MFA Financial, Inc. (NYSE:MFA) today provided its financial
results for the fourth quarter ended December 31, 2022.
Fourth Quarter 2022 financial results
update:
- MFA generated a GAAP loss for the fourth quarter of ($1.5)
million, or $(0.02) per common share. Distributable Earnings, a
non-GAAP financial measure, was $49.4 million, or $0.48 per common
share.
- GAAP book value at December 31, 2022 was $14.87 per common
share, while Economic book value, a non-GAAP financial measure of
MFA’s financial position, was $15.55 per common share at
quarter-end.
- Financing cost (including the impact of hedging) for the fourth
quarter of 3.7% was relatively unchanged from the prior quarter,
despite the Fed increasing interest rates by 125 basis points
during the fourth quarter and by 200 basis points since its
September 2022 meeting, due to our strategic focus on hedging and
liability management.
- As of December 31, 2022, recourse leverage was 1.8x and
portfolio sensitivity to interest rate changes remained relatively
low with net duration of 0.99. Throughout 2022 we prioritized
maintaining prudent levels of liquidity in light of the challenging
interest rate environment. We closed the year with unrestricted
cash of $334 million.
- At December 31, 2022, MFA’s residential whole loan portfolio
totaled $7.5 billion. Fourth quarter loan acquisition activity of
$480.6 million included $378.9 million of funded originations of
Business Purpose loans (including draws on Transitional loans) and
$101.7 million of Non-QM loan acquisitions. Full year acquisition
loan activity was $3.1 billion and included $2.0 billion of funded
originations of Business Purpose loans (including draws on
Transitional loans) and $1.1 billion of Non-QM loan
acquisitions.
- MFA’s residential whole loan portfolio has benefited from
strong home price appreciation (HPA) and loan amortization. At
December 31, 2022, the portfolio has an estimated weighted average
current loan-to-value ratio (LTV) of 58%. Loan delinquencies
trended down across the portfolio during 2022. Measured as a
percentage of the unpaid principal balance, 3.1% of the Purchased
Performing Loan portfolio was 60 or more days delinquent at the end
of the fourth quarter, down from 4.2% as of December 31, 2021. For
Purchased Credit Deteriorated and Purchased Non-Performing loans,
31.6% were 60 or more days delinquent at the end of the fourth
quarter, down from 36.7% as of December 31, 2021. The estimated
weighted average current LTV of all loans in the portfolio that are
60 or more days delinquent at December 31, 2022 is 62%.
- Continued interest rate volatility and generally wider spreads
during the fourth quarter resulted in losses of $68.8 million on
MFA’s residential whole loans that are measured at fair value
through earnings. These losses were partially offset by unrealized
gains on securitized debt measured at fair value through earnings,
as well as gains on derivatives used for risk management purposes
totaling $44.5 million.
- Net interest income for the fourth quarter was $55.7 million.
Interest income from residential whole loans increased 9% to $125.0
million as compared to the immediately prior quarter. Net interest
income this quarter also included approximately $7.8 million in
connection with the redemption of a MSR note at par. For the fourth
quarter, the overall net interest spread generated by all of MFA’s
interest-bearing assets, including the positive carry on our swaps,
increased to 2.21%. Adjusting for the impact of the MSR note
redemption, the overall net interest spread was 1.89%, compared to
1.64% in the immediately prior quarter, an increase of
approximately 15%.
- On January 31, 2023, MFA paid a regular cash dividend for the
fourth quarter of $0.35 per share of common stock.
Commenting on the fourth quarter, Craig Knutson, MFA’s CEO and
President said, “While rates ended the fourth quarter only slightly
higher than at September 30, the fourth quarter was another very
volatile period for fixed income and mortgages in particular.
Two-year Treasuries began the fourth quarter at 4.28% and sold off
to 4.72% in early November before rallying back to end the year at
4.43%. After beginning the quarter at 3.83%, ten-year Treasuries
hit a high for the year of 4.24% in late October before rallying
back to close the year at 3.87%. Agency mortgage spreads widened
out to the widest levels since the Great Financial Crisis in late
October, and securitization markets, while not closed, were
dysfunctional as spreads on even AAA cash flows widened more than
Agency MBS spreads. Nonetheless, as we had done all year, our team
at MFA protected book value and preserved capital, as we awaited
more favorable market conditions.”
Mr. Knutson continued, “Our book value was relatively flat in
the fourth quarter. Although mortgage REIT book values are down
substantially since the beginning of 2022, our book value
performance and economic returns for the year were better than most
in our peer group. Our focus has been on maintaining substantial
liquidity, fortifying our balance sheet by continuing to increase
non-mark-to-market financing for our loan portfolio and decreasing
our sensitivity to future interest rate increases. We stated on our
third quarter earnings call that 99% of our asset-based financing
costs were effectively fixed, either through securitizations or
interest rate swaps. To illustrate how impactful this positioning
was, our fourth quarter 2022 cost of funds (including the impact of
swaps) was 3.7%, which is only 10 basis points higher than our
third quarter cost of funds. This is despite the fact that the Fed
raised rates by 125 basis points in the fourth quarter and by 200
basis points since its September 2022 meeting. We ended the year
with unrestricted cash of $334 million, which is approximately 17%
of our equity, and currently have approximately $1.9 billion of
unused financing capacity across all loan product types. Finally,
our loan portfolio has significant embedded home price
appreciation, which, when combined with principal amortization,
lowers the average LTV of our mortgage loan portfolio to
approximately 58%.”
Mr. Knutson added, “Our Lima One subsidiary produced a record
$2.3 billion of originations in 2022, a 42% increase over 2021, and
contributed approximately 65% of our asset acquisitions during
2022. We believe that these organically-produced business purpose
loans have strong credit characteristics and provide attractive
yields that we could not obtain through third party purchases. Lima
One’s current origination pipeline has a weighted average coupon of
over 10%. Although fourth quarter origination volume declined 37%
from the third quarter, this was due to higher coupons and tighter
underwriting standards that we implemented throughout 2022 to
reflect higher interest rates and economic uncertainty. When market
conditions improve, Lima One’s operational capacity should position
us to increase production quickly and efficiently.”
Q4 2022 Portfolio Activity
Loan acquisitions were $480.6 million, including $378.9 million
of funded originations of Business Purpose loans (including draws
on Transitional loans) and $101.7 million of Non-QM loan
acquisitions, partially offset by portfolio run-off and asset
valuation declines. In addition, near the end of the quarter, we
entered into transactions to sell the majority of our holdings of
Agency Eligible Investor loans and deconsolidate securitization
trusts that hold previously securitized Agency Eligible Investor
loans. As a result of these transactions, our reported portfolio of
Agency Eligible Investor loans decreased by approximately $780
million, which drove the overall $572.0 million decrease in MFA’s
residential mortgage investment portfolio for the fourth
quarter.
At December 31, 2022, our investments in residential whole loans
totaled $7.5 billion. Of this amount, $6.3 billion are Purchased
Performing Loans, $448.9 million are Purchased Credit Deteriorated
Loans and $796.1 million are Purchased Non-performing Loans.
Overall yields on our residential whole loans increased over the
quarter resulting in a net interest spread of 2.06%, a 13.8%
increase over the immediately prior quarter. During the quarter, we
recognized approximately $125.0 million of Interest Income on
residential whole loans in our consolidated statements of
operations, representing a yield of 5.62%. Purchased Performing
Loans generated a yield of 5.04%, Purchased Credit Deteriorated
Loans generated a yield of 6.59% and Purchased Non-performing Loans
generated a yield of 11.15%. Interest income from our residential
whole loan portfolio increased on a sequential quarter basis by
over 9%. Loan delinquencies have remained relatively low and
trended down across the portfolio during 2022. Measured as a
percentage of the unpaid principal balance, 3.1% of the Purchased
Performing Loan portfolio was 60 or more days delinquent at the end
of the fourth quarter, down from 4.2% as of December 31, 2021. For
Purchased Credit Deteriorated and Purchased Non-Performing loans,
31.6% were 60 or more days delinquent at the end of the fourth
quarter, down from 36.7% as of December 31, 2021. The estimated
weighted average current LTV of loans that are 60 or more days
delinquent at December 31, 2022 is 62%.
Lima One continued to perform well, funding more than $268.1
million of new business purpose loans with a maximum loan amount of
approximately $406 million. Further, $110.8 million of draws were
funded on previously originated Transitional loans. For the
quarter, Lima One generated approximately $9.2 million of
origination, servicing, and other fee income.
During the quarter we completed one loan securitization, with
$234.8 million UPB of Single-Family Rental loans sold. Subsequent
to the end of the quarter we completed three additional
securitizations, selling $313.7 million UPB of Non-QM loans, $203.9
million UPB of Single Family Rental loans and $150.6 million UPB of
Transitional loans.
During the fourth quarter we maintained our position in interest
rate swaps at a notional amount of $3.2 billion. At December 31,
2022, these swaps had a weighted average fixed pay interest rate of
1.69% and a weighted average variable receive interest rate of
4.30%. After including the impact of these swaps, as well as the
effect of securitized and other fixed rate debt, we estimate that
the net effective duration of our investment portfolio at December
31, 2022 was 0.99.
We also continued to reduce our REO portfolio, selling 83
properties in the fourth quarter for aggregate proceeds of $28.8
million and generating $7.4 million of gains. For 2022, we sold 416
properties for aggregate proceeds of $133.8 million and generated
$28.7 million of gains.
At the end of the fourth quarter, MFA held $333.4 million of
Securities, at fair value, including $131.7 million of Agency MBS,
$97.9 million of MSR-related assets, $79.2 million of CRT
securities and $24.6 million of Non-Agency MBS securities recorded
in connection with the deconsolidation of Agency Eligible Investor
loan securitizations.
General and Administrative and other expenses
For the three months ended December 31, 2022, MFA’s compensation
and benefits expense and other general and administrative expenses
were $24.8 million. Expenses for the quarter included $13.0 million
of compensation and other general and administrative expenses
recorded at Lima One. Compensation related expenses were
approximately $4.0 million lower than the immediately prior quarter
due to lower incentive compensation expense in connection with the
final determination of annual incentive awards and lower sales
commission expense at Lima One due to lower origination volume in
the fourth quarter.
Segment reporting
Included in this press release is information on our reportable
segments, including GAAP Net Income and Distributable Earnings for
each segment for the three month periods ended September 30 and
December 31, 2022 and segment assets as of December 31, 2021 and
December 31, 2022.
The following table presents MFA’s asset allocation as of
December 31, 2022, and the fourth quarter 2022 yield on average
interest-earning assets, average cost of funds and net interest
rate spread for the various asset types.
Table 1 - Asset Allocation
At December 31, 2022
Purchased Performing Loans
(1)
Purchased Credit Deteriorated
Loans (2)
Purchased Non- Performing
Loans
Securities, at fair
value
Real Estate Owned
Other, net (3)
Total
(Dollars in Millions)
Fair Value/Carrying Value
$
6,274
$
449
$
796
$
333
$
131
$
675
$
8,658
Receivable/(Payable) for Unsettled
Transactions
276
—
—
(132
)
—
—
144
Financing Agreements with
Non-mark-to-market Collateral Provisions
(862
)
(37
)
(96
)
—
(9
)
—
(1,004
)
Financing Agreements with Mark-to-market
Collateral Provisions
(1,893
)
(89
)
(113
)
(112
)
(16
)
—
(2,223
)
Securitized Debt
(2,758
)
(249
)
(334
)
—
(17
)
—
(3,358
)
Convertible Senior Notes
—
—
—
—
—
(228
)
(228
)
Net Equity Allocated
$
1,037
$
74
$
253
$
89
$
89
$
447
$
1,989
Debt/Net Equity Ratio (4)
5.3 x
5.1 x
2.1 x
2.7 x
0.5 x
3.5 x
For the
Quarter Ended December 31, 2022
Yield on Average Interest Earning Assets
(5)
5.04
%
6.59
%
11.15
%
30.33
%
N/A
5.91
%
Less Average Cost of Funds (6)
(3.70
)
(2.13
)
(3.01
)
(5.47
)
(4.76
)
(3.70
)
Net Interest Rate Spread
1.34
%
4.46
%
8.14
%
24.86
%
(4.76
)%
2.21
%
(1)
Includes $3.4 billion of Non-QM loans,
$1.4 billion of Transitional loans, $1.4 billion of Single-family
rental loans, $82.9 million of Seasoned performing loans, and $51.1
million of Agency eligible investor loans. At December 31, 2022,
the total fair value of these loans is estimated to be
approximately $6.2 billion.
(2)
At December 31, 2022, the total fair value
of these loans is estimated to be approximately $468.8 million.
(3)
Includes $334.2 million of cash and cash
equivalents, $159.9 million of restricted cash, and $28.3 million
of capital contributions made to loan origination partners, as well
as other assets and other liabilities.
(4)
Total Debt/Net Equity ratio represents the
sum of borrowings under our financing agreements and payable for
unsettled transactions 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
December 31, 2022, the amortized cost of our Securities, at fair
value, was $313.4 million. In addition, the yield for residential
whole loans was 5.60%, net of two basis points 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.
(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 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 interest
rate swap agreements (or Swaps) on the funding costs shown in the
table above. For the quarter ended December 31, 2022, this
decreased the overall funding cost by 84 basis points for our
overall portfolio, 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.
The following table presents the activity for our residential
mortgage asset portfolio for the three months ended December 31,
2022:
Table 2 - Investment Portfolio Activity Q4 2022
(In Millions)
September 30, 2022
Runoff (1)
Acquisitions (2)
Other (3)
December 31, 2022
Change
Residential whole loans and REO
$
8,327
$
(326
)
$
480
$
(832
)
$
7,649
$
(678
)
Securities, at fair value
227
(49
)
156
(1
)
333
106
Totals
$
8,554
$
(375
)
$
636
$
(833
)
$
7,982
$
(572
)
(1)
Primarily includes principal repayments
and sales of REO.
(2)
Includes draws on previously originated
Transitional loans.
(3)
Primarily includes the impact of
transactions that resulted in the sale of previously
non-securitized Agency Eligible Investor loans and deconsolidation
of Agency Eligible Investor loan securitizations, 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, 2022
December 31, 2021
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Purchased Performing Loans:
Non-QM loans
$
987,282
$
1,448,162
$
2,372,548
$
2,013,369
$
3,359,830
$
3,461,531
Transitional loans (1)
75,188
217,315
1,342,032
517,530
1,417,220
734,845
Single-family rental loans
210,833
331,808
1,165,741
619,415
1,376,574
951,223
Seasoned performing loans
82,932
102,041
—
—
82,932
102,041
Agency eligible investor loans
—
—
51,094
1,082,765
51,094
1,082,765
Total Purchased Performing Loans
$
1,356,235
$
2,099,326
$
4,931,415
$
4,233,079
$
6,287,650
$
6,332,405
Purchased Credit Deteriorated Loans
$
470,294
$
547,772
$
—
$
—
$
470,294
$
547,772
Allowance for Credit Losses
$
(35,314
)
$
(39,447
)
$
—
$
—
$
(35,314
)
$
(39,447
)
Purchased Non-Performing Loans
$
—
$
—
$
796,109
$
1,072,270
$
796,109
$
1,072,270
Total Residential Whole Loans
$
1,791,215
$
2,607,651
$
5,727,524
$
5,305,349
$
7,518,739
$
7,913,000
Number of loans
7,126
9,361
16,717
14,734
23,843
24,095
(1)
As of December 31, 2022 includes $784.9 million of loans
collateralized by one-to-four family residential properties and
$632.3 million of loans collateralized by multi-family properties.
As of December 31, 2021, includes $521.0 million of loans
collateralized by one-to-four family residential properties and
$213.9 million of loans collateralized by multi-family
properties.
Table 4 - Yields and average balances
For the Three-Month Period
Ended
(Dollars in Thousands)
December 31, 2022
September 30, 2022
December 31, 2021
Interest
Average Balance
Average Yield
Interest
Average Balance
Average Yield
Interest
Average Balance
Average Yield
Purchased Performing Loans:
Non-QM loans
$
41,621
$
3,767,900
4.42
%
$
40,658
$
3,743,940
4.34
%
$
28,902
$
3,002,644
3.85
%
Transitional loans
26,134
1,335,471
7.83
%
19,342
1,126,178
6.87
%
9,214
652,663
5.65
%
Single-family rental loans
20,237
1,483,529
5.46
%
18,998
1,391,769
5.46
%
10,684
828,183
5.16
%
Seasoned performing loans
1,283
84,876
6.05
%
1,227
89,458
5.49
%
1,423
106,065
5.37
%
Agency eligible investor loans
7,631
1,021,007
2.99
%
7,542
1,035,266
2.91
%
8,046
1,065,062
3.02
%
Total Purchased Performing Loans
96,906
7,692,783
5.04
%
87,767
7,386,611
4.75
%
58,269
5,654,617
4.12
%
Purchased Credit Deteriorated Loans
7,830
474,971
6.59
%
7,916
487,918
6.49
%
10,033
561,262
7.15
%
Purchased Non-Performing Loans
20,252
726,303
11.15
%
18,732
761,706
9.84
%
22,010
895,472
9.83
%
Total Residential Whole Loans
$
124,988
$
8,894,057
5.62
%
$
114,415
$
8,636,235
5.30
%
$
90,312
$
7,111,351
5.08
%
Table 5 - Net Interest Spread
For the Three-Month Period
Ended
December 31, 2022
September 30, 2022
December 31, 2021
Purchased Performing Loans
Net Yield (1)
5.04 %
4.75 %
4.12 %
Cost of Funding (2)
3.70 %
3.60 %
2.24 %
Net Interest Spread
1.34 %
1.15 %
1.88 %
Purchased Credit Deteriorated
Loans
Net Yield (1)
6.59 %
6.49 %
7.15 %
Cost of Funding (2)
2.13 %
2.72 %
2.32 %
Net Interest Spread
4.46 %
3.77 %
4.83 %
Purchased Non-Performing Loans
Net Yield (1)
11.15 %
9.84 %
9.83 %
Cost of Funding (2)
3.01 %
2.86 %
2.53 %
Net Interest Spread
8.14 %
6.98 %
7.30 %
Total Residential Whole Loans
Net Yield (1)
5.62 %
5.30 %
5.08 %
Cost of Funding (2)
3.56 %
3.49 %
2.28 %
Net Interest Spread
2.06 %
1.81 %
2.80 %
(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,
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. For the quarter ended September 30, 2022,
this decreased the overall funding cost by 20 basis points for our
Residential whole loans, 19 basis points for our Purchased
Performing Loans, 43 basis points for our Purchased Credit
Deteriorated Loans, and 24 basis points for our Purchased
Non-Performing Loans. For the quarter ended December 31, 2021, this
increased the overall funding cost by 5 basis points for our
Residential whole loans, 5 basis points for our Purchased
Performing Loans, 9 basis points for our Purchased Credit
Deteriorated Loans, and 2 basis points for our Purchased
Non-Performing Loans.
Table 6 - Allowance for Credit Losses
The following table presents a roll-forward of the allowance for
credit losses on the Company’s Residential Whole Loans, at Carrying
Value:
For the Year Ended December
31, 2022
(Dollars In Thousands)
Non-QM Loans
Transitional Loans
(1)(2)
Single-family Rental
Loans
Seasoned Performing
Loans
Purchased Credit Deteriorated
Loans (3)
Totals
Allowance for credit losses at December
31, 2021
$
8,289
$
6,881
$
1,451
$
46
$
22,780
$
39,447
Current provision
(909
)
(1,460
)
(122
)
(1
)
(975
)
(3,467
)
Write-offs
(51
)
(219
)
(27
)
—
(226
)
(523
)
Allowance for credit losses at March 31,
2022
$
7,329
$
5,202
$
1,302
$
45
$
21,579
$
35,457
Current provision/(reversal)
(199
)
(23
)
174
1
1,877
1,830
Write-offs
—
(118
)
(184
)
—
(58
)
(360
)
Allowance for credit losses at June 30,
2022
$
7,130
$
5,061
$
1,292
$
46
$
23,398
$
36,927
Current provision/(reversal)
(242
)
583
83
3
120
547
Write-offs
—
(114
)
(61
)
—
(107
)
(282
)
Allowance for credit losses at September
30, 2022
$
6,888
$
5,530
$
1,314
$
49
$
23,411
$
37,192
Current provision/(reversal)
471
(13
)
(37
)
(1
)
(1,996
)
(1,576
)
Write-offs
—
(294
)
—
—
(8
)
(302
)
Allowance for credit losses at December
31, 2022
$
7,359
$
5,223
$
1,277
$
48
$
21,407
$
35,314
For the Year Ended December
31, 2021
(Dollars In Thousands)
Non-QM Loans
Transitional Loans
(1)(2)
Single-family Rental
Loans
Seasoned Performing
Loans
Purchased Credit Deteriorated
Loans (3)
Totals
Allowance for credit losses at December
31, 2020
$
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 and valuation losses
at March 31, 2021
$
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
Current provision/(reversal)
(2,403
)
(2,526
)
(670
)
(7
)
(4,020
)
(9,626
)
Write-offs
—
(393
)
(56
)
—
(84
)
(533
)
Allowance for credit losses at September
30, 2021
$
9,689
$
8,685
$
1,634
$
50
$
24,044
$
44,102
Current provision/(reversal)
$
(1,400
)
$
(706
)
$
(178
)
$
(4
)
$
(1,142
)
$
(3,430
)
Write-offs
$
—
$
(1,098
)
$
(5
)
$
—
$
(122
)
$
(1,225
)
Allowance for credit losses at December
31, 2021
$
8,289
$
6,881
$
1,451
$
46
$
22,780
$
39,447
(1)
In connection with purchased Transitional
loans at carrying value, the Company had unfunded commitments of
$8.0 million and $18.5 million as of December 31, 2022 and 2021,
respectively, with an allowance for credit losses of $29,000 and
$205,000 at December 31, 2022 and 2021, respectively. Such
allowance is included in “Other liabilities” in the Company’s
consolidated balance sheets.
(2)
Includes $56.1 million and $87.0 million
of loans that were assessed for credit losses based on a collateral
dependent methodology as of December 31, 2022 and 2021,
respectively.
(3)
Includes $48.5 million and $57.4 million
of loans that were assessed for credit losses based on a collateral
dependent methodology as of December 31, 2022 and 2021,
respectively.
Table 7 - Credit related metrics/Residential Whole
Loans
December 31,
2022
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+ Delinquency %
Past Due Days
(Dollars In Thousands)
Current
30-59
60-89
90+
Purchased Performing Loans:
Non-QM loans
$
3,352,471
$
3,671,468
5.13%
351
65%
733
$
3,520,671
$
56,825
$
32,253
$
61,719
2.6%
Transitional loans (1)
1,411,997
1,431,692
7.78
12
66
746
1,348,815
6,463
2,234
74,180
5.3
Single-family rental loans
1,375,297
1,485,967
5.74
324
69
737
1,442,095
8,431
7,978
27,463
2.4
Seasoned performing loans
82,884
90,843
3.31
151
30
714
84,514
993
937
4,399
5.9
Agency eligible investor loans
51,094
61,816
3.44
344
68
757
61,816
—
—
—
—
Total Purchased Performing Loans
$
6,273,743
$
6,741,786
5.78%
271
3.1%
Purchased Credit Deteriorated Loans
$
448,887
$
554,907
4.66%
277
63%
N/A
$
403,042
$
48,107
$
16,270
$
87,488
18.7%
Purchased Non-Performing Loans
$
796,109
$
884,257
5.01%
277
68%
N/A
$
444,045
$
89,623
$
40,554
$
310,035
39.6%
Residential whole loans, total or weighted
average
$
7,518,739
$
8,180,950
5.64%
272
8.1%
December 31,
2021
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+ Delinquency %
Past Due Days
(Dollars In Thousands)
Current
30-59
60-89
90+
Purchased Performing Loans:
Non-QM loans
$
3,453,242
$
3,361,164
5.07%
355
66%
731
$
3,165,964
$
77,581
$
22,864
$
94,755
3.5%
Transitional loans (1)
727,964
731,154
7.18
11
67
735
616,733
5,834
5,553
103,034
14.9
Single-family rental loans
949,772
924,498
5.46
329
70
732
898,166
2,150
695
23,487
2.6
Seasoned performing loans
101,995
111,710
2.76
162
37
722
102,047
938
481
8,244
7.8
Agency eligible investor loans
1,082,765
1,060,486
3.40
354
62
767
1,039,257
21,229
—
—
—
Total Purchased Performing Loans
$
6,315,738
$
6,189,012
5.05%
307
4.2%
Purchased Credit Deteriorated Loans
$
524,992
$
643,187
4.55%
283
69%
N/A
$
456,924
$
50,048
$
18,736
$
117,479
21.2%
Purchased Non-Performing Loans
$
1,072,270
$
1,073,544
4.87%
283
73%
N/A
$
492,481
$
87,041
$
40,876
$
453,146
46.0%
Residential whole loans, total or weighted
average
$
7,913,000
$
7,905,743
4.99%
301
11.2%
(1)
As of December 31, 2022 Transitional loans
includes $632.3 million of loans collateralized by multi-family
properties with a weighted average term to maturity of 18 months
and a weighted average LTV ratio of 73%. As of December 31, 2021,
Transitional loans includes $213.9 million of loans collateralized
by multi-family properties with a weighted average term to maturity
of 23 months and a weighted average LTV ratio of 80%.
(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 $223.2 million and $137.3 million at December 31, 2022 and
2021, respectively, an after repaired valuation was not obtained
and the loan was underwritten based on an “as is” valuation. The
weighted average LTV of these loans based on the current unpaid
principal balance and the valuation obtained during underwriting,
is 70% and 71% at December 31, 2022 and 2021, respectively.
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.
(4)
Excludes loans for which no Fair Isaac
Corporation (“FICO”) score is available.
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:
December 31, 2022
(Dollars In Thousands)
Carrying Value / Fair
Value
UPB
LTV (1)
Purchased Performing Loans
Non-QM loans
$
61,812
$
61,719
67.9 %
Transitional loans
73,266
74,180
68.1 %
Single-family rental loans
27,466
27,463
72.9 %
Seasoned performing loans
4,127
4,399
42.2 %
Agency eligible investor loans
—
—
—
Total Purchased Performing Loans
$
166,671
$
167,761
Purchased Credit Deteriorated Loans
$
69,402
$
87,488
74.8 %
Purchased Non-Performing Loans
$
296,697
$
310,035
76.9 %
Total Residential Whole Loans
$
532,770
$
565,284
December 31, 2021
(Dollars In Thousands)
Carrying Value / Fair
Value
UPB
LTV (1)
Purchased Performing Loans
Non-QM loans
$
96,473
$
94,755
64.6 %
Transitional loans
103,166
103,034
67.6 %
Single-family rental loans
23,524
23,487
73.4 %
Seasoned performing loans
7,740
8,244
45.6 %
Agency eligible investor loans
—
—
—
Total Purchased Performing Loans
$
230,903
$
229,520
Purchased Credit Deteriorated Loans
$
95,899
$
117,479
79.1 %
Purchased Non-Performing Loans
$
454,443
$
453,146
80.2 %
Total Residential Whole Loans
$
781,245
$
800,145
(1)
LTV represents the ratio of the total unpaid principal balance
of the loan to the estimated value of the collateral securing the
related loan as of the most recent date available, which may be the
origination date. For 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, an after repaired valuation was not
obtained and the loan was underwritten based on an “as is”
valuation. Excluded from the calculation of weighted average LTV
are certain low value loans secured by vacant lots, for which the
LTV ratio is not meaningful.
Table 9 - Shock Table
The information presented in the following “Shock Table”
projects the potential impact of sudden parallel changes in
interest rates on the value of our portfolio, including the impact
of Swaps and securitized debt, based on the assets in our
investment portfolio at December 31, 2022. Changes in portfolio
value are measured as the percentage change when comparing the
projected portfolio value to the base interest rate scenario at
December 31, 2022.
Change in Interest Rates
Percentage Change in
Portfolio Value
Percentage Change in
Equity
+100 Basis Point Increase
(1.27) %
(5.54) %
+ 50 Basis Point Increase
(0.57) %
(2.48) %
Actual at December 31, 2022
— %
— %
- 50 Basis Point Decrease
0.43 %
1.89 %
-100 Basis Point Decrease
0.73 %
3.20 %
Webcast
MFA Financial, Inc. plans to host a live audio webcast of its
investor conference call on Thursday, February 23, 2023, at 10:00
a.m. (Eastern Time) to discuss its fourth quarter 2022 financial
results. The live audio webcast will be accessible to the general
public over the internet at http://www.mfafinancial.com through the
“Webcasts & Presentations” link on MFA’s home page. To listen
to the conference call over the internet, please go to the MFA
website at least 15 minutes before the call to register and to
download and install any needed audio software. Earnings
presentation materials will be posted on the MFA website prior to
the conference call and an audio replay will be available on the
website following the call.
Cautionary 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.
MFA FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share
Amounts)
December 31,
2022
December 31,
2021
(unaudited)
Assets:
Residential whole loans, net ($5,727,524
and $5,305,349 held at fair value, respectively) (1)(2)
$
7,518,739
$
7,913,000
Securities, at fair value
333,364
256,685
Cash and cash equivalents
334,183
304,696
Restricted cash
159,898
99,751
Other assets
766,221
565,556
Total Assets
$
9,112,405
$
9,139,688
Liabilities:
Financing agreements ($3,898,744 and
$3,266,773 held at fair value, respectively)
$
6,812,086
$
6,378,782
Other liabilities
311,470
218,058
Total Liabilities
$
7,123,556
$
6,596,840
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; 101,802 and 108,138 shares issued
and outstanding, respectively
1,018
1,082
Additional paid-in capital, in excess of
par
3,684,291
3,775,482
Accumulated deficit
(1,717,991
)
(1,279,484
)
Accumulated other comprehensive income
21,341
45,578
Total Stockholders’ Equity
$
1,988,849
$
2,542,848
Total Liabilities and Stockholders’
Equity
$
9,112,405
$
9,139,688
(1)
Includes approximately $4.0 billion and $3.0 billion of
Residential whole loans transferred to consolidated variable
interest entities (“VIEs”) at December 31, 2022 and December 31,
2021, 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
December 31,
Twelve Months Ended
December 31,
(In Thousands, Except Per Share
Amounts)
2022
2021
2022
2021
(Unaudited)
(Unaudited)
(Unaudited)
Interest Income:
Residential whole loans
$
124,988
$
90,312
$
441,223
$
303,468
Securities, at fair value
12,740
14,257
28,921
56,690
Other interest-earning assets
2,366
1,168
7,437
1,800
Cash and cash equivalent investments
2,783
105
4,838
344
Interest Income
$
142,877
$
105,842
$
482,419
$
362,302
Interest Expense:
Asset-backed and other collateralized
financing arrangements
$
83,277
$
31,770
$
243,083
$
104,597
Other interest expense
3,949
3,925
15,760
15,788
Interest Expense
$
87,226
$
35,695
$
258,843
$
120,385
Net Interest Income
$
55,651
$
70,147
$
223,576
$
241,917
Reversal of Provision/(Provision) for
Credit Losses on Residential Whole Loans
$
1,540
$
3,537
$
2,646
$
44,863
Provision for Credit Losses on Other
Assets
—
—
(28,579
)
—
Net Interest Income after
(Provision)/Reversal of Provision for Credit Losses
$
57,191
$
73,684
$
197,643
$
286,780
Other (Loss)/Income, net:
Net (loss)/gain on residential whole loans
measured at fair value through earnings
(68,828
)
(42,564
)
(866,762
)
16,243
Impairment and other net (loss)/gain on
securities and other portfolio investments
(8,909
)
23,594
(25,067
)
74,496
Net gain on real estate owned
5,602
9,113
25,379
22,838
Net gain/(loss) on derivatives used for
risk management purposes
1,458
399
255,179
1,426
Net gain/(loss) on securitized debt
measured at fair value through earnings
43,091
6,772
290,639
15,027
Lima One - origination, servicing and
other fee income
9,206
12,961
46,745
22,600
Other, net
1,945
4,415
9,297
12,473
Other (Loss)/Income, net
$
(16,435
)
$
14,690
$
(264,590
)
$
165,103
Operating and Other Expense:
Compensation and benefits
$
17,049
$
20,284
$
76,728
$
53,817
Other general and administrative
expense
7,796
8,391
35,812
31,729
Loan servicing, financing and other
related costs
7,901
12,277
42,894
30,867
Amortization of intangible assets
1,300
3,300
9,200
6,600
Costs associated with
restructuring/forbearance agreement
—
—
—
—
Operating and Other Expense
$
34,046
$
44,252
$
164,634
$
123,013
Net (Loss)/Income
$
6,710
$
44,122
$
(231,581
)
$
328,870
Less Preferred Stock Dividend
Requirement
$
8,219
$
8,219
$
32,875
$
32,875
Net (Loss)/Income Available to Common
Stock and Participating Securities
$
(1,509
)
$
35,903
$
(264,456
)
$
295,995
Basic (Loss)/Earnings per Common
Share
$
(0.02
)
$
0.32
$
(2.57
)
$
2.66
Diluted (Loss)/Earnings per Common
Share
$
(0.02
)
$
0.34
$
(2.57
)
$
2.63
Segment Reporting
At December 31, 2022, 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,
2022
Interest Income
$
100,800
$
39,398
$
2,679
$
142,877
Interest Expense
56,046
27,231
3,949
87,226
Net Interest Income/(Expense)
$
44,754
$
12,167
$
(1,270
)
$
55,651
Reversal of Provision/(Provision) for
Credit Losses on Residential Whole Loans
1,631
(91
)
—
1,540
Net Interest Income/(Expense) after
Reversal of Provision/(Provision) for Credit Losses
$
46,385
$
12,076
$
(1,270
)
$
57,191
Net (loss)/gain on residential whole loans
measured at fair value through earnings
$
(72,805
)
$
3,977
$
—
$
(68,828
)
Impairment and other net loss on
securities and other portfolio investments
(383
)
—
(8,526
)
(8,909
)
Net gain on real estate owned
5,602
—
—
5,602
Net gain on derivatives used for risk
management purposes
621
837
—
1,458
Net gain on securitized debt measured at
fair value through earnings
29,159
13,932
—
43,091
Lima One - origination, servicing and
other fee income
—
9,206
—
9,206
Other, net
86
472
1,387
1,945
Total Other (Loss)/Income, net
$
(37,720
)
$
28,424
$
(7,139
)
$
(16,435
)
General and administrative expenses
(including compensation)
$
—
$
13,026
$
11,819
$
24,845
Loan servicing, financing, and other
related costs
5,876
281
1,744
7,901
Amortization of intangible assets
—
1,300
—
1,300
Net Income/(Loss)
$
2,789
$
25,893
$
(21,972
)
$
6,710
Less Preferred Stock Dividend
Requirement
$
—
$
—
$
8,219
$
8,219
Net Income/(Loss) Available to Common
Stock and Participating Securities
$
2,789
$
25,893
$
(30,191
)
$
(1,509
)
(Dollars in Thousands)
Mortgage-Related
Assets
Lima One
Corporate
Total
Three Months Ended September 30,
2022
Interest Income
$
90,406
$
31,883
$
1,583
$
123,872
Interest Expense
47,780
19,856
3,943
71,579
Net Interest Income/(Expense)
$
42,626
$
12,027
$
(2,360
)
$
52,293
Provision for Credit Losses on Residential
Whole Loans
$
(520
)
$
(68
)
$
—
$
(588
)
Net Interest Income/(Expense) after
Provision for Credit Losses
$
42,106
$
11,959
$
(2,360
)
$
51,705
Net loss on residential whole loans
measured at fair value through earnings
$
(226,894
)
$
(64,924
)
$
—
$
(291,818
)
Impairment and other net gain/(loss) on
securities and other portfolio investments
1,620
—
(2,031
)
(411
)
Net gain on real estate owned
3,860
—
—
3,860
Net gain on derivatives used for risk
management purposes
86,944
24,872
—
111,816
Net gain on securitized debt measured at
fair value through earnings
79,471
19,387
—
98,858
Lima One - origination, servicing and
other fee income
—
12,372
—
12,372
Other, net
282
35
815
1,132
Total Other Loss, net
$
(54,717
)
$
(8,258
)
$
(1,216
)
$
(64,191
)
General and administrative expenses
(including compensation)
$
—
$
14,926
$
14,949
$
29,875
Loan servicing, financing, and other
related costs
6,063
280
5,014
11,357
Amortization of intangible assets
—
1,300
—
1,300
Net Loss
$
(18,674
)
$
(12,805
)
$
(23,539
)
$
(55,018
)
Less Preferred Stock Dividend
Requirement
$
—
$
—
$
8,218
$
8,218
Net Loss Available to Common Stock and
Participating Securities
$
(18,674
)
$
(12,805
)
$
(31,757
)
$
(63,236
)
(Dollars in Thousands)
Mortgage-Related
Assets
Lima One
Corporate
Total
December 31, 2022
Total Assets
$
6,065,557
$
2,618,695
$
428,153
$
9,112,405
December 31, 2021
Total Assets
$
7,567,084
$
1,200,737
$
371,867
$
9,139,688
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. 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
(loss)/income 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, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
GAAP Net income/(loss) used in the
calculation of basic EPS
$
(1,647
)
$
(63,410
)
$
(108,760
)
$
(91,266
)
$
35,734
Adjustments:
Unrealized and realized gains and losses
on:
Residential whole loans held at fair
value
68,828
291,818
218,181
287,935
42,564
Securities held at fair value
383
(1,549
)
1,459
2,934
364
Interest rate swaps
12,725
(108,917
)
(31,767
)
(80,753
)
(71
)
Securitized debt held at fair value
(44,988
)
(100,767
)
(84,348
)
(62,855
)
(6,137
)
Investments in loan origination
partners
8,526
2,031
39,162
780
(23,956
)
Expense items:
Amortization of intangible assets
1,300
1,300
3,300
3,300
3,300
Equity based compensation
2,480
2,673
3,540
2,645
2,306
Securitization-related transaction
costs
1,744
5,014
6,399
3,233
5,178
Total adjustments
50,998
91,603
155,926
157,219
23,548
Distributable earnings
$
49,351
$
28,193
$
47,166
$
65,953
$
59,282
GAAP earnings/(loss) per basic common
share
$
(0.02
)
$
(0.62
)
$
(1.06
)
$
(0.86
)
$
0.33
Distributable earnings per basic common
share
$
0.48
$
0.28
$
0.46
$
0.62
$
0.54
Weighted average common shares for basic
earnings per share
101,800
101,795
102,515
106,568
109,468
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,
2022
GAAP Net income/(loss) used in the
calculation of basic EPS
$
2,789
$
25,893
$
(30,329
)
$
(1,647
)
Adjustments:
Unrealized and realized gains and losses
on:
Residential whole loans held at fair
value
72,805
(3,977
)
—
68,828
Securities held at fair value
383
—
—
383
Interest rate swaps
10,202
2,523
—
12,725
Securitized debt held at fair value
(30,453
)
(14,535
)
—
(44,988
)
Investments in loan origination
partners
—
—
8,526
8,526
Expense items:
Amortization of intangible assets
—
1,300
—
1,300
Equity based compensation
—
53
2,427
2,480
Securitization-related transaction
costs
—
—
1,744
1,744
Total adjustments
$
52,937
$
(14,636
)
$
12,697
$
50,998
Distributable earnings
$
55,726
$
11,257
$
(17,632
)
$
49,351
(Dollars in Thousands)
Mortgage- Related
Assets
Lima One
Corporate
Total
Three months ended September 30,
2022
GAAP Net loss used in the calculation of
basic EPS
$
(18,674
)
$
(12,805
)
$
(31,931
)
$
(63,410
)
Adjustments:
Unrealized and realized gains and losses
on:
Residential whole loans held at fair
value
226,894
64,924
—
291,818
Securities held at fair value
(1,549
)
—
—
(1,549
)
Interest rate swaps
(84,759
)
(24,158
)
—
(108,917
)
Securitized debt held at fair value
(80,907
)
(19,860
)
—
(100,767
)
Investments in loan origination
partners
—
—
2,031
2,031
Expense items:
Amortization of intangible assets
—
1,300
—
1,300
Equity based compensation
—
61
2,612
2,673
Securitization-related transaction
costs
—
—
5,014
5,014
Total adjustments
$
59,679
$
22,267
$
9,657
$
91,603
Distributable earnings
$
41,005
$
9,462
$
(22,274
)
$
28,193
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, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
GAAP Total Stockholders’ Equity
$
1,988.8
$
2,033.9
$
2,146.4
$
2,349.0
$
2,542.8
Preferred Stock, liquidation
preference
(475.0
)
(475.0
)
(475.0
)
(475.0
)
(475.0
)
GAAP Stockholders’ Equity for book value
per common share
1,513.8
1,558.9
1,671.4
1,874.0
2,067.8
Adjustments:
Fair value adjustment to Residential whole
loans, at carrying value
(70.2
)
(58.2
)
9.5
54.0
153.5
Fair value adjustment to Securitized debt,
at carrying value
139.7
109.6
75.4
47.7
4.3
Stockholders’ Equity including fair value
adjustments to Residential whole loans and Securitized debt held at
carrying value (Economic book value)
$
1,583.3
$
1,610.3
$
1,756.3
$
1,975.7
$
2,225.6
GAAP book value per common share
$
14.87
$
15.31
$
16.42
$
17.84
$
19.12
Economic book value per common share
$
15.55
$
15.82
$
17.25
$
18.81
$
20.58
Number of shares of common stock
outstanding
101.8
101.8
101.8
105.0
108.1
Category: Earnings
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INVESTOR CONTACT:
InvestorRelations@mfafinancial.com 212-207-6488
www.mfafinancial.com MEDIA CONTACT: Abernathy
MacGregor Tom Johnson 212-371-5999
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