MFA Financial, Inc. Announces Second Quarter 2015 Financial Results

NEW YORK, Aug. 4, 2015 /PRNewswire/ -- MFA Financial, Inc. (NYSE: MFA) today announced financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 and other highlights:

• Generated second quarter net income available to common shareholders of $74.3 million, or $0.20 per common share (based on 370.2 million weighted average common shares outstanding).  As of June 30, 2015, book value per common share was $7.96.
• On July 31, 2015, MFA paid its second quarter 2015 dividend of $0.20 per share of common stock to shareholders of record as of June 29, 2015.
• Subsequent to June 30, 2015, MFA's wholly-owned subsidiary, MFA Insurance, Inc. became a member of the Federal Home Loan Bank ("FHLB") of Des Moines.  We are excited to add this partner as a counterparty and look forward to working together with FHLB Des Moines to further its core mission of supporting housing finance.

In the second quarter, both net income and dividend per common share were $0.20.  Net income of $74.3 million includes $7.6 million of gains realized on sales of MBS.

William Gorin, MFA's CEO, said, "In the second quarter, we continued to identify and acquire credit sensitive residential mortgage assets that generate earnings without increasing MFA's overall interest rate exposure.  We grew our holdings of securities backed by re-performing and non-performing loans to $2.592 billion while moving forward with the acquisition of re-performing and non-performing whole loans, bringing our holdings of credit sensitive residential whole loans to $429.3 million.  In addition, we sold $16.3 million of Non-Agency MBS issued prior to 2008 ("Legacy Non-Agency MBS"), realizing a gain of $7.6 million.  This is the twelfth consecutive quarter we have realized gains through selected sales of Legacy Non-Agency MBS based on our projections of future cash flows relative to market pricing.  We did not acquire any Agency MBS in this quarter.

"MFA remains positioned for a period when Federal Reserve monetary policy may become more variable based on measures of the labor markets, indicators of inflation, international developments and other incoming data.  Through asset selection and hedging strategy, the estimated effective duration, a gauge of MFA's interest rate sensitivity, remains below 1.0 and measured 0.61 at quarter-end. Leverage, which reflects the ratio of our financing obligations to equity, was 3.3:1 at quarter-end."

Craig Knutson, MFA's President and COO, added, "MFA's portfolio asset selection process continues to emphasize residential mortgage credit exposure while seeking to minimize sensitivity to interest rates.  Our Legacy Non-Agency portfolio has benefited from improved housing fundamentals as LTVs decrease and delinquencies decline, thus lowering our expectations of future defaults and reducing expected future losses.  Our RPL/NPL MBS portfolio has credit protection through deal structure and subordination, while the short term nature of the cash flows minimizes its sensitivity to interest rate changes.  And our credit sensitive residential whole loans offer additional exposure to residential mortgage credit while offering us the opportunity to improve outcomes through sensible and effective servicing decisions."

MFA's Legacy Non-Agency MBS had a face amount of $4.809 billion with an amortized cost of $3.602 billion and a net purchase discount of $1.207 billion at June 30, 2015.  This discount consists of a $847.0 million credit reserve and other-than-temporary impairments and a $359.6 million net accretable discount.  We believe this credit reserve appropriately factors in remaining uncertainties regarding underlying mortgage performance and the potential impact on future cash flows.  Our Legacy Non-Agency MBS loss adjusted yield of 7.59% for the second quarter is based on projected defaults equal to 23% of underlying loan balances.  On average, these loans are approximately nine years seasoned and approximately 14% are currently 60 or more days delinquent.

The Agency MBS portfolio had an average amortized cost basis of 103.8% of par as of June 30, 2015, and generated a 1.89% yield in the second quarter.  The Legacy Non-Agency MBS portfolio had an average amortized cost of 74.9% of par as of June 30, 2015, and generated a loss-adjusted yield of 7.59% in the second quarter.  At the end of the second quarter, MFA held approximately $2.592 billion of the senior most tranches of RPL/NPL MBS.  These securities had an amortized cost of 99.9% of par and generated a 3.66% yield for the quarter. 

In addition, at June 30, 2015, our investments in credit sensitive residential whole loans totaled $429.3 million.  Of this amount, $245.4 million is recorded at carrying value, or 84.0% of the unpaid principal balance and generated a loss-adjusted yield of 6.88% (6.20% net of servicing costs) during the quarter and $183.9 million is recorded at fair value in our consolidated balance sheet.  On this portion of the portfolio we recorded gains for the quarter of approximately $3.2 million, primarily reflecting coupon interest payments received and changes in the fair value of the underlying loans during the quarter.

For the three months ended June 30, 2015, MFA's costs for compensation and benefits and other general and administrative expenses were $11.2 million or an annualized 1.43% of stockholders' equity as of June 30, 2015.

The following table presents the weighted average prepayment speed on MFA's MBS portfolio.

As of June 30, 2015, under its swap agreements, MFA had a weighted average fixed-pay rate of interest of 1.82% and a floating receive rate of 0.19% on notional balances totaling $3.050 billion, with an average maturity of 51 months.

The following table presents MFA's asset allocation as of June 30, 2015 and the second quarter 2015 yield on average interest earning assets, average cost of funds and net interest rate spread for the various asset types.

At June 30, 2015, MFA's $9.620 billion of Agency and Legacy Non-Agency MBS, were backed by Hybrid, adjustable and fixed-rate mortgages.  Additional information about these MBS, including average months to reset and three-month average CPR, is presented below:

 

 

 

Webcast MFA Financial, Inc. plans to host a live audio webcast of its investor conference call on Tuesday, August 4, 2015, at 10:00 a.m. (Eastern Time) to discuss its second quarter 2015 financial results. The live audio webcast will be accessible to the general public over the internet at http://www.mfafinancial.com through the "Webcasts & Presentations" link on MFA's home page.  To listen to the conference call over the internet, please go to the MFA website at least 15 minutes before the call to register and to download and install any needed audio software.  Earnings presentation materials will be posted on the MFA website prior to the conference call and an audio replay will be available on the website following the call.

When used in this press release or other written or oral communications, statements which are not historical in nature, including those containing words such as "will," "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. Statements regarding the following subjects, among others, may be forward-looking: changes in interest rates and the market value of MFA's MBS; changes in the prepayment rates on the mortgage loans securing MFA's MBS; changes in the default rates and management's assumptions regarding default rates on the mortgage loans securing MFA's Non-Agency MBS; MFA's ability to borrow to finance its assets and the terms, including the cost, maturity and other terms, of any such borrowing; 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 the Company to accrete the market discount on Non-Agency MBS and the extent of prepayments, realized losses and changes in the composition of MFA's Agency MBS and Non-Agency MBS portfolios that may occur during the applicable tax period, including gain or loss on any MBS disposals; 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 the Board 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 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 in engaged in the business of acquiring mortgages and mortgage-related interests; MFA's ability to successfully implement its strategy to grow its residential whole loan portfolio; expected returns on our investments in non-performing 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; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that MFA files with the Securities and Exchange Commission, could cause MFA's actual results to differ materially from those projected in any forward-looking statements it makes. All forward-looking statements 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.

 

 

 

 

                                   

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SOURCE MFA Financial, Inc.