MFA Financial(MFA) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - As of December 31, GAAP book value was $13.39 per share, and economic book value was$13.93 per share, a decrease of approximately 3.7% from $14.46 at the end of September [17] - The company delivered a total economic return of negative 1.2$40.8 million or $0.39 per basic common share, up from$0.37 in the third quarter [21] Business Line Data and Key Metrics Changes - The investment portfolio grew by over $1.2 billion in the fourth quarter, with$470 million in non-QM loans carrying a coupon of 7.8% and an LTV of 67% [26] - Lima One originated $235 million of loans in the quarter with an average coupon of 9.5$1.4 billion in business purpose loans for 2024 [28] Market Data and Key Metrics Changes - The yield curve steepened in the fourth quarter, with two-year yields rising sixty basis points while ten-year rates rose nearly eighty basis points [9] - The company added over $700 million in loans, non-QM and BPL, and over$450 million of agencies during the quarter [10] Company Strategy and Development Direction - The company aims to maintain a strong liquidity position while complementing the volume and timing of loan acquisitions [12] - Management expressed confidence in the leadership team for 2025 and beyond, indicating a focus on growth and operational improvements [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the economy remains resilient, with a strong labor market and persistent inflation [9] - The company expects macroeconomic tailwinds, including a positively sloped yield curve and additional rate cuts, to support business moving forward [24] Other Important Information - The company mourned the passing of Board member Frank Ulrich, highlighting his contributions and impact [11] - Approximately 40% of the 2024 common dividends were treated as a non-taxable return of capital to shareholders, enhancing after-tax dividend yield [18] Q&A Session Summary Question: Current economic return of the portfolio - Management indicated that the economic return is in the low teens, aligning with the economic earnings power of the portfolio [39][40] Question: Increase in delinquency for single-family and multifamily transitional loans - Management explained that higher delinquencies are expected in riskier asset classes, particularly in transitional loans [54][56] Question: Outlook for Lima One - Management confirmed that single-family loans remain the focus, with expectations for growth in 2025, potentially reaching around $1.5 billion [64] Question: Level of unfunded commitments in the Lima One portfolio - Management estimated unfunded commitments to be in the$600 million range, with expectations for funding over the next year [81]