MFA Financial (MFA) Tops Q4 EPS by 1c

February 20, 2020 8:36 AM EST

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MFA Financial (NYSE: MFA) reported Q4 EPS of $0.21, $0.01 better than the analyst estimate of $0.20.

Fourth Quarter 2019 and other highlights:

  • MFA generated fourth quarter GAAP net income of $96.9 million, or $0.21 per common share. Core earnings, a non-GAAP financial measure of MFA\'s operating performance that is calculated by adjusting GAAP net income to exclude the impact of unrealized gains and losses on certain investments in residential mortgage securities and related hedges, was also $0.21 per common share.
  • MFA acquired approximately $1.7 billion of residential mortgage assets in the fourth quarter, including $1.5 billion of residential whole loans. During 2019, residential whole loan acquisitions of approximately $4.3 billion drove net portfolio growth exceeding $1.0 billion.
  • Interest income on MFA\'s purchased performing loan portfolio increased 15.6% from the prior quarter to $61.9 million. For the full year, this portfolio generated $200.6 million in interest income, more than triple the prior year.
  • GAAP book value per common share during the quarter continued to be stable and was $7.04 at December 31, 2019. GAAP book value decreased from $7.15 at December 31, 2018, primarily due to discount accretion and realized gains on sales of Legacy Non-Agency MBS that were distributed as dividends.
  • Economic book value per common share, a non-GAAP financial measure of MFA\'s financial position that adjusts GAAP book value by the amount of unrealized mark to market gains on residential whole loans held at carrying value for GAAP reporting, was $7.44 at December 31, 2019. Economic book value increased marginally during the quarter and by approximately 1% during 2019.
  • On January 31, 2020, MFA paid its fourth quarter 2019 dividend of $0.20 per share of common stock to shareholders of record as of December 30, 2019.
  • Economic return (a measure of changes in MFA\'s GAAP book value plus dividends for a period) was 2.1% for the fourth quarter and 9.7% for the full year. When calculated using Economic book value, economic return was 3.1% for the fourth quarter and 12.1% for the full year.

Craig Knutson, MFA's CEO and President, said, "MFA's investment portfolio activity in the fourth quarter of 2019 was fueled by acquisitions of $1.7 billion of new assets. Our residential whole loan and REO portfolio increased during the quarter in excess of $1 billion and by nearly $3 billion for the year, primarily due to investments in purchased performing loans. Our growth in purchased performing loans was driven by the acquisition of Non-QM, fix and flip and single-family rental loans, as we continue to cultivate the strategic relationships with select loan origination partners that have been developed over the past several years. Through our willingness and ability to explore and enter into various arrangements, including flow agreements, strategic alliances and also minority investments, we have been able to partner with originators to source attractive investments, while enabling them to grow with support from MFA as a reliable provider of capital. During the quarter we made an additional $25 million investment, bringing total capital contributions across five different loan origination partners to approximately $148 million at year-end. These investments generated $3.7 million of income in the form of interest and dividends (before allocation of profits) during the quarter."

Mr. Knutson added, "Through our asset selection and hedging strategy, our estimated net effective duration, a gauge of our portfolio\'s sensitivity to interest rates, remained relatively low and measured 1.36 at quarter-end. Our portfolio continues to deliver GAAP book value stability. In addition, MFA\'s Economic book value was $7.44 at December 31, 2019 and has increased by approximately 1% during 2019. Leverage, which reflects the ratio of our financing obligations to equity, was 3.0:1 at quarter-end, up from 2.8:1 at the end of the third quarter, as we accessed additional borrowing capacity to fund loan growth."

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



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