
amount of approximately $3.3 billion. At June 30, 2024, these swaps
had a weighted average fixed pay interest rate of 1.92% and a
weighted average variable receive interest rate of 5.33%.
- MFA estimates the net effective duration of its investment
portfolio at June 30, 2024 rose to 1.12 from 0.98 at March 31,
2024.
- MFA’s Debt/Net Equity Ratio was 4.7x and recourse leverage was
1.7x at June 30, 2024.
Webcast
MFA Financial, Inc. plans to host a live audio webcast of its
investor conference call on Thursday, August 8, 2024, at 10:00 a.m.
(Eastern Time) to discuss its second quarter 2024 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 $4.7 billion in dividends to stockholders since its
initial public offering in 1998. MFA is an internally-managed,
publicly-traded real estate investment trust.
The following table presents MFA’s asset allocation as of June
30, 2024, and the second quarter 2024 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, 2024
Business purpose loans
(1)
Non-QM loans
Legacy RPL/NPL loans
Securities, at fair
value
Other, net (2)
Total
(Dollars in Millions)
Asset Amount
$
4,016
$
3,994
$
1,123
$
863
$
778
$
10,774
Financing Agreements with
Non-mark-to-market Collateral Provisions
(931
)
—
—
—
—
(931
)
Financing Agreements with Mark-to-market
Collateral Provisions
(651
)
(796
)
(479
)
(731
)
(72
)
(2,729
)
Securitized Debt
(1,843
)
(2,747
)
(457
)
—
(1
)
(5,048
)
Senior Notes
—
—
—
—
(183
)
(183
)
Net Equity Allocated
$
591
$
451
$
187
$
132
$
522
$
1,883
Debt/Net Equity Ratio (3)
5.8 x
7.9 x
5.0 x
5.5 x
4.7 x
For the Quarter
Ended June 30, 2024
Yield on Average Interest Earning Assets
(4)
7.99
%
5.49
%
8.72
%
7.03
%
6.79
%
Less Average Cost of Funds (5)
(5.80
)
(3.55
)
(3.70
)
(3.84
)
(4.63
)
Net Interest Rate Spread
2.19
%
1.94
%
5.02
%
3.19
%
2.16
%
(1)
Includes $1.2 billion of Single-family transitional loans, $1.2
billion of Multifamily transitional loans and $1.6 billion of
Single-family rental loans.
(2)
Includes $289.4 million of cash and cash equivalents, $252.0
million of restricted cash, $53.4 million of Other loans and $18.3
million of capital contributions made to loan origination partners,
as well as other assets and other liabilities.
(3)
Total Debt/Net Equity ratio represents the sum of borrowings under
our financing agreements as a multiple of net equity allocated.
(4)
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, 2024, the
amortized cost of our Securities, at fair value, was $846.8
million. In addition, the yield for residential whole loans was
6.91%, net of one basis point of servicing fee expense incurred
during the quarter. For GAAP reporting purposes, such expenses are
included in Loan servicing and other related operating expenses in
our statement of operations.
(5)
Average cost of funds includes interest on financing agreements,
Convertible Senior Notes, 8.875% Senior Notes, 9.00% 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 June 30,
2024, this decreased the overall funding cost by 127 basis points
for our overall portfolio, 128 basis points for our Residential
whole loans, 92 basis points for our Business purpose loans, 163
basis points for our Non-QM loans, 107 basis points for our Legacy
RPL/NPL loans and 190 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 June 30,
2024:
Table 2 - Investment Portfolio Activity Q2 2024
(In Millions)
March 31, 2024
Runoff (1)
Acquisitions (2)
Other (3)
June 30, 2024
Change
Residential whole loans and REO
$
9,225
$
(624
)
$
688
$
5
$
9,294
$
69
Securities, at fair value
737
(19
)
176
(31
)
863
126
Totals
$
9,962
$
(643
)
$
864
$
(26
)
$
10,157
$
195
(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/Residential Whole
Loans
Held at Carrying Value
Held at Fair Value
Total
(Dollars in Thousands)
June 30, 2024
December 31, 2023
June 30, 2024
December 31, 2023
June 30, 2024
December 31, 2023
Business purpose loans:
Single-family transitional loans (1)
$
27,857
$
35,467
$
1,190,699
$
1,157,732
$
1,218,556
$
1,193,199
Multifamily transitional loans
—
—
1,155,198
1,168,297
1,155,198
1,168,297
Single-family rental loans
129,471
172,213
1,514,219
1,462,583
1,643,690
1,634,796
Total Business purpose loans
$
157,328
$
207,680
$
3,860,116
$
3,788,612
$
4,017,444
$
3,996,292
Non-QM loans
791,746
843,884
3,203,845
2,961,693
3,995,591
3,805,577
Legacy RPL/NPL loans
477,826
498,671
655,230
705,424
1,133,056
1,204,095
Other loans
—
—
53,416
55,779
53,416
55,779
Allowance for Credit Losses
(13,271
)
(20,451
)
—
—
(13,271
)
(20,451
)
Total Residential whole loans
$
1,413,629
$
1,529,784
$
7,772,607
$
7,511,508
$
9,186,236
$
9,041,292
Number of loans
5,973
6,326
19,848
19,075
25,821
25,401
(1)
Includes $476.9 million and $471.1 million of loans collateralized
by new construction projects at origination as of June 30, 2024 and
December 31, 2023, respectively.
Table 4 - Yields and Average Balances/Residential Whole
Loans
For the Three-Month Period
Ended
(Dollars in Thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Interest
Average Balance
Average Yield
Interest
Average Balance
Average Yield
Interest
Average Balance
Average Yield
Business purpose loans:
Single-family transitional loans
$
30,242
$
1,241,300
9.75
%
$
28,018
$
1,239,558
9.04
%
$
18,749
$
885,057
8.47
%
Multifamily transitional loans
25,291
1,213,450
8.34
%
25,198
1,209,393
8.33
%
13,872
769,528
7.21
%
Single-family rental loans
27,564
1,703,334
6.47
%
27,102
1,746,058
6.21
%
23,141
1,587,636
5.83
%
Total business purpose loans
$
83,097
$
4,158,084
7.99
%
$
80,318
$
4,195,009
7.66
%
$
55,762
$
3,242,221
6.88
%
Non-QM loans
58,749
4,280,761
5.49
%
55,861
4,149,257
5.39
%
45,518
3,879,175
4.69
%
Legacy RPL/NPL loans
23,346
1,070,629
8.72
%
20,969
1,100,553
7.62
%
26,250
1,208,036
8.69
%
Other loans
525
67,771
3.10
%
517
68,490
3.02
%
518
72,875
2.84
%
Total Residential whole loans
$
165,717
$
9,577,245
6.92
%
$
157,665
$
9,513,309
6.63
%
$
128,048
$
8,402,307
6.10
%
Table 5 - Net Interest Spread/Residential Whole Loans
For the Three-Month Period
Ended
June 30, 2024
March 31, 2024
June 30, 2023
Business purpose loans
Net Yield (1)
7.99
%
7.66
%
6.88
%
Cost of Funding (2)
5.80
%
5.67
%
5.01
%
Net Interest Spread
2.19
%
1.99
%
1.87
%
Non-QM loans
Net Yield (1)
5.49
%
5.39
%
4.69
%
Cost of Funding (2)
3.55
%
3.44
%
3.07
%
Net Interest Spread
1.94
%
1.95
%
1.62
%
Legacy RPL/NPL loans
Net Yield (1)
8.72
%
7.62
%
8.69
%
Cost of Funding (2)
3.70
%
3.44
%
2.96
%
Net Interest Spread
5.02
%
4.18
%
5.73
%
Total Residential whole loans
Net Yield (1)
6.92
%
6.63
%
6.10
%
Cost of Funding (2)
4.54
%
4.43
%
3.83
%
Net Interest Spread
2.38
%
2.20
%
2.27
%
(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 June 30,
2024, this decreased the overall funding cost by 128 basis points
for our Residential whole loans, 92 basis points for our Business
purpose loans, 163 basis points for our Non-QM loans, and 107 basis
points for our Legacy RPL/NPL loans. For the quarter ended March
31, 2024, this decreased the overall funding cost by 132 basis
points for our Residential whole loans, 227 basis points for our
Business purpose loans, 168 basis points for our Non-QM loans, and
238 basis points for our Legacy RPL/NPL loans. For the quarter
ended June 30, 2023, this decreased the overall funding cost by 144
basis points for our Residential whole loans, 222 basis points for
our Business purpose loans, 175 basis points for our Non-QM loans,
and 297 basis points for our Legacy RPL/NPL loans.
Table 6 - Credit-related Metrics/Residential Whole
Loans
June 30,
2024
Asset Amount
Fair Value
Unpaid Principal Balance
(“UPB”)
Weighted Average Coupon
(1)
Weighted Average Term to
Maturity (Months)
Weighted Average LTV Ratio
(2)
Weighted Average Original FICO
(3)
Aging by UPB
60+ DQ %
60+
LTV (4)
Past Due Days
(Dollars In Thousands)
Current
30-59
60-89
90+
Business purpose loans:
Single-family transitional (4)
$
1,217,255
$
1,217,599
$
1,226,736
10.39
%
6
67
%
748
$
1,100,554
$
20,416
$
8,837
$
96,929
8.6
%
87
%
Multifamily transitional (4)
1,155,198
1,155,198
1,184,613
8.87
%
11
66
%
748
1,097,323
33,188
15,544
38,558
4.6
%
69
%
Single-family rental
1,643,081
1,642,760
1,712,879
6.62
%
330
69
%
739
1,637,918
12,197
4,627
58,137
3.7
%
112
%
Total Business purpose loans
$
4,015,534
$
4,015,557
$
4,124,228
8.39
%
68
%
$
3,835,795
$
65,801
$
29,008
$
193,624
5.4
%
Non-QM loans
3,994,236
3,949,676
4,183,917
6.16
%
341
64
%
735
3,975,323
82,676
34,121
91,797
3.0
%
62
%
Legacy RPL/NPL loans
1,123,050
1,140,736
1,284,232
5.12
%
257
56
%
647
874,319
134,000
43,974
231,939
21.5
%
64
%
Other loans
53,416
53,416
65,671
3.44
%
326
66
%
758
65,671
—
—
—
—
%
—
%
Residential whole loans, total or weighted
average
$
9,186,236
$
9,159,385
$
9,658,048
6.98
%
64
%
$
8,751,108
$
282,477
$
107,103
$
517,360
6.5
%
(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. 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. 60+ LTV has been calculated on a
consistent basis.
(3)
Excludes loans for which no Fair Isaac Corporation (“FICO”) score
is available.
(4)
For Single-family and Multifamily 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. At June 30, 2024, for certain Single-family and
Multifamily Transitional loans totaling $467.2 million and $498.7
million, respectively, an after repaired valuation was not
available. For these loans, the weighted average LTV is calculated
based on the current unpaid principal balance and the as-is value
of the collateral securing the related loan.
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 June 30, 2024. Changes in portfolio value
are measured as the percentage change when comparing the projected
portfolio value to the base interest rate scenario at June 30,
2024.
Change in Interest Rates
Percentage Change
in Portfolio Value
Percentage Change
in Total Stockholders’
Equity
+100 Basis Point Increase
(1.37
)%
(7.96
)%
+ 50 Basis Point Increase
(0.62
)%
(3.62
)%
Actual at June 30, 2024
—
%
—
%
- 50 Basis Point Decrease
0.50
%
2.90
%
-100 Basis Point Decrease
0.87
%
5.08
%
MFA FINANCIAL, INC.
CONSOLIDATED BALANCE
SHEETS
(In Thousands, Except Per Share
Amounts)
June 30, 2024
December 31,
2023
(unaudited)
Assets:
Residential whole loans, net ($7,772,607
and $7,511,508 held at fair value, respectively) (1)
$
9,186,236
$
9,041,292
Securities, at fair value
863,289
746,090
Cash and cash equivalents
289,412
318,000
Restricted cash
252,015
170,211
Other assets
485,973
497,097
Total Assets
$
11,076,925
$
10,772,690
Liabilities:
Financing agreements ($5,082,181 and
$4,633,660 held at fair value, respectively)
$
8,891,042
$
8,536,745
Other liabilities
302,641
336,030
Total Liabilities
$
9,193,683
$
8,872,775
Stockholders’ Equity:
Preferred stock, $0.01 par value; 7.5%
Series B cumulative redeemable; 8,050 shares authorized; 8,000
shares issued and outstanding ($200,000 aggregate liquidation
preference)
$
80
$
80
Preferred stock, $0.01 par value; 6.5%
Series C fixed-to-floating rate cumulative redeemable; 12,650
shares authorized; 11,000 shares issued and outstanding ($275,000
aggregate liquidation preference)
110
110
Common stock, $0.01 par value; 874,300 and
874,300 shares authorized; 102,083 and 101,916 shares issued and
outstanding, respectively
1,021
1,019
Additional paid-in capital, in excess of
par
3,707,886
3,698,767
Accumulated deficit
(1,843,507
)
(1,817,759
)
Accumulated other comprehensive income
17,652
17,698
Total Stockholders’ Equity
$
1,883,242
$
1,899,915
Total Liabilities and Stockholders’
Equity
$
11,076,925
$
10,772,690
(1)
Includes approximately $6.0 billion and $5.7 billion of Residential
whole loans transferred to consolidated variable interest entities
(“VIEs”) at June 30, 2024 and December 31, 2023, respectively. Such
assets can be used only to settle the obligations of each
respective VIE.
MFA FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended
June 30,
Six Months Ended
June 30,
(In Thousands, Except Per Share
Amounts)
2024
2023
2024
2023
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Interest Income:
Residential whole loans
$
165,717
$
128,048
$
323,382
$
247,558
Securities, at fair value
13,629
9,948
26,621
17,256
Other interest-earning assets
1,177
2,622
2,340
4,973
Cash and cash equivalent investments
6,308
3,732
11,319
6,768
Interest Income
$
186,831
$
144,350
$
363,662
$
276,555
Interest Expense:
Asset-backed and other collateralized
financing arrangements
$
126,755
$
95,884
$
250,197
$
184,764
Other interest expense
6,587
3,961
12,162
7,917
Interest Expense
$
133,342
$
99,845
$
262,359
$
192,681
Net Interest Income
$
53,489
$
44,505
$
101,303
$
83,874
Reversal/(Provision) for Credit Losses
on Residential Whole Loans
$
1,079
$
(294
)
$
1,539
$
(281
)
Reversal/(Provision) for Credit Losses
on Other Assets
(26
)
—
(1,135
)
—
Net Interest Income after
Reversal/(Provision) for Credit Losses
$
54,542
$
44,211
$
101,707
$
83,593
Other Income/(Loss), net:
Net gain/(loss) on residential whole loans
measured at fair value through earnings
$
16,430
$
(130,703
)
$
4,917
$
(1,529
)
Impairment and other net gain/(loss) on
securities and other portfolio investments
(2,842
)
(4,569
)
(7,618
)
(1,638
)
Net gain/(loss) on real estate owned
1,880
2,153
2,871
6,095
Net gain/(loss) on derivatives used for
risk management purposes
16,087
60,451
66,028
39,243
Net gain/(loss) on securitized debt
measured at fair value through earnings
(10,642
)
27,394
(33,104
)
(24,331
)
Lima One - origination, servicing and
other fee income
7,619
11,477
15,547
20,453
Net realized gain/(loss) on residential
whole loans held at carrying value
—
—
418
—
Other, net
1,317
5,492
3,192
8,506
Other Income/(Loss), net
$
29,849
$
(28,305
)
$
52,251
$
46,799
Operating and Other Expense:
Compensation and benefits
$
21,747
$
21,771
$
47,215
$
42,401
Other general and administrative
expense
10,835
11,522
22,830
21,199
Loan servicing, financing and other
related costs
8,717
7,598
15,759
17,137
Amortization of intangible assets
800
1,300
1,600
2,600
Operating and Other Expense
$
42,099
$
42,191
$
87,404
$
83,337
Income/(loss) before income
taxes
$
42,292
$
(26,285
)
$
66,554
$
47,055
Provision for/(benefit from) income
taxes
$
346
$
(357
)
$
1,395
$
199
Net Income/(Loss)
$
41,946
$
(25,928
)
$
65,159
$
46,856
Less Preferred Stock Dividend
Requirement
$
8,218
$
8,218
$
16,437
$
16,437
Net Income/(Loss) Available to Common
Stock and Participating Securities
$
33,728
$
(34,146
)
$
48,722
$
30,419
Basic Earnings/(Loss) per Common
Share
$
0.32
$
(0.34
)
$
0.47
$
0.30
Diluted Earnings/(Loss) per Common
Share
$
0.32
$
(0.34
)
$
0.46
$
0.29
Segment Reporting
At June 30, 2024, 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:
(In Thousands)
Mortgage-Related
Assets
Lima One
Corporate
Total
Three months ended June 30,
2024
Interest Income
$
101,216
$
81,780
$
3,835
$
186,831
Interest Expense
70,009
56,746
6,587
133,342
Net Interest Income/(Expense)
$
31,207
$
25,034
$
(2,752
)
$
53,489
Reversal/(Provision) for Credit Losses on
Residential Whole Loans
1,079
—
—
1,079
Reversal/(Provision) for Credit Losses on
Other Assets
(26
)
—
—
(26
)
Net Interest Income/(Expense) after
Reversal/(Provision) for Credit Losses
$
32,260
$
25,034
$
(2,752
)
$
54,542
Net gain/(loss) on residential whole loans
measured at fair value through earnings
$
28,474
$
(12,044
)
$
—
$
16,430
Impairment and other net gain/(loss) on
securities and other portfolio investments
(1,358
)
—
(1,484
)
(2,842
)
Net gain on real estate owned
2,167
(287
)
—
1,880
Net gain/(loss) on derivatives used for
risk management purposes
11,296
4,791
—
16,087
Net gain/(loss) on securitized debt
measured at fair value through earnings
(6,620
)
(4,022
)
—
(10,642
)
Lima One - origination, servicing and
other fee income
—
7,619
—
7,619
Net realized gain/(loss) on residential
whole loans held at carrying value
—
—
—
—
Other, net
(85
)
914
488
1,317
Other Income/(Loss), net
$
33,874
$
(3,029
)
$
(996
)
$
29,849
Compensation and benefits
$
—
$
10,765
$
10,982
$
21,747
Other general and administrative
expense
115
4,936
5,784
10,835
Loan servicing, financing and other
related costs
4,796
615
3,306
8,717
Amortization of intangible assets
—
800
—
800
Income/(loss) before income taxes
$
61,223
$
4,889
$
(23,820
)
$
42,292
Provision for/(benefit from) income
taxes
$
—
$
—
$
346
$
346
Net Income/(Loss)
$
61,223
$
4,889
$
(24,166
)
$
41,946
Less Preferred Stock Dividend
Requirement
$
—
$
—
$
8,218
$
8,218
Net Income/(Loss) Available to Common
Stock and Participating Securities
$
61,223
$
4,889
$
(32,384
)
$
33,728
(Dollars in Thousands)
Mortgage-Related
Assets
Lima One
Corporate
Total
June 30, 2024
Total Assets
$
6,575,888
$
4,167,768
$
333,269
$
11,076,925
December 31, 2023
Total Assets
$
6,370,237
$
4,000,932
$
401,521
$
10,772,690
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)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
GAAP Net income/(loss) used in the
calculation of basic EPS
$
33,614
$
14,827
$
81,527
$
(64,657
)
$
(34,146
)
Adjustments:
Unrealized and realized gains and losses
on:
Residential whole loans held at fair
value
(16,430
)
11,513
(224,272
)
132,894
130,703
Securities held at fair value
4,026
4,776
(21,371
)
13,439
3,698
Residential whole loans and securities at
carrying value
(2,668
)
(418
)
332
—
—
Interest rate swaps
10,237
(23,182
)
97,400
(9,433
)
(37,018
)
Securitized debt held at fair value
7,597
20,169
108,693
(40,229
)
(30,908
)
Investments in loan origination
partners
1,484
—
254
722
872
Expense items:
Amortization of intangible assets
800
800
800
800
1,300
Equity based compensation
3,899
6,243
3,635
4,447
3,932
Securitization-related transaction
costs
3,009
1,340
2,702
3,217
2,071
Total adjustments
11,954
21,241
(31,827
)
105,857
74,650
Distributable earnings
$
45,568
$
36,068
$
49,700
$
41,200
$
40,504
GAAP earnings/(loss) per basic common
share
$
0.32
$
0.14
$
0.80
$
(0.64
)
$
(0.34
)
Distributable earnings per basic common
share
$
0.44
$
0.35
$
0.49
$
0.40
$
0.40
Weighted average common shares for basic
earnings per share
103,446
103,175
102,266
102,255
102,186
The following table presents our non-GAAP Distributable earnings
by segment for the quarterly periods below:
(In Thousands)
Mortgage-Related
Assets
Lima One
Corporate
Total
Three months ended June 30,
2024
GAAP Net income/(loss) used in the
calculation of basic EPS
$
61,223
$
4,876
$
(32,485
)
$
33,614
Adjustments:
Unrealized and realized gains and losses
on:
Residential whole loans held at fair
value
(28,474
)
12,044
—
(16,430
)
Securities held at fair value
4,026
—
—
4,026
Residential whole loans and securities at
carrying value
(2,668
)
—
—
(2,668
)
Interest rate swaps
7,863
2,374
—
10,237
Securitized debt held at fair value
4,179
3,418
—
7,597
Investments in loan origination
partners
—
—
1,484
1,484
Expense items:
Amortization of intangible assets
—
800
—
800
Equity based compensation
—
279
3,620
3,899
Securitization-related transaction
costs
(197
)
—
3,206
3,009
Total adjustments
$
(15,271
)
$
18,915
$
8,310
$
11,954
Distributable earnings
$
45,952
$
23,791
$
(24,175
)
$
45,568
(In Thousands)
Mortgage-Related
Assets
Lima One
Corporate
Total
Three Months Ended March 31,
2024
GAAP Net income/(loss) used in the
calculation of basic EPS
$
36,363
$
10,655
$
(32,191
)
$
14,827
Adjustments:
Unrealized and realized gains and losses
on:
Residential whole loans held at fair
value
8,699
2,814
—
11,513
Securities held at fair value
4,776
—
—
4,776
Residential whole loans and securities at
carrying value
(418
)
—
—
(418
)
Interest rate swaps
(17,068
)
(6,114
)
—
(23,182
)
Securitized debt held at fair value
9,591
10,578
—
20,169
Investments in loan origination
partners
—
—
—
—
Expense items:
Amortization of intangible assets
—
800
—
800
Equity based compensation
—
261
5,982
6,243
Securitization-related transaction
costs
197
—
1,143
1,340
Total adjustments
$
5,777
$
8,339
$
7,125
$
21,241
Distributable earnings
$
42,140
$
18,994
$
(25,066
)
$
36,068
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)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
GAAP Total Stockholders’ Equity
$
1,883.2
$
1,884.2
$
1,899.9
$
1,848.5
$
1,944.8
Preferred Stock, liquidation
preference
(475.0
)
(475.0
)
(475.0
)
(475.0
)
(475.0
)
GAAP Stockholders’ Equity for book value
per common share
1,408.2
1,409.2
1,424.9
1,373.5
1,469.8
Adjustments:
Fair value adjustment to Residential whole
loans, at carrying value
(26.8
)
(35.4
)
(35.6
)
(85.3
)
(58.3
)
Fair value adjustment to Securitized debt,
at carrying value
82.3
88.4
95.6
122.5
129.8
Stockholders’ Equity including fair value
adjustments to Residential whole loans and Securitized debt held at
carrying value (Economic book value)
$
1,463.7
$
1,462.2
$
1,484.9
$
1,410.7
$
1,541.3
GAAP book value per common share
$
13.80
$
13.80
$
13.98
$
13.48
$
14.42
Economic book value per common share
$
14.34
$
14.32
$
14.57
$
13.84
$
15.12
Number of shares of common stock
outstanding
102.1
102.1
101.9
101.9
101.9
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 and loss severities 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, industry
competition, 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 and loss
severities 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
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version on businesswire.com: https://www.businesswire.com/news/home/20240806453574/en/
INVESTOR CONTACT: InvestorRelations@mfafinancial.com
212-207-6488 www.mfafinancial.com MEDIA CONTACT: H/Advisors
Abernathy Tom Johnson 212-371-5999
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