NEW YORK, Nov. 6, 2019 /PRNewswire/ -- MFA Financial, Inc.
(NYSE: MFA) today announced its financial results for the third
quarter ended September 30, 2019.
Third Quarter 2019 and other
highlights:
- MFA generated third quarter GAAP net income of $91.8 million, or $0.20 per common share. Core earnings, a non-GAAP
financial measure of MFA's operating performance that is calculated
by adjusting GAAP net income to exclude the impact of unrealized
gains and losses on certain investments in residential mortgage
securities and related hedges, was also $0.20 per common share.
- GAAP book value per common share during the quarter continued
to be stable and was $7.09 at
September 30, 2019.
- Economic book value per common share, a non-GAAP financial
measure of MFA's financial position that adjusts GAAP book value by
the amount of unrealized mark to market gains on residential whole
loans held at carrying value for GAAP reporting, was $7.41 at September 30, 2019.
- MFA acquired, or committed to acquire, approximately
$1.1 billion of residential mortgage
assets in the third quarter, including $918
million of residential whole loans. In addition,
consistent with the ongoing execution of our residential whole loan
investment strategy, we provided $100
million of capital to select loan origination partners.
- Interest income on MFA's purchased performing loan portfolio
increased 14.3% from the prior quarter to $53.6 million, building on the growth observed in
this portfolio over the past several quarters.
- On October 31, 2019, MFA paid its third quarter 2019
dividend of $0.20 per share of common
stock to shareholders of record as of September 30, 2019.
Craig Knutson, MFA's CEO and
President, said, "MFA's investment portfolio activity in the third
quarter of 2019 was driven by acquisitions of $1.1 billion of new assets. Our residential
whole loan and REO portfolio increased by $548 million, largely due to investments in
purchased performing loans. Our growth in purchased
performing loans was driven by the acquisition of Non-QM, fix and
flip and single-family rental loans. We continue to gain
traction on these new acquisition efforts, which involve
relationships cultivated over the past two years. Through our
willingness and ability to explore and enter into various
arrangements, including flow agreements, strategic alliances and
also minority equity investments, we have been able to partner with
originators to source attractive new investments, while enabling
them to grow with support from MFA as a reliable provider of
capital. During the quarter we made approximately
$100 million of capital contributions
to select loan origination partners."
Mr. Knutson added, "Through our asset selection and hedging
strategy, our estimated net effective duration, a gauge of our
portfolio's sensitivity to interest rates, remained relatively low
and measured 1.14 at quarter-end. Our portfolio continues to
deliver GAAP book value stability. In addition, MFA's
Economic book value was $7.41 at
September 30, 2019 and has increased
by approximately 1% during 2019. Leverage, which reflects the
ratio of our financing obligations to equity, was 2.8:1 at
quarter-end, unchanged from the end of the second quarter."
At September 30, 2019, our investments in residential whole
loans totaled $6.4 billion. Of
this amount, $5.0 billion is recorded
at carrying value and generated a yield of 5.58% during the
quarter, and $1.5 billion is recorded
at fair value on our consolidated balance sheet. We recorded gains
for the quarter on residential whole loans measured at fair value
for GAAP reporting purposes of approximately $40.2 million, primarily reflecting coupon
interest payments and other cash received during the quarter
together with changes in the fair value of the underlying
loans. In addition, as of the end of the quarter, we held
approximately $376 million of REO
properties. MFA's proactive asset management team has been
able to shorten liquidation timelines and increase property sale
proceeds, leading to improved outcomes and better returns.
MFA's Legacy Non-Agency MBS had a face amount of $1.7 billion with an amortized cost of
$1.1 billion and a net purchase
discount of $563.9 million at
September 30, 2019. This discount consists of a
$462.1 million credit reserve and
other-than-temporary impairments and a $101.8 million net accretable discount. We
believe this credit reserve appropriately factors in remaining
uncertainties regarding underlying mortgage performance and the
potential impact on future cash flows. Our Legacy Non-Agency
MBS generated a yield of 10.32% for the quarter. The
portfolio continues to outperform our credit assumptions and has
underlying mortgage loans that are on average approximately
thirteen years seasoned and only 10.9% are currently 60 or more
days delinquent.
As of September 30, 2019, the Agency MBS portfolio totaled
$1.8 billion, had an amortized cost
basis of 103.9% of par and generated a yield of 2.32% for the third
quarter. At the end of the third quarter, MFA held
approximately $828.0 million of
RPL/NPL MBS. These securities had an amortized cost basis of
99.94% of par and generated a yield of 5.18% for the quarter.
In addition, our investments in MSR-related assets at
September 30, 2019 totaled $1.2
billion and generated a yield of 5.26% for the third
quarter. Our investments in CRT securities totaled
$377.9 million at September 30,
2019, and generated a yield of 4.36% for the third quarter.
During the quarter we opportunistically sold residential mortgage
securities for $334.1 million,
realizing gains of $17.7 million
($2.9 million of which had been
recorded in prior periods as unrealized gains on 30-Year Agency MBS
and CRT securities for which we had elected fair value accounting).
We realized a loss of $3.7 million on
termination of swap hedges ($3.5
million of which had been recorded in prior periods as
unrealized losses) in connection with managing our investment in
30-Year Agency MBS, in response to the continued rally in rates
that occurred during the quarter.
For the three months ended September 30,
2019, MFA's costs for compensation and benefits and other
general and administrative expenses were $12.9 million, or an annualized 1.52% of
stockholders' equity as of September 30, 2019.
The following table presents MFA's asset allocation as of
September 30, 2019, and the third quarter 2019 yield on
average interest-earning assets, average cost of funds and net
interest rate spread for the various asset types.
Table
1
|
ASSET
ALLOCATION
|
|
At September 30,
2019
|
Agency
MBS
|
Legacy
Non-
Agency
MBS
|
RPL/NPL
MBS
|
Credit
Risk
Transfer
Securities
|
Residential
Whole
Loans, at
Carrying
Value
(1)
|
Residential
Whole
Loans,
at
Fair
Value
|
MSR-
Related
Assets
|
Other,
net
(2)
|
Total
|
($ in Millions)
|
|
|
|
|
|
|
|
|
|
Fair Value/Carrying
Value
|
$
|
1,814
|
|
$
|
1,570
|
|
$
|
828
|
|
$
|
378
|
|
$
|
4,969
|
|
$
|
1,453
|
|
$
|
1,164
|
|
$
|
785
|
|
$
|
12,961
|
|
Less Payable for
Unsettled Purchases
|
—
|
|
—
|
|
—
|
|
—
|
|
(60)
|
|
—
|
|
—
|
|
—
|
|
(60)
|
|
Less Repurchase
Agreements
|
(1,676)
|
|
(1,232)
|
|
(643)
|
|
(304)
|
|
(3,046)
|
|
(679)
|
|
(918)
|
|
(73)
|
|
(8,571)
|
|
Less Securitized
Debt
|
—
|
|
—
|
|
—
|
|
—
|
|
(139)
|
|
(467)
|
|
—
|
|
—
|
|
(606)
|
|
Less Convertible
Senior Notes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(224)
|
|
(224)
|
|
Less Senior
Notes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(97)
|
|
(97)
|
|
Net Equity
Allocated
|
$
|
138
|
|
$
|
338
|
|
$
|
185
|
|
$
|
74
|
|
$
|
1,724
|
|
$
|
307
|
|
$
|
246
|
|
$
|
391
|
|
$
|
3,403
|
|
Debt/Net Equity Ratio
(3)
|
12.1x
|
|
3.6x
|
|
3.5x
|
|
4.1x
|
|
1.9x
|
|
3.7x
|
|
3.7x
|
|
|
2.8x
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter
Ended September 30, 2019
|
|
|
|
|
|
|
|
Yield on Average
Interest Earning Assets (4)(5)
|
2.32%
|
|
10.32%
|
|
5.18%
|
|
4.36%
|
|
5.58%
|
|
N/A
|
|
5.26%
|
|
|
5.32%
|
|
Less Average Cost
of
Funds
(6)
|
(2.47)
|
|
(3.24)
|
|
(3.18)
|
|
(3.12)
|
|
(3.90)
|
|
(3.95)
|
|
(3.23)
|
|
|
(3.50)
|
|
Net Interest Rate
Spread
|
(0.15)%
|
|
7.08%
|
|
2.00%
|
|
1.24%
|
|
1.68%
|
|
N/A
|
|
2.03%
|
|
|
1.82%
|
|
(1)
|
Includes $2.7
billion of Non-QM loans, $968.9 million of Rehabilitation loans,
$366.4 million of Single-family rental loans, $189.0 million of
Seasoned performing loans and $718.2 million of Purchased Credit
Impaired loans. At September 30, 2019, the total fair
value of these loans is estimated to be approximately $5.1
billion.
|
(2)
|
Includes cash and
cash equivalents and restricted cash, other assets and other
liabilities.
|
(3)
|
Represents the sum
of borrowings under repurchase agreements, securitized debt and
payable for unsettled purchases as a multiple of net equity
allocated. The numerator of our Total Debt/Net Equity Ratio
also includes Convertible Senior Notes and Senior
Notes.
|
(4)
|
Yields reported on
our interest earning assets are calculated based on the interest
income recorded and the average amortized cost for the quarter of
the respective asset. At September 30, 2019, the
amortized cost of our interest earning assets were as follows:
Agency MBS - $1.8 billion; Legacy Non-Agency MBS - $1.1 billion;
RPL/NPL MBS - $824.3 million; Credit Risk Transfer securities -
$370.0 million; and Residential Whole Loans at carrying value -
$5.0 billion. In addition, the yield for residential whole
loans at carrying value was 5.52%, net of 6 basis points of
servicing fee expense incurred during the quarter. For GAAP
reporting purposes, such expenses are included in Loan servicing
and other related operating expenses in our statement of
operations.
|
(5)
|
Interest payments
received on residential whole loans at fair value is reported in
Other Income as Net gain on residential whole loans measured at
fair value through earnings in our statement of operations.
Accordingly, no yield is presented as such loans are not included
in interest earning assets for reporting purposes.
|
(6)
|
Average cost of
funds includes interest on repurchase agreements, the cost
of swaps, Convertible Senior Notes and Senior Notes
and securitized debt. Agency MBS cost of funds includes 1
basis point and Legacy Non-Agency MBS cost of funds includes 1
basis point associated with swaps to hedge interest rate
sensitivity on these assets. Residential Whole Loans at
Carrying Value cost of funds includes 3 basis points associated
with swaps to hedge interest rate sensitivity on these
assets.
|
At September 30, 2019, MFA's $3.4
billion of Agency and Legacy Non-Agency MBS were backed by
hybrid, adjustable and fixed-rate mortgages. Additional
information about these MBS, including average months to reset and
three-month average CPR, is presented below:
Table
2
|
|
|
|
Agency
MBS
|
|
Legacy Non-Agency
MBS (1)
|
|
Total
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time to
Reset
|
|
Fair Value (2)
|
Average
Months
to Reset (3)
|
3 Month
Average CPR
(4)
|
|
Fair Value
|
Average
Months
to Reset (3)
|
3 Month
Average CPR
(4)
|
|
Fair Value (2)
|
Average
Months
to Reset (3)
|
3 Month
Average CPR
(4)
|
($ in
Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
< 2 years
(5)
|
|
$
|
791
|
|
6
|
20.8%
|
|
$
|
948
|
|
5
|
16.3%
|
|
$
|
1,739
|
|
6
|
18.2%
|
2-5 years
|
|
87
|
|
36
|
15.5
|
|
—
|
|
—
|
—
|
|
87
|
|
36
|
15.5
|
> 5
years
|
|
8
|
|
68
|
39.6
|
|
—
|
|
—
|
—
|
|
8
|
|
68
|
39.6
|
ARM-MBS
Total
|
|
$
|
886
|
|
10
|
20.4%
|
|
$
|
948
|
|
5
|
16.3%
|
|
$
|
1,834
|
|
7
|
18.2%
|
15-year fixed
(6)
|
|
$
|
614
|
|
|
10.5%
|
|
$
|
1
|
|
|
15.0%
|
|
$
|
615
|
|
|
10.6%
|
30-year fixed
(6)
|
|
313
|
|
|
32.9
|
|
574
|
|
|
12.6
|
|
887
|
|
|
19.2
|
40-year fixed
(6)
|
|
—
|
|
|
—
|
|
44
|
|
|
15.1
|
|
44
|
|
|
15.1
|
Fixed-Rate
Total
|
|
$
|
927
|
|
|
17.1%
|
|
$
|
619
|
|
|
12.8%
|
|
$
|
1,546
|
|
|
15.4%
|
MBS Total
|
|
$
|
1,813
|
|
|
18.6%
|
|
$
|
1,567
|
|
|
14.9%
|
|
$
|
3,380
|
|
|
16.9%
|
(1)
|
Excludes $828.0
million of RPL/NPL MBS.
|
(2)
|
Does not include
principal payments receivable of $965,000.
|
(3)
|
Months to Reset is
the number of months remaining before the coupon interest rate
resets. At reset, the MBS coupon will adjust based upon the
underlying benchmark interest rate index, margin and periodic or
lifetime caps. Months to Reset does not reflect scheduled
amortization or prepayments.
|
(4)
|
3 month average
CPR weighted by positions as of beginning of each month in the
quarter.
|
(5)
|
Amounts presented
are based on origination data. Includes floating-rate MBS
that may be collateralized by fixed-rate mortgages. In
addition, underlying loans may have been modified to be fixed or
step rate.
|
(6)
|
Information
presented based on data available at time of loan
origination.
|
Webcast
MFA Financial, Inc. plans to host a live audio webcast of its
investor conference call on Wednesday, November 6, 2019, at
10:00 a.m. (Eastern Time) to discuss
its third quarter 2019 financial results. The live audio webcast
will be accessible to the general public over the internet at
http://www.mfafinancial.com through the "Webcasts &
Presentations" link on MFA's home page. To listen to the
conference call over the internet, please go to the MFA website at
least 15 minutes before the call to register and to download and
install any needed audio software. Earnings presentation
materials will be posted on the MFA website prior to the conference
call and an audio replay will be available on the website following
the call.
Cautionary Language Regarding Forward-Looking
Statements
When used in this press release or other written or oral
communications, statements which are not historical in nature,
including those containing words such as "will," "believe,"
"expect," "anticipate," "estimate," "plan," "continue," "intend,"
"should," "could," "would," "may," or similar expressions, are
intended to identify "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and, as such, may involve known and unknown risks, uncertainties
and assumptions. Statements regarding the following subjects, among
others, may be forward-looking: changes in interest rates and the
market (i.e., fair) value of MFA's MBS, residential whole loans,
CRT securities and other assets; changes in the prepayment rates on
residential mortgage assets, an increase of which could result in a
reduction of the yield on certain investments in its portfolio and
could require MFA to reinvest the proceeds received by it as a
result of such prepayments in investments with lower coupons, while
a decrease in which could result in an increase in the interest
rate duration of certain investments in MFA's portfolio making
their valuation more sensitive to changes in interest rates and
could result in lower forecasted cash flows or, in certain
circumstances, other-than-temporary impairment on certain Legacy
Non-Agency MBS purchased at a discount; credit risks underlying
MFA's assets, including changes in the default rates and
management's assumptions regarding default rates on the mortgage
loans securing MFA's Non-Agency MBS and relating to MFA's
residential whole loan portfolio; MFA's ability to borrow to
finance its assets and the terms, including the cost, maturity and
other terms, of any such borrowings; implementation of or changes
in government regulations or programs affecting MFA's business;
MFA's estimates regarding taxable income, the actual amount of
which is dependent on a number of factors, including, but not
limited to, changes in the amount of interest income and financing
costs, the method elected by MFA to accrete the market discount on
Non-Agency MBS and residential whole loans and the extent of
prepayments, realized losses and changes in the composition of
MFA's Agency MBS, Non-Agency MBS and residential whole loan
portfolios that may occur during the applicable tax period,
including gain or loss on any MBS disposals and whole loan
modifications, foreclosures and liquidations; the timing and amount
of distributions to stockholders, which are declared and paid at
the discretion of MFA's Board of Directors and will depend on,
among other things, MFA's taxable income, its financial results and
overall financial condition and liquidity, maintenance of its REIT
qualification and such other factors as MFA's Board of Directors
deems relevant; MFA's ability to maintain its qualification as a
REIT for federal income tax purposes; MFA's ability to maintain its
exemption from registration under the Investment Company Act of
1940, as amended (or the "Investment Company Act"), including
statements regarding the concept release issued by the Securities
and Exchange Commission ("SEC") relating to interpretive issues
under the Investment Company Act with respect to the status under
the Investment Company Act of certain companies that are engaged in
the business of acquiring mortgages and mortgage-related interests;
MFA's ability to continue growing its residential whole loan
portfolio, which is dependent on, among other things, the supply of
loans offered for sale in the market; expected returns on MFA's
investments in nonperforming residential whole loans ("NPLs"),
which are affected by, among other things, the length of time
required to foreclose upon, sell, liquidate or otherwise reach a
resolution of the property underlying the NPL, home price values,
amounts advanced to carry the asset (e.g., taxes, insurance,
maintenance expenses, etc. on the underlying property) and the
amount ultimately realized upon resolution of the asset; targeted
or expected returns on MFA's investments in recently-originated
loans, the performance of which is, similar to MFA's other mortgage
loan investments, subject to, among other things, differences in
prepayment risk, credit risk and financing cost associated with
such investments; risks associated with MFA's investments in
MSR-related assets, including servicing, regulatory and economic
risks, and risks associated with investing in real estate assets,
including changes in business conditions and the general economy.
These and other risks, uncertainties and factors, including those
described in the annual, quarterly and current reports that MFA
files with the SEC, could cause MFA's actual results to differ
materially from those projected in any forward-looking statements
it makes. All forward-looking statements are based on beliefs,
assumptions and expectations of MFA's future performance, taking
into account all information currently available. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are made.
New risks and uncertainties arise over time and it is not possible
to predict those events or how they may affect MFA. Except as
required by law, MFA is not obligated to, and does not intend to,
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
MFA FINANCIAL,
INC.
CONSOLIDATED BALANCE SHEETS
|
|
(In
Thousands, Except Per Share Amounts)
|
|
September 30,
2019
|
|
December 31,
2018
|
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
|
Residential mortgage
securities:
|
|
|
|
|
Agency MBS, at fair
value ($1,809,380 and $2,575,331 pledged as collateral,
respectively)
|
|
$
|
1,813,873
|
|
|
$
|
2,698,213
|
|
Non-Agency MBS, at
fair value ($2,389,549 and $3,248,900 pledged as collateral,
respectively)
|
|
2,397,789
|
|
|
3,318,299
|
|
Credit Risk Transfer
("CRT") securities, at fair value ($377,779 and $480,315 pledged as
collateral, respectively)
|
|
377,892
|
|
|
492,821
|
|
Residential whole
loans, at carrying value ($3,657,830 and $1,645,372 pledged as
collateral, respectively) (1)
|
|
4,969,414
|
|
|
3,016,715
|
|
Residential whole
loans, at fair value ($835,762 and $738,638 pledged as collateral,
respectively) (1)
|
|
1,453,169
|
|
|
1,665,978
|
|
Mortgage servicing
rights ("MSR") related assets ($1,164,284 and $611,807 pledged as
collateral, respectively)
|
|
1,164,284
|
|
|
611,807
|
|
Cash and cash
equivalents
|
|
154,193
|
|
|
51,965
|
|
Restricted
cash
|
|
38,998
|
|
|
36,744
|
|
Other
assets
|
|
735,209
|
|
|
527,785
|
|
Total
Assets
|
|
$
|
13,104,821
|
|
|
$
|
12,420,327
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Repurchase
agreements
|
|
$
|
8,571,422
|
|
|
$
|
7,879,087
|
|
Other
liabilities
|
|
1,129,973
|
|
|
1,125,139
|
|
Total
Liabilities
|
|
$
|
9,701,395
|
|
|
$
|
9,004,226
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Preferred stock, $.01
par value; 7.50% Series B cumulative redeemable; 8,050 shares
authorized;
8,000 shares issued and outstanding ($200,000 aggregate
liquidation preference)
|
|
80
|
|
|
80
|
|
Common stock, $.01
par value; 886,950 shares authorized; 451,692 and 449,787 shares
issued
and outstanding, respectively
|
|
4,517
|
|
|
4,498
|
|
Additional paid-in
capital, in excess of par
|
|
3,634,140
|
|
|
3,623,275
|
|
Accumulated
deficit
|
|
(637,161)
|
|
|
(632,040)
|
|
Accumulated other
comprehensive income
|
|
401,850
|
|
|
420,288
|
|
Total Stockholders'
Equity
|
|
$
|
3,403,426
|
|
|
$
|
3,416,101
|
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
13,104,821
|
|
|
$
|
12,420,327
|
|
(1)
|
Includes
approximately $189.9 million and $209.4 million of Residential
whole loans, at carrying value and $593.3 million and $694.7
million of Residential whole loans, at fair value transferred to
consolidated VIEs at September 30, 2019 and December 31,
2018, respectively. Such assets can be used only to settle the
obligations of each respective VIE.
|
MFA FINANCIAL,
INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(In Thousands, Except Per Share Amounts)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
Interest
Income:
|
|
|
|
|
|
|
|
|
Agency MBS
|
|
$
|
11,806
|
|
|
$
|
14,332
|
|
|
$
|
45,521
|
|
|
$
|
42,795
|
|
Non-Agency
MBS
|
|
44,582
|
|
|
58,667
|
|
|
150,610
|
|
|
169,812
|
|
CRT
securities
|
|
4,251
|
|
|
7,748
|
|
|
15,545
|
|
|
25,939
|
|
Residential whole
loans held at carrying value
|
|
64,226
|
|
|
29,524
|
|
|
171,725
|
|
|
61,788
|
|
MSR-related
assets
|
|
15,274
|
|
|
6,407
|
|
|
38,232
|
|
|
20,249
|
|
Cash and cash
equivalent investments
|
|
903
|
|
|
754
|
|
|
2,703
|
|
|
2,348
|
|
Other
interest-earning assets
|
|
1,679
|
|
|
—
|
|
|
4,272
|
|
|
—
|
|
Interest
Income
|
|
$
|
142,721
|
|
|
$
|
117,432
|
|
|
$
|
428,608
|
|
|
$
|
322,931
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense:
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
|
74,240
|
|
|
$
|
50,881
|
|
|
$
|
220,939
|
|
|
$
|
142,832
|
|
Other interest
expense
|
|
11,583
|
|
|
7,997
|
|
|
28,954
|
|
|
18,410
|
|
Interest
Expense
|
|
$
|
85,823
|
|
|
$
|
58,878
|
|
|
$
|
249,893
|
|
|
$
|
161,242
|
|
|
|
|
|
|
|
|
|
|
Net Interest
Income
|
|
$
|
56,898
|
|
|
$
|
58,554
|
|
|
$
|
178,715
|
|
|
$
|
161,689
|
|
|
|
|
|
|
|
|
|
|
Other Income,
net:
|
|
|
|
|
|
|
|
|
Net gain on
residential whole loans measured at fair value through
earnings
|
|
$
|
40,175
|
|
|
$
|
34,942
|
|
|
$
|
116,915
|
|
|
$
|
105,883
|
|
Net realized gain on
sales of residential mortgage securities
|
|
17,708
|
|
|
16,415
|
|
|
50,027
|
|
|
32,661
|
|
Net unrealized
(loss)/gain on residential mortgage securities measured
at fair value through earnings
|
|
(571)
|
|
|
(8,545)
|
|
|
8,101
|
|
|
(11,776)
|
|
Net (loss)/gain on
Swaps not designated as hedges for accounting
purposes
|
|
(929)
|
|
|
4,002
|
|
|
(17,267)
|
|
|
4,355
|
|
Other, net
|
|
6,046
|
|
|
1,545
|
|
|
12,684
|
|
|
5,902
|
|
Other Income,
net
|
|
$
|
62,429
|
|
|
$
|
48,359
|
|
|
$
|
170,460
|
|
|
$
|
137,025
|
|
|
|
|
|
|
|
|
|
|
Operating and
Other Expense:
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
$
|
7,920
|
|
|
$
|
6,868
|
|
|
$
|
24,315
|
|
|
$
|
20,654
|
|
Other general and
administrative expense
|
|
5,022
|
|
|
4,155
|
|
|
15,601
|
|
|
13,569
|
|
Loan servicing and
other related operating expenses
|
|
10,786
|
|
|
8,758
|
|
|
31,763
|
|
|
23,569
|
|
Operating and
Other Expense
|
|
$
|
23,728
|
|
|
$
|
19,781
|
|
|
$
|
71,679
|
|
|
$
|
57,792
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
95,599
|
|
|
$
|
87,132
|
|
|
$
|
277,496
|
|
|
$
|
240,922
|
|
Less Preferred Stock
Dividends
|
|
3,750
|
|
|
3,750
|
|
|
11,250
|
|
|
11,250
|
|
Net Income
Available to Common Stock and Participating
Securities
|
|
$
|
91,849
|
|
|
$
|
83,382
|
|
|
$
|
266,246
|
|
|
$
|
229,672
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
0.59
|
|
|
$
|
0.56
|
|
Diluted Earnings
per Common Share
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
0.58
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared
per Share of Common Stock
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.60
|
|
|
$
|
0.60
|
|
Non-GAAP Financial Measures
Reconciliation of GAAP net income available to common stock
and participating securities to non-GAAP Core earnings
"Core earnings" is a non-GAAP financial measure of our operating
performance, within the meaning of Regulation G and Item 10(e) of
Regulation S-K, as promulgated by the Securities and Exchange
Commission. Core earnings excludes certain unrealized gains
and losses on investments in residential mortgage securities and
related hedges that we are required to include in GAAP Net Income
each period because management believes that these items, which to
date have typically resulted from short-term market volatility or
other market technical factors and not due to changes in
fundamental asset cash flows, are not reflective of the economic
income generated by our investment portfolio. Accordingly, we
believe that the adjustments to compute Core earnings specified
below better allow investors and analysts to evaluate our financial
results, including by analyzing changes in our Core earnings
between periods. In addition to using Core earnings in
the evaluation of investment portfolio performance over time,
Management considers estimates of periodic Core earnings as an
input to the determination of the level of quarterly dividends to
common shareholders that are recommended to the Board of Directors
for approval and in its forecasting and decision-making processes
relating to the allocation of capital between different asset
classes.
We believe that Core earnings provides useful supplemental
information to both management and investors in evaluating our
financial results. Core earnings should be used in
conjunction with results presented in accordance with GAAP.
Core earnings does not represent and should not be considered as a
substitute for Net Income or Cash Flows from Operating Activities,
each as determined in accordance with GAAP, and our calculation of
this measure may not be comparable to similarly titled measures
reported by other companies.
The following table provides a reconciliation of our GAAP net
income available to common stock and participating securities to
our non-GAAP Core earnings for the three months ended
September 30, 2019, June 30, 2019, March 31, 2019
and December 31, 2018:
|
|
Three Months
Ended
|
(In Thousands, Except Per Share
Amounts)
|
|
September 30,
2019
|
|
June 30,
2019
|
|
March 31,
2019
|
|
December 31,
2018
|
|
|
(Unaudited)
|
GAAP Net income to
common stockholders - basic
|
|
$
|
91,569
|
|
|
$
|
89,014
|
|
|
$
|
84,851
|
|
|
$
|
56,888
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Unrealized
(gain)/loss on CRT securities measured at fair value
through earnings
|
|
(83)
|
|
|
2,040
|
|
|
(2,690)
|
|
|
27,246
|
|
Unrealized net
(gain)/loss on Agency MBS measured at fair value
through earnings and related swaps that are not accounted
for as
hedging transactions
|
|
(2,074)
|
|
|
(918)
|
|
|
(4,840)
|
|
|
11,758
|
|
Total
adjustments
|
|
$
|
(2,157)
|
|
|
$
|
1,122
|
|
|
$
|
(7,530)
|
|
|
$
|
39,004
|
|
Core
earnings
|
|
$
|
89,412
|
|
|
$
|
90,136
|
|
|
$
|
77,321
|
|
|
$
|
95,892
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings per
common share
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
0.13
|
|
Core earnings per
common share
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.17
|
|
|
$
|
0.21
|
|
Weighted average
common shares for basic earnings per share
|
|
451,020
|
|
|
450,538
|
|
|
450,358
|
|
|
449,559
|
|
Reconciliation of GAAP Book Value per Common Share to
non-GAAP Economic Book Value per Common Share
"Economic book value" is a non-GAAP financial measure of our
financial position. To calculate our Economic book value, our
portfolios of Residential whole loans at carrying value are
adjusted to their fair value, rather than the carrying value that
is required to be reported under the GAAP accounting model applied
to these loans. This adjustment is also reflected in the
Company's end of period stockholders' equity in the table
below. Management considers that Economic book value provides
investors with a useful supplemental measure to evaluate the
Company's financial position as it reflects the impact of fair
value changes for all of our residential mortgage assets,
irrespective of the accounting model applied for GAAP reporting
purposes. Economic book value does not represent and should
not be considered as a substitute for Stockholders' Equity, as
determined in accordance with GAAP, and our calculation of this
measure may not be comparable to similarly titled measures reported
by other companies.
The following table provides a reconciliation of our GAAP book
value per common share to our non-GAAP Economic book value per
common share as of September 30, 2019 and December 31,
2018:
(In Thousands,
Except Per Share Amounts)
|
|
September 30,
2019
|
|
December 31,
2018
|
GAAP Total
Stockholders' Equity
|
|
$
|
3,403,426
|
|
|
$
|
3,416,101
|
|
Preferred Stock,
liquidation preference
|
|
(200,000)
|
|
|
(200,000)
|
|
GAAP Stockholders'
Equity for book value per common share
|
|
3,203,426
|
|
|
3,216,101
|
|
Adjustments:
|
|
|
|
|
Fair value adjustment
to Residential whole loans, at carrying value
|
|
145,807
|
|
|
87,686
|
|
|
|
|
|
|
Stockholders' Equity
including fair value adjustment to Residential whole loans,
at carrying value
|
|
$
|
3,349,233
|
|
|
$
|
3,303,787
|
|
|
|
|
|
|
GAAP book value per
common share
|
|
$
|
7.09
|
|
|
$
|
7.15
|
|
Economic book value
per common share
|
|
$
|
7.41
|
|
|
$
|
7.35
|
|
Number of shares of
common stock outstanding
|
|
451,692
|
|
|
449,787
|
|
INVESTOR
CONTACT:
|
InvestorRelations@mfafinancial.com
|
|
212-207-6488
|
|
www.mfafinancial.com
|
|
|
MEDIA
CONTACT:
|
Abernathy
MacGregor
|
|
Tom
Johnson
|
|
212-371-5999
|
View original
content:http://www.prnewswire.com/news-releases/mfa-financial-inc-announces-third-quarter-2019-financial-results-300952115.html
SOURCE MFA Financial, Inc.