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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 22, 2024
MFA
FINANCIAL, INC.
(Exact name of registrant as specified in its
charter)
| Maryland |
|
1-13991 |
|
13-3974868 |
(State or
other jurisdiction
of incorporation
or organization) |
|
(Commission File Number) |
|
(IRS Employer
Identification
No.) |
| One Vanderbilt Avenue, 48th Floor |
|
|
| New York, New York |
|
10017 |
| (Address of principal executive offices) |
|
(Zip Code) |
Registrant's
telephone number, including area code: (212)
207-6400
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
| |
|
| ¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title
of each class: |
|
Trading
Symbols:
|
|
Name
of each
exchange on which
registered:
|
| Common
Stock, par value $0.01 per share |
|
MFA |
|
New
York Stock Exchange |
7.50%
Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share
|
|
MFA/PB |
|
New
York Stock Exchange |
| 6.50% Series C Fixed-to-Floating Rate
Cumulative Redeemable Preferred Stock, par value $0.01 per share |
|
MFA/PC |
|
New York Stock Exchange |
| 8.875% Senior Notes due 2029 |
|
MFAN |
|
New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ¨
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition and
Item 7.01 Regulation FD Disclosure
MFA Financial, Inc. (“MFA”) issued a press release,
dated February 22, 2024, announcing its financial results for the quarter and year ended December 31, 2023, which is attached
hereto as Exhibit 99.1 and is incorporated herein by reference. In addition, in conjunction with the announcement of its financial
results, MFA issued additional information relating to its 2023 fourth quarter financial results. Such additional information is attached
to this report as Exhibit 99.2 and is incorporated herein by reference.
The information referenced in this Current Report on Form 8-K
(including Exhibits 99.1 and 99.2) is being “furnished” and, as such, shall not be deemed to be “filed” for the
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject
to the liabilities of that Section. The information set forth in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2)
is and will not be incorporated by reference into any registration statement or other document filed by MFA pursuant to the Securities
Act of 1933, as amended (the “Securities Act”), except as may be expressly set forth by specific reference in such filing.
As discussed therein, the press release contains forward-looking statements
within the meaning of the Securities Act and the Exchange Act and, as such, may involve known and unknown risks, uncertainties and assumptions.
These forward-looking statements relate to MFA’s current expectations and are subject to the limitations and qualifications set
forth in the press release as well as in MFA’s other documents filed with the SEC, including, without limitation, that actual events
and/or results may differ materially from those projected in such forward-looking statements.
Exhibit
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL). |
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| |
|
| |
MFA FINANCIAL, INC. |
| |
(REGISTRANT) |
| |
|
| |
By: |
/s/ Harold E. Schwartz |
| |
|
Name: Harold E. Schwartz |
|
|
Title: Senior Vice President and General Counsel |
| Date: February 22, 2024 |
|
EXHIBIT INDEX
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL). |
Exhibit 99.1
MFA
FINANCIAL, INC.
One Vanderbilt Ave.
New York, New York 10017
| PRESS RELEASE |
|
FOR IMMEDIATE RELEASE |
| |
|
|
| February 22, 2024 |
|
NEW YORK METRO |
| INVESTOR CONTACT: |
InvestorRelations@mfafinancial.com |
NYSE:
MFA |
| |
212-207-6488 |
|
| |
www.mfafinancial.com |
|
| |
|
|
| MEDIA CONTACT: |
H/Advisors Abernathy |
|
| |
Tom Johnson |
|
| |
212-371-5999 |
|
MFA Financial, Inc.
Announces Fourth Quarter and Full Year 2023 Financial Results
NEW
YORK - MFA Financial, Inc. (NYSE:MFA) today provided its financial results for the fourth
quarter and full year ended December 31, 2023.
Fourth
Quarter 2023 Financial Results:
| · | MFA
generated GAAP net income for the fourth quarter of $81.5 million, or $0.80 per basic and
$0.76 per diluted common share. Distributable earnings, a non-GAAP financial measure, were
$49.7 million, or $0.49 per common share. |
| · | GAAP
book value at December 31, 2023 was $13.98 per common share. Economic book value, a
non-GAAP financial measure, was $14.57 per common share. |
| · | Total
economic return was 7.8% for the fourth quarter. |
| · | MFA
closed the year with unrestricted cash of $318.0 million. |
| · | MFA
paid a regular cash dividend of $0.35 per common share on January 31, 2024. |
Full Year 2023 Highlights:
| · | MFA
delivered a total stockholder return of 30.7% for 2023. |
| · | GAAP
net income was $47.3 million, or $0.46 per basic and diluted common share, up from $(264.5
million), or $(2.57) per common share, in 2022. |
| · | Distributable
earnings were $1.59 per common share in 2023, down from $1.85 per common share in 2022. |
| · | MFA
paid quarterly dividends of $0.35 per common share throughout 2023, totaling $1.40 per common
share. |
| · | Total
economic return was 2.7% for 2023. |
| · | Asset
yield averaged 6.16% in 2023, up from 5.20% in 2022. |
| · | Net
interest spread averaged 2.05% in 2023, up from 1.74% in 2022. |
| · | Loan
acquisitions were $3.0 billion, including $2.1 billion of funded originations of business
purpose loans (including draws on Transitional loans) and $0.9 billion of Non-QM loan acquisitions. |
| · | MFA
added $456.7 million of Agency MBS throughout 2023. |
| · | MFA
completed eight securitizations in 2023 collateralized by $2.2 billion unpaid principal balance
(UPB) of loans, including $1.4 billion UPB of Non-QM loans, $418.6 million UPB of SFR loans
and $376.1 million UPB of Transitional loans. |
| · | Interest
income totaled $605.6 million, up from $482.4 million in 2022. |
| · | Lima
One generated $43.4 million of origination, servicing and other fee income. |
“In another historically volatile year,
MFA stockholders earned a total return of 30.7% in 2023,” said Craig Knutson, MFA’s CEO and President. “In addition,
MFA produced a total economic return of 2.7% while generating $1.59 per share of Distributable earnings. These results are a testament
to our focused approach to risk management and to the success of our strategic initiatives.”
Commenting on the quarter, Mr. Knutson stated:
“We are pleased to report strong earnings to conclude 2023. Although interest rates and credit spreads remained turbulent during
the fourth quarter, we continued to add high-yielding assets to our balance sheet while keeping our funding costs relatively stable.
Our total economic return was 7.8% and we once again generated Distributable earnings in excess of our dividend.”
Mr. Knutson continued: “We acquired
or originated more than $850 million of residential mortgage loans during the quarter with an average coupon of 10%. This includes nearly
$600 million in new business purpose loans originated by our wholly-owned subsidiary Lima One, which exceeded $2 billion in originations
in 2023 for the second consecutive year. We also added to our Agency MBS position when spreads were historically wide in October.”
“Our net interest spread and net interest
margin both remained healthy at 2.13% and 2.96%, respectively. While delinquencies in our Purchased Performing Loan portfolios rose modestly,
they remain low and we believe are mitigated by proactive asset management. We completed two securitizations during the fourth quarter
totaling over $450 million, bringing total issuance in 2023 to $1.8 billion, and we issued an additional securitization earlier this
month. We also continued to benefit from our $3.3 billion interest rate swap position, which generated a net positive carry of $31 million
during the quarter.”
“We repurchased $10 million of our convertible
notes during the fourth quarter and another $40 million so far in 2024, reducing the outstanding balance to less than $170 million. Finally,
last month we issued $115 million of five-year 8.875% senior unsecured notes due in February 2029.”
Q4
2023 Portfolio Activity
| · | Loan
acquisitions were $860.4 million, including $572.9 million of funded originations of business
purpose loans (including draws on Transitional loans) and $287.5 million of Non-QM loan acquisitions,
bringing MFA’s residential whole loan balance to $9.0 billion. |
| · | Lima
One funded $417.0 million of new business purpose loans with a maximum loan amount of $594.0
million. Further, $155.9 million of draws were funded on previously originated Transitional
loans. Lima One generated $10.8 million of origination, servicing, and other fee income. |
| · | MFA
added $22.3 million of Agency MBS during the quarter, bringing its total Securities portfolio
to $746.1 million. |
| · | Asset
dispositions included $78.5 million of Non-QM loans and $18.2 million of MSR-related securities. |
| · | MFA
continued to reduce its REO portfolio, selling 71 properties in the fourth quarter for aggregate
proceeds of $22.6 million and generating $2.2 million of gains. |
| · | 60+
day delinquencies (measured as a percentage of UPB) for Purchased Performing Loans increased
to 3.8% from 3.1% in the third quarter. Combined Purchased Credit Deteriorated and Purchased
Non-Performing 60+ day delinquencies declined to 24.5% from 25.9% in the third quarter. |
| · | MFA
completed two loan securitizations during the quarter, collateralized by $520.1 million
UPB of loans, including $294.6 million of Non-QM loans and $225.5 million of Transitional
loans, bringing its securitized debt to approximately $4.8 billion. |
| · | MFA
maintained its position in interest rate swaps at a notional amount of approximately $3.3
billion. At December 31, 2023, these swaps had a weighted average fixed pay interest
rate of 1.85% and a weighted average variable receive interest rate of 5.38%. |
| · | MFA
estimates the net effective duration of its investment portfolio at December 31, 2023
declined to 0.91 from 1.05 at September 30, 2023. |
| · | MFA’s
Debt/Net Equity Ratio was 4.5x and recourse leverage was 1.7x at December 31, 2023. |
Webcast
MFA Financial, Inc. plans to host a live
audio webcast of its investor conference call on Thursday, February 22, 2024, at 11:00 a.m. (Eastern Time) to discuss its fourth
quarter 2023 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. 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.
About MFA Financial, Inc.
MFA Financial, Inc. (NYSE: MFA) is a leading
specialty finance company that invests in residential mortgage loans, residential mortgage-backed securities and other real estate assets.
Through its wholly-owned subsidiary, Lima One Capital, MFA also originates and services business purpose loans for real estate investors.
MFA has distributed $4.7 billion in dividends to stockholders since its initial public offering in 1998. MFA is an internally-managed,
publicly-traded real estate investment trust.
The following table presents MFA’s asset
allocation as of December 31, 2023, and the fourth quarter 2023 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, 2023 | |
Purchased
Performing
Loans (1) | | |
Purchased
Credit
Deteriorated
Loans (2) | | |
Purchased
Non-
Performing
Loans | | |
Securities,
at fair value | | |
Real Estate
Owned | | |
Other,
net (3) | | |
Total | |
| (Dollars in Millions) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Fair Value/Carrying
Value | |
$ | 7,918 | | |
$ | 418 | | |
$ | 705 | | |
$ | 746 | | |
$ | 110 | | |
$ | 644 | | |
$ | 10,541 | |
| Receivable/(Payable)
for Unsettled Transactions | |
| (104 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (104 | ) |
| Financing Agreements
with Non-mark-to-market Collateral Provisions | |
| (1,217 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,217 | ) |
| Financing Agreements
with Mark-to-market Collateral Provisions | |
| (1,348 | ) | |
| (144 | ) | |
| (220 | ) | |
| (623 | ) | |
| (25 | ) | |
| — | | |
| (2,360 | ) |
| Securitized
Debt | |
| (4,234 | ) | |
| (234 | ) | |
| (272 | ) | |
| — | | |
| (11 | ) | |
| — | | |
| (4,751 | ) |
| Convertible
Senior Notes | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (209 | ) | |
| (209 | ) |
| Net
Equity Allocated | |
$ | 1,015 | | |
$ | 40 | | |
$ | 213 | | |
$ | 123 | | |
$ | 74 | | |
$ | 435 | | |
$ | 1,900 | |
| Debt/Net
Equity Ratio (4) | |
| 6.7 | x | |
| 9.5 | x | |
| 2.3 | x | |
| 5.1 | x | |
| 0.5 | x | |
| | | |
| 4.5 | x |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| For the Quarter Ended December 31, 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Yield
on Average Interest Earning Assets (5) | |
| 6.22 | % | |
| 6.49 | % | |
| 9.65 | % | |
| 7.20 | % | |
| N/A | | |
| | | |
| 6.46 | % |
| Less
Average Cost of Funds (6) | |
| (4.43 | ) | |
| (2.68 | ) | |
| (3.63 | ) | |
| (3.75 | ) | |
| (6.03 | ) | |
| | | |
| (4.33 | ) |
| Net
Interest Rate Spread | |
| 1.79 | % | |
| 3.81 | % | |
| 6.02 | % | |
| 3.45 | % | |
| (6.03 | )% | |
| | | |
| 2.13 | % |
| (1) | Includes $3.7 billion of Non-QM
loans, $2.4 billion of Transitional loans, $1.6 billion of Single-family rental loans, $68.9
million of Seasoned performing loans, and $55.8 million of Agency eligible investor loans.
At December 31, 2023, the total fair value of these loans is estimated to be $7.9 billion. |
| (2) | At December 31, 2023, the
total fair value of these loans is estimated to be $438.7 million. |
| (3) | Includes $318.0 million of cash
and cash equivalents, $170.2 million of restricted cash, and $19.8 million of capital contributions
made to loan origination partners, as well as other assets and other liabilities. |
| (4) | Total Debt/Net Equity ratio represents
the sum of borrowings under our financing agreements as a multiple of net equity allocated. |
| (5) | 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, 2023, the amortized cost
of our Securities, at fair value, was $722.3 million. In addition, the yield for residential
whole loans was 6.46%, net of one basis point 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. |
| (6) | Average cost of funds includes
interest on financing agreements, Convertible Senior Notes and securitized debt. Cost of
funding also includes the impact of the net carry (the difference between swap interest income
received and swap interest expense paid) on our interest rate swap agreements (or Swaps).
While we have not elected hedge accounting treatment for Swaps and accordingly net carry
is not presented in interest expense in our consolidated statement of operations, we believe
it is appropriate to allocate net carry to the cost of funding to reflect the economic impact
of our Swaps on the funding costs shown in the table above. For the quarter ended December 31,
2023, this decreased the overall funding cost by 140 basis points for our overall portfolio,
140 basis points for our Residential whole loans, 142 basis points for our Purchased Performing
Loans, 143 basis points for our Purchased Credit Deteriorated Loans, 102 basis points for
our Purchased Non-Performing Loans and 206 basis points for our Securities, at fair value. |
The following table presents the activity for
our residential mortgage asset portfolio for the three months ended December 31, 2023:
Table 2 - Investment Portfolio Activity Q4
2023
| (In Millions) | |
September 30,
2023 | | |
Runoff
(1) | | |
Acquisitions
(2) | | |
Other
(3) | | |
December 31,
2023 | | |
Change | |
| Residential whole loans and REO | |
$ | 8,537 | | |
$ | (400 | ) | |
$ | 860 | | |
$ | 154 | | |
$ | 9,151 | | |
$ | 614 | |
| Securities, at fair value | |
| 724 | | |
| (8 | ) | |
| 22 | | |
| 8 | | |
| 746 | | |
| 22 | |
| Totals | |
$ | 9,261 | | |
$ | (408 | ) | |
$ | 882 | | |
$ | 162 | | |
$ | 9,897 | | |
$ | 636 | |
| (1) | Primarily includes principal repayments
and sales of REO. |
| (2) | Includes draws on previously originated
Transitional loans. |
| (3) | Primarily includes sales, changes
in fair value and changes in the allowance for credit losses. |
The following tables present information on our
investments in residential whole loans.
Table 3 - Portfolio composition
| | |
Held at
Carrying Value | | |
Held at
Fair Value | | |
Total | |
| (Dollars in Thousands) | |
December 31,
2023 | | |
December 31,
2022 | | |
December 31,
2023 | | |
December 31,
2022 | | |
December 31,
2023 | | |
December 31,
2022 | |
| Purchased Performing Loans: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-QM loans | |
$ | 843,884 | | |
$ | 987,282 | | |
$ | 2,961,693 | | |
$ | 2,372,548 | | |
$ | 3,805,577 | | |
$ | 3,359,830 | |
| Transitional
loans (1) | |
| 35,467 | | |
| 75,188 | | |
| 2,326,029 | | |
| 1,342,032 | | |
| 2,361,496 | | |
| 1,417,220 | |
| Single-family rental loans | |
| 172,213 | | |
| 210,833 | | |
| 1,462,583 | | |
| 1,165,741 | | |
| 1,634,796 | | |
| 1,376,574 | |
| Seasoned performing loans | |
| 68,945 | | |
| 82,932 | | |
| — | | |
| — | | |
| 68,945 | | |
| 82,932 | |
| Agency eligible
investor loans | |
| — | | |
| — | | |
| 55,779 | | |
| 51,094 | | |
| 55,779 | | |
| 51,094 | |
| Total Purchased Performing Loans | |
$ | 1,120,509 | | |
$ | 1,356,235 | | |
$ | 6,806,084 | | |
$ | 4,931,415 | | |
$ | 7,926,593 | | |
$ | 6,287,650 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Purchased Credit Deteriorated Loans | |
$ | 429,726 | | |
$ | 470,294 | | |
$ | — | | |
$ | — | | |
$ | 429,726 | | |
$ | 470,294 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allowance for Credit Losses | |
$ | (20,451 | ) | |
$ | (35,314 | ) | |
$ | — | | |
$ | — | | |
$ | (20,451 | ) | |
$ | (35,314 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Purchased Non-Performing
Loans | |
$ | — | | |
$ | — | | |
$ | 705,424 | | |
$ | 796,109 | | |
$ | 705,424 | | |
$ | 796,109 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Residential
Whole Loans | |
$ | 1,529,784 | | |
$ | 1,791,215 | | |
$ | 7,511,508 | | |
$ | 5,727,524 | | |
$ | 9,041,292 | | |
$ | 7,518,739 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Number of loans | |
| 6,326 | | |
| 7,126 | | |
| 19,075 | | |
| 16,717 | | |
| 25,401 | | |
| 23,843 | |
| (1) | As of December 31, 2023 includes
$1.2 billion of loans collateralized by one-to-four family residential properties, including
$471.1 million of loans collateralized by new construction projects at origination,
and $1.2 billion of loans collateralized by multi-family properties. As of December 31,
2022 includes $784.9 million of loans collateralized by one-to-four family residential
properties and $632.3 million of loans collateralized by multi-family properties. |
Table 4 - Yields and average balances
| | |
For the
Three-Month Period Ended | |
| |
December 31,
2023 | | |
September 30,
2023 | | |
December 31,
2022 | |
| (Dollars in Thousands) | |
Interest | | |
Average
Balance | | |
Average
Yield | | |
Interest | | |
Average
Balance | | |
Average
Yield | | |
Interest | | |
Average
Balance | | |
Average
Yield | |
| Purchased Performing Loans: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-QM
loans | |
$ | 51,997 | | |
$ | 4,111,425 | | |
| 5.06 | % | |
$ | 51,724 | | |
$ | 4,053,924 | | |
| 5.10 | % | |
$ | 41,621 | | |
$ | 3,767,900 | | |
| 4.42 | % |
| Transitional loans | |
| 48,358 | | |
| 2,249,974 | | |
| 8.60 | % | |
| 40,223 | | |
| 1,927,533 | | |
| 8.35 | % | |
| 26,134 | | |
| 1,335,471 | | |
| 7.83 | % |
| Single-family rental
loans | |
| 25,598 | | |
| 1,702,940 | | |
| 6.01 | % | |
| 24,087 | | |
| 1,639,626 | | |
| 5.88 | % | |
| 20,237 | | |
| 1,483,529 | | |
| 5.46 | % |
| Seasoned performing
loans | |
| 1,191 | | |
| 71,207 | | |
| 6.69 | % | |
| 1,095 | | |
| 74,345 | | |
| 5.89 | % | |
| 1,283 | | |
| 84,876 | | |
| 6.05 | % |
| Agency
eligible investor loans | |
| 512 | | |
| 69,436 | | |
| 2.95 | % | |
| 486 | | |
| 71,306 | | |
| 2.73 | % | |
| 7,631 | | |
| 1,021,007 | | |
| 2.99 | % |
| Total Purchased Performing Loans | |
| 127,656 | | |
| 8,204,982 | | |
| 6.22 | % | |
| 117,615 | | |
| 7,766,734 | | |
| 6.06 | % | |
| 96,906 | | |
| 7,692,783 | | |
| 5.04 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Purchased Credit Deteriorated
Loans | |
| 7,051 | | |
| 434,650 | | |
| 6.49 | % | |
| 7,371 | | |
| 444,568 | | |
| 6.63 | % | |
| 7,830 | | |
| 474,971 | | |
| 6.59 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Purchased Non-Performing
Loans | |
| 15,080 | | |
| 624,910 | | |
| 9.65 | % | |
| 15,552 | | |
| 648,959 | | |
| 9.59 | % | |
| 20,252 | | |
| 726,303 | | |
| 11.15 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Residential Whole
Loans | |
$ | 149,787 | | |
$ | 9,264,542 | | |
| 6.47 | % | |
$ | 140,538 | | |
$ | 8,860,261 | | |
| 6.34 | % | |
$ | 124,988 | | |
$ | 8,894,057 | | |
| 5.62 | % |
Table 5 - Net Interest Spread
| | |
For the
Three-Month Period Ended | |
| | |
December 31,
2023 | | |
September 30,
2023 | | |
December 31,
2022 | |
| Purchased Performing Loans | |
| | | |
| | | |
| | |
| Net
Yield (1) | |
| 6.22 | % | |
| 6.06 | % | |
| 5.04 | % |
| Cost of
Funding (2) | |
| 4.43 | % | |
| 4.23 | % | |
| 3.70 | % |
| Net Interest Spread | |
| 1.79 | % | |
| 1.83 | % | |
| 1.34 | % |
| | |
| | | |
| | | |
| | |
| Purchased Credit Deteriorated Loans | |
| | | |
| | | |
| | |
| Net
Yield (1) | |
| 6.49 | % | |
| 6.63 | % | |
| 6.59 | % |
| Cost of
Funding (2) | |
| 2.68 | % | |
| 2.43 | % | |
| 2.13 | % |
| Net Interest Spread | |
| 3.81 | % | |
| 4.20 | % | |
| 4.46 | % |
| | |
| | | |
| | | |
| | |
| Purchased Non-Performing Loans | |
| | | |
| | | |
| | |
| Net
Yield (1) | |
| 9.65 | % | |
| 9.59 | % | |
| 11.15 | % |
| Cost of
Funding (2) | |
| 3.63 | % | |
| 3.65 | % | |
| 3.01 | % |
| Net Interest Spread | |
| 6.02 | % | |
| 5.94 | % | |
| 8.14 | % |
| | |
| | | |
| | | |
| | |
| Total Residential Whole Loans | |
| | | |
| | | |
| | |
| Net
Yield (1) | |
| 6.47 | % | |
| 6.34 | % | |
| 5.62 | % |
| Cost of
Funding (2) | |
| 4.29 | % | |
| 4.10 | % | |
| 3.56 | % |
| Net Interest Spread | |
| 2.18 | % | |
| 2.24 | % | |
| 2.06 | % |
| (1) | Reflects annualized interest
income on Residential whole loans divided by average amortized cost of Residential whole
loans. Excludes servicing costs. |
| (2) | Reflects annualized interest
expense divided by average balance of agreements with mark-to-market collateral provisions
(repurchase agreements), agreements with non-mark-to-market collateral provisions, and securitized
debt. Cost of funding shown in the table above includes the impact of the net carry (the
difference between swap interest income received and swap interest expense paid) on our Swaps.
While we have not elected hedge accounting treatment for Swaps, and, accordingly, net carry
is not presented in interest expense in our consolidated statement of operations, we believe
it is appropriate to allocate net carry to the cost of funding to reflect the economic impact
of our Swaps on the funding costs shown in the table above. For the quarter ended December 31,
2023, this decreased the overall funding cost by 140 basis points for our Residential whole
loans, 142 basis points for our Purchased Performing Loans, 143 basis points for our Purchased
Credit Deteriorated Loans, and 102 basis points for our Purchased Non-Performing Loans. For
the quarter ended September 30, 2023, this decreased the overall funding cost by 143
basis points for our Residential whole loans, 146 basis points for our Purchased Performing
Loans, 161 basis points for our Purchased Credit Deteriorated Loans, and 89 basis points
for our Purchased Non-Performing Loans. For the quarter ended December 31, 2022, this
decreased the overall funding cost by 89 basis points for our Residential whole loans, 87
basis points for our Purchased Performing Loans, 141 basis points for our Purchased Credit
Deteriorated Loans, and 76 basis points for our Purchased Non-Performing Loans. |
Table 6 - Credit related metrics/Residential
Whole Loans
December 31, 2023
| |
|
Fair
|
|
|
Unpaid
|
|
|
Weighted |
|
|
Weighted
Average |
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
| |
|
Value
/ |
|
|
Principal |
|
|
Average
|
|
|
Term to |
|
|
Average |
|
|
Average |
|
|
Aging
by UPB |
|
|
|
|
|
60+ |
|
| (Dollars |
|
Carrying |
|
|
Balance |
|
|
Coupon |
|
|
Maturity |
|
|
LTV |
|
|
Original |
|
|
|
|
|
|
Past
Due Days |
|
|
60+ |
|
|
LTV |
|
| In Thousands) |
|
Value |
|
|
(“UPB”) |
|
|
(2) |
|
|
(Months) |
|
|
Ratio
(3) |
|
|
FICO
(4) |
|
|
Current |
|
|
30-59 |
|
|
60-89 |
|
|
90+ |
|
|
DQ
% |
|
|
(3) |
|
| Purchased
Performing Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-QM
loans (5) |
|
$ |
3,700,052 |
|
|
$ |
3,934,798 |
|
|
|
5.78 |
% |
|
|
344 |
|
|
|
65 |
% |
|
|
735 |
|
|
$ |
3,732,327 |
|
|
$ |
98,017 |
|
|
$ |
29,587 |
|
|
$ |
74,867 |
|
|
|
2.7 |
% |
|
|
63.9 |
% |
| Transitional
loans (1) |
|
|
2,358,909 |
|
|
|
2,368,121 |
|
|
|
9.22 |
|
|
|
10 |
|
|
|
64 |
|
|
|
747 |
|
|
|
2,187,161 |
|
|
|
61,024 |
|
|
|
26,618 |
|
|
|
93,318 |
|
|
|
5.1 |
|
|
|
65.1 |
|
| Single-family
rental loans |
|
|
1,630,442 |
|
|
|
1,729,923 |
|
|
|
6.30 |
|
|
|
320 |
|
|
|
70 |
|
|
|
738 |
|
|
|
1,636,810 |
|
|
|
12,543 |
|
|
|
12,314 |
|
|
|
68,256 |
|
|
|
4.7 |
|
|
|
109.1 |
|
| Seasoned
performing loans |
|
|
68,924 |
|
|
|
75,715 |
|
|
|
4.58 |
|
|
|
143 |
|
|
|
28 |
|
|
|
725 |
|
|
|
72,126 |
|
|
|
1,045 |
|
|
|
235 |
|
|
|
2,309 |
|
|
|
3.4 |
|
|
|
33.6 |
|
| Agency
eligible investor loans |
|
|
55,779 |
|
|
|
66,830 |
|
|
|
3.44 |
|
|
|
332 |
|
|
|
66 |
|
|
|
758 |
|
|
|
65,094 |
|
|
|
1,508 |
|
|
|
— |
|
|
|
228 |
|
|
|
0.3 |
|
|
|
73.4 |
|
| Total
Purchased Performing Loans |
|
$ |
7,814,106 |
|
|
$ |
8,175,387 |
|
|
|
6.86 |
% |
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8 |
% |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Purchased
Credit Deteriorated Loans |
|
$ |
418,109 |
|
|
$ |
506,828 |
|
|
|
4.83 |
% |
|
|
267 |
|
|
|
59 |
% |
|
|
N/A |
|
|
$ |
379,970 |
|
|
$ |
44,731 |
|
|
$ |
12,814 |
|
|
$ |
69,313 |
|
|
|
16.2 |
% |
|
|
64.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Purchased
Non-Performing Loans |
|
$ |
705,424 |
|
|
$ |
772,737 |
|
|
|
5.21 |
% |
|
|
270 |
|
|
|
62 |
% |
|
|
N/A |
|
|
$ |
444,491 |
|
|
$ |
96,464 |
|
|
$ |
31,560 |
|
|
$ |
200,222 |
|
|
|
30.0 |
% |
|
|
70.7 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential
whole loans, total or weighted average |
|
$ |
8,937,639 |
|
|
$ |
9,454,952 |
|
|
|
6.04 |
% |
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.6 |
% |
|
|
|
|
| (1) | As
of December 31, 2023 Transitional loans includes $1.2 billion of loans collateralized
by multi-family properties with a weighted average term to maturity of 14 months and a weighted
average LTV ratio of 63%. As of December 31, 2022, Transitional loans includes $632.3
million of loans collateralized by multi-family properties with a weighted average term to
maturity of 18 months and a weighted average LTV ratio of 64%. |
| (2) | 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. |
| (3) | 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 Transitional 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
Transitional loans, totaling $551.3 million at December 31, 2023,
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 68% at December 31,
2023. 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. 60+ LTV has been calculated on
a consistent basis. |
| (4) | Excludes
loans for which no Fair Isaac Corporation (“FICO”) score is available. |
| (5) | Excluded
from the table above are approximately $103.7 million of Residential whole loans, at fair
value for which the closing of the purchase transaction had not occurred as of December 31,
2023. |
Table 7 - Shock Table
The information presented in the following “Shock
Table” projects the potential impact of sudden parallel changes in interest rates on the value of our portfolio, including the
impact of Swaps and securitized debt, based on the assets in our investment portfolio at December 31, 2023. Changes in portfolio
value are measured as the percentage change when comparing the projected portfolio value to the base interest rate scenario at December 31,
2023.
| Change in Interest Rates | |
Percentage
Change in
Portfolio Value | | |
Percentage
Change in
Total Stockholders’ Equity | |
| +100 Basis Point Increase | |
| (1.17 | )% | |
| (6.53 | )% |
| + 50 Basis Point Increase | |
| (0.52 | )% | |
| (2.92 | )% |
| Actual at December 31, 2023 | |
| — | % | |
| — | % |
| - 50 Basis Point Decrease | |
| 0.40 | % | |
| 2.23 | % |
| -100 Basis Point Decrease | |
| 0.68 | % | |
| 3.76 | % |
MFA FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
| (In Thousands, Except Per Share Amounts) | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
(unaudited) | | |
| |
| Assets: | |
| | | |
| | |
| Residential
whole loans, net ($7,511,508 and $5,727,524 held at fair value, respectively) (1) | |
$ | 9,041,292 | | |
$ | 7,518,739 | |
| Securities,
at fair value | |
| 746,090 | | |
| 333,364 | |
| Cash and cash
equivalents | |
| 318,000 | | |
| 334,183 | |
| Restricted cash | |
| 170,211 | | |
| 159,898 | |
| Other
assets | |
| 497,097 | | |
| 766,221 | |
| Total
Assets | |
$ | 10,772,690 | | |
$ | 9,112,405 | |
| | |
| | | |
| | |
| Liabilities: | |
| | | |
| | |
| Financing agreements
($4,633,660 and $3,898,744 held at fair value, respectively) | |
$ | 8,536,745 | | |
$ | 6,812,086 | |
| Other
liabilities | |
| 336,030 | | |
| 311,470 | |
| Total
Liabilities | |
$ | 8,872,775 | | |
$ | 7,123,556 | |
| | |
| | | |
| | |
| Stockholders’
Equity: | |
| | | |
| | |
| Preferred stock,
$0.01 par value; 7.5% Series B cumulative redeemable; 8,050 shares authorized; 8,000 shares issued and outstanding
($200,000 aggregate liquidation preference) | |
$ | 80 | | |
$ | 80 | |
| Preferred stock,
$0.01 par value; 6.5% Series C fixed-to-floating rate cumulative redeemable; 12,650 shares authorized; 11,000
shares issued and outstanding ($275,000 aggregate liquidation preference) | |
| 110 | | |
| 110 | |
Common stock,
$0.01 par value; 874,300 and 874,300 shares authorized; 101,916 and 101,802 shares issued
and outstanding, respectively | |
| 1,019 | | |
| 1,018 | |
| Additional paid-in
capital, in excess of par | |
| 3,698,767 | | |
| 3,684,291 | |
| Accumulated
deficit | |
| (1,817,759 | ) | |
| (1,717,991 | ) |
| Accumulated
other comprehensive income | |
| 17,698 | | |
| 21,341 | |
| Total
Stockholders’ Equity | |
$ | 1,899,915 | | |
$ | 1,988,849 | |
| Total
Liabilities and Stockholders’ Equity | |
$ | 10,772,690 | | |
$ | 9,112,405 | |
| (1) | Includes approximately $5.7
billion and $4.0 billion of Residential whole loans transferred to consolidated variable
interest entities (“VIEs”) at December 31, 2023 and December 31, 2022,
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) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
| |
| Interest
Income: | |
| | | |
| | | |
| | | |
| | |
| Residential
whole loans | |
$ | 149,787 | | |
$ | 124,988 | | |
$ | 537,883 | | |
$ | 441,223 | |
| Securities,
at fair value | |
| 13,175 | | |
| 12,740 | | |
| 42,376 | | |
| 28,921 | |
| Other interest-earning
assets | |
| 1,467 | | |
| 2,366 | | |
| 9,027 | | |
| 7,437 | |
| Cash
and cash equivalent investments | |
| 5,448 | | |
| 2,783 | | |
| 16,311 | | |
| 4,838 | |
| Interest
Income | |
$ | 169,877 | | |
$ | 142,877 | | |
$ | 605,597 | | |
$ | 482,419 | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest
Expense: | |
| | | |
| | | |
| | | |
| | |
| Asset-backed
and other collateralized financing arrangements | |
$ | 119,665 | | |
$ | 83,277 | | |
$ | 413,517 | | |
$ | 243,083 | |
| Other
interest expense | |
| 3,748 | | |
| 3,949 | | |
| 15,601 | | |
| 15,760 | |
| Interest
Expense | |
$ | 123,413 | | |
$ | 87,226 | | |
$ | 429,118 | | |
$ | 258,843 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net
Interest Income | |
$ | 46,464 | | |
$ | 55,651 | | |
$ | 176,479 | | |
$ | 223,576 | |
| | |
| | | |
| | | |
| | | |
| | |
| Reversal
of Provision for Credit Losses on Residential Whole Loans | |
$ | 7,876 | | |
$ | 1,540 | | |
$ | 8,853 | | |
$ | 2,646 | |
| Provision
for Credit Losses on Other Assets | |
| — | | |
| — | | |
| — | | |
| (28,579 | ) |
| Net Interest
Income after Provision for Credit Losses | |
$ | 54,340 | | |
$ | 57,191 | | |
$ | 185,332 | | |
$ | 197,643 | |
| | |
| | | |
| | | |
| | | |
| | |
| Other Income/(Loss),
net: | |
| | | |
| | | |
| | | |
| | |
| Net gain/(loss)
on residential whole loans measured at fair value through earnings | |
$ | 224,273 | | |
$ | (68,828 | ) | |
$ | 89,850 | | |
$ | (866,762 | ) |
| Impairment and
other net gain/(loss) on securities and other portfolio investments | |
| 22,024 | | |
| (8,909 | ) | |
| 6,225 | | |
| (25,067 | ) |
| Net gain on
real estate owned | |
| 888 | | |
| 5,602 | | |
| 9,392 | | |
| 25,379 | |
| Net gain/(loss)
on derivatives used for risk management purposes | |
| (70,342 | ) | |
| 1,458 | | |
| 3,761 | | |
| 255,179 | |
| Net gain/(loss)
on securitized debt measured at fair value through earnings | |
| (111,689 | ) | |
| 43,091 | | |
| (99,589 | ) | |
| 290,639 | |
| Lima One - origination,
servicing and other fee income | |
| 10,822 | | |
| 9,206 | | |
| 43,384 | | |
| 46,745 | |
| Net realized
loss on residential whole loans held at carrying value | |
| (1,240 | ) | |
| — | | |
| (1,240 | ) | |
| — | |
| Other,
net | |
| 1,407 | | |
| 1,866 | | |
| 11,331 | | |
| 8,623 | |
| Other
Income/(Loss), net | |
$ | 76,143 | | |
$ | (16,514 | ) | |
$ | 63,114 | | |
$ | (265,264 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Operating
and Other Expense: | |
| | | |
| | | |
| | | |
| | |
| Compensation
and benefits | |
$ | 19,347 | | |
$ | 17,049 | | |
$ | 85,799 | | |
$ | 76,728 | |
| Other general
and administrative expense | |
| 12,580 | | |
| 7,717 | | |
| 44,147 | | |
| 35,138 | |
| Loan servicing,
financing and other related costs | |
| 8,010 | | |
| 7,901 | | |
| 34,136 | | |
| 42,894 | |
| Amortization
of intangible assets | |
| 800 | | |
| 1,300 | | |
| 4,200 | | |
| 9,200 | |
| Operating
and Other Expense | |
$ | 40,737 | | |
$ | 33,967 | | |
$ | 168,282 | | |
$ | 163,960 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net Income/(Loss) | |
$ | 89,746 | | |
$ | 6,710 | | |
$ | 80,164 | | |
$ | (231,581 | ) |
| Less
Preferred Stock Dividend Requirement | |
$ | 8,219 | | |
$ | 8,219 | | |
$ | 32,875 | | |
$ | 32,875 | |
| Net
Income/(Loss) Available to Common Stock and Participating Securities | |
$ | 81,527 | | |
$ | (1,509 | ) | |
$ | 47,289 | | |
$ | (264,456 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic
Earnings/(Loss) per Common Share | |
$ | 0.80 | | |
$ | (0.02 | ) | |
$ | 0.46 | | |
$ | (2.57 | ) |
| Diluted
Earnings/(Loss) per Common Share | |
$ | 0.76 | | |
$ | (0.02 | ) | |
$ | 0.46 | | |
$ | (2.57 | ) |
Segment Reporting
At December 31, 2023, the Company’s
reportable segments include (i) mortgage-related assets and (ii) Lima One. The Corporate column in the table below primarily
consists of corporate cash and related interest income, investments in loan originators and related economics, general and administrative
expenses not directly attributable to Lima One, interest expense on unsecured convertible senior notes, securitization issuance costs,
and preferred stock dividends.
The following tables summarize segment financial
information, which in total reconciles to the same data for the Company as a whole:
| (Dollars
in Thousands) | |
Mortgage-
Related
Assets | | |
Lima One | | |
Corporate | | |
Total | |
| Three months ended December 31,
2023 | |
| | | |
| | | |
| | | |
| | |
| Interest
Income | |
$ | 94,495 | | |
$ | 71,896 | | |
$ | 3,486 | | |
$ | 169,877 | |
| Interest
Expense | |
| 68,655 | | |
| 51,009 | | |
| 3,749 | | |
| 123,413 | |
| Net
Interest Income/(Expense) | |
$ | 25,840 | | |
$ | 20,887 | | |
$ | (263 | ) | |
$ | 46,464 | |
| Reversal
of Provision for Credit Losses on Residential Whole Loans | |
| 7,876 | | |
| — | | |
| — | | |
| 7,876 | |
| Net Interest
Income/(Expense) after Provision for Credit Losses | |
$ | 33,716 | | |
$ | 20,887 | | |
$ | (263 | ) | |
$ | 54,340 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net gain on
residential whole loans measured at fair value through earnings | |
$ | 170,936 | | |
$ | 53,337 | | |
$ | — | | |
$ | 224,273 | |
| Impairment and
other net gain/(loss) on securities and other portfolio investments | |
| 22,279 | | |
| — | | |
| (255 | ) | |
| 22,024 | |
| Net gain on
real estate owned | |
| 795 | | |
| 93 | | |
| — | | |
| 888 | |
| Net loss on
derivatives used for risk management purposes | |
| (53,291 | ) | |
| (17,051 | ) | |
| — | | |
| (70,342 | ) |
| Net loss on
securitized debt measured at fair value through earnings | |
| (76,381 | ) | |
| (35,308 | ) | |
| — | | |
| (111,689 | ) |
| Lima One - origination,
servicing and other fee income | |
| — | | |
| 10,822 | | |
| — | | |
| 10,822 | |
| Net realized
loss on residential whole loans held at carrying value | |
| (1,240 | ) | |
| — | | |
| — | | |
| (1,240 | ) |
| Other,
net | |
| 1,424 | | |
| 153 | | |
| (170 | ) | |
| 1,407 | |
| Total
Other Income/(Loss), net | |
$ | 64,522 | | |
$ | 12,046 | | |
$ | (425 | ) | |
$ | 76,143 | |
| | |
| | | |
| | | |
| | | |
| | |
| Compensation
and benefits | |
$ | — | | |
$ | 11,875 | | |
$ | 7,472 | | |
$ | 19,347 | |
| General and
administrative expenses | |
| 214 | | |
| 5,680 | | |
| 6,686 | | |
| 12,580 | |
| Loan servicing,
financing, and other related costs | |
| 4,953 | | |
| 467 | | |
| 2,590 | | |
| 8,010 | |
| Amortization
of intangible assets | |
| — | | |
| 800 | | |
| — | | |
| 800 | |
| Net
Income/(Loss) | |
$ | 93,071 | | |
$ | 14,111 | | |
$ | (17,436 | ) | |
$ | 89,746 | |
| | |
| | | |
| | | |
| | | |
| | |
| Less
Preferred Stock Dividend Requirement | |
$ | — | | |
$ | — | | |
$ | 8,219 | | |
$ | 8,219 | |
| Net
Income/(Loss) Available to Common Stock and Participating Securities | |
$ | 93,071 | | |
$ | 14,111 | | |
$ | (25,655 | ) | |
$ | 81,527 | |
| (Dollars in Thousands) | |
Mortgage-
Related Assets | | |
Lima One | | |
Corporate | | |
Total | |
| December 31, 2023 | |
| | | |
| | | |
| | | |
| | |
| Total
Assets | |
$ | 6,370,237 | | |
$ | 4,000,932 | | |
$ | 401,521 | | |
$ | 10,772,690 | |
| | |
| | | |
| | | |
| | | |
| | |
| December 31, 2022 | |
| | | |
| | | |
| | | |
| | |
| Total Assets | |
$ | 6,065,557 | | |
$ | 2,618,695 | | |
$ | 428,153 | | |
$ | 9,112,405 | |
Reconciliation of GAAP Net Income to non-GAAP Distributable Earnings
“Distributable 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. Distributable earnings is determined by adjusting GAAP net income/(loss) by
removing certain unrealized gains and losses, primarily on residential mortgage investments, associated debt, and hedges that are, in
each case, accounted for at fair value through earnings, certain realized gains and losses, as well as certain non-cash expenses and
securitization-related transaction costs. The transaction costs are primarily comprised of costs only incurred at the time of execution
of our securitizations and include costs such as underwriting fees, legal fees, diligence fees, bank fees and other similar transaction
related expenses. These costs are all incurred prior to or at the execution of our securitizations and do not recur. Recurring expenses,
such as servicing fees, custodial fees, trustee fees and other similar ongoing fees are not excluded from distributable earnings. Management
believes that the adjustments made to GAAP earnings result in the removal of (i) income or expenses that are not reflective of the
longer term performance of our investment portfolio, (ii) certain non-cash expenses, and (iii) expense items required to be
recognized solely due to the election of the fair value option on certain related residential mortgage assets and associated liabilities.
Distributable earnings is one of the factors that our Board of Directors considers when evaluating distributions to our shareholders.
Accordingly, we believe that the adjustments to compute Distributable earnings specified below provide investors and analysts with additional
information to evaluate our financial results.
Distributable earnings should
be used in conjunction with results presented in accordance with GAAP. Distributable 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/(loss) used in the calculation of basic EPS to our non-GAAP Distributable earnings for the quarterly
periods below:
| | |
Quarter
Ended | |
| (In
Thousands, Except Per Share Amounts) | |
December 31,
2023 | | |
September 30,
2023 | | |
June 30,
2023 | | |
March 31,
2023 | | |
December 31,
2022 | |
| GAAP
Net income/(loss) used in the calculation of basic EPS | |
$ | 81,527 | | |
$ | (64,657 | ) | |
$ | (34,146 | ) | |
$ | 64,565 | | |
$ | (1,647 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjustments: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Unrealized and
realized gains and losses on: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential
whole loans held at fair value | |
| (224,272 | ) | |
| 132,894 | | |
| 130,703 | | |
| (129,174 | ) | |
| 68,828 | |
| Securities held
at fair value | |
| (21,371 | ) | |
| 13,439 | | |
| 3,698 | | |
| (2,931 | ) | |
| 383 | |
| Residential
whole loans and securities at carrying value | |
| 332 | | |
| — | | |
| — | | |
| — | | |
| — | |
| Interest rate
swaps | |
| 97,400 | | |
| (9,433 | ) | |
| (37,018 | ) | |
| 40,747 | | |
| 12,725 | |
| Securitized
debt held at fair value | |
| 108,693 | | |
| (40,229 | ) | |
| (30,908 | ) | |
| 48,846 | | |
| (44,988 | ) |
| Investments
in loan origination partners | |
| 254 | | |
| 722 | | |
| 872 | | |
| — | | |
| 8,526 | |
| Expense items: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Amortization
of intangible assets | |
| 800 | | |
| 800 | | |
| 1,300 | | |
| 1,300 | | |
| 1,300 | |
| Equity based
compensation | |
| 3,635 | | |
| 4,447 | | |
| 3,932 | | |
| 3,020 | | |
| 2,480 | |
| Securitization-related
transaction costs | |
| 2,702 | | |
| 3,217 | | |
| 2,071 | | |
| 4,602 | | |
| 1,744 | |
| Total
adjustments | |
| (31,827 | ) | |
| 105,857 | | |
| 74,650 | | |
| (33,590 | ) | |
| 50,998 | |
| Distributable
earnings | |
$ | 49,700 | | |
$ | 41,200 | | |
$ | 40,504 | | |
$ | 30,975 | | |
$ | 49,351 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| GAAP
earnings/(loss) per basic common share | |
$ | 0.80 | | |
$ | (0.64 | ) | |
$ | (0.34 | ) | |
$ | 0.63 | | |
$ | (0.02 | ) |
| Distributable
earnings per basic common share | |
$ | 0.49 | | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.30 | | |
$ | 0.48 | |
| Weighted
average common shares for basic earnings per share | |
| 102,266 | | |
| 102,255 | | |
| 102,186 | | |
| 102,155 | | |
| 101,800 | |
The following table presents
our non-GAAP Distributable earnings by segment for the quarterly periods below:
| (Dollars
in Thousands) | |
Mortgage-
Related Assets | | |
Lima One | | |
Corporate | | |
Total | |
| Three months ended December 31,
2023 | |
| | | |
| | | |
| | | |
| | |
| GAAP
Net income/(loss) used in the calculation of basic EPS | |
$ | 93,071 | | |
$ | 14,111 | | |
$ | (25,655 | ) | |
$ | 81,527 | |
| | |
| | | |
| | | |
| | | |
| | |
| Adjustments: | |
| | | |
| | | |
| | | |
| | |
| Unrealized and
realized gains and losses on: | |
| | | |
| | | |
| | | |
| | |
| Residential
whole loans held at fair value | |
| (170,935 | ) | |
| (53,337 | ) | |
| — | | |
| (224,272 | ) |
| Securities held
at fair value | |
| (21,371 | ) | |
| — | | |
| — | | |
| (21,371 | ) |
| Residential
whole loans and securities at carrying value | |
| 332 | | |
| — | | |
| — | | |
| 332 | |
| Interest rate
swaps | |
| 72,741 | | |
| 24,659 | | |
| — | | |
| 97,400 | |
| Securitized
debt held at fair value | |
| 73,779 | | |
| 34,914 | | |
| — | | |
| 108,693 | |
| Investments
in loan origination partners | |
| — | | |
| — | | |
| 254 | | |
| 254 | |
| Expense items: | |
| | | |
| | | |
| | | |
| | |
| Amortization
of intangible assets | |
| — | | |
| 800 | | |
| — | | |
| 800 | |
| Equity based
compensation | |
| — | | |
| 132 | | |
| 3,503 | | |
| 3,635 | |
| Securitization-related
transaction costs | |
| 145 | | |
| — | | |
| 2,557 | | |
| 2,702 | |
| Total
adjustments | |
$ | (45,309 | ) | |
$ | 7,168 | | |
$ | 6,314 | | |
$ | (31,827 | ) |
| Distributable
earnings | |
$ | 47,762 | | |
$ | 21,279 | | |
$ | (19,341 | ) | |
$ | 49,700 | |
| (Dollars
in Thousands) | |
Mortgage-
Related Assets | | |
Lima One | | |
Corporate | | |
Total | |
| Three months ended September 30,
2023 | |
| | | |
| | | |
| | | |
| | |
| GAAP
Net income/(loss) used in the calculation of basic EPS | |
$ | (33,411 | ) | |
$ | (993 | ) | |
$ | (30,253 | ) | |
$ | (64,657 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Adjustments: | |
| | | |
| | | |
| | | |
| | |
| Unrealized and
realized gains and losses on: | |
| | | |
| | | |
| | | |
| | |
| Residential
whole loans held at fair value | |
| 99,500 | | |
| 33,394 | | |
| — | | |
| 132,894 | |
| Securities held
at fair value | |
| 13,439 | | |
| — | | |
| — | | |
| 13,439 | |
| Interest rate
swaps | |
| (7,098 | ) | |
| (2,335 | ) | |
| — | | |
| (9,433 | ) |
| Securitized
debt held at fair value | |
| (28,572 | ) | |
| (11,657 | ) | |
| — | | |
| (40,229 | ) |
| Investments
in loan origination partners | |
| — | | |
| — | | |
| 722 | | |
| 722 | |
| Expense items: | |
| | | |
| | | |
| | | |
| | |
| Amortization
of intangible assets | |
| — | | |
| 800 | | |
| — | | |
| 800 | |
| Equity based
compensation | |
| — | | |
| 131 | | |
| 4,316 | | |
| 4,447 | |
| Securitization-related
transaction costs | |
| — | | |
| — | | |
| 3,217 | | |
| 3,217 | |
| Total
adjustments | |
$ | 77,269 | | |
$ | 20,333 | | |
$ | 8,255 | | |
$ | 105,857 | |
| Distributable
earnings | |
$ | 43,858 | | |
$ | 19,340 | | |
$ | (21,998 | ) | |
$ | 41,200 | |
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 and securitized debt held 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 financial instruments. These adjustments are also reflected in the table
below in our end of period stockholders’ equity. 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 investment activities,
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 the quarterly periods
below:
| | |
Quarter
Ended: | |
| (In
Millions, Except Per Share Amounts) | |
December 31,
2023 | | |
September 30,
2023 | | |
June 30,
2023 | | |
March 31,
2023 | | |
December 31,
2022 | |
| GAAP
Total Stockholders’ Equity | |
$ | 1,899.9 | | |
$ | 1,848.5 | | |
$ | 1,944.8 | | |
$ | 2,018.6 | | |
$ | 1,988.8 | |
| Preferred
Stock, liquidation preference | |
| (475.0 | ) | |
| (475.0 | ) | |
| (475.0 | ) | |
| (475.0 | ) | |
| (475.0 | ) |
| GAAP Stockholders’
Equity for book value per common share | |
| 1,424.9 | | |
| 1,373.5 | | |
| 1,469.8 | | |
| 1,543.6 | | |
| 1,513.8 | |
| Adjustments: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Fair value adjustment
to Residential whole loans, at carrying value | |
| (35.6 | ) | |
| (85.3 | ) | |
| (58.3 | ) | |
| (33.9 | ) | |
| (70.2 | ) |
| Fair value adjustment
to Securitized debt, at carrying value | |
| 95.6 | | |
| 122.5 | | |
| 129.8 | | |
| 122.4 | | |
| 139.7 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stockholders’
Equity including fair value adjustments to Residential whole loans and Securitized debt held at carrying value (Economic book value) | |
$ | 1,484.9 | | |
$ | 1,410.7 | | |
$ | 1,541.3 | | |
$ | 1,632.1 | | |
$ | 1,583.3 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| GAAP book
value per common share | |
$ | 13.98 | | |
$ | 13.48 | | |
$ | 14.42 | | |
$ | 15.15 | | |
$ | 14.87 | |
| Economic
book value per common share | |
$ | 14.57 | | |
$ | 13.84 | | |
$ | 15.12 | | |
$ | 16.02 | | |
$ | 15.55 | |
| Number
of shares of common stock outstanding | |
| 101.9 | | |
| 101.9 | | |
| 101.9 | | |
| 101.9 | | |
| 101.8 | |
Cautionary Note Regarding Forward-Looking
Statements
When used in this press release or other written
or oral communications, statements that are not historical in nature, including those containing words such as “will,” “believe,”
“expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,”
“should,” “could,” “would,” “may,” the negative of these words 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. These forward-looking statements include information about possible or assumed future results with respect
to MFA’s business, financial condition, liquidity, results of operations, plans and objectives. Among the important factors that
could cause our actual results to differ materially from those projected in any forward-looking statements that we make are: general
economic developments and trends and the performance of the housing, real estate, mortgage finance, broader financial markets; inflation,
increases in interest rates and changes in the market (i.e., fair) value of MFA’s residential whole loans, MBS, securitized debt
and other assets, as well as changes in the value of MFA’s liabilities accounted for at fair value through earnings; the effectiveness
of hedging transactions; 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; credit risks underlying MFA’s assets, including changes in the default rates and management’s assumptions
regarding default rates on the mortgage loans in 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 residential whole loans and the extent of prepayments, realized losses and changes in
the composition of MFA’s residential whole loan portfolios that may occur during the applicable tax period, including gain or loss
on any MBS disposals or 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; targeted or expected returns on our investments in recently-originated mortgage loans, the performance of which
is, similar to our other mortgage loan investments, subject to, among other things, differences in prepayment risk, credit risk and financing
costs associated with such investments; risks associated with the ongoing operation of Lima One Holdings, LLC (including, without limitation,
unanticipated expenditures relating to or liabilities arising from its operation (including, among other things, a failure to realize
management’s assumptions regarding expected growth in business purpose loan (BPL) origination volumes and credit risks underlying
BPLs, including changes in the default rates and management’s assumptions regarding default rates on the BPLs originated by Lima
One)); 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; risks associated with our investments in MSR-related
assets, including servicing, regulatory and economic risks; risks associated with our investments in loan originators; risks associated
with investing in real estate assets generally, including changes in business conditions and the general economy; and other risks, uncertainties
and factors, including those described in the annual, quarterly and current reports that we file with the SEC. These forward-looking
statements are based on beliefs, assumptions and expectations of MFA’s future performance, taking into account information currently
available. Readers and listeners 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.
Exhibit 99.2
Company Update FOURTH QUARTER 2023
2 Q3 202 2 Financial Snapshot Forward - looking statements When used in this presentation or other written or oral communications, statements that are not historical in nature, including those containing words such as “will,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “could,” “would,” “may,” the negative of these words or similar expressions, are intended to identify “forward - looking statements” within the meaning of Section 27 A of the Securities Act of 1933 , as amended, and Section 21 E of the Securities Exchange Act of 1934 , as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions . These forward - looking statements include information about possible or assumed future results with respect to MFA’s business, financial condition, liquidity, results of operations, plans and objectives . Among the important factors that could cause our actual results to differ materially from those projected in any forward - looking statements that we make are : general economic developments and trends and the performance of the housing, real estate, mortgage finance, broader financial markets ; inflation, increases in interest rates and changes in the market (i . e . , fair) value of MFA’s residential whole loans, MBS, securitized debt and other assets, as well as changes in the value of MFA’s liabilities accounted for at fair value through earnings ; the effectiveness of hedging transactions ; 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 ; credit risks underlying MFA’s assets, including changes in the default rates and management’s assumptions regarding default rates on the mortgage loans in 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 residential whole loans and the extent of prepayments, realized losses and changes in the composition of MFA’s residential whole loan portfolios that may occur during the applicable tax period, including gain or loss on any MBS disposals or 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 ; targeted or expected returns on our investments in recently - originated mortgage loans, the performance of which is, similar to our other mortgage loan investments, subject to, among other things, differences in prepayment risk, credit risk and financing costs associated with such investments ; risks associated with the ongoing operation of Lima One Holdings, LLC (including, without limitation, unanticipated expenditures relating to or liabilities arising from its operation (including, among other things, a failure to realize management’s assumptions regarding expected growth in business purpose loan (BPL) origination volumes and credit risks underlying BPLs, including changes in the default rates and management’s assumptions regarding default rates on the BPLs originated by Lima One) ; 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 ; risks associated with our investments in MSR - related assets, including servicing, regulatory and economic risks ; risks associated with our investments in loan originators ; risks associated with investing in real estate assets generally, including changes in business conditions and the general economy ; and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC . These forward - looking statements are based on beliefs, assumptions and expectations of MFA’s future performance, taking into account information currently available . Readers and listeners 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 .
3 MFA at a glance 3 $1.9B Total equity 1998 Listed on NYSE in Leading hybrid mortgage REIT with extensive experience in managing residential mortgage assets through economic cycles $10.8B Total assets NYSE: MFA $4.7B Common dividends as of Dec. 31, 2023 as of Dec. 31, 2023 paid since IPO Dividend yield 13% as of Feb. 20, 2024 Loans acquired 3 $22B since 2014 Total shareholder return 2 30.7% FY 2023 Total economic return 1 7.8% Q4 2023 See page 26 for endnotes
4 Q 4 202 3 financial snapshot $13.98 $14.57 GAAP net income 5 $0.80 per basic common share Distributable earnings 6 $0.49 per common share GAAP book value Economic book value 4 per common share per common share $318M Unrestricted cash 1.7x Recourse leverage 7 4 Q4 Dividend $0.35 per common share Average coupon 10% on loans acquired in Q4
5 Q4 2023 Company Highlights □ Strong earnings and book value performance during another volatile quarter ▪ GAAP and Economic book value rose by 3.7% and 5.3%, respectively ▪ Distributable earnings of $0.49 per share, which includes $0.08 per share due to release of CECL reserve ▪ Declared $0.35 dividend □ Added $882M of loans and securities at attractive levels ▪ Lima One originated loans with a maximum UPB of $594M 8 at average coupon of 10.5% □ Loan portfolio credit fundamentals remain strong ▪ Current LTV of 59% on our loan portfolio at year - end □ Continued focus on liquidity and non - mark - to - market (non - MTM) 9 funding ▪ Issued two securitizations totaling $452M, bringing total securitized debt issued in 2023 to $1.8B ▪ Increased share of non - MTM loan financing to 78% ▪ Ended year with $318M of unrestricted cash ▪ Issued $115M of 5 - year 8.875% senior unsecured notes in Jan. 2024
6 Non - QM Loans Business Purpose Loans 12 Legacy RPL/NPL Other $3.8B $4.0B $1.1B $0.4B □ Acquired $882M of loans and Agency MBS, growing investment portfolio to $9.9B ▪ Lima One funded $573M 10 of new business purpose loans (BPLs) and draws on existing loans ▪ Purchased $287M of non - qualified mortgage (Non - QM) loans ▪ Purchased $22M of Agency MBS, growing position to $559M ▪ Sold $79M of lower coupon Non - QM loans and $18M of MSR - related securities ▪ Portfolio runoff was $408M in Q4 and $1.5B for FY 2023 □ High interest rates continue to provide opportunities to add new assets at attractive yields ▪ Average coupon on loans acquired in Q4 was 10% ▪ Acquired $3B of loans in FY 2023 at average coupon of 9.8% ▪ Average coupon in Lima One origination pipeline exceeds 10.25% ▪ Incremental ROE for new investments expected to be mid - teens Q4 2023 Investment Activity Investment Portfolio as of Dec. 31 11 Agency MBS $0.6B Average Coupon on Loan Acquisitions 4% 5% 6% 7% 8% 9% 10% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023
7 Q4 2023 Liability Highlights □ Our borrowing costs have been relatively stable due to fixed - rate securitizations and interest rate swaps ▪ Effective cost of funds in Q4 was 4.33% and 4.11% for FY 2023 □ Issued $452M of securitized term debt in Q4 ▪ Collateralized by $520M UPB of Non - QM and Transitional loans ▪ 72% of our asset - based financing is non - MTM ▪ Issued additional securitization collateralized by $193M UPB of Transitional loans in Feb. 2024 □ Overall leverage was 4.5x and recourse leverage was 1.7x at Dec. 31 ▪ $2.4B of unused financing capacity across all loan product types □ Repurchased $10M of convertible notes and additional $40M so far in 2024 ▪ Outstanding balance is less than $170M as of Feb. 21 □ Issued $115M of 5 - Year 8.875% senior unsecured notes in Jan. 2024 MTM Warehouse Line Non - MTM Warehouse Line Non - MTM Securitized Debt Other $2.4B MTM $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 Liabilities ($B) as of Dec. 31 Agency Repo MTM Warehouse Lines Non - MTM Warehouse Lines Non - MTM Securitized Debt Other $6.5B Non - MTM
8 Q4 2023 Interest Rate Swaps □ Positive carry on our interest rate swap position exceeds 350 bps ▪ We continue to benefit from our $3.3B interest rate hedge placed primarily in late 2021 and early 2022 before the Federal Reserve began aggressively raising the Fed Funds Rate in mid - 2022 ▪ Weighted average fixed pay rate was 1.85% and variable receive rate was 5.38% 13 at Dec. 31 ▪ Net positive swap carry of $31M, up from $29M in Q3 □ Added $185M of longer duration swaps in Q4, bringing net portfolio duration to 0.91 at Dec. 31 □ $3.3B swap position nearly covers $3.6B of floating - rate liabilities 1.49% 0.90% 1.25% WA Fixed Pay Rate: 2.69% 1.12% 1.58% 2.71% 3.64% $- $100 $200 $300 $400 $500 $600 $700 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Q4 2025 Q1 2026 Q2 2026 Q3 2026 Q4 2026 Q1 2027 Q2 2027 Q3 2027 Q4 2027 2028- 2033 Swap Maturity Profile ($M)
9 □ Loan delinquencies and loan - to - value (LTV) ratios remain low ▪ We continue to benefit from accumulated home price appreciation and principal paydowns ▪ 60+ day delinquency rate on Purchased Performing Loans 14 rose to 3.8% □ Realized losses have been rare due to low LTVs, strong underwriting and proactive asset management ▪ Total loan portfolio LTV was 59% at Dec. 31 15 ▪ Only 3.3% of our Purchased Performing Loans (as measured by UPB) have LTV ratios above 80% □ Geographically diverse loan portfolio Q4 2023 Credit Highlights 32% 25% Legacy RPL/NPL Legacy RPL/NPL 16 60+ day delinquency Q4 2022 Q4 2023 3.1% 3.8% Purchased Performing Purchased Performing 60+ day delinquency Q4 2022 Q4 2023 56% 64% 54% 59% Loan Portfolio LTV 15 Q4 2023 CA 27% FL 13% TX 7% NY 5% GA 5% NJ 3% Other 40% Loan Portfolio State Concentration 17 - $1B $2B $3B $4B <60% 60-70% 70-80% 80-90% 90-100% >100 % Loan Portfolio LTV Distribution Purchased Performing LTV Legacy RPL/NPL LTV
10 □ Strong origination volume in Q4 and FY 2023 ▪ $594M of originations 8 in Q4 with average LTV 18 of 64% and FICO score of 749 ▪ $2.3B originated in 2023, exceeding $2B for second consecutive year ▪ Origination fees, servicing fees and other fee income totaled $10.8M □ Lima has originated $5.6B 8 of BPLs for our balance sheet since our acquisition in 2021 ▪ Lima offers a broad range of loan products to real estate investors nationwide including rehab loans, bridge loans, construction loans, rental loans and small - balance multifamily loans ▪ Credit performance remains strong with 60+ day delinquency rate of 3.9% for our BPLs originated by Lima One Q4 2023 Lima One Highlights $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Origination UPB ($B) Lima One Origination Volume Since Acquisition 8 6.38% 5.38% 6.13% 5.70% 6.09% 6.58% 6.62% 6.88% 7.21% 7.45% Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 BPL Portfolio Yield
11 Portfolio s tatistics 12/31/23 9/30/23 UPB ($M) $2,368 $2,106 Maximum loan amount ($M) $2,954 $2,693 Average maximum loan amount $852K $788K WA gross coupon 9.24% 8.92% Quarterly yield 8.60% 8.35% WA as - is/purchased LTV 19 66% 66% WA current ARV - LTV 20 64% 64% WA FICO score 747 746 WA loan age (months) 11 11 Small balance multifamily (5+ units) 50% 49% Ground - up construction 20% 20% 3 - month repayment rate 21 33 CPR 37 CPR 60+ days delinquent 5.1% 4.3 % Top 2 states TX 16% 17% FL 11% 12% Q4 2023 Transitional Loan Highlights □ Transitional loan portfolio grew to $2.4B UPB ▪ Lima One originated loans with a maximum UPB of $498M 8 at average ARV - LTV of 63% and average coupon of 10.9% □ Issued our third revolving securitization in Oct. 2023 and fourth in Feb. 2024 ▪ $1.3B UPB of loans have been financed via these revolving structures since 2022 □ 79% of Transitional loan financing is non - MTM TX 16% FL 12% GA 11% NY 7% NC 6% CA 5% IL 4% SC 4% OH 4% TN 3% Other 30% State Concentration 17 Small Balance Multifamily Loans 50% Bridge Loans 14% Ground - up Construction Loans 20% Rehab Loans 16% Loan Product 1% 2% 12% 25% 38% 23% <620 620-659 660-699 700-739 740-779 780+ FICO Score at Origination
12 P ortfolio s tatistics 12/31 /2 3 9/30/23 UPB ($M) $1,730 $1,668 Average loan balance $247K $249K WA gross coupon 6.36% 6.22% Quarterly yield 6.01% 5.88% WA original LTV 70% 70% WA current LTV 15 64% 62% WA FICO score 738 737 WA DSCR 22 1.47x 1.48x WA loan age (months) 21 20 Hybrid ARMs 25% 25% Cash - out refinance 70% 71% 3 - month prepayment rate 6 CPR 6 CPR 60+ days delinquent 4.7% 3.8% Top 2 states FL 10% 11% GA 8% 9% Q4 2023 SFR Loan Highlights □ Single - family rental (SFR) loan portfolio grew by 4% ▪ Lima One originated $96M of SFR loans in Q4 with average LTV of 67% and average coupon of 8.6% ▪ $364M of SFR loans originated in FY 2023 with average LTV of 68% and average coupon of 8.4% □ Issued seven securitizations collateralized by $1.6B UPB of SFR loans since 2021 □ 87% of SFR loan financing is non - MTM FL 10% PA 9% GA 8% OH 8% NC 5% NJ 5% IL 5% TX 5% MI 4% NY 4% Other 37% State Concentration 17 0% 12% 51% 37% < 1x 1-1.20x 1.20-1.5x >1.5x DSCR at Origination 0% 4% 14% 28% 33% 19% <620 620-659 660-699 700-739 740-779 780+ FICO Score at Origination
13 Q4 2023 Non - QM Highlights □ Acquired $282M UPB of Non - QM loans in Q4 with average LTV of 71% and average coupon of 8.8% ▪ Acquired $863M of loans in FY 2023 with average LTV of 67% and average coupon of 8.8% □ Issued our 13 th Non - QM securitization in Q4 ▪ Collateralized by $295M UPB of loans ▪ $4.8B UPB securitized since strategy inception □ 79% of Non - QM loan financing is non - MTM CA 53% FL 16% TX 5% AZ 3% CO 2% Other 21% State Concentration 17 12.8% 43.7% 25.6% 2.5% 15.3% Loan Product Type Full Doc Bank Statement DSCR Asset Depletion Other 3.3% 2.6% 2.3% 2.6% 2.7% 2.4% 2.2% 2.7% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 60+ Days Delinquent P ortfolio s tatistics 12/31/23 23 9/30/23 UPB ($M) $3,935 $3,963 Average loan balance $496K $503K WA gross coupon 5.92% 5.74% Quarterly yield 5.06% 5.10% WA original LTV 67% 67% WA current LTV 15 56% 56% WA FICO score 735 735 Fixed rate 79% 78% Hybrid ARMs 21% 22% Purchase 52% 52% Cash - out refinance 37% 37% 3 - month prepayment rate 8 CPR 9 CPR 60+ days delinquent 2.7% 2.2% Top 2 states CA 53% 55% FL 16% 15%
14 Legacy Non - Performing and Re - Performing Loans Non - Performing L oans (NPLs) 24 □ Remaining UPB of $651M for loans purchased as NPLs □ 94% of loans purchased as NPLs were performing, paid in full (PIF), liquidated or REO at Dec. 31 □ Achieving favorable outcomes due to home price appreciation and intensive asset management □ 77% of loans modified by MFA are either performing or have paid in full as of Dec. 31 □ Sold 71 REO properties for $23M, realizing net gains of $2M Re - Performing Loans (RPL) 25 □ Remaining UPB of $ 704M for loans purchased as RPLs □ 8 6 % of RPL portfolio was less than 60 days delinquent a t Dec. 31 □ On average, 33 % of 60+ days delinquent loans are making payments □ Portfolio LTV has fallen to 49 % due to significant home price appreciation and principal repayments □ Seasoned , stable portfolio with average loan age of 1 8 years and average UPB of $186K NPL Acquisition Year 2014 2015 2016 2017 2018 2019 Total UPB Purchased ($M) 208 620 280 670 497 227 2,501 Status 12/31/2023 Performing 26 /PIF 46% 29% 31% 40% 53% 40% 40% Liquidation/REO 49% 65% 66% 54% 40% 47% 54% Non - performing 5% 6% 3% 6% 7% 13% 6% Remaining UPB ($M) 50 110 41 178 170 102 651 0% 5% 10% 15% 20% 25% Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 RPL Portfolio CPR 1-Month 3-Month
15 Appendix James Casebere , Landscape with Houses ( Dutchess County, NY) #2, 2010 (detail)
16 MFA Financial Overview □ MFA Financial, Inc. (NYSE: MFA) is an internally managed real estate investment trust (REIT) that invests in U.S. residential mortgage loans and mortgage - backed securities □ MFA focuses primarily on mortgage subsectors in which it tries to avoid direct competition with banks and government - sponsored enterprises □ MFA owns a diversified portfolio of business purpose loans (BPLs), non - qualified mortgage (Non - QM) loans, re - performing/non - performing loans (RPL/NPLs) and residential mortgage - backed securities □ In 2021, MFA acquired Lima One Capital, a leading nationwide BPL originator and servicer with $9B 8 in originations since its formation in 2011 □ MFA originates BPLs directly through Lima One and acquires Non - QM loans through flow and mini - bulk arrangements with a select group of originators with which it holds strong relationships □ MFA operates a leading residential credit securitization platform with $8.8B of issuance since inception □ MFA has deep expertise in residential credit as well as a long history of investing in new asset classes when compelling opportunities arise □ Since its IPO in 1998, MFA has distributed $4.7 billion of dividends to its stockholders
17 Lima One: Leading Nationwide BPL Originator and Servicer Product Offerings □ Lima One offers a diverse selection of both short - term and long - term financing solutions to experienced real estate investors across the U.S. □ Current products include rehab loans, construction loans, single - family rental loans and small - balance multifamily loans Fully Integrated BPL Platform □ Lima One, a wholly - owned subsidiary of MFA, is an industry - leading, fully integrated business purpose lending platform □ Lima operates an efficient and scalable platform with approximately 300 employees headquartered in Greenville, SC □ Lima has originated $5.6 B 8 since MFA’s acquisition in 2021 and $9B 8 since its formation in 2011 □ Origination volume of $2.3B 8 in both 2022 and 2023 □ Lima provides MFA with access to organically - created, high - yielding loans, substantially below the cost to purchase from third parties Credit Quality □ Strong focus on credit quality, with disciplined underwriting, in - house servicing and construction management teams □ Conservative underwriting with average FICO score of 744 and average LTV of 67% 15 as of Dec. 31, 2023 □ 60+ day delinquency rate of 3.9% as of Dec. 31, 2023 27 □ Historical losses of less than 1 bp on over $2B of payoffs and liquidations for loans held by MFA and originated by Lima One Geographic and Borrower Diversity □ No state concentration above 15% and no borrower concentration above 2% Concentration 10% to 15% 5% to 10% Below 5% No loans
18 Book Value Upside □ Economic book value has over $3 per share of potential upside ▪ Our loan portfolio is marked at a substantial discount to par largely due to impact of higher interest rates ▪ We recoup these unrealized losses as borrowers make scheduled principal payments and as loans pay off □ Economic book value would be $17.65 per share if our loans and securitized debt were repaid at par ▪ Strong credit fundamentals support potential book value upside $3.08 potential upside $6 $8 $10 $12 $14 $16 $18 $20 $22 MFA Stock Price 12/31 EBV 12/31 Loan portfolio discount to par Securitized debt discount to par Potential EBV Potential upside in Economic book value (EBV) $14.57 $5.43 $(2.35) $17.65 $11.27 $14.57 EBV
19 MFA - Issued Securitizations Outstanding Securitization Name Loan Product Type Settlement Date Original Collateral UPB ($M) 28 Current Collateral UPB ($M) 28 Bonds Sold ($M) Original UPB Sold (%) 29 Outstanding Balance of Bonds Sold ($M) Weighted Average Coupon (WAC) of Outstanding Bonds Sold WAC of Underlying Loans Callable Date MFRA 2020 - NQM1 Non - QM Sep - 20 391 114 373 95% 96 2.27% 5.92% Currently Callable MFRA 2020 - NQM2 Non - QM Oct - 20 570 178 535 94% 142 2.13% 6.17% 30% Clean - up Call MFRA 2020 - NQM3 Non - QM Dec - 20 381 123 359 94% 101 1.79% 5.57% Currently Callable MFRA 2021 - INV1 SFR Feb - 21 217 82 198 91% 63 1.36% 6.96% Currently Callable MFRA 2021 - NPL1 NPL Mar - 21 367 214 240 65% 81 2.36% 5.16% Currently Callable MFRA 2021 - NQM1 Non - QM Apr - 21 394 140 371 94% 118 1.71% 5.56% Mar - 24 MFRA 2021 - RPL1 RPL Jun - 21 473 294 435 92% 262 1.42% 5.18% 20% Clean - up Call MFRA 2021 - NQM2 Non - QM Aug - 21 289 154 277 96% 142 1.36% 5.11% Jul - 24 MFRA 2021 - AEINV1 Agency Eligible Oct - 21 312 267 297 95% N/A 1.43% 3.27% N/A MFRA 2021 - INV2 SFR Nov - 21 284 238 260 91% 213 2.18% 5.14% Oct - 24 MFRA 2021 - AEINV2 Agency Eligible Dec - 21 340 301 323 95% N/A 1.52% 3.46% N/A MFRA 2022 - CHM1 Non - QM Mar - 22 237 178 204 86% 144 3.92% 5.11% Mar - 24 MFRA 2022 - NQM1 Non - QM Mar - 22 333 272 310 93% 249 4.14% 4.56% Mar - 25 MFRA 2022 - INV1 SFR Apr - 22 258 230 224 87% 196 4.01% 4.84% Apr - 25 MFRA 2022 - RTL1 Transitional Apr - 22 265 265 239 90% 239 5.22% 8.13% Mar - 24 MFRA 2022 - NQM2 Non - QM Jun - 22 541 473 398 74% 339 4.00% 4.27% Jun - 25 MFRA 2022 - RPL1 RPL Jul - 22 336 259 307 96% 246 3.39% 4.83% Jul - 25 MFRA 2022 - INV2 SFR Jul - 22 214 198 169 79% 152 4.95% 5.63% Jul - 25 MFRA 2022 - NQM3 Non - QM Sep - 22 342 303 274 80% 235 5.57% 5.88% Sep - 25 MFRA 2022 - INV3 SFR Oct - 22 235 219 160 68% 147 6.00% 6.51% Oct - 25 MFRA 2023 - NQM1 Non - QM Jan - 23 314 284 253 81% 224 5.75% 6.04% Jan - 26 MFRA 2023 - RTL1 Transitional Feb - 23 155 155 116 75% 116 7.58% 9.52% Aug - 24 MFRA 2023 - INV1 SFR Feb - 23 204 192 154 76% 143 6.10% 6.97% Feb - 26 MFRA 2023 - NQM2 Non - QM May - 23 372 346 309 83% 283 4.66% 5.74% May - 26 MFRA 2023 - INV2 SFR Sep - 23 215 213 191 89% 190 7.05% 8.05% Sep - 26 MFRA 2023 - NQM3 Non - QM Sep - 23 387 364 343 89% 321 6.74% 7.87% Aug - 26 MFRA 2023 - RTL2 Transitional Oct - 23 230 230 184 80% 184 8.50% 10.05% Oct - 25 MFRA 2023 - NQM4 Non - QM Dec - 23 295 295 268 91% 268 6.32% 8.06% Dec - 26 MFRA 2024 - RTL1 Transitional Feb - 24 200 200 160 80% 160 7.09% 10.83% Jul - 26 Total 9,152 6,781 7,931 85% 5,054 4.60% 6.09%
20 Select Financial Metrics 1.74% 2.14% 2.17% 2.13% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Net Interest Spread 2.64% 2.99% 3.02% 2.96% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Net Interest Margin 3.95% 3.96% 4.18% 4.33% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Effective Cost of Funds $- $0.10 $0.20 $0.30 $0.40 $0.50 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Distributable Earnings vs. Dividend DE Dividend $- $4 $8 $12 $16 Q1 2023 Q2 2023 Q3 2023 Q4 2023 GAAP vs. Economic Book Value GAAP Book Value Economic Book Value 5.69% 6.10% 6.35% 6.46% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Asset Yield
21 Reconciliation of GAAP net income to non - GAAP Distributable earnings “Distributable 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 . Distributable earnings is determined by adjusting GAAP net income/(loss) by removing certain unrealized gains and losses, primarily on residential mortgage investments, associated debt, and hedges that are, in each case, accounted for at fair value through earnings, certain realized gains and losses, as well as certain non - cash expenses and securitization - related transaction costs . The transaction costs are primarily comprised of costs only incurred at the time of execution of our securitizations and include costs such as underwriting fees, legal fees , diligence fees, bank fees and other similar transaction related expenses . These costs are all incurred prior to or at the execution of our securitizations and do not recur . Recurring expenses, such as servicing fees, custodial fees, trustee fees and other similar ongoing fees are not excluded from distributable earnings . Management believes that the adjustments made to GAAP earnings result in the removal of ( i ) income or expenses that are not reflective of the longer term performance of our investment portfolio, (ii) certain non - cash expenses, and (iii) expense items required to be recognized solely due to the election of the fair value option on certain related residential mortgage assets and associated liabilities . Distributable earnings is one of the factors that our Board of Directors considers when evaluating distributions to our shareholders . Accordingly, we believe that the adjustments to compute Distributable earnings specified below provide investors and analysts with additional information to evaluate our financial results . The following table provides a reconciliation of GAAP net (loss)/income used in the calculation of basic EPS to our non - GAAP Distributable earnings for the quarterly periods presented . ( $ i n m illions, e xcept p er s hare a mounts) Q4 202 3 Q3 202 3 Q 2 202 3 Q 1 202 3 Q 4 2022 GAAP Net income/(loss) used in the calculation of basic EPS $ 81.5 $ (64.7) $ (34.2) $ 64.6 $ (1.6) Adjustments: Unrealized and realized gains and losses on: Residential whole loans held at fair value (224.2) 132.9 130.7 (129.2) 68.8 Securities held at fair value (21.4) 13.4 3.7 (2.9) 0.4 Residential whole loans and securities at carrying value 0.3 - - - - Interest rate swaps 97.4 (9.4) (37.0) 40.8 12.7 Securitized debt held at fair value 108.7 (40.2) (30.9) 48.8 ( 45.0 ) Investments in loan origination partners 0.3 0.8 0.9 - 8.5 Expense items: Amortization of intangible assets 0.8 0.8 1.3 1.3 1.3 Equity based compensation 3.6 4.4 3.9 3.0 2.5 Securitization - related transaction costs 2.7 3.2 2.1 4.6 1.7 Total adjustments $ (31.8) $ 105.9 $ 74.7 $ (33.6) $ 51.0 Distributable earnings $ 49.7 $ 41.2 $ 40.5 $ 31.0 $ 49.4 GAAP earnings/(loss) per basic common share $ 0.80 $ (0.64) $ (0.34) $ 0.63 $ (0.02) Distributable earnings per basic common share $ 0.49 $ 0.40 $ 0.40 $ 0.30 $ 0.48 Weighted average common shares for basic earnings per share 102.3 10 2.3 10 2.2 10 2.2 10 1 . 8
22 Reconciliation of GAAP Book Value to Economic Book Value “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 and securitized debt( 1 ) held 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 financial instruments . These adjustments are also reflected in the table below in our end of period stockholders’ equity . 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 investment activities, 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 GAAP book value per common share to our non - GAAP Economic book value per common share as of the end of each quarter since Q 4 2022 . ($ i n millions, except per share amounts) 12/31 /2 3 9/30 /2 3 6/30 /2 3 3 /3 1 /2 3 12 /3 1 /22 GAAP Total Stockholders’ Equity $ 1,899.9 $ 1,848.5 $ 1,944.8 $ 2,018.6 $ 1,988.8 Preferred Stock, liquidation preference (475.0) (475.0) (475.0) (475.0 ) (475.0 ) GAAP Stockholders’ Equity for book value per common share $ 1,424.9 $ 1,373.5 $ 1,469.8 $ 1, 543.6 $ 1, 513.8 Adjustments: Fair value adjustment to Residential whole loans, at carrying value (35.6) (85.3) (58.3) (33.9) (70.2) Fair value adjustment to Securitized debt, at carrying value 95.6 122.5 129.8 122.4 139.7 Stockholders’ Equity including fair value adjustments to Residential whole loans and Securitized debt held at carrying value (Economic book value ) $ 1,484.9 $ 1,410.7 $ 1,541.3 $ 1,632.1 $ 1,583.3 GAAP book value per common share $ 13.98 $ 13.48 $ 14.42 $ 15.15 $ 14.87 Economic book value per common share $ 14.57 $ 13.84 $ 15.12 $ 16.02 $ 15.55 Number of shares of common stock outstanding 101.9 101.9 101.9 101. 9 101.8
23 Book Value and Economic Book Value Rollforward GAAP Economic Book value per common share as of 9/30/23 $13.48 $13.84 Net income available to common shareholders 0.80 0.80 Common stock dividends declared (0. 35 ) (0. 35 ) Fair value changes attributable to residential mortgage securities and other 0.05 0.05 Change in fair value of residential whole loans reported at carrying value under GAAP — 0.49 Change in fair value of securitized debt at carrying value under GAAP — (0.26) Book value per common share as of 12/31/23 $ 13.98 $ 14.57
24 GAAP Segment Reporting (Dollars in m illions) Mortgage - Related Assets Lima One Corporate Total Three months ended Dec. 31, 2023 Interest Income 94.5 71.9 3.5 169.9 Interest Expense 68.7 51.0 3.7 123.4 Net Interest Income /(Expense) $ 25.8 $ 20.9 $ (0.2) $ 46.5 (Provision)/Reversal of Provision for Credit Losses on Residential Whole Loans 7.9 - - 7.9 Net Interest Income /(Expense) after Reversal of Provision/( Provision ) for Credit Losses $ 33.7 $ 20.9 $ (0.2) $ 54.4 Net gain/(loss) on residential whole loans measured at fair value through earnings 170.9 53.3 - 224.2 Net Realized Loss on Residential Whole Loan Held at Carrying Value (1.2) - - (1.2) ) Impairment and other net gain on securities and other portfolio investments 22.3 - (0.3) 22.0 Net gain on real estate owned 0.8 0.1 - 0.9 Net gain on derivatives used for risk management purposes (53.3) (17.1) - (70.4) Net gain on securitized debt measured at fair value through earnings (76.4) (35.3) - (111.7) Lima One - origination, servicing and other fee income - 10.8 - 10.8 Other, net 1.4 0.2 (0.1) 1.5 Total Other Income/(Loss) , net $ 64.5 $ 12.0 $ (0.4) $ 76.1 Compensation and benefits - 11.9 7.5 19.4 General and administrative expenses 0.2 5.7 6.7 12.6 Loan servicing, financing, and other related costs 4.9 0.4 2.6 7.9 Amortization of intangible assets - 0.9 - 0.9 Net Income/( Loss ) $ 93.1 $ 14.0 $ (17.4) $ 89.7 Less Preferred Stock Dividend Requirement - - 8.2 8.2 Net Income/( Loss ) Available to Common Stock and Participating Securities $ 93.1 $ 14.0 $ (25.6) $ 81.5
25 Distributable Earnings by Operating Segment (Dollars in m illions) Mortgage - Related Assets Lima One Corporate Total Three months ended Dec. 31, 2023 GAAP Net income/(loss) used in the calculation of basic EPS $ 93.1 $ 14.1 $ (25.7) $ 81.5 Adjustments: Unrealized and realized gains and losses on: Residential whole loans held at fair value (170.9) (53.3) — (224.2) Securities held at fair value (21.4) — — (21.4) Gain/Loss on Loans and Securities 0.3 0.3 Interest rate swaps 72.7 24.7 — 97.4 Securitized debt held at fair value 73.8 34.9 — 108.7 Investments in loan origination partners — — 0.3 0.3 Expense items: Amortization of intangible assets — 0.8 — 0.8 Equity based compensation — 0.1 3.5 3.6 Securitization - related transaction costs 0.1 — 2.6 2.7 Total adjustments $ (45.4) $ 7.2 $ 6.4 $ (31.8)
26 Endnotes 1) Total economic return is calculated as the quarterly change in Economic Book Value (EBV) plus common dividends declared durin g t he quarter divided by EBV at the start of the quarter. 2) Total shareholder return includes dividends paid. Assumes dividends reinvested in MFA shares. 3) Purchased value of all residential whole loans acquired by MFA since 2014. 4) Economic book value is a non - GAAP financial measure. Refer to slide 19 for further information regarding the calculation of this measure and a reco nciliation to GAAP book value. 5) GAAP net income presented per basic and diluted common share. 6) Distributable earnings is a non - GAAP financial measure. Refer to slide 18 for further information regarding the calculation of this measure and a reconciliation to GAAP net income. 7) Recourse leverage is the ratio of MFA’s financing liabilities (excluding non - recourse Securitized Debt) to net equity. Includin g Securitized Debt, MFA’s overall leverage ratio at Dec. 31, 2023 was 4.5x. 8) Origination amounts are based on the maximum loan amount, which includes amounts initially funded plus any committed but undr awn amounts. 9) Non - MTM refers to financing arrangements not subject to margin calls based on changes in the fair value of the financed resident ial whole loans. Such agreements may experience changes in advance rates or collateral eligibility as a result of factors such as changes in the delinquency statu s o f the financed residential whole loans. 10) Includes $417M of funded originations during Q4 plus $156M of draws funded during Q4 on previously originated Transitional lo ans . 11) Amounts presented reflect the aggregation of fair value and carrying value amounts as presented in MFA’s consolidated balance sh eet at Dec. 31, 2023. 12) Business Purpose Loans comprised of $2.4B of Transitional loans and $1.6B of SFR loans at Dec. 31, 2023. 13) Swap variable receive rate is the Secured Overnight Financing Rate (SOFR). 14) Purchased Performing Loans includes Non - QM, Transitional, Single - family rental, Seasoned Performing and Agency - eligible investor loans. 15) Reflects principal amortization and estimated home price appreciation (or depreciation) since acquisition. Zillow Home Value In dex (ZHVI) is utilized to estimate updated LTVs. For Transitional loans, the LTV reflects after repaired loan to value. 16) Legacy RPL/NPL includes Purchased Credit Deteriorated and Purchased Non - Performing loans. 17) State concentration measured by loan balance. No state in “Other” category has concentration above 3%. 18) LTV is based on After Repaired Value (ARV) for Transitional loans and as - is LTV for Rental loans at origination. 19) Weighted average loan amount to as - is value (when available) or purchase value at origination. 20) Weighted average loan amount to after repaired value. Reflects loan amortization and estimated home price appreciation (or d epr eciation) since origination. ZHVI is utilized to estimate updated LTVs. 21) Includes all principal repayments. 22) Weighted average debt service coverage ratio (DSCR). 23) Excludes approximately $104M of Non - QM loans for which the closing had not yet occurred as of Dec. 31, 2023. 24) Non - Performing at purchase refers to loans at least 60 days delinquent at purchase. 25) Includes Purchased Credit Deteriorated (PCD) and certain other loans purchased as Re - Performing Loans but were not classified as PCD loans for accounting purposes. 26) Performing as of Dec. 31, 2023 defined as less than 60 days delinquent or made a full P&I payment in Dec. 2023. 27) 60+ day delinquency rate for loans originated by Lima One and held by MFA. 28) Collateral UPB includes cash for Transitional securitizations and REO properties for MFRA 2021 - NPL1. 29) Bonds sold relative to certificates issued.
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