MFA Financial(US:MFA)2024-02-22 18:34Financial 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]