MFA Financial (MFA) Q2 2024 earnings summary

Executive summary

• Delivered distributable earnings of $45.6 million ($0.44 per share) and GAAP net income of $33.7 million ($0.32 per share) for Q2 2024, with total economic return of 2.6% and economic book value per share rising to $14.34; GAAP book value per share was $13.80.

• Total assets reached $11.1 billion and total equity was $1.9 billion as of June 30, 2024.

• Opportunistically sold loans above marks, completed a $75 million unsecured bond offering, and paid off $170 million in convertible notes.

• Refocused away from multifamily lending at Lima One due to sector headwinds, emphasizing single-family, transitional, and rental lending.

• Announced leadership transition at Lima One, appointing Josh Woodward as CEO.

Financial highlights

• Net interest income for Q2 2024 was $53.5 million, up from $47.8 million in Q1, with a net interest margin of 3.01% and net interest spread of 2.16%.

• GAAP and economic book values per share were $13.80 and $14.34, respectively, both unchanged from Q1.

• Q2 dividend declared at $0.35 per share; total economic return for Q2 was 2.6%.

• Unrestricted cash at quarter-end was $289.4 million.

• Net interest income increase driven by higher discount accretion and collections on reinstated loans.

Outlook and guidance

• Expect modest decline in Q3 origination volume and continued constructive environment for loan prices and spreads, with potential for increased loan sales.

• High interest rates continue to offer opportunities for acquiring new residential mortgage assets at attractive yields; incremental ROE for new investments expected in the mid-teens.

• Positive outlook for single-family, transitional, and rental lending, with multifamily origination volumes expected to remain low.

• Rate cuts and a normalizing yield curve seen as tailwinds for income generation in H2 2024.

• Economic book value has nearly $3 per share of potential upside if loans and securitized debt are repaid at par.