NEW YORK, Feb. 20, 2020
/PRNewswire/ -- MFA Financial, Inc. (NYSE: MFA) today announced its
financial results for the fourth quarter ended December 31,
2019.
Fourth Quarter 2019 and other
highlights:
- MFA generated fourth quarter GAAP net income of $96.9 million, or $0.21 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 $0.21 per common share.
- MFA acquired approximately $1.7
billion of residential mortgage assets in the fourth
quarter, including $1.5 billion of
residential whole loans. During 2019, residential whole loan
acquisitions of approximately $4.3
billion drove net portfolio growth exceeding $1.0 billion.
- Interest income on MFA's purchased performing loan portfolio
increased 15.6% from the prior quarter to $61.9 million. For the full year, this portfolio
generated $200.6 million in interest
income, more than triple the prior year.
- GAAP book value per common share during the quarter continued
to be stable and was $7.04 at
December 31, 2019. GAAP book value
decreased from $7.15 at December 31, 2018, primarily due to discount
accretion and realized gains on sales of Legacy Non-Agency MBS that
were distributed as dividends.
- 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 $7.44 at December 31,
2019. Economic book value increased marginally during the
quarter and by approximately 1% during 2019.
- On January 31, 2020, MFA paid its
fourth quarter 2019 dividend of $0.20
per share of common stock to shareholders of record as of
December 30, 2019.
- Economic return (a measure of changes in MFA's GAAP book value
plus dividends for a period) was 2.1% for the fourth quarter and
9.7% for the full year. When calculated using Economic book value,
economic return was 3.1% for the fourth quarter and 12.1% for the
full year.
Craig Knutson, MFA's CEO and
President, said, "MFA's investment portfolio activity in the fourth
quarter of 2019 was fueled by acquisitions of $1.7 billion of new assets. Our residential
whole loan and REO portfolio increased during the quarter in excess
of $1 billion and by nearly
$3 billion for the year, primarily
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, as we continue
to cultivate the strategic relationships with select loan
origination partners that have been developed over the past several
years. Through our willingness and ability to explore and
enter into various arrangements, including flow agreements,
strategic alliances and also minority investments, we have been
able to partner with originators to source attractive investments,
while enabling them to grow with support from MFA as a reliable
provider of capital. During the quarter we made an additional
$25 million investment, bringing
total capital contributions across five different loan origination
partners to approximately $148
million at year-end. These investments generated
$3.7 million of income in the form of
interest and dividends (before allocation of profits) during the
quarter."
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 1.36 at quarter-end. Our portfolio continues to
deliver GAAP book value stability. In addition, MFA's
Economic book value was $7.44 at
December 31, 2019 and has increased by approximately 1% during
2019. Leverage, which reflects the ratio of our financing
obligations to equity, was 3.0:1 at quarter-end, up from 2.8:1 at
the end of the third quarter, as we accessed additional borrowing
capacity to fund loan growth."
At December 31, 2019, our investments in residential whole
loans totaled $7.5 billion. Of
this amount, $6.1 billion is recorded
at carrying value and $1.4 billion is
recorded at fair value on our consolidated balance sheet.
Loans held at carrying value generated an overall yield of 5.31%
during the quarter, with purchased performing loans generating a
yield of 5.24% and purchased credit impaired loans generating a
yield of 5.80%. Net gains for the quarter on residential
whole loans measured at fair value through earnings were
$41.4 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 $412 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 $1.6 billion with an amortized cost of
$1.0 billion and a net purchase
discount of $526.6 million at
December 31, 2019. This discount consists of a
$436.6 million credit reserve and
other-than-temporary impairments and a $90.0
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. Including the impact of bond
redemptions, this portfolio generated a yield of 14.76% for the
quarter. Eliminating the impact of these redemptions, the
portfolio generated a yield in the fourth quarter of 10.60%.
The portfolio continues to outperform our credit assumptions and
has underlying mortgage loans that are on average nearly fourteen
years seasoned and only 10.5% are currently 60 or more days
delinquent.
As of December 31, 2019, the Agency MBS portfolio totaled
$1.7 billion, had an amortized cost
basis of 103.9% of par and generated a yield of 2.38% for the
fourth quarter. At the end of the fourth quarter, MFA held
approximately $635.0 million of
RPL/NPL MBS. These securities had an amortized cost basis of
99.9% of par and generated a yield of 5.17% for the quarter.
In addition, our investments in MSR-related assets at
December 31, 2019 totaled $1.2
billion and generated a yield of 4.88% for the fourth
quarter. Our investments in CRT securities totaled
$255.4 million at December 31,
2019, and generated a yield of 3.98% for the fourth quarter.
During the quarter we opportunistically sold residential mortgage
securities for $169.8 million,
realizing gains of $12.0
million. Sale activity included $123.3 million of CRT securities that realized
gains of $3.0 million, of which
$2.5 million had been recorded in
prior periods as unrealized gains as we had elected fair value
accounting on these securities.
For the three months ended December 31,
2019, MFA's costs for compensation and benefits and other
general and administrative expenses were $12.7 million, or an annualized 1.50% of
stockholders' equity as of December 31, 2019.
The following table presents MFA's asset allocation as of
December 31, 2019, and the fourth quarter 2019 yield on
average interest-earning assets, average cost of funds and net
interest rate spread for the various asset types.
Table 1 - Asset
Allocation
|
At December 31,
2019
|
Agency
MBS
|
Legacy
Non-
Agency
MBS
|
RPL/NPL
MBS
|
Credit
Risk
Transfer
Securities
|
Residential
Whole
Loans, at
Carrying
Value
(1)
|
Residential
Whole
Loans,
at
Fair
Value
|
MSR-
Related
Assets
|
Other,
net
(2)
|
Total
|
($ in Millions)
|
|
|
|
|
|
|
|
|
|
Fair Value/Carrying
Value
|
$
|
1,665
|
$
|
1,429
|
$
|
635
|
$
|
255
|
$
|
6,066
|
$
|
1,382
|
$
|
1,217
|
$
|
767
|
$
|
13,416
|
Less Repurchase
Agreements
|
(1,558)
|
(1,122)
|
(495)
|
(204)
|
(4,088)
|
(653)
|
(963)
|
(57)
|
(9,140)
|
Less Securitized
Debt
|
—
|
—
|
—
|
—
|
(130)
|
(441)
|
—
|
—
|
(571)
|
Less Convertible
Senior Notes
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(224)
|
(224)
|
Less Senior
Notes
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(97)
|
(97)
|
Net Equity
Allocated
|
$
|
107
|
$
|
307
|
$
|
140
|
$
|
51
|
$
|
1,848
|
$
|
288
|
$
|
254
|
$
|
389
|
$
|
3,384
|
Debt/Net Equity Ratio
(3)
|
14.6x
|
3.7x
|
3.5x
|
4.0x
|
2.3x
|
3.8x
|
3.8x
|
|
3.0x
|
|
|
|
|
|
|
|
|
|
|
For the Quarter
Ended December 31, 2019
|
|
|
|
|
|
|
|
Yield on Average
Interest Earning Assets (4)(5)
|
2.38%
|
14.76%
|
5.17%
|
3.98%
|
5.31%
|
N/A
|
4.88%
|
|
5.66%
|
Less Average Cost
of
Funds
(6)
|
(2.33)
|
(3.18)
|
(2.78)
|
(2.71)
|
(3.59)
|
(3.73)
|
(2.82)
|
|
(3.33)
|
Net Interest Rate
Spread
|
0.05%
|
11.58%
|
2.39%
|
1.27%
|
1.72%
|
N/A
|
2.06%
|
|
2.33%
|
|
|
(1)
|
Includes $3.7
billion of Non-QM loans, $1.0 billion of Rehabilitation loans,
$460.7 million of Single-family rental loans, $176.6 million of
Seasoned performing loans and $698.5 million of Purchased Credit
Impaired loans. At December 31, 2019, the total fair
value of these loans is estimated to be approximately $6.2
billion.
|
(2)
|
Includes cash and
cash equivalents, restricted cash, other assets and other
liabilities.
|
(3)
|
Represents the sum
of borrowings under repurchase agreements and securitized debt 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 December 31, 2019, the
amortized cost of our interest earning assets were as follows:
Agency MBS - $1.7 billion; Legacy Non-Agency MBS - $1.0 billion;
RPL/NPL MBS - $631.8 million; Credit Risk Transfer securities -
$249.2 million; Residential Whole Loans at carrying value - $6.1
billion; and MSR-related assets - $1.2 billion. In addition,
the yield for residential whole loans at carrying value was 5.27%,
net of 4 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 24 basis point and
Legacy Non-Agency MBS cost of funds includes 36 basis point
associated with swaps to hedge interest rate sensitivity on these
assets. Residential Whole Loans at Carrying Value cost of
funds includes 5 basis points associated with swaps to hedge
interest rate sensitivity on these assets.
|
The following tables present information on our investments in
residential whole loans.
Residential Whole Loans, at Carrying Value at
December 31, 2019 and 2018:
Table 2 -
Portfolio composition
|
|
(Dollars In
Thousands)
|
|
December 31,
2019
|
|
December 31,
2018
|
Purchased Performing
Loans:
|
|
|
|
|
Non-QM
loans
|
|
$
|
3,706,857
|
|
$
|
1,354,774
|
Rehabilitation
loans
|
|
1,023,766
|
|
494,576
|
Single-family rental
loans
|
|
460,679
|
|
145,327
|
Seasoned performing
loans
|
|
176,569
|
|
224,051
|
Total Purchased
Performing Loans
|
|
5,367,871
|
|
2,218,728
|
Purchased Credit
Impaired Loans
|
|
698,474
|
|
797,987
|
Total Residential
whole loans, at carrying value
|
|
$
|
6,066,345
|
|
$
|
3,016,715
|
|
|
|
|
|
Number of
loans
|
|
17,082
|
|
11,149
|
Table 3 - Yields
and average balances
|
|
|
|
For the Year Ended
December 31,
|
(In
Thousands)
|
|
2019
|
|
2018
|
|
|
Interest
|
|
Average
Balance
|
|
Average
Yield
|
|
Interest
|
|
Average
Balance
|
|
Average
Yield
|
Purchased Performing
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-QM
loans
|
|
$
|
116,282
|
|
$
|
2,305,593
|
|
5.04%
|
|
$
|
31,036
|
|
$
|
584,388
|
|
5.31%
|
Rehabilitation
loans
|
|
54,419
|
|
817,307
|
|
6.66%
|
|
15,975
|
|
210,745
|
|
7.58%
|
Single-family rental
loans
|
|
17,742
|
|
295,384
|
|
6.01%
|
|
3,315
|
|
58,571
|
|
5.66%
|
Seasoned performing
loans
|
|
12,191
|
|
202,471
|
|
6.02%
|
|
5,818
|
|
99,035
|
|
5.87%
|
Total Purchased
Performing Loans
|
|
200,634
|
|
3,620,755
|
|
5.54%
|
|
56,144
|
|
952,739
|
|
5.89%
|
Purchased Credit
Impaired Loans
|
|
43,346
|
|
750,176
|
|
5.78%
|
|
44,777
|
|
786,131
|
|
5.70%
|
Total Residential
whole loans, at carrying value
|
|
$
|
243,980
|
|
$
|
4,370,931
|
|
5.58%
|
|
$
|
100,921
|
|
$
|
1,738,870
|
|
5.80%
|
Table 4 - Credit
related metrics
|
|
|
|
Carrying
Value
|
|
Unpaid
Principal
Balance
("UPB")
|
|
Weighted
Average
Coupon
(1)
|
|
Weighted
Average
Term to
Maturity
(Months)
|
|
Weighted
Average
LTV
Ratio (2)
|
|
Weighted
Average
Original
FICO (3)
|
|
Aging by
UPB
|
|
|
|
|
|
|
|
|
|
|
Past Due
Days
|
(Dollars
In Thousands)
|
|
|
|
|
|
|
|
Current
|
|
30-59
|
|
60-89
|
|
90+
|
Purchased
Performing Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-QM loans
(4)
|
|
$
|
3,707,245
|
|
$
|
3,592,701
|
|
5.96%
|
|
368
|
|
67%
|
|
716
|
|
$
|
3,492,533
|
|
$
|
59,963
|
|
$
|
19,605
|
|
$
|
20,600
|
Rehabilitation loans
(4)
|
|
1,026,097
|
|
1,026,097
|
|
7.30
|
|
8
|
|
64
|
|
717
|
|
868,281
|
|
67,747
|
|
27,437
|
|
62,632
|
Single-family rental
loans (4)
|
|
460,741
|
|
457,146
|
|
6.29
|
|
324
|
|
70
|
|
734
|
|
432,936
|
|
15,948
|
|
2,047
|
|
6,215
|
Seasoned performing
loans
|
|
176,569
|
|
192,151
|
|
4.24
|
|
181
|
|
46
|
|
723
|
|
187,683
|
|
2,164
|
|
430
|
|
1,874
|
Purchased Credit
Impaired Loans (5)
|
|
698,474
|
|
873,326
|
|
4.46
|
|
294
|
|
81
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
108,998
|
Residential whole
loans, at carrying value, total or weighted average
|
|
$
|
6,069,126
|
|
$
|
6,141,421
|
|
5.96%
|
|
288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Weighted average
is calculated based on the interest bearing principal balance of
each loan within the related category. For loans acquired with
servicing rights released by the seller, interest rates included in
the calculation do not reflect loan servicing fees. For loans
acquired with servicing rights retained by the seller, interest
rates included in the calculation are net of servicing
fees.
|
(2)
|
LTV represents the
ratio of the total unpaid principal balance of the loan to the
estimated value of the collateral securing the related loan as of
the most recent date available, which may be the origination date.
For Rehabilitation loans, the LTV presented is the ratio of the
maximum unpaid principal balance of the loan, including unfunded
commitments, to the estimated "after repaired" value of the
collateral securing the related loan, where available. For certain
Rehabilitation loans, totaling $269.2 million, an after repaired
valuation was not obtained and the loan was underwritten based on
an "as is" valuation. The weighted average LTV of these loans
based on the current unpaid principal balance and the valuation
obtained during underwriting, is 69%. Excluded from the
calculation of weighted average LTV are certain low value loans
secured by vacant lots, for which the LTV ratio is not
meaningful.
|
(3)
|
Excludes loans for
which no FICO score is available.
|
(4)
|
Carrying value of
Non-QM, Rehabilitation and Single-family rental loans excludes an
allowance for loan losses of $388,000, $2.3 million and $62,000,
respectively, at December 31, 2019.
|
(5)
|
Purchased Credit
Impaired Loans tend to be characterized by varying performance of
the underlying borrowers over time, including loans where multiple
months of payments are received in a period to bring the loan to
current status, followed by months where no payments are
received. Accordingly, delinquency information is presented
for loans that are more than 90 days past due that are considered
to be seriously delinquent.
|
Residential Whole Loans, at fair value at
December 31, 2019 and 2018:
Table 5 - Credit
related metrics
|
|
(Dollars
in Thousands)
|
|
December 31,
2019
|
|
December 31, 2018
(1)
|
Less than 60 Days
Past Due:
|
|
|
|
|
Outstanding principal
balance
|
|
$
|
666,026
|
|
$
|
610,290
|
Aggregate fair
value
|
|
$
|
641,616
|
|
$
|
561,770
|
Weighted Average LTV
Ratio (2)
|
|
76.69%
|
|
76.18%
|
Number of
loans
|
|
3,159
|
|
2,898
|
|
|
|
|
|
60 Days to 89 Days
Past Due:
|
|
|
|
|
Outstanding principal
balance
|
|
$
|
58,160
|
|
$
|
63,938
|
Aggregate fair
value
|
|
$
|
53,485
|
|
$
|
54,947
|
Weighted Average LTV
Ratio (2)
|
|
79.48%
|
|
82.86%
|
Number of
loans
|
|
313
|
|
285
|
|
|
|
|
|
90 Days or More Past
Due:
|
|
|
|
|
Outstanding principal
balance
|
|
$
|
767,320
|
|
$
|
970,758
|
Aggregate fair
value
|
|
$
|
686,482
|
|
$
|
854,545
|
Weighted Average LTV
Ratio (2)
|
|
89.69%
|
|
90.24%
|
Number of
loans
|
|
2,983
|
|
3,531
|
Total Residential whole loans, at fair value
|
|
$
|
1,381,583
|
|
$
|
1,471,262
|
|
|
(1)
|
Excluded from the
table above are approximately $194.7 million of residential whole
loans held at fair value for which the closing of the purchase
transaction had not occurred as of December 31,
2018.
|
(2)
|
LTV represents the
ratio of the total unpaid principal balance of the loan, to the
estimated value of the collateral securing the related loan.
Excluded from the calculation of weighted average LTV are certain
low value loans secured by vacant lots, for which the LTV ratio is
not meaningful.
|
Table 6 - Net gain
on residential whole loans measured at fair value through
earnings
|
|
|
|
For the Year Ended
December 31,
|
(In
Thousands)
|
|
2019
|
|
2018
|
Coupon payments and
other income received (1)
|
|
$
|
82,168
|
|
$
|
70,515
|
Net unrealized
gains
|
|
47,849
|
|
36,725
|
Net gain on
payoff/liquidation of loans
|
|
9,270
|
|
11,087
|
Net gain on transfers
to REO
|
|
19,043
|
|
19,292
|
Total
|
|
$
|
158,330
|
|
$
|
137,619
|
|
|
(1)
|
Primarily includes
recovery of delinquent interest upon the liquidation of
non-performing loans, recurring coupon interest payments received
on mortgage loans that are contractually current, and cash payments
received from private mortgage insurance on liquidated
loans.
|
Webcast
MFA Financial, Inc. plans to host a live audio
webcast of its investor conference call on Thursday,
February 20, 2020, at 10:00 a.m.
(Eastern Time) to discuss its fourth 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, 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, risks associated with our investments in loan originators,
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)
|
|
December 31, 2019
|
|
December 31,
2018
|
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
|
Residential mortgage
securities:
|
|
|
|
|
Agency MBS, at fair
value ($1,658,614 and $2,575,331 pledged as collateral,
respectively)
|
|
$
|
1,664,582
|
|
$
|
2,698,213
|
Non-Agency MBS, at
fair value ($2,055,802 and $3,248,900 pledged as collateral,
respectively)
|
|
2,063,529
|
|
3,318,299
|
Credit Risk Transfer
("CRT") securities, at fair value ($252,175 and $480,315 pledged as
collateral, respectively)
|
|
255,408
|
|
492,821
|
Residential whole
loans, at carrying value ($4,847,782 and $1,645,372 pledged as
collateral, respectively) (1)
|
|
6,066,345
|
|
3,016,715
|
Residential whole
loans, at fair value ($794,684 and $738,638 pledged as collateral,
respectively) (1)
|
|
1,381,583
|
|
1,665,978
|
Mortgage servicing
rights ("MSR") related assets ($1,217,002 and $611,807 pledged as
collateral, respectively)
|
|
1,217,002
|
|
611,807
|
Cash and cash
equivalents
|
|
70,629
|
|
51,965
|
Restricted
cash
|
|
64,035
|
|
36,744
|
Other
assets
|
|
784,251
|
|
527,785
|
Total
Assets
|
|
$
|
13,567,364
|
|
$
|
12,420,327
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Repurchase
agreements
|
|
$
|
9,139,821
|
|
$
|
7,879,087
|
Other
liabilities
|
|
1,043,591
|
|
1,125,139
|
Total
Liabilities
|
|
$
|
10,183,412
|
|
$
|
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; 452,369 and 449,787 shares
issued
and
outstanding, respectively
|
|
4,524
|
|
4,498
|
Additional paid-in
capital, in excess of par
|
|
3,640,341
|
|
3,623,275
|
Accumulated
deficit
|
|
(631,040)
|
|
(632,040)
|
Accumulated other
comprehensive income
|
|
370,047
|
|
420,288
|
Total Stockholders'
Equity
|
|
$
|
3,383,952
|
|
$
|
3,416,101
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
13,567,364
|
|
$
|
12,420,327
|
|
|
(1)
|
Includes
approximately $186.4 million and $209.4 million of Residential
whole loans, at carrying value and $567.4 million and $694.7
million of Residential whole loans, at fair value transferred to
consolidated VIEs at December 31, 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 December
31,
|
|
Twelve Months Ended December
31,
|
(In Thousands, Except Per Share Amounts)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
Interest
Income:
|
|
|
|
|
|
|
|
|
Agency MBS
|
|
$
|
10,380
|
|
$
|
19,508
|
|
$
|
55,901
|
|
$
|
62,303
|
Non-Agency
MBS
|
|
49,460
|
|
56,984
|
|
200,070
|
|
226,796
|
CRT
securities
|
|
3,038
|
|
7,437
|
|
18,583
|
|
33,376
|
Residential whole
loans held at carrying value
|
|
72,255
|
|
39,133
|
|
243,980
|
|
100,921
|
MSR-related
assets
|
|
14,415
|
|
8,171
|
|
52,647
|
|
28,420
|
Cash and cash
equivalent investments
|
|
690
|
|
588
|
|
3,393
|
|
2,936
|
Other
interest-earning assets
|
|
2,880
|
|
923
|
|
7,152
|
|
923
|
Interest
Income
|
|
$
|
153,118
|
|
$
|
132,744
|
|
$
|
581,726
|
|
$
|
455,675
|
|
|
|
|
|
|
|
|
|
Interest
Expense:
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
|
71,111
|
|
$
|
62,506
|
|
$
|
292,050
|
|
$
|
205,338
|
Other interest
expense
|
|
11,352
|
|
8,438
|
|
40,306
|
|
26,848
|
Interest
Expense
|
|
$
|
82,463
|
|
$
|
70,944
|
|
$
|
332,356
|
|
$
|
232,186
|
|
|
|
|
|
|
|
|
|
Net Interest
Income
|
|
$
|
70,655
|
|
$
|
61,800
|
|
$
|
249,370
|
|
$
|
223,489
|
|
|
|
|
|
|
|
|
|
Other Income,
net:
|
|
|
|
|
|
|
|
|
Net gain on
residential whole loans measured at fair value through
earnings
|
|
$
|
41,415
|
|
$
|
31,736
|
|
$
|
158,330
|
|
$
|
137,619
|
Net realized gain on
sales of residential mortgage securities
|
|
11,975
|
|
28,646
|
|
62,002
|
|
61,307
|
Net unrealized
(loss)/gain on residential mortgage securities measured at fair
value through earnings
|
|
(1,021)
|
|
(25,039)
|
|
7,080
|
|
(36,815)
|
Net gain/(loss) on
Swaps not designated as hedges for accounting purposes
|
|
767
|
|
(13,965)
|
|
(16,500)
|
|
(9,610)
|
Other, net
|
|
2,261
|
|
(428)
|
|
14,945
|
|
5,474
|
Other Income,
net
|
|
$
|
55,397
|
|
$
|
20,950
|
|
$
|
225,857
|
|
$
|
157,975
|
|
|
|
|
|
|
|
|
|
Operating and
Other Expense:
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
$
|
7,920
|
|
$
|
7,769
|
|
$
|
32,235
|
|
$
|
28,423
|
Other general and
administrative expense
|
|
4,812
|
|
4,084
|
|
20,413
|
|
17,653
|
Loan servicing and
other related operating expenses
|
|
12,699
|
|
10,018
|
|
44,462
|
|
33,587
|
Operating and
Other Expense
|
|
$
|
25,431
|
|
$
|
21,871
|
|
$
|
97,110
|
|
$
|
79,663
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
100,621
|
|
$
|
60,879
|
|
$
|
378,117
|
|
$
|
301,801
|
Less Preferred Stock
Dividends
|
|
3,750
|
|
3,750
|
|
15,000
|
|
15,000
|
Net Income
Available to Common Stock and Participating
Securities
|
|
$
|
96,871
|
|
$
|
57,129
|
|
$
|
363,117
|
|
$
|
286,801
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share
|
|
$
|
0.21
|
|
$
|
0.13
|
|
$
|
0.80
|
|
$
|
0.68
|
Diluted Earnings
per Common Share
|
|
$
|
0.21
|
|
$
|
0.13
|
|
$
|
0.79
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
Dividends Declared
per Share of Common Stock
|
|
$
|
0.20
|
|
$
|
0.20
|
|
$
|
0.80
|
|
$
|
0.80
|
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 each fiscal quarter of 2019 and for
the fourth fiscal quarter of 2018:
|
|
Quarter
Ended:
|
|
|
December 31,
2019
|
|
September 30,
2019
|
|
June 30,
2019
|
|
March 31,
2019
|
|
December 31,
2018
|
(In Thousands, Except Per Share
Amounts)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
GAAP Net income to
common stockholders - basic
|
|
$
|
96,576
|
|
$
|
91,569
|
|
$
|
89,014
|
|
$
|
84,851
|
|
$
|
56,888
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss/(gain) on CRT securities measured at fair value through
earnings
|
|
1,443
|
|
(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
|
|
(1,188)
|
|
(2,074)
|
|
(918)
|
|
(4,840)
|
|
11,758
|
Total
adjustments
|
|
$
|
255
|
|
$
|
(2,157)
|
|
$
|
1,122
|
|
$
|
(7,530)
|
|
$
|
39,004
|
Core
earnings
|
|
$
|
96,831
|
|
$
|
89,412
|
|
$
|
90,136
|
|
$
|
77,321
|
|
$
|
95,892
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings per
common share
|
|
$
|
0.21
|
|
$
|
0.20
|
|
$
|
0.20
|
|
$
|
0.19
|
|
$
|
0.13
|
Core earnings per
common share
|
|
$
|
0.21
|
|
$
|
0.20
|
|
$
|
0.20
|
|
$
|
0.17
|
|
$
|
0.21
|
Weighted average
common shares for basic earnings per share
|
|
451,952
|
|
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 our end
of period stockholders' equity in the table below. Management
considers that Economic book value provides investors with a useful
supplemental measure to evaluate our 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 for the quarterly periods below:
(In Millions,
Except Per Share Amounts)
|
|
December 31,
2019
|
|
September 30,
2019
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
December 31,
2018
|
|
September 30,
2018
|
|
June 30,
2018
|
|
March 31,
2018
|
GAAP Total
Stockholders' Equity
|
|
$
|
3,384.0
|
|
$
|
3,403.4
|
|
$
|
3,403.4
|
|
|
$
|
3,404.5
|
|
$
|
3,416.1
|
|
$
|
3,552.2
|
|
$
|
3,206.6
|
|
$
|
3,235.4
|
Preferred Stock,
liquidation preference
|
|
(200.0)
|
|
(200.0)
|
|
(200.0)
|
|
|
(200.0)
|
|
(200.0)
|
|
(200.0)
|
|
(200.0)
|
|
(200.0)
|
GAAP Stockholders'
Equity for book value per common share
|
|
3,184.0
|
|
3,203.4
|
|
3,203.4
|
|
|
3,204.5
|
|
3,216.1
|
|
3,352.2
|
|
3,006.6
|
|
3,035.4
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment
to Residential whole loans, at carrying value
|
|
182.4
|
|
145.8
|
|
131.2
|
|
|
92.1
|
|
87.7
|
|
78.4
|
|
81.0
|
|
77.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
including fair value adjustment to Residential whole loans, at
carrying value (Economic book value)
|
|
$
|
3,366.4
|
|
$
|
3,349.2
|
|
$
|
3,334.6
|
|
|
$
|
3,296.7
|
|
$
|
3,303.8
|
|
$
|
3,430.6
|
|
$
|
3,087.6
|
|
$
|
3,113.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP book value per
common share
|
|
$
|
7.04
|
|
$
|
7.09
|
|
$
|
7.11
|
|
|
$
|
7.11
|
|
$
|
7.15
|
|
$
|
7.46
|
|
$
|
7.54
|
|
$
|
7.62
|
Economic book value
per common share
|
|
$
|
7.44
|
|
$
|
7.41
|
|
$
|
7.40
|
|
|
$
|
7.32
|
|
$
|
7.35
|
|
$
|
7.63
|
|
$
|
7.75
|
|
$
|
7.81
|
Number of shares of
common stock outstanding
|
|
452.4
|
|
451.7
|
|
450.6
|
|
|
450.5
|
|
449.8
|
|
449.5
|
|
398.5
|
|
398.4
|
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-fourth-quarter-2019-financial-results-301007924.html
SOURCE MFA Financial, Inc.