MFA Financial, Inc. Announces Fourth Quarter 2021 Financial Results

NEW YORK, Feb. 23, 2022

Fourth Quarter 2021 financial results update:

• MFA generated fourth quarter net income of $35.9 million, or $0.08 per common share.
• GAAP book value at December 31, 2021 was $4.78 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 and securitized debt held at carrying value for GAAP reporting, was $5.15 per common share at quarter-end.
• Net interest income increased on a sequential quarterly basis to $70.1 million, primarily driven by continued successful asset acquisitions and another record quarter for origination volumes at Lima One, resulting in a 13% increase in net interest income. In addition, during the quarter, we completed a securitization of $284.2 million of Single-Family Rental Loans, with a weighted average coupon of bonds sold of 2.15%, providing $103.1 million additional liquidity and longer term, non-recourse, non-mark-to-market financing. We also completed two securitizations of Agency Eligible Single-Family Rental loans totaling $652.9 million during the quarter. For the fourth quarter, the overall net interest spread generated by all of our interest-bearing assets was 2.98%, unchanged from the prior quarter.
• Loan acquisition activity of $1.4 billion reflects continued successful execution of our asset aggregation strategy, resulting in net portfolio growth for the quarter approaching $800 million. During the quarter we acquired, or committed to acquire, approximately $950 million of Non-QM loans. At Lima One, funded originations were more than $450 million (over $600 million maximum loan amount inclusive of undrawn amounts), reflecting record volumes for the second consecutive quarter. In addition, draws funded during the quarter on Rehabilitation loans were $45.7 million. For the full year, MFA acquired approximately $4.6 billion in residential whole loans (including draws on Rehabilitation loans), resulting in net portfolio growth of $2.6 billion.
• Interest rate volatility resulted in market value decreases in our residential whole loans that are measured at fair value through earnings of $42.6 million. These unrealized losses reflect a partial reversal of unrealized gains recorded in earlier quarters of 2021. On a full year basis we recorded unrealized gains on these loans of $16.2 million.
• Unrealized losses on residential whole loans were partially offset by a gain of approximately $24.0 million on a minority investment held in a residential whole loan origination company. This gain reflects an adjustment of the carrying value of our minority stake and includes the partial reversal of an impairment that was initially recorded in March of 2020. The adjustment was required after the investee company entered into a capital transaction with an unrelated third party. In addition, offsetting gains totaling $7.2 million were also recorded on economic hedge positions in short TBAs, interest rate swaps and securitized debt held at fair value through earnings.
• MFA paid a regular cash dividend for the fourth quarter of $0.11 per share of common stock on January 31, 2022. During the quarter, under our existing stock repurchase authorization we repurchased 8,495,265 shares of common stock at an average price of $4.42 per share. Subsequent to the end of the quarter through February 18, 2022, we repurchased an additional 7.9 million shares of common stock at an average price of $4.43, leaving approximately $45.5 million of remaining capacity under the authorization as of such date.

Commenting on the fourth quarter 2021 and full year 2021 results, Craig Knutson, MFA's CEO and President said, "We continued to execute on our plan to grow our loan portfolio and term out financing through securitization in the fourth quarter of 2021.  We acquired $1.4 billion of loans in the fourth quarter and grew our loan portfolio by nearly $800 million.  In addition, we completed three securitizations totaling $937 million.  For the full year 2021, we grew our loan portfolio by over $2.6 billion, or 48.6%, and completed eight securitizations totaling $2.6 billion. The acquisition of Lima One on July 1, 2021 generated almost immediate results as we added $1.0 billion of business purpose loans in the second half of the year.  Our net interest income for the fourth quarter was $70.1 million, a 13% increase from the third quarter, and an 83% increase from the fourth quarter of 2020.  We earned $0.08 per common share  in the fourth quarter.  Earnings were negatively impacted by market value decreases in our loan portfolio held at fair value, as the Fed signaled a sharp shift in monetary policy early in the fourth quarter resulting in negative investor sentiment and increased interest rate volatility.  Short rates, in particular, moved sharply higher and the yield curve flattened.  Our GAAP book value declined slightly (less than 1%) to $4.78 from $4.82, and our Economic book value declined 2% to $5.15 from $5.25, due primarily to declines in prices of loans held at carrying value." 

Mr. Knutson added, "Despite a challenging interest rate environment in the fourth quarter, MFA generated a GAAP economic return for the quarter of 1.5%, while our Economic book value economic return was 0.2%.  For the full year 2021, MFA's GAAP economic return was 13.8% and Economic book value economic return was 12.7%.  Finally, our total shareholder return for 2021 was 27.6%.  We repurchased 8.5 million shares of our common stock at an average price of $4.42 during the fourth quarter.  For the year 2021, we repurchased 20.1 million shares of our common stock at an average price of $4.26."

Mr. Knutson continued, "We also continued to take advantage of a strong housing market to  reduce our REO portfolio, selling 177 properties in the fourth quarter for aggregate proceeds of $53.9 million and generating $10.1 million of gains.  For the full year 2021, we sold 647 REO properties for aggregate proceeds of $187.9 million, generating gains of $23.5 million.  Our REO portfolio was $156.2 million at December 31, 2021, a 37.4% decrease since December 31, 2020." 

Q4 2021 Portfolio Activity

MFA's residential mortgage investment portfolio increased by $782.6 million during the fourth quarter, as we continued to successfully execute on our asset acquisition strategy.  Loan acquisitions included $946.1 million of Non-QM loans and $500.0 million of funded originations (including draws on Rehabilitation loans) of Business Purpose loans.