• Distributable Earnings: $0.37 per share.
• Book Value: Increased by approximately 1% to $13.77 per common share.
• Economic Return: 3.3% for the quarter.
• GAAP Earnings: $48.2 million or $0.38 per basic common share.
• Dividends Declared: $0.35 per common share.
• Loan Acquisitions: Over $550 million with an average coupon of 9.4%.
• Agency Securities Added: $294 million.
• Single-Family Rental Loans Sold: $236 million in unpaid principal balance.
• Lima One Loan Originations: $329 million of business purpose loans.
• Non-QM Purchases: $236 million with an average coupon of 8.2% and LTV of 64%.
• 60+ Day Delinquencies: Increased to 6.7% from 6.5% in the previous quarter.
• Economic Book Value Post Quarter End: Estimated decrease of 3% to 4% due to higher market interest rates.

• Warning! GuruFocus has detected 4 Warning Sign with MFA.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MFA Financial Inc (NYSE:MFA) reported solid third-quarter results with distributable earnings of $0.37 per share and an economic return of 3.3%.
• The company acquired over $550 million in loans with an average coupon of 9.4%, enhancing its portfolio with high-yielding assets.
• MFA successfully utilized securitization to fund assets, closing multiple deals, including its first rated deal for residential transition loans, which improved funding costs.
• The Federal Reserve's rate cut is seen as a positive development, providing a tailwind for MFA's business model in a lower rate environment.
• MFA's management changes, including the promotion of Bryan Wulfsohn to President, reflect a strong and experienced leadership team poised for future growth.

Negative Points

• MFA's economic book value decreased by approximately 3% to 4% post-quarter due to higher market interest rates.
• The company experienced a decline in Lima One's origination volume, attributed to recent management changes and a shift away from multifamily lending.
• MFA reported an increase in 60-plus day delinquencies, particularly in its Non-QM and multifamily loan portfolios.
• The third quarter saw $0.07 of realized credit losses, primarily on transitional loans, impacting distributable earnings.
• Non-recurring separation, severance, and retirement-related charges of approximately $3.3 million affected the company's general and administrative expenses.

Q & A Highlights

Q: Can you clarify the book value comments and how you think about dividend accrual in that context? A: Michael Roper, CFO, explained that the 3% to 4% decrease in book value is as of earlier this morning and is net of the dividend accrual. It's a moving target due to spread and rate volatility.

Q: How do you view the earnings power of the portfolio and its sensitivity to lower short-term rates? A: Michael Roper, CFO, stated that they feel confident about the earnings power of the portfolio and the dividend, even with swaps rolling off. The portfolio's earnings power is assessed by restriking yields to current market conditions.

Q: How much loan warehouse capacity does Lima One have if the securitization pipeline slows? A: Bryan Wulfsohn, Co-Chief Investment Officer, mentioned that there is ample capacity with over $1 billion of potential borrowing available, ensuring flexibility away from securitization.

Q: What are the considerations for increasing the agency portfolio and leverage? A: Bryan Wulfsohn, Co-Chief Investment Officer, noted that they assess market spreads and the curve's shape. The agency portfolio could grow to $1.5 billion to $2 billion if conditions remain favorable.

Q: Can you provide more detail on the programmatic loan sale outlook and its potential size? A: Craig Knutson, CEO, indicated that third-party sales, especially in rental loans, could become significant. This channel validates pricing and provides strategic diversification, potentially growing as Lima One's origination volume increases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.