MFA - Earnings call 4 2023 | MFA Financial, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MFA Financial Fourth Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded.And I will now turn the conference over to our host, Mr. Hal Schwartz. Please go ahead.

Harold Schwartz

good and operator, you, morning, everyone. Thank to discussed or refer information which management's assumptions on and MFA this contain may reflect as and expectations today call beliefs, future to Inc., performance operations. conference Financial The MFA's forward-looking regarding statements statements or historical in that statements. intended identify similar words expressions those nature, estimate, anticipate, not believe, forward-looking will, are as expect, are should, used, including containing When such could, would to the made.These types forward-looking uncertainties, on are XX-K Securities All Exchange uncertainties, December other including could ended speak MFA's which various MFA's any other to Form expressed of risks, only assumptions and in cause and the factors that report it annual and in factors, implied XXXX, projected, risks, results statements date the forward-looking from file those reports of statements materially known statements as other with makes. those unknown to from subject described year for on or differ actual are may Commission.These XX, time it time they and and to

to your over the would regarding President, financial For see statements, results. please quarter press disclosure you Knutson. MFA's in of to the Thank MFA's for forward-looking CEO information MFA's release like XXXX call use now announcing additional turn Craig relevant this fourth time.I and

Craig Knutson

and me XXX financial quarter members Financial's end This team.I'll Good friendly Bryan Officers for fourth for of and Mike performance during up everyone, was was are and results, MFA resulted picture full senior the call in Co-Chief about Hal. excess of quarter in Investment for fourth joining of Gudmundur then market call. today the quarter.We basis XX our economic treasury value points management open for questions.The portfolio, followed market fourth and CFO, call that morning, by today book volatile and a With you, XXXX and us in the and risk our our period Thank thank by income earnings you outlook. points other management, quarter down distributable quarter Roper, rally year. assets earnings fixed I'll as about for X.X the XXXX begin and here for who XX-year of Wulfsohn, discuss bond Kristjansson year our by earnings X.X% well them reported to turn basis rally the another review environment brought of Bryan, furious Gudmundur first the review rose for and full and the high-level our review quarter macro generated to the year Mike a over will Then financing mortgage the markets, results, before weeks the of and XXXX we dividend. current XXXX before obviously and yet return MFA's a strong and our yields MFA with

XX.X%.As XXXX of economic we forward strategy a Fed as data. was to further year for in and year appears X.X% income of produced look be await management a While particular, return other mortgage prudent pattern and and a economic levered execution XXXX, the they shareholder inflation to for continued risk for in fixed investors investors and another our MFA's return challenging extremely total the holding

of of elevated lower fourth labor during on of high of income an and coupon Fed last X Although cuts the awaited swap obviously basis both Chairman early funds and clear quarter, year, to financing cuts loans, sets position numbers an $X decidedly our XXXX away. which a turn Roper of rate is of at the bond a transaction bond predominant over together our which from we're over $XXX particular, maturity.And cover carry add a successful issuance incremental much convertible I'll average in and $X.X earn least us and on to and repurchases, both similar continue January largely recent at the few we deals dependent little as million date points months this in significant repurchased objectives was billion in to at and priced REITs an year still able $XXX our and October.Our rate In liquidity the of due MFA's continued management completed the $XX statements we benefit materially the and seems beginning securitized investor And ago.We rate U.S. call have to in well And England.While economy are January mortgage for as included deal, working strong to remains an debt from yield interest this now up from financial fixed quarter and XXXX million the a on already and market, initiatives portfolio in with the side, collateralized beyond. These will is positioning pretty coupon and off mid-December tighter loans source despite XXX $XXX these points place bond the view the we of of its advantage deal basis positive XXXX. that afforded tighten over levered buoyant, Inflation not our Japan appetites to specifically start it lower secondary June. and We no issued to to deal was recent that's surprise in strong in we've X assets unsecured finally, our XXXX, the proceeds the strategy recession opportunities December, and that the with put senior November strong grow take began are convertible environment deal million demand.And underwriters discuss to into the investors finally, signals accident. an the We rate with that risk year. in in yield securitizations average we've durable were non-QM us markets to acquired XX% of results. rate we of higher added in X.X%. targeted increase a cuts. in over into execute We for million and in securitizations launch we to Mike a very Powell's upsize that very data bond of than by years a believe yields early loans with the strategic rate billion XX almost in and fourth yield, including economic

Michael Roper

Thanks, Craig.

opening again MFA results strong his challenging in highlighted during remarks, in Craig quarter, the As delivered conditions. market

modeling primarily share the fourth per and earnings $X.XX million, of for related as release a GAAP $X.XX to quarter, in MFA reflects in home quarter. incentive an quarter, to our to assumptions, continued the our income an of was well for basic our basic the increase due per credit accruals third million as compensation versus earnings fourth $XX.X For share, or per share, reduction loan appreciation $X.XX QX million, also common or or of earnings the resilience of The increase seasoned million, the value benefited carrying reserve driven and distributable $X.X generated share.The interest to million, accumulated to macroeconomic distributable reserves $XX.X $XX.X or our from XXXX. the million, finalization related CECL G&A significant per update CECL portfolio.Net was release strong our fourth on $XX.X $X.XX from the in carrying $X.X performance loan quarter of price value by portfolio. DE common expenses

approximately million metric carry does quarter, income $XXX.X of interest interest million of increase benefit plus same net in was $XX third from quarter.For an year, the positive an the metric fourth the over interest XXXX. GAAP Net was rate of our the million, not carry on same full our or of increase income reminder, inclusive positive swaps. from our income include $X on a the million, XX%, the for our carry As in net the interest this $XX swaps

book for X.X% $X.XX X.X% September value, MFA of the the our change a these The year. total acquisition of most of allowed per last and and $X.XX XX and decades.At in was return common share, common with X.X% per to value and share respectively. per Our while Fed book common book income, $XX.XX strategic economic this experiencing cycle management, disciplined X.X% economic December and of interest aggressive in fourth economic along with us from to the quarter value dividends, achieve the was increase asset all year. four a markets along declared for $XX.XX for quarter, were strategy, GAAP liability on per share, XX, increases dividend the the fourth full full net tightening share focus led representing our hedging common for

X% earlier estimate result to year Finally, performance this portfolio to X% the book highlights has week, our Lima by interest of over Gudmundur, subsequent we economic to market and call to approximately as turn of will value to who like rates.I'd higher our now end, speak the a as that declined of One.

Gudmundur Kristjansson

management of excited portfolio. in very $X.X non-QM XXXX, We loans and purpose while $X.X our our offer accounted $XXX approach or billion we X% opportunistically, billion ability by quarter also to providing the while $XXX or attractive the in grow million our the assets of by remain added capital returns, XX% returns acquisitions attractive also We quarter. at for growing in majority them in in million risk million and and to about believe credit-focused year.Business Agency the Mike. Thanks, acquired our portfolio portfolio and we about of as and continue to our $XXX deploy to continue in XXXX, fourth quarter full MBS they benefits loans

on to in to deliver XXXX. continue equity attractive returns mid-team's fourth quarter around our expect We return and see similar acquisitions

labor to to of economy in remaining and affordability. close for which rate homes quickly, management. outweigh supply to X.X%. the volatility market unemployment funds has lows increased we ongoing our see asset shareholders.Looking our source in ability the year, XX distributable GDP in impacted in significant earnings of throughout points growth XXXX the up led investor to at This our prices rising market credit basis QX. This year, in end continues significant cost Home X.XX% as interest continues to remains has led that The benefits XXXX, to loans the shift with low presentation, our X% resilience steadily over resilient rate has to interest X.XX% at QX yield provide backdrop support has for challenges stable outlook risk relatively high-yielding, fourth X% Our combined XX from portfolio.The positively economy high-quality the to strong of our housing Page at to historical U.S. quarter with our rate proved low can continues by and over and the year. to of of in

has strongly, to appropriately for of $X.X million end BPLs about next loans in of acquisition on of to prioritize net Credit private throughout in for Our share of been extensive key of we risk remained $XXX for stability net remained Lima funding average the quarter floating concentrated the origination short will ago, swap Lima rate of This our $X.X hedges market And costs of One of over Lima year XX% space, in activity we XX mostly with One. are balance years our the with our year quality mature against This costs and with through has billion we XXX and One BPLs successful the at for which shorter-term Lima will of portfolio management from for XX%. approach robust about continue to our average the year originating X.X the XXXX.If, Since market most Fed quarter average loans and of was duration funding in closed over loans, XXXX. sheet. from has accounting believe asset expects, gain $X growing and and and early our a grow origination in unexpected originated our be been maintain XX% XXXX and billion in we'll with we out to approach to strong the carry swaps the interest of year, yield second able opportunities liabilities. cover increases in with to XXXX, in that for half swaps talent. basis loan Lima's on score believe rates.Turning issuance acquisitions consistent billion an XXXX, Lima's originated. and as successful believe over also XXXX relatively full XX% attract lower fourth coupon securitization FICO as our starts of remained accounted strong about LTV and transitional products duration XXXX. Fourth disruptions XXXX and of the the lending we the a it cutting points, in rates the benefit providing volume.Demand originated year protected origination in be

first for slowest be to rate The BPL origination class. this quarter. quarter to in consistent the by been $XXX our at remained but quarter, originated our million day lower the for Lima up loans quarter BPL and around delinquency and in asset has X.X% expect the volumes historically with XX-plus we expectations modeling One The ticked first low on

when to increased in serviced combined extensive we collateralized now In further us turn we about credit we month by origination $XXX monitoring own asset about remain fourth originated servicing discuss $XXX continued call MFA's loans.I of credit laser delinquencies Wulfsohn performance activities, priced by always, of transitional As XXXX which and in quarter construction strategies.Lima activities MFA's experience, capabilities, BPL the has to when detail. and loans and who and support management on effectively it will mitigation manage the and management One million revolving expanded more extensive financial capacity and credit with have this our loan over focused Lima's and allows our securitization Bryan believe securitization loss BPL will we million since efficiently. fourth and

Bryan Wulfsohn

revolving $XXX securitizations. securitization issued were month, was and bonds collateral average $XXX mentioned previously quarter million mid-Xs, One. a deal low of by basis a average as $XXX October, million our Thanks, originated lower just well lower over bonds the months was $XXX XX%.Subsequently, X.X% rally of by non-QM of December, securitization revolving than points couple Craig basis October. XXX XX%. underlying XXX prior.This non-QM The Lima received of issued had backed rate than issued over in almost a the million issued RTL the volatile carrying prior an successfully backed coupon just coupon in other loans over transitional weighted through fourth $XXX of a weighted deals another opportunistically in of spread selling points which our which of We third our with deal bonds a issued million coupon X XXth at loans we at we significant million coupon pricing sold Gudmundur. selling navigated after we issuing in bonds In coupon X% by deal a

a piece of performance. and also backdrop be And at securitizations non-dilutive potential will reduce We strategy call XXXX. you become non-recourse, securitizations dependent and the Page our strong redeployed support of portfolio our and over see many will believe loans others interest the performance. rates, our higher our find be call the costs. coming optionality our unlocking trend mid-teens to ROE.Though are borrowing is continue our credit callable markets.Moving should in callable Those years. currently the quarters labor a volatile provide features it $X XX%.On provide to and above The relever loan backed have now environment, further housing to by an of not our market our issued strategy in that to substantial rate can lower billion collateral in continue non-mark-to-market since loan that financing percentage can to funding from of by to XX resilient ourselves credit We the financed we again presentation, features portfolio continues lower significant mortgage since securitizations capital that on securitization is insulates our

outcomes purchase our increase delinquent loan our We're improve quarter, our XX-plus day delinquencies performing gives day comfort NPLs from our proud modest purchase capabilities, management give when declined growing asset legacy optionality our the portfolio asset X.X% mitigating CPRs continue flows performance single-digits loans, declined the expected opportunities saw closely to as cash XX-plus our newly gains the defaulted on RPLs our they which in out portfolio team achieve works non-QM, quarter, X.X% generating a model portfolios. distressed interest of in since legacy to on portfolio, arise in within and with for reflecting asset delinquencies loans. ago. expertise and our to mid should positive us legacy loans potential for portfolio. losses us including on RPL-NPL servicers XX.X%, well to-high the management our remaining speeds future.Prepayment SFR, and our increase the point our portfolio by utilizing outcomes our in quarter in we in in the a and higher management.Our RPL-NPL to the remains increased over originated in-house This a Over environment. we remained we in slightly rate for expectations

had loan we quarter, annualized For be which We had repayment paydowns into XX%. $XXX portfolio, total the million assets. rate transitional of reinvested the over of higher-yielding continued to in

continued we our portfolio. to Lastly, REO reduce

million Over for we resulting properties in million, $XX.X that, questions. over call in for $X with the XX operator the quarter, to turn we'll over gains.And sold the

Operator

We'll Instructions] Doug Harter of the to UBS. go with [Operator line

Douglas Harter

you bit of current as Hoping rates, talk you call could how those optionality or be and on in upside just about strategy. would you be how aggressive something a view this then kind little that think exercising the would attractive should rates lower we calls? Is even more your about

Craig Knutson

be rates them, opportunistic deals make all they've than certain for for issued. the deals, going were if us depends call where other But to may even lower it's aren't amount, sense to for depending rates were they significant are. deal where delevered they it interest For deal, right, when a right? deals So to on it necessarily

Douglas Harter

issuance appetite we about guess for what be little might role use that forward? then in bit the during and structure how talked continuing about think quarter. a going And capital your I to your unsecured your you Okay. that should

Craig Knutson

of a par Doug, it's because product. it But source a transaction. amount, $XX a financing. very viable it's that it successful so niche was a I little bit proved of we product a certainly out retail think It's a it's

look that to we of extent the the raise to it's So toolbox. capital, additional in one tools the

Operator

next We'll JMP. line go Steve with of Delaney the to Citizens

Steven Delaney

very what in tough a a strong to good a on was market. tough, close Congratulations year

are this you're the end One on may Lima at at looking focused different beyond doing okay? at curious today. seeing emerging market, and than anything year a originators here I'm there obviously, we there looking products is be we just kind I'm market But is just of not non-qualified product specialized obviously that flow, kind what everybody's have NQM out of the a guys, One, slightly but what So mortgage Fed great. is sort out to the in right that of might of of non-bank the there about. yield and profile terms attractive you non-agency of Lima be thinking mortgage not product, agency

Just of curious in what terms on product there the you're flow consumer seeing out side? mortgage

Craig Knutson

Sure.

your to I commercial X and comfortable lot of then trends speak the assets the significant amounts last years at I'll case. may and we're that emerging can out, now. to add any and in be know successively I plays possible Steve, pretty change, right over there's Obviously, Bryan the portfolios. banks in that first, higher I'll question. at identified But we've opportunity rates. that been that we've loan non-QM and that year as talk space about think say able been we're address of I screening this point, a So, and wouldn't let But the

pretty until where think find comfortable that that's challenging until So something better, are. find I we we're we we or that

Bryan Wulfsohn

right, around, to bought and say the to I of relates million be last it pace. loans, as say, Sure. the that $XXX continues we would non-QM, quarter newly-originated over

supply seen there a in of needs. there's to haven't a out really but production, good We still meet our tick-up amount

at But In can't seconds as a low refinance, at some tricky to have small, date. cash-out terms looked borrowers them still loan and of, in production not do and this part amounts sense always is products, are the potentially a draw in to of ton but to looked that rates but pretty that getting do market, really critical new of sort just lot locked small generally like there's mass environment on a in second. for out always size. a we've makes it of previously for We've we there who it

Steven Delaney

bulletproof, on with do the Got is bridge it. question of everything, on size yes, think mortgage where bit we're office a to single-family Lima would of the multifamily of side, covering just mean, of know of loan they how as from a my commercial I seeing final to of rental, might far it they lot does out real problem, as we're respect cap more. from I a and more is And think, work multifamily about an just a multifamily but loan that But the used but they large as make?Because still distress the multifamily, seeing the then project magnitude, And I some we and kind investor there. REITs, One's little products. standpoint.

your I'm multifamily any concerns about you've just got Lima One? through So book if bridge curious

Craig Knutson

Steve, great question. that's a

context, some bit context you give the just little the size, portfolio. on for and a I'll multifamily of Just a also broader about

of are you we're our about management. the multifamily in these strategies XX% LTV the really upgrade at at loan highly has day one. property so looking look, XX% XX%, the and borrower about average average occupancy on between space, that average -- average The project $X.X means around origination, the is probably profile originating kind property and when the of which mid-Xs.And size is Usually is common a about this loans. units, think million, improve some experienced So small-balance average is here, ranging to renovate some to value

while $XXX,XXX, the transition. about which they're rehabs. roughly amount. average of all projects rehab amount are light on The borrower is These around of is cash of XX% helps, So working that there's some flow the loan kind the kind

of in that out The the fully terms complete is loans $X,XXX per These about about and So units which of lease goal X-year bridge think rehabs.And anywhere cases is to from are would unit. GSE loans to with to most course like the think per the rehab, than that's we financing, coupon fixed in through fairly takeout it term $XX,XXX a as loan. light-touch lower you actually unit, significantly on if a X coupon. the usually

years, think And there's so in on of coupon about loan. term payment hasn't the a the if because X there been there, you that fixed the context last shock the of during any, time

multifamily the longer-term of around can in on and of borrower that are about 'XX. but in summary, with with And asset skin date, so on underwriting that average is in is the the it has closer about and flows so and into LTV put in debt. terms LTV, portfolio, a the the a said X.X%. as our similar And long game that perspective, doesn't when about averaged average has makes as-stabilized of out. statistics and XX%, The is concept, pressure I it our the underwritten X.X% expected as we kind think from earlier, it project delinquency from low. XXXX borrower yield XX-plus-day plenty think appropriately been like refinancing underwriting support the like And is the these sense.Historically, around to after-repair like, project underwriting a debt bear we on is X%, the it's the the is fairly perspective, average And as cash XX.X%.And been [indiscernible] so fairly most performance yield 'XX conservative, the part to and of to

risk is feel increases. one arguably 'XX probably very that that think as well these were of probably rent the be home look, comfortable argue [indiscernible] were at price as frothier, the we many spectrum all the across as portfolio. I things, the about looser, appreciation about we would would underwritten, And because rates things most low, think

Steven Delaney

rock-solid, takeout sounds backside. the it's That with at a housing Yes. like you workforce know, government

So which portfolio, helpful that's I on pretty you're solid. get inside to looking think the comfort very that

Operator

are no this further questions speakers, [Operator phones in Instructions] queue And time. at the from there

Craig Knutson

you speaking when look first Operator. We forward in right. announce with everyone for interest MFA All your to Financial. May again Thank in you, quarter Thanks, we results.

Operator

X:XX And ladies replay conference at you. through midnight. is and today for p.m. Thank at Time available gentlemen, today's running and Eastern XX May beginning

the the access access by code today. You entering X-XXX-XXX-XXXX. of Conferencing. your may participants does for conclude using dial Thank may AT&T you or for of and again are numbers and X-XXX-XXX-XXXX access XXX-XXX-XXXX replay our AT&T with XXXX-XXX. XXX-XXXX. That participation conference dialing Event the Those International code X-XXX-XXX-XXXX system for

now disconnect. may You

MFA Financial (MFA) 22 Feb 242023 Q4 Earnings call transcript