MFA Financial (MFA) Misses Q1 EPS by 2c

May 7, 2019 8:32 AM EDT

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MFA Financial (NYSE: MFA) reported Q1 EPS of $0.17, $0.02 worse than the analyst estimate of $0.19.

First Quarter 2019 and other highlights:

  • MFA generated first quarter GAAP net income of $85.1 million, or $0.19 per common share.
  • As of March 31, 2019, book value per common share was $7.11.
  • GAAP Net Income per common share was $0.06 higher than the fourth quarter of 2018, primarily due to partial recovery of unrealized losses in our residential mortgage securities portfolio, particularly CRT securities.
  • Core earnings was $77.6 million, or $0.17 per common share in the first quarter. Core earnings is a non-GAAP measure of MFA's financial performance that is calculated by adjusting GAAP net income to exclude the impact of unrealized gains and losses on certain of our investments. Core earnings was lower than GAAP earnings in the first quarter due to the exclusion of unrealized gains on residential mortgage securities and related swap hedges measured at fair value through earnings.
  • Continued success in growing the investment portfolio, for the sixth consecutive quarter. MFA added approximately $1.2 billion of residential mortgage assets in the first quarter, including $875 million of residential whole loans, increasing the total investment portfolio by $369 million.
  • Net interest income on MFA's residential whole loan portfolio increased 21.4% from the prior quarter to $17.6 million, due to the acquisition of Purchased Performing Loans, including Non-QM loans, rehabilitation or "fix and flip" loans and single family rental loans.
  • On April 30, 2019, MFA paid its first quarter 2019 dividend of $0.20 per share of common stock to shareholders of record as of March 29, 2019.

Craig Knutson, MFA's CEO and President, said, "MFA continued to grow our investment portfolio in the first quarter of 2019, acquiring $1.2 billion of new assets during the quarter. Our residential whole loan and REO portfolio increased by $595 million, largely due to investments in purchased performing loans. In addition, MSR-related assets increased by $213 million. Our growth in purchased performing whole loans was driven by the acquisition of Non-QM loans, fix and flip loans and single family rental loans. We continue to gain traction on these new acquisition efforts, which involve relationships cultivated over the past two years. Through our willingness and ability to explore and enter into various arrangements, including flow agreements, strategic alliances and also minority equity investments, we have been able to partner with originators to source attractive new investments, while enabling them to grow with support from MFA as a reliable provider of capital."

"MFA is introducing this quarter a Core earnings financial measure that we consider to be more useful to understanding the economic earnings generated by our portfolio. Core earnings adjusts GAAP net income by excluding unrealized gains and losses of certain assets that arise due to market pricing disruptions that may be caused by technical factors rather than fundamental or cash flow-related changes. In addition, Core earnings serves as a consideration for our Board of Directors in the determination of our dividend."

Mr. Knutson added, "Through our asset selection and hedging strategy, our estimated net effective duration, a gauge of our portfolio's sensitivity to interest rates, remained relatively low and measured 1.07 at quarter-end. Our portfolio continues to deliver book value stability. MFA's book value per common share slightly decreased to $7.11 from $7.15 as of December 31, 2018. Leverage, which reflects the ratio of our financing obligations to equity, was 2.7:1 at quarter-end."

For earnings history and earnings-related data on MFA Financial (MFA) click here.

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