MFA Financial Returns to Profit as Credit Losses Climb
The mortgage REIT’s net interest spread narrowed to 1.56% during the quarter.
MFA Financial, Inc. (MFA) returned to profitability as the mortgage real estate investment trust recorded second-quarter GAAP net income available to common stockholders of $36.2 million, or $0.35 a share, reversing a first-quarter loss of $11.7 million. A year earlier, the company earned $22.6 million, or $0.22 a share.
The improvement in GAAP results contrasted with weaker distributable earnings, which fell to $12.2 million, or $0.12 a share, from $31.1 million, or $0.30 a share, in the first quarter. Realized credit losses on residential whole loans rose to $24.5 million from $4.4 million sequentially and $9.8 million a year earlier.
Before those losses, distributable earnings increased to $36.7 million, or $0.35 a share, from $35.5 million, or $0.34 a share, in the first quarter and $34.7 million, or $0.33 a share, a year earlier. MFA introduced that pre-credit-loss measure at the start of 2024 and revised prior periods to conform to the presentation.
Net interest income declined to $58.6 million from $61.3 million a year earlier as higher interest expense outpaced growth in interest income. The residential whole-loan spread narrowed to 1.51% from 1.68% sequentially, led partly by compression in Non-QM loans, while the business-purpose-loan spread expanded to 1.99% from 1.90% as funding costs declined.
MFA expanded its residential investment portfolio by $535 million to $13.04 billion, with $1.45 billion of acquisitions and originations exceeding runoff and other reductions. The growth tilted toward securities, which increased by $561 million, while residential whole loans and real-estate-owned assets declined by $26 million.
Lima One’s originations grew 44% to a maximum loan amount of $315.8 million, including $184.7 million of newly funded loans and $84.9 million of draws on previously originated transitional loans. The unit’s mortgage-banking income rose to $8.4 million, though the segment recorded a $2.5 million net loss after $18.7 million of fair-value losses on residential loans.
Credit performance across the portfolio improved, with loans at least 60 days delinquent declining to 7.0% of residential-loan unpaid principal balance from 7.8% at the end of the first quarter. MFA also repurchased more than 500,000 common shares for a second consecutive quarter, reducing shares outstanding to 101.1 million, while economic book value slipped two cents sequentially to $13.20 a share.