Core Viewpoint - MFA Financial reported quarterly earnings of $0.39 per share, matching the Zacks Consensus Estimate, but down from $0.49 per share a year ago [1] - The company posted revenues of $50.8 million for the quarter, missing the Zacks Consensus Estimate by 2.40%, compared to $46.46 million in the same quarter last year [2] Earnings Performance - The company has surpassed consensus EPS estimates only once in the last four quarters [1] - The current consensus EPS estimate for the upcoming quarter is $0.38, with expected revenues of $54.3 million, and for the current fiscal year, the estimate is $1.61 on revenues of $224.66 million [7] Market Comparison - MFA Financial shares have increased by approximately 1.1% since the beginning of the year, while the S&P 500 has gained 4.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Outlook - The REIT and Equity Trust industry is currently in the top 50% of over 250 Zacks industries, suggesting that stocks in this category tend to outperform those in the bottom 50% by more than 2 to 1 [8] - Ellington Credit, another company in the same industry, is expected to report significant revenue growth of 2397.4% year-over-year, with an EPS estimate of $0.26 for the upcoming quarter [9]

Core Insights - Mortgage rates have increased to 6.91% as of January 2, 2025, the highest since July 2024, following the Federal Reserve's slower rate-cutting timeline [1][3] - Despite rising mortgage rates, mREIT stocks such as NexPoint Real Estate Finance, Two Harbors Investment Corp, and MFA Mortgage Investments are recommended for solid returns in 2025 [2][7] - The U.S. economy is expected to grow in 2025, albeit at a slower pace, with anticipated interest rate cuts leading to lower mortgage rates and moderate house price appreciation [4][5] mREITs Overview - The rise in mortgage rates has led to a decline in purchase applications and refinancing activities, with the refinance share dropping to 39.4% from 44.3% [3] - mREIT companies are expected to see improvements in book value in 2025 as mortgage rates gradually decrease, enhancing purchase originations and refinancing activities [5][6] NexPoint Real Estate Finance (NREF) - NREF focuses on first mortgage loans, mezzanine loans, and multi-family commercial mortgage-backed securities, with a current dividend yield of 12.96% [10][13] - The company’s net interest income (NII) fell by 50.3% to $6.4 million in the first nine months of 2024, but is expected to improve with Fed rate cuts [13][14] - The Zacks Consensus Estimate for NREF's 2025 earnings is $2.44 per share, reflecting a 41.6% year-over-year increase [14] Two Harbors Investment Corp (TWO) - TWO's portfolio is primarily composed of RMBS with mortgage servicing rights, which helps mitigate exposure to mortgage spread changes [15][16] - The company has faced net interest losses due to high borrowing costs but anticipates relief as interest rates fall, potentially increasing dividend payouts [17][18] - The Zacks Consensus Estimate for TWO's 2025 earnings is 85 cents per share, indicating an 81.9% year-over-year increase [19] MFA Mortgage Investments, Inc. (MFA) - MFA invests in residential mortgage loans and MBS, with significant progress in its portfolio and loan originations, including $293.9 million of Agency MBS added in Q3 2024 [20][21] - The current dividend yield for MFA is 13.93%, with a payout ratio of 94% [22] - The Zacks Consensus Estimate for MFA's 2025 earnings is $1.62 per share, reflecting a 3.6% year-over-year increase [24]

Company Overview - MFA Financial, Inc. (NYSE: MFA) is a real estate investment trust (REIT) that specializes in investing in mortgages, also referred to as mREIT [4]. Investment Appeal - The company has attracted income investors due to its current dividend yield of 13.5%, although this yield has been unstable over time [4].

Financial Performance - GAAP earnings for Q3 2024 were $0.38 per basic common share, with Distributable Earnings at $0.37 per share [277]. - For Q3 2024, net income available to common stock and participating securities was $40.0 million, or $0.38 per basic share, up from $33.7 million, or $0.32 per share in Q2 2024, reflecting a $10.4 million increase in Other income/(loss), net [307]. - The company reported net income available to common stock of $88.7 million for the nine months ended September 30, 2024, compared to a net loss of $(34.2) million in the same period of 2023 [336]. - Basic earnings per common share for the nine months ended September 30, 2024, was $0.85, a significant increase from $(0.34) per share in the same period of 2023 [336]. - The return on average total assets improved to 1.74% in Q3 2024 from 1.52% in Q2 2024 [331]. - The return on average total stockholders' equity for Q3 2024 was 9.89%, a decrease from 11.53% in Q2 2024 [362]. - The company reported a net gain on residential whole loans measured at fair value for the nine months ended September 30, 2024, compared to a loss in the prior year [336]. Asset and Investment Management - As of September 30, 2024, the company had total assets of approximately $11.2 billion, with $9.0 billion (81%) representing residential whole loans [265]. - Approximately $1.1 billion (10%) of total assets were invested in securities, including Agency MBS and Non-Agency MBS as of September 30, 2024 [265]. - The residential mortgage asset portfolio was approximately $10.3 billion, up from $10.2 billion at the end of Q2 2024 [278]. - The total asset allocation amounts to $10,867 million, with business purpose loans at $3,682 million and Non-QM loans at $4,171 million [285]. - The company had $3.5 billion in borrowings under asset-backed financing agreements as of September 30, 2024, with $2.5 billion secured by residential whole loans [382]. - The company had unused financing capacity of approximately $3.1 billion across its financing arrangements for all collateral types [374]. Interest Income and Expense - Net interest income for Q3 2024 decreased by $2.9 million to $50.6 million, compared to $53.5 million in Q2 2024, primarily due to lower net interest income from the residential whole loan portfolio [309]. - Average interest-earning assets for Q3 2024 were $10.84 billion, generating interest income of $181.97 million, with an average yield of 6.71% [311]. - Interest income on residential whole loans decreased by $8.3 million, or 5.0%, to $157.4 million for Q3 2024 compared to Q2 2024, primarily due to a decrease in yield to 6.74% from 6.92% [320]. - Interest expense decreased by $2.0 million, or 1.5%, to $131.3 million for Q3 2024 from $133.3 million for Q2 2024, reflecting lower average balance and rates on financing agreements [321]. - The net interest margin for Q3 2024 was 3.00%, compared to 3.01% for Q2 2024 [315]. - The net yield on residential whole loans was 6.74% for Q3 2024, compared to 6.92% for Q2 2024 [316]. Credit Risk and Delinquency - Delinquency on Residential whole loans increased from 6.5% to 6.7%, with Multifamily transitional loan delinquency rising to 8.1% as of October 31, 2024 [277]. - The company is exposed to credit risk through residential whole loans, but current loan-to-value ratios (LTVs) have decreased significantly due to home price appreciation [402]. - The company is exposed to potential credit losses from CRT securities, which are not guaranteed by Fannie Mae and Freddie Mac [406]. - The company reported a reversal for credit losses on residential whole loans of $1.94 million in Q3 2024, compared to a provision of $1.08 million in Q2 2024 [306]. Regulatory Environment - The Dodd-Frank Act and its regulations are likely to increase economic and compliance costs for participants in the mortgage and securitization industries [300]. - The company is subject to ongoing regulatory changes under the Dodd-Frank Act, which may increase compliance costs and affect operations in the mortgage and securitization industries [298][300]. Market Conditions and Economic Factors - The Federal Reserve cut the target for the Fed Funds rate by 50 basis points on September 18, 2024, marking the beginning of a rate-cutting cycle [276]. - The two-year Treasury yield fell approximately 110 basis points and the ten-year Treasury yield fell approximately 60 basis points during the third quarter of 2024 [276]. - A 100 basis point increase in interest rates could lead to a decrease in estimated net portfolio value by $159,900,000, representing a 1.44% decline [398]. - A 50 basis point decrease in interest rates could increase estimated net portfolio value by $57,244,000, representing a 0.51% increase [398]. Shareholder Returns and Dividends - The company paid $107.9 million in cash dividends on common stock and $24.7 million on preferred stock during the nine months ended September 30, 2024 [387]. - The company declared a third quarter 2024 dividend of $0.35 per share, totaling approximately $36.0 million, including dividend equivalents of approximately $0.3 million [387]. - The company announced a new $200 million stock repurchase program effective through the end of 2025, with $200 million remaining available under this authorization as of September 30, 2024 [372]. Operational Expenses - Compensation and benefits expenses rose to $22.42 million in Q3 2024 from $21.75 million in Q2 2024 [306]. - Other general and administrative expenses rose to $11.4 million in Q3 2024 from $10.8 million in Q2 2024, mainly due to software asset impairment [328].

Financial Data and Key Metrics Changes - Distributable earnings for Q3 2024 were $0.37 per share, a decrease from $0.45 in Q2 2024 [23] - GAAP earnings increased to $48.2 million or $0.38 per share, up from $41.9 million or $0.32 per share in the previous quarter [18] - GAAP book value was $13.77 per share, and economic book value was $14.46 per share, reflecting a 1% increase from $14.34 at the end of June [18] Business Line Data and Key Metrics Changes - The company acquired over $550 million in loans with an average coupon of 9.4% during the quarter [11] - Lima One funded $329 million in business purpose loans, reflecting a decline in origination volume due to management changes and a shift away from multifamily originations [13][35] - Non-QM acquisitions remained flat compared to Q2, with total asset acquisitions for Q3 being almost identical to the previous quarter [14] Market Data and Key Metrics Changes - The Federal Reserve cut the federal funds rate target by 50 basis points, signaling the start of an easing cycle [8] - The company reported a modest increase in estimated duration to 1.16% from 1.12% in the previous quarter [34] Company Strategy and Development Direction - The company is focusing on enhancing its portfolio through securitization, having closed two deals in Q3 and two more post-quarter [12] - Lima One is seen as a key differentiator, allowing the company to create high-yielding assets organically [15] - The management team is working on filling personnel vacancies and improving underwriting guidelines to strengthen the platform for future growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business model in the context of lower rates and a steepening yield curve, indicating potential growth opportunities [16] - The company anticipates a modest reduction in G&A expenses and a benefit to distributable earnings starting in Q1 2025 due to recent personnel changes [25] Other Important Information - The company sold single-family rental loans with an unpaid principal balance of approximately $236 million, marking the beginning of a new distribution channel for Lima One [20] - The company expects to see additional swap activity and the use of longer-dated swaps to balance the portfolio as it continues to add agencies [34] Q&A Session Summary Question: Clarification on book value comments - Management indicated that the 3% to 4% decrease in economic book value was as of earlier that morning and is subject to market volatility [40] Question: Earnings power of the portfolio and sensitivity to lower short-term rates - Management discussed the earnings power of the portfolio and the impact of swaps, expressing confidence in the portfolio's earnings potential moving forward [42][44] Question: Loan warehouse capacity for Lima One - Management confirmed ample capacity for retaining loans on the balance sheet, with over $1 billion of potential borrowing available [46] Question: Considerations for increasing leverage in the agency portfolio - Management stated that growth in the agency portfolio would depend on market spreads and conditions, with potential growth to $1.5 billion to $2 billion [47] Question: Programmatic loan sale outlook - Management indicated that third-party sales could become a significant distribution channel, particularly for rental loans, as origination volumes grow [49] Question: Credit mark on the multifamily piece - Management reported a credit mark of about $15 million on the multifamily portfolio, with a total UPB of approximately $1.1 billion [50] Question: Competitive landscape in the BPL business - Management acknowledged the competitive nature of the market but expressed confidence in their ability to regain lost volume through improvements in sales and marketing [51]

Company Update THIRD QUARTER 2024 FINANCIAL, INC. Q3 2022 Financial Snapshot Forward-looking statements When used in this presentation 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 S ...

Core Viewpoint - MFA Financial reported quarterly earnings of $0.36 per share, missing the Zacks Consensus Estimate of $0.41 per share, and showing a decrease from $0.40 per share a year ago, indicating an earnings surprise of -12.20% [1][2] Financial Performance - The company posted revenues of $50.63 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 6.25%, compared to $46.14 million in the same quarter last year [2] - Over the last four quarters, MFA Financial has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - MFA Financial shares have increased approximately 9.3% since the beginning of the year, while the S&P 500 has gained 21.2% [3] - The current consensus EPS estimate for the upcoming quarter is $0.40 on revenues of $55.4 million, and for the current fiscal year, it is $1.60 on revenues of $211 million [7] Industry Outlook - The REIT and Equity Trust industry, to which MFA Financial belongs, is currently ranked in the bottom 45% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that industry outlook can materially affect stock performance [5][8]

MFA Financial, Inc. (MFA) is slated to report third-quarter 2024 results on Nov. 6. The company is likely to have registered year-over-year growth in revenues and earnings.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the last reported quarter, this real estate investment trust, which is primarily engaged in the business of investing in mortgage-backed securities, posted distributable earnings of 44 cents, beating the Zacks Consensus Estimate by 15.8%. Revenues were $53.49 mill ...

Editor's note: Seeking Alpha is proud to welcome David Johnson as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. David A. Johnson is founder and principal of Endurance Capital Management, a New Jersey Limited Liability Company. As an investor entrepreneur, David invests in stocks, bonds, options, ETFs, REITs, real estate, closed end funds and alternati ...

Quite a few REITs (Real Estate Invesment Trusts) have made their way onto the Zacks Rank #1 (Strong Buy) list with several standing out in terms of affordability. Trading under $20 a share, these REIT stocks have annual dividend yields over 10% which may certainly peak investors' interest. MFA Financial At $12, MFA Financials' (MFA) stock currently has a 10.96% annual dividend yield. More intriguing is that MFA trades at just 7.8X forward earnings with the company's focus being on mortgage-backed securities ...