MFA Financial(MFA) - 2024 Q3 - Quarterly Report

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$11.2 billion, with $9.0 billion (81$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$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$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$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].