MFA Financial (MFA) 6 Nov 242024 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the MFA Third Quarter 2024 Earnings Conference Call. [Operator Instructions].

As a reminder, today's conference is being recorded. I would now like to turn the conference over to our first speaker, Mr. Hal 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 date that statements. All intended identify similar words expressions those nature, estimate, anticipate, forward-looking not are believe, made. they only which forward-looking the will, are on as expect, are as statements should, used, including containing When such could, of speak would to These unknown Securities file types XX, December MFA's for other time from Exchange those of known statements XX-K and are subject with may Commission. ended in risks, factors, XXXX, to to time various and described annual and Form year and report other on uncertainties, reports the assumptions the it including that risks, results actual or it cause and to projected, other in differ makes. any These factors expressed could those statements forward-looking implied from MFA's uncertainties materially

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

to who a the you the Good our high-level CFO; me XXXX senior and other for turn Hal. opportunities, our of to now will then quarter and target for Federal Investment and and by Reserve decreased expected portfolio, Third followed Roper, than federal detail, with Mike that Wulfsohn, while September Chief financials basis before clear points XX our environment, we I'll most Lima over some the Officer; noteworthy Board points are review us review by as cycle. embarked and One begin the call our was morning, touch an call This you, a of activities of open Mike our questions. The more results, Financials' the rate everyone, basis the Bryan management team. market many Earnings easing third on on XX for XX. review I'll MFA Thank Fed today market joining With cut, thank funds Quarter up at Call. on in President and members rate meeting by risk management signal has more participants, their the financing, Bryan,

For levered the been somewhat than that Chair proceed and a period originally a curve. Economic a very is of after return the welcome monetary of Powell and slowly income fixed the level has to merited data recalibration policy investors, and this mixed but easing may challenging market months, few cycle more is in development X.X-year a which order. neutral funds restrictive anticipated, has suggests clear Fed that accompanying been inverted last over is a yield labor

this how it is to long refreshing this seen rates, Although the cuts remains and tailwind lasts easing a and our business. cycle how for ultimately much be Fed clear

very as MFA, last Chief XX roles his testament Lori added During attractive in acquired some at X.X%. million XXXX just $XXX promotions was $XXX solid MFA economic third Bryan Chief that key value We of are of XXXX over $X.XX, X.X% Investment quarter talented Samuels Officer. return role important yields. results and and with earnings in senior about shy X% the naming and addition Bryan much distributable are have the management Officer coupon naming of deep as a executives. in of our loans of over bench quite an agencies of million played to and many joined of Loan quarter, with turned MFA announced average changes, up Wulfsohn, an of the President book years. to and Lori also and we deserved Operations Both and These third in

continue the third to the deals of quarter We to X subsequent QX. and utilize assets, securitizations additional in our end deals fund X closing to

Lima some deal impact delinquent agencies acquisitions third QX, changes, away improves platform personnel for quarter purpose to transition we including And future. QX, fill recent management One, with volume engaged is funding the have but that the high-yielding acquisitions management asset to recent of added some team rated business hard identical priced by $XXX residential most construct led quarter. This guidelines at group through quarter. is working a vacancies, together were evaluate multifamily rated now of the originations management loans, The some out turns Josh team not our MFA's as to week it sales loans we just total second consolidation the with refocus Our these some One. our had new third in last servicing deal asset costs Lima to was through our improvements materially sales almost and flat CEO, funded Woodward, institute actively assets. At in to relatively originated loans and a first Lima were the and from by One process million channel Non-QM origination unexpected more QX strengthen for positions. work Lima's in for underwriting on the

purpose instant on about and unique steepening now own we on have the with as differentiator markets draws a important opportunities reliant construction Roper because And developments. In to the finally, One. the is lower have and time high-yielding the are new resolve said This Lima the model at provides to it Mike feedback were go are to loan pricing and we loans. Because sales our discuss manages loans reflect loan another intimately not more MFA transitional an our services in loop And parties in with Lima important securitization parties, to adjust differentiator and welcome are turn underwrites that to delinquent. market we the to One with call a loan for to originations third a able optimistic over I'll and Lima and organically loans excited we involved ability few create it for we business repeatedly, our borrowers, space. loans business assets One rates As recently, us is period will Lima this financial results. about we yield generate and MFA. third curve, real One of our

Thanks, of Craig. share At dividends common $XX.XX the book from was total return $XX.XX was increase of share, X% approximately an economic of approximately value per $X.XX We X.X%. of share September per XX, economic at declared a and GAAP value end June. $XX.XX delivered quarterly book common per and common

$X.XX up from $XX.X common of common basic $X.XX quarter, share, or million per basic $XX.X third or share the quarter. in For MFA second GAAP generated earnings million per the

$XXX on gains Our GAAP by a slight transitional million. losses increase net loan earnings unrealized unrealized in SFR These included loans. our gains primarily non-QM portfolio concentrated were credit-related loan portfolios partially and of in residential approximately our our whole and offset on were multifamily

approximately quarter, the we During rental loans balance single-family $XXX sold principal million. with unpaid of an

represent years detail gains from despite X his UPB be capital sold recently a included parties third sales of parties these We market were months participants and for One's to ahead. origination Lima's will returns. $XX mortgage other Lima diversification These securitization Lima improve as origination a recently component what channel of markets, with lower distributable new Sales originated originated $X.X and in derived included loans distribution third loans Lima's Lima growing banking quarters away which to from of in sales quarter, strategic of in the this Bryan report million SFR remarks, banking origination we of mortgage provide third-party our and million enhance from contributed later earnings. sales increase by One. second relationships We expect believe income, our quarter that to first As their driving volumes. within further that the sold loans the the One's to is income

in DE During our fair second in quarter for basic the quarter, dividend. or the common decrease $XX.X common in a DE our was The from the MFA $X.XX excess quarter. per primarily of decrease again $X.XX $X.XX quarter. million an share, generated $X.XX losses realized transitional credit value during DE value, was by from quarter, increase driven primarily on the our second of the in realized loans of on loans at losses fair credit

expected economic generally value are both the and in in losses loans underlying GAAP recorded only our results are loans, our As call, completion but proceedings. book in values fair realized, life credit of when and DE of mark-to-market over as losses explained we on our our GAAP the impact foreclosure at last adjustments the the

nonrecurring charges by Our third and and retirement-related $X.X million. of were our separation, impacted DE expenses severance quarter also G&A approximately

We first DE XXXX. result charges these personnel our to and beginning of a modest a the gave G&A the changes rise reduction expect in that quarter in benefit to our that quarterly in will

interest of to who value book economic as Finally, quarter approximately rates. I'd subsequent to One. that to result the by and Lima our of Bryan, turn discuss end, market X% highlights now a over call X% estimate we the portfolio like performance our decreased to has will higher

and with our Thanks, for of Mike. accounted million believe We an continue million billion be from additions. and and our $XXX during attractive. flow approximately spreads X.X% XX%. We quarter to quarter adding the by carry since coupon originations Agency an new million of MBS the Lima bulk sourced agency and during securities. portfolio totaled we of LTV channels and the of portfolio average Non-QM $XXX $X $XXX to of grew investment $XXX loans draws grew both One purchases million

to million, purchases Runoff currently believe pay been credit complementary came our payout loans second portfolio. $XXX investments portfolio which the was to sacrificing transitional maturities focused have quickly entire with these off months provide down to ROEs from We mid-teens loan are slightly ranging Our years. in on prepay from offer majority as X portfolio pools, without quarter. usually some and low are quarter the in yield. our those The our across protection from X designed the

we loans sold to of portfolio million $XXX our runoff, quarter. addition loan in In the rental the single-family from

million we of made by $XX loans All Lima sold were One of and were them newly originated. those

to their expect loans bid as to loans accounts forward the strong, from investment portfolios. to rental add more insurance looking We particularly sell for remains moving duration

our have strategies. Craig million RPL/NPL of rated compared deal. the issued excited September, just under coupon in just under XXth issued coupon deal market RTL $XXX rated a The The bonds our issued our million transaction absorbing X%. last post at allowed X.X%. to a points has a tranche bonds approximately residential non-QM And week, close portfolio. debt our end, lower year. the credit to As XX the selling million of touched significantly issuing in year-to-date legacy our non-rated first $XXX transaction. at rated as traded In we a issuance from securitization, last of loan securitization, of successful securitized quarter cost The in rated been securitization with selling our across compromised the a almost cost our been X.X%. And NPLs $XXX we senior non-rated markets than RPL We basis of non-rated last over July, we RTL supportive from we on, of double us bonds tighter senior transaction of were funds of to tranche of our of last nature deal

We and by have financed bonds callable and portfolio to down as securitized XX% callable collateral since now the if percentage opportunity the end billion quarters loan the costs well XXXX, options loans as in become ability at give come and the relever are as lower $XX years. the will of borrowing redeploy to these coming down. at over us securitizations quarter. These the our securitizations Many pay in was rates capital of call refinance of or our

ago. Our quarter a from estimated in quarter duration X.XX third rose the to X.XX modestly

rolling issuing off swaps, swaps we which as As see X the $X fixed notional hedge billion longer-dated at portfolio, rate to a out over we sold of additional securitizations, And billion quarters. and of we quarter to exposure our swap continue to expect be next and incremental of which usage add had these bonds of have the of end. $X.X portfolio. swaps balance we to our will agencies interest the activity rate outstanding we by interest reminder, with $X.X billion rate

in in which quarter, down was third the rental in Moving million loans prior XX% to just from short-term loans. originated longer-term Lima million of One. origination the and loans transitional XX% We quarter. $XXX of over in is $XXX QX

of One's away rental to shift Lima We a to volume As we in additional programmatically and generate from begun lending. as enhance have attribute sell organization loans decline previously sales income multifamily restructuring way to since origination the franchise value. mentioned, Lima's our

dividends We have with should technology higher beginning and talent been pay our with team XXXX. adding outreach improving in volume to marketing production initiatives to borrower start that and

day was XX-plus and performance. credit from delinquencies our X.X% our for a loan multifamily to our ago. primarily to rise Moving increased from portfolios. non-QM entire quarter X.X% The portfolio

resulting portfolio a to payments, pay equity. they have and borrower our it cases falls sell unfortunately that to us $XX home get in post $X LTV, additional the the by low figure given are rose often to protect $XX non-QM, in their delinquencies million. we a usually full quarter increased payoff. full where outbid on relates we quarter end, As foreclosure auction, million. to to behind And million Multifamily an In when just by over off

As management loans a and to reminder, over decade team through shareholders. the past dollars our of defaulted benefit billions our asset worked has the of of borrowers

down group loan of Lima to over MFA leverage these including that and with working investors. And turn that, continue will the for portfolio, operator We to We our the to to our One. have puts and for delinquent across with transitional believe loans teams strong servicing team entire the experience our deliver a through at outcomes expertise questions. call position in we'll combined improve

Instructions]. [Operator

question first Harter. comes Our Doug line today from the of

Just value of of kind around how comments was that when made, you X% X% first, you are as given book and the how dividend things hoping think of much just in about moving kind context? you accrual clarify to could

Yes. the question. Thanks for

So this spread a bit moving a would accrual. earlier but of is to morning, net the it's that as some be dividend X% and with of volatility target volatility, of rate and that X% probably

the of lower kind And rates expirations? sensitivity you short-term portfolio swaps you in kind Appreciate about you power as just earnings Great. factor to have are the and that. of the the then and how thinking swap of

for amount thanks Again, we at. Yes. is good the question. something a This time spend of looking

And we we the forward. the of interest assets those when the the the think portfolio try if that about power restrike effectively look whether yields and were long or would expense we be income, hedges going I earnings to over those is what of portfolio, interest that's effectively, and today. earnings liabilities at to as mark-to-market, term, is power think reported what

dividend quarter, that given have rates, question yes, where for quarter sell-off of swaps But those about marked we with of going fourth fourth market of the sort feel QX. where since really have power as portfolio and I the earnings again, forward. at power long the about think the in we the really some again of portfolio is in we beginning the So for is end yields, we've off are a good in pay from context rolling the and things good returns the in quarter rates. swaps, we your at set below benefited the feel about the the restrike again, what obviously, earnings time end those But increased of X/XX dividend.  As and swaps really with really

from [Operator Instructions] And our comes question of next Hagen. the Eric line

where doesn't were the turn over loan much scenario a widen? quickly balance talk spreads the in warehouse loans pipeline to about capacity securitization and how has as you One on Can to sheet retain Lima maybe

ample securitizations several So revolving outstanding. and we capacity RTL have

really there's from and potential One, MFA Lima over between $X assets borrowing of So on billion have combined away those securitization. we

plenty there's of really, room. So

Okay. say there? constraints, Got portfolio taking and What the up considerations of you. increasing some you again will, are leverage the if would or agency you back that

assets. the at what other and our versus I mean, look just spreads in are market really, available we

$X it's a portfolio. think our it do we to So We billion. complementary credit grew to asset

see quarters. the $X if we to remain maybe curve in the that think out, $X.X of out, I if you billion look of are to spreads steepen to billion coming they continues sort growing where to were shape the and could

our Brian [indiscernible]. from of Instructions] And the line question comes next [Operator

the get more outlook. could detail distribution sale how as guess sales big on some it loan programmatic time? transitional was to channel see And Just is well? we some over could I hoping only that Or loan get SFR?

So It's Brian, that. take Craig. I'll

So I a rental part significant particularly think could the it be on side.

of and were They environment, asset XX% we that validate the said, third-party channel. these Bryan quarter over time. origination But Right about It's lower think that grow open significant our in a an there. have in that sales, still I loans rental also they demand now, validate an in pricing, we marks. our think like they could the As I rate is additional distribution the portfolio. pretty

all but another what the So in loans, it's It's I it's think a arrow we'll not outlet quiver. rental to have. do with good

fast you point. now, some necessary outlet volume If forward of the growing may a we're really be for years, But next think I and Lima distribution origination One's it more significantly imagine channel. developing over another at just couple

the of our next line comes [Operator Instructions] And George. Bose from question

multifamily was And remind credit there? BPL? talk Actually, you just you the on exposure can of much mark us can the you how have how much the just piece then left about

Yes.

about portfolio a The X/XX. think around at it's as it exact And So the UPB. the at, now $X number. total that carry during right $XX I'll of UPB quarter, discount was to $X.X billion the give X-point I you million. was we total billion, X/XX

the Okay. to talk the seeing you developing? but characterize that's the competitive side you of how seems Great. are then incumbents Or demand can strong, grow? about business? And just Obviously, BPL very can just trying side you

in X technology us we we for to it's had sort fronts. that to the enough right? lost of and We We're then definitely as competitive. of we're but And getting sort It's room back competitive, those of of you get the aware we that we're sort market It's sort of think grow, and attract past on all improvements. was volume improving there's believe out that really, mentioned, And that quarter. there's think over the having volume down to trying of good talent. way slightly. But a marketing X Yes. ways, sales we there's sort force

from the at it there Please questions appear are no lines. does phone time, continue. Instructions] And further this [Operator

interest to MFA We everyone, your in you fourth announce in again results. Thanks, operator. for look Financial. speaking you, Thank quarter when with February forward we

ladies replay X:XX available p.m. Eastern. and conference And after today be gentlemen, will today's for

the are (XXX) access X(XXX) replay XXX-XXXX XXX-XXXX, again, code X, you International for AT&T AT&T entering XXX-XXXX, February XXX-XXXX and conferencing conference code system participants again XXXXXXX. today. and may You using numbers participation and service. dial (XXX) dialing may for time Thank X XXXX. That the replay at access entering (XXX) the by any does your available be access your that will conclude XXXXXXX, for and those through

disconnect. You may now