Core Viewpoint - MFA Financial reported quarterly earnings of $0.44 per share, exceeding the Zacks Consensus Estimate of $0.38 per share, and showing an increase from $0.40 per share a year ago, representing an earnings surprise of 15.79% [1][2] Financial Performance - The company posted revenues of $53.49 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 12.14%, compared to revenues of $44.51 million in the same quarter last year [2] - Over the last four quarters, MFA Financial has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance and Outlook - MFA Financial shares have declined approximately 3.9% since the beginning of the year, while the S&P 500 has gained 9% [3] - The company's current consensus EPS estimate for the upcoming quarter is $0.39 on revenues of $50.05 million, and for the current fiscal year, it is $1.52 on revenues of $197.6 million [7] Industry Context - The REIT and Equity Trust industry, to which MFA Financial belongs, is currently ranked in the top 19% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

RUNSTUDIO/DigitalVision via Getty Images MFA Financial (NYSE:MFA) is a mortgage REIT that has a couple of interesting things going for it right now. Its dividend yield trades at a high 13%, and this also comes with a discount to book value. @ MFA Comments of Collection Co.SE MFA Price/Book 5Y History (Seeking Alpha) At 0.58, this looks like a large discount. During this period as well, the company has made some changes to its strategy to avoid some of the pitfalls of the past. After examining where they are ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-13991 MFA FINANCIAL, INC. (Exact name of registrant as specified in its charter) ______________________________ ...

Financial Data and Key Metrics Changes - MFA Financial reported distributable earnings of $0.35 per share for Q1 2024, with GAAP earnings of $15 million or $0.14 per share [16][26] - GAAP book value decreased by 1.3% to $13.80 per common share, while economic book value decreased by 1.7% to $14.32 per common share [25][26] - The company declared dividends of $0.35 per common share, achieving a total economic return of 0.7% for the quarter [26] Business Line Data and Key Metrics Changes - Mortgage banking income at Lima One declined by $0.03 per share due to lower origination volumes [27] - Net interest income for Q1 2024 was $47.8 million, an increase from $46.5 million in the previous quarter [27] - Lima One originated approximately $430 million in loans during the quarter, with a strong credit profile reflected in an average LTV of 65% and an average FICO score of 749 [43][37] Market Data and Key Metrics Changes - The labor market remained strong with non-farm payroll growth accelerating and the unemployment rate under 4% [32] - Home prices continued to trend higher, rising by about 6% last year, supported by low supply and high demand [32] - Agency mortgage spreads widened slightly since the beginning of the year but remained tighter than last October [13] Company Strategy and Development Direction - The company emphasized a strategy focused on maintaining a relatively short net duration to protect against interest rate volatility [33] - MFA Financial plans to optimize its liability framework through callable securitizations, which provide optionality to unlock liquidity [22][50] - The company continues to see attractive investment opportunities, adding about $650 million of loans with an average coupon of approximately 10% [30] Management's Comments on Operating Environment and Future Outlook - Management noted that the path of interest rates remains uncertain, with future Fed actions being data-dependent [12][15] - The company expects continued strong economic data to push rates higher, with market participants reducing expectations for rate cuts in 2024 [40] - Management expressed confidence in the sustainability of dividends, citing solid earnings capability going forward [66] Other Important Information - The board authorized a $200 million share repurchase program and filed a $300 million at-the-market program [28] - The company executed a $193 million RTL securitization deal in February and a $365 million non-QM deal in April [17][48] Q&A Session Summary Question: Credit performance and resolution timelines - Management explained that resolution timelines vary by loan type and geography, with non-QM loans typically resolving within a year if the borrower sells the property [62][64] Question: Dividend sustainability amidst higher rates - Management indicated confidence in covering dividends based on solid net interest income and portfolio performance [66] Question: Typical losses on loan resolution - Management noted that while there are historical data on losses, the resolution process can take years, and many loans may ultimately pay off in full due to borrower equity [70][76] Question: Securitization and capital needs - Management discussed the potential to call prior securitizations to unlock liquidity, emphasizing the importance of optimizing the liability structure [94][96] Question: Extension activity for transitional loans - Management reported that about 12% of the portfolio was extended, which is modest historically, and extensions are part of normal business operations [101][105]

bankerwin Welcome to another installment of our Preferreds Market Weekly Review, where we discuss preferred stock and baby bond market activity from both the bottom-up, highlighting individual news and events, as well as top-down, providing an overview of the broader market. We also try to add some historical context as well as relevant themes that look to be driving markets or that investors ought to be mindful of. This update covers the period through the third week of April. Be sure to check out our ...

Stock Repurchase and Issuance - The company did not repurchase any shares of its common stock during the year ended December 31, 2023, leaving approximately $202.5 million unused under its stock repurchase program[219] - The company issued 6,666 and 80,027 shares of common stock through the DRSPP in 2023 and 2022, generating net proceeds of approximately $74,000 and $1.2 million, respectively[221] Geographic and Economic Risks - A significant portion of the company's residential whole loans and residential mortgage securities are concentrated in California, Florida, Texas, Georgia, and New York, making them vulnerable to economic or housing downturns in these areas[63] - The company's residential whole loans and residential mortgage securities are at risk from natural disasters, pandemics, terrorist events, and adverse climate changes, which could decrease property values and increase defaults[65] Regulatory and Legal Risks - Changes in governmental laws, regulations, and fiscal policies could negatively impact property values, leading to increased defaults and loss severities[66] - The company faces counterparty risk, as it may be unable to enforce indemnity or repurchase agreements if sellers breach representations and warranties, potentially leading to losses[67] - The company's due diligence on potential investments may not uncover all risks, which could result in losses and adversely affect its financial condition[68] - The company's business is heavily regulated, with the Dodd-Frank Act imposing significant restrictions on mortgage loan origination, servicing, and securitization, increasing compliance costs[117][118][119] - The company is subject to extensive federal and state regulations, including compliance with RESPA, fair lending, and privacy regulations, which impose significant ongoing costs[125][126] - The Dodd-Frank Act has led to increased regulatory oversight, including the creation of the CFPB and enhanced consumer protections for mortgage lending and servicing[127] - The General QM Final Rule, effective March 1, 2021, introduced changes to qualified mortgage definitions, potentially increasing compliance costs for mortgage origination and securitization participants[128] - Regulatory actions by FHFA, the U.S. Treasury, and the Federal Reserve Board can indirectly or directly impact the company's business model and liquidity[129] - Regulatory changes or new interpretations of existing laws could materially affect the company's business, financial condition, and liquidity[130] - The company may face challenges in obtaining or maintaining licenses required to purchase, hold, or sell residential mortgage loans in certain jurisdictions[131] - The SEC's potential rulemaking or guidance on exemptions under the Investment Company Act could require the company to adjust its investment strategy[137][140] Financial and Operational Risks - The company's GAAP results of operations may experience increased volatility due to the fair value option accounting model used for certain investments and financing agreements[69] - The company's use of models for asset valuation and credit loss estimation is subject to risks if the models are incorrect, misleading, or based on incomplete information[70] - The company's investments in residential whole loans are difficult to value and depend on the borrower's ability to service or refinance their debt, which could adversely affect liquidity and results of operations[74] - The company has approximately $79.9 million invested in MSR-related assets as of December 31, 2023, exposing it to risks such as illiquidity, regulatory costs, and sensitivity to prepayment rates[86] - Investments in mortgage loan originators total approximately $19.8 million as of December 31, 2023, with significant risks due to lack of control and illiquidity[87] - Business purpose loans, including Transitional loans, are subject to high risks, including borrower defaults, market conditions, and regulatory challenges[88][89][90] - The company faces potential impairments on residential mortgage securities due to declines in market value, impacting financial performance[84] - REO properties are illiquid and subject to market risks, potentially affecting liquidity and operational results[83] - The foreclosure process in judicial states like New York, Florida, and New Jersey is lengthy and costly, increasing potential losses[79] - Regulatory changes and servicer performance risks could negatively impact the value of residential whole loans and financial performance[77][82] - Prepayment risks on mortgage loans may reduce expected yields, especially if rates differ from projections[94][95] - Liquidity pressures on servicers due to economic conditions could increase delinquency and forbearance rates, impacting cash flows[78] - Compliance costs and regulatory risks for mortgage servicers are increasing, potentially affecting servicing obligations and investment returns[80][81] - The company's business strategy involves the use of leverage, which may lead to overleveraging and adversely affect liquidity, results of operations, or financial condition[96] - The company's ability to achieve investment objectives depends on renewing or replacing maturing borrowings, with repurchase agreement credit lines renewable at lenders' discretion[97] - A decline in the market value of residential mortgage investments may result in margin calls, forcing asset sales under adverse conditions and reducing liquidity[98] - Adverse developments involving major financial institutions or lenders could reduce borrowing capacity and force asset sales, impacting liquidity and profitability[98] - The company's profitability may be adversely affected by a reduction in leverage, as positive spreads between interest income and borrowing costs are critical[98] - Counterparty defaults in repurchase transactions could result in losses, with exposure to Wells Fargo (14.9%), Barclay's Bank (8.9%), and Churchill (8.0%) as of December 31, 2023[99] - An increase in borrowing costs relative to interest income may materially adversely affect profitability, especially during periods of rising interest rates[101] - Inflation and Federal Reserve rate hikes in 2022 and 2023 may compress margins between short and long-term rates, impacting financial performance[102] - Restrictive covenants in borrowing agreements may require minimum equity, leverage ratios, and performance triggers, with potential cross-default provisions[103] - Reliance on short-term repurchase agreements and securitization financing exposes the company to risks of asset liquidation or less attractive financing options[105] - The company's financing arrangements are subject to rating agency delays, which could adversely impact the availability of borrowings, interest rates, and liquidity[108] - The company may be required to repurchase affected loans or make indemnification payments in the event of a breach of representations or warranties, potentially affecting its results of operations and liquidity[107] - The company's investments are subject to illiquidity risks, making it difficult to sell investments quickly, which could result in significant losses[116] - The company is vulnerable to adverse developments in the mortgage finance and credit markets, which could materially affect the value of its investments and financing terms[115] - The company's reliance on information systems and open-source software poses risks, including potential cybersecurity incidents and operational failures[113][114] - The company may face increased regulatory scrutiny and potential legislative changes, which could further impact its operations and financial condition[121] - The COVID-19 pandemic led to foreclosure moratoria and forbearance provisions, which could be reenacted in the event of future public health crises, adversely affecting the company's business[123] Hedging and Interest Rate Risks - The company uses hedging strategies, including Swaps, to mitigate interest rate risks, but these strategies may not fully protect against adverse changes in interest rates[142] - Interest rate hedging using Swaps may fail to protect the company, exposing it to risks such as counterparty default, collateral loss, and adverse effects on earnings, potentially reducing cash available for distribution to stockholders[143] - Hedging instruments could expose the company to contingent liabilities, requiring cash payments in cases of early termination or collateral posting, which may materially affect financial results and liquidity[144] - Swap transactions are subject to increased regulation, margin requirements, and fees, which could adversely impact the company's business and operational results[145] - Clearing facilities may increase margin requirements on hedging instruments during adverse economic developments, potentially affecting the company's liquidity and financial condition[146] REIT and Tax Risks - Failure to maintain REIT qualification could result in substantial tax liabilities, reducing cash available for distribution to stockholders and potentially leading to delisting from the NYSE[147][149][150] - REIT distribution requirements mandate distributing at least 90% of taxable income, limiting cash available for growth and potentially forcing unfavorable borrowing or asset sales[152][153] - Compliance with REIT requirements may hinder the company's ability to pursue attractive investment opportunities due to income source and asset diversification constraints[156] - Accumulation of cash or reinvestment in TRSs could cause the company to exceed REIT asset testing limits, risking disqualification as a REIT[157] - Taxable income from Non-Agency MBS and residential whole loans may differ from GAAP income, leading to timing variances in income and loss recognition[158] - The company may face a 100% tax on net income from prohibited transactions, such as certain sales or securitizations of mortgage loans, which could limit its ability to engage in beneficial transactions[160] - Securitizations could result in the creation of taxable mortgage pools, potentially leading to excess inclusion income for stockholders and limitations on selling equity interests to outside investors[161] - The company has not established a minimum dividend payment level, and dividend payments may fluctuate significantly or cease entirely depending on operating results and REIT qualification requirements[162][163] - Differences between GAAP net income and REIT taxable income could lead to significant variances in income recognition timing, making GAAP results an unreliable indicator of future taxable income and dividend distributions[164] - Changes in accounting principles or tax rules could materially affect the company's reported income, earnings, and REIT taxable income, potentially impacting dividend distribution requirements[165] - The company's ability to remain qualified as a REIT could be adversely affected if assets subject to repurchase agreements fail to qualify as real estate assets[166] - REIT requirements may limit the company's ability to hedge effectively, potentially increasing hedging costs or exposing the company to greater interest rate risks[167] - The company may be required to report taxable income for certain investments in excess of the economic income ultimately realized, particularly for debt instruments acquired at a discount[168][169] - Significant modifications to debt instruments could result in taxable gain recognition, even if the value or payment expectations of the instrument remain unchanged[171] - The company may be required to accrue interest income on delinquent debt instruments, despite doubts about collectability, potentially impacting its ability to maintain REIT qualification or avoid corporate income tax[172][173] - Future taxable distributions may require stockholders to pay income taxes exceeding cash distributions received, potentially leading to stock sales that could depress market prices[178] - IRS guidance allows elective cash/stock dividends for REITs, but future requirements or retroactive changes could impact the company's ability to make such distributions[179] - Changes in U.S. federal income tax laws or interpretations could affect the company's REIT qualification and investment strategies, potentially impacting stock value[180] - Ownership limitations restrict any single entity from owning more than 9.8% of the company's capital stock to maintain REIT qualification[181] Corporate Governance and Stockholder Risks - Provisions in Maryland law and organizational documents may delay or prevent changes in control, potentially affecting stockholder premiums[183][184] - Future debt or equity offerings could dilute existing stockholders and reduce the market price of common stock[185][186] - Board-approved issuance of preferred stock with superior rights could discourage takeover attempts, affecting stockholder premiums[187] - Sales of substantial shares in the public market could adversely affect the market price of common stock and impair capital-raising ability[188] - Future cash dividends on common stock are subject to uncertainty, particularly during market disruptions in mortgage or housing sectors[189] - Competition for investment opportunities may limit the company's ability to acquire desirable assets, impacting profitability[191] Cybersecurity Risks - The company faces cybersecurity risks, including potential breaches of borrower non-public personal information, which could result in material adverse impacts on its business and financial results[109][110][111]

Financial Data and Key Metrics Changes - For Q4 2023, the company reported GAAP earnings of $81.5 million, or $0.80 per basic common share, and distributable earnings of $49.7 million, or $0.49 per basic common share, with an increase in distributable earnings driven by a release of CECL reserves [19][21] - The net interest income plus positive carry on swaps for the full year was $283.6 million, an increase of over $50 million, or 21% from 2022 [20] - As of December 31, GAAP book value was $13.98 per common share and economic book value was $14.57 per common share, representing increases of 3.7% and 5.3% respectively from the previous quarter [21][24] Business Line Data and Key Metrics Changes - The company acquired $860 million of loans in Q4 2023 with an average coupon of 10%, and $3 billion of loans in 2023 with an average coupon of 9.8% [15] - Business purpose loans and non-QM loans accounted for the majority of acquisitions in 2023, with an asset yield increase from 5.69% in Q1 to 6.46% in Q4 [26][28] Market Data and Key Metrics Changes - The U.S. economy showed strong performance with Q4 GDP growth over 3% and an unemployment rate of 3.7% [29] - Home prices rose by over 5% in 2023, supported by low supply and high demand [29] Company Strategy and Development Direction - The company’s strategy is not dependent on rate cuts, focusing on maintaining a short net duration and prioritizing stability of funding costs through securitization and swap hedges [31][41] - The company plans to continue deploying capital at attractive returns and growing its portfolio, with a focus on high-yielding loans [22][31] Management's Comments on Operating Environment and Future Outlook - Management noted that while inflation numbers are high and labor markets remain strong, the Fed's anticipated rate cuts are still a few months away [12][13] - The company expects to benefit from extensive carry on swaps and lower funding costs as $1 billion of swaps mature at the end of 2024 and early 2025 [31] Other Important Information - The company repurchased over $60 million of its convertible bond due in June, which, along with proceeds from a bond deal, largely covered this maturity [17] - The company successfully issued an unsecured senior bond early in January, upsizing the deal to $115 million [16] Q&A Session Summary Question: Discussion on call strategy and attractiveness in current rates - Management indicated that the call strategy is opportunistic and depends on the specific deal and market conditions [51][53] Question: Appetite for unsecured issuance and its role in capital structure - Management confirmed that the recent unsecured issuance was successful and will be considered as a viable source of financing in the future [54] Question: Insights on non-bank originators and specialized products - Management stated that while there are discussions about trends in banks and commercial loan portfolios, they have not identified significant opportunities outside their current focus [60][61] Question: Concerns regarding multifamily bridge products - Management expressed confidence in their multifamily portfolio, highlighting conservative underwriting and low delinquency rates [67][70]

4% 5% 6% 7% 8% 9% 10% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Average coupon in Lima One origination pipeline exceeds 10.25% 9 Lima offers a broad range of loan products to real estate investors nationwide including rehab loans, bridge loans, construction loans, rental loans and small-balance multifamily loans Legacy Non-Performing and Re-Performing Loans | --- | --- | --- | --- | --- | --- | --- | --- | |--------------------|-------|-------|-------|-------|-------|-------|-------| | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-13991 MFA FINANCIAL, INC. (Exact name of registra ...

Financial Data and Key Metrics Changes - MFA's GAAP book value decreased by 6.5% and economic book value decreased by 8.5% in Q3 2023 [25] - Distributable earnings were $0.40 per share, covering the $0.35 dividend, with net interest spread increasing to 217 basis points and net interest margin increasing to 302 basis points [54][87] - The average coupon on loan acquisitions was approximately 9.9%, with a significant increase in yield on interest-earning assets to 6.35%, up 25 basis points from Q2 and 111 basis points from a year ago [27][88] Business Line Data and Key Metrics Changes - Lima One originated $671 million of business purpose loans in Q3, a 15% increase from Q2, accounting for over 80% of MFA's loan acquisitions [5] - The average loan-to-value (LTV) ratio for loans originated by Lima One was 65%, with an average FICO score of 754 [67][78] - The 60-plus day delinquency rate on BPL loans originated by Lima One increased to 3.2% but remained within modeling expectations [67] Market Data and Key Metrics Changes - The interest rate environment was highly volatile, with the 10-year treasury rate increasing by about 75 basis points during the quarter [27][25] - Home prices increased by approximately 5% year-to-date, supported by low inventory and a resilient labor market [89] Company Strategy and Development Direction - MFA continues to focus on high-quality borrowers and has successfully increased its market share in the business purpose loan sector due to the exit of smaller originators [95] - The company aims to manage interest rate risk through securitization, having executed two securitizations totaling $600 million in Q3 [87][91] - MFA is committed to increasing non-mark-to-market financing, which now stands at 77% of its loan portfolio [87] Management's Comments on Operating Environment and Future Outlook - Management noted that the Fed appears to be nearing the end of its tightening cycle, which may improve the outlook for levered investor returns [2] - The company expressed confidence in its ability to manage delinquencies effectively, leveraging in-house expertise and the performance of Lima One [28][36] - The economic environment remains resilient, with GDP growth at 4.9% in Q3, supporting the credit portfolio [56] Other Important Information - MFA has executed over $6.5 billion in securitizations since 2020, with over 60% of loans financed through securitization [91] - The company sold 77 properties from its REO portfolio for $26 million, resulting in over $3 million in gains [30] Q&A Session Summary Question: What is the outlook for the fair value mark taken this quarter? - Management indicated that the fair value mark is primarily due to market interest rate movements and that recovery will take time as prepayment speeds are slower in the current environment [71] Question: How is Lima One performing in the current market? - Management highlighted that Lima One has been hiring experienced personnel from competitors and has successfully expanded its market share due to its integrated operations with MFA [95][96] Question: What are the plans for refinancing unsecured debt coming due next June? - Management noted that the convertible market is not currently viable due to stock trading below book value, and they are exploring options for refinancing [81]