MFA Financial (MFA) Tops Q3 EPS by 11c

November 5, 2020 8:35 AM EST

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MFA Financial (NYSE: MFA) reported Q3 EPS of $0.17, $0.11 better than the analyst estimate of $0.06.

Third Quarter 2020 financial results update:

  • MFA generated third quarter net income of $79.0 million, or $0.17 per common share.
  • GAAP book value at September 30, 2020 was $4.61 per common share, while Economic book value, a non-GAAP financial measure of MFA's financial position that adjusts GAAP book value by the amount of unrealized market value changes in residential whole loans held at carrying value for GAAP reporting, was $4.92 per common share at quarter-end.
  • Earnings and changes in book value during the quarter were driven by continued improvements in the values of residential mortgage assets. In particular, values of our various types of residential whole loans increased appreciably during the period. Income from residential whole loans at fair value included $58.9 million of market value gains. Changes in the fair value of loans held on our balance at carrying value drove the increase in Economic book value, which has increased in excess of 20% since March 31, 2020.
  • We continued to make significant progress on initiatives to lower the cost of financing our investments with more durable forms of borrowing. We completed a $390.0 million securitization transaction of Non-QM assets in early September, which generated $92.7 million of additional liquidity and lowered the funding costs for the associated assets by approximately 165 basis points. In addition, following the end of the quarter, we completed a $570 million Non-QM securitization transaction in late October, which generated $125.1 million of additional liquidity and lowered the funding costs for the associated assets by approximately 179 basis points.
  • Subsequent to the end of the third quarter we repaid in full, without penalty or yield maintenance, the remaining principal balance of $481,250,000 under the 11% senior secured term loan that we obtained from Apollo and Athene on June 26, 2020.
  • MFA paid its previously declared cash dividend of $0.05 per share of common stock on October 30, 2020. On September 30, 2020 the Company paid its previously declared preferred stock dividends on its Series B and Series C preferred stock.
  • MFA's Board of Directors has authorized a share repurchase for up to $250 million of the Company's common stock.
  • Following the completion of the second Non-QM securitization, the repayment of the loan from Apollo and Athene and the payment of the dividend to common stockholders on October 30, 2020, MFA's cash totaled approximately $641.1 million.

Commenting on the third quarter 2020 results, Craig Knutson, MFA's CEO and President said, "MFA's third quarter financial results were the beginning of what we hope is a return to normal in this tumultuous year of 2020. Strong housing metrics combined with a continued tightening in credit spreads contributed materially to our third quarter earnings and also to book value, particularly our Economic book value, which was up over 10% in the quarter. We reinstated dividends on both our Series B and Series C Preferred Stock, paid all accrued but previously unpaid dividends on July 31st and resumed normal dividend payments on September 30th. We also paid a $0.05 dividend on our common stock on October 30th to stockholders of record on September 30, 2020."

Mr. Knutson added, "We have made substantial progress on multiple initiatives since June 30th that we believe should have a significant positive impact on our results in the fourth quarter and into 2021. Recall that we ended the second quarter after exiting forbearance on June 26th having restructured our funding liabilities to include $2 billion of non-mark-to-market term financing and a $500 million senior secured term loan. While this financing was critical in fortifying our balance sheet at the time, the cost of this debt was predictably expensive. We have completed two Non-QM securitizations aggregating over $960 million (the second of which closed last week), which substantially lowers our cost of financing while preserving the non-recourse, non-mark-to-market and term elements of these borrowings. In addition, through the additional liquidity generated from these transactions together with liquidity generated by our portfolio, we have also fully paid off the $500 million senior secured term loan. This loan had a scheduled amortization payment of $18.75 million on September 30, and we paid off the balance during October."

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

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