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| Statement |
|---|
| Home price proved resilient in 2023, rising by over 5% in the year as low supply of homes continues to outweigh low affordability |
| The strong labor market and resilient housing backdrop continues to support our credit performance |
| We successfully navigated another volatile quarter issuing over $450 million in bonds through two securitizations |
| We remain very excited about our ability to deploy capital at attractive returns and continued to grow our portfolio in the quarter |
| economy remains buoyant despite recent recession signals from both Japan and England |
| Lima One has originated and serviced BPL loans since 2010 can have extensive servicing and construction management capabilities, which we believe when combined with MFA's own extensive credit and asset management experience allows us to manage delinquencies effectively and efficiently |
| In the elevated rate environment of the last year, we've continued to add incremental assets at higher yields to execute securitizations as a durable source of financing and earn significant positive carry on our interest rate swap position that we put in place almost two years ago |
| Our strategic objectives and risk management initiatives have afforded us the opportunities and liquidity to grow our portfolio and materially increase its yield, which we believe sets us up well for 2024 and beyond |
| Demand for Lima’s products remained strong with disruptions in the private lending space, providing opportunities to grow market share and attract talent |
| That was a very successful transaction, as we were able to upsize the deal to $115 million and tighten the yields into very strong demand |
| As Craig highlighted in his opening remarks, during the quarter MFA again delivered strong results in challenging market conditions |
| Credit quality and Lima’s origination remained strong and consistent throughout the year with average LTV of 65% and average FICO score of 745 on loans originated |
| We'll also be able to gain from lower funding costs next year as $1 billion for swaps mature at the end of 2024 and early 2025, and with a net duration of about 90 basis points, we believe we are appropriately protected against unexpected increases in interest rates |
| The CECL reserve release reflects an update to our modeling assumptions due to continued macroeconomic resilience as well as the significant accumulated home price appreciation and strong credit performance of our seasoned carrying value loan portfolio |
| This approach was successful in 2023 and we believe it will continue to be successful in 2024, if as the market expects the Fed stops cutting rates in the second half of 2024, we believe we will benefit from the extensive carry on our swaps for most of the year |
| And we've been able to -- we've been able to add significant amounts of assets over the last two years that successively higher rates on |
| Congratulations on a strong close to what was a very good year in a tough – tough market |
| Our strategic focus on hedging and liability management along with our disciplined asset acquisition strategy allowed us to achieve this increase in net interest income |
| Inflation numbers continue to surprise on the high side, labor markets are still strong, and the U.S |
| This bond market rally was obviously friendly for mortgage assets and resulted in strong earnings and book-value performance for MFA during the quarter |
| 60 plus day delinquencies in our legacy RPL NPL portfolio declined by over a point to 24.5% as we continue to achieve positive outcomes for our remaining delinquent loans utilizing our in-house expertise and asset management |
| We're proud of our asset management capabilities since that give us comfort, growing our purchase performing portfolio and gives us optionality, should distressed loan opportunities arise in the future |
| The US economy remains strong at the end of 2023 with fourth quarter GDP growth of over 3% and the unemployment rate remaining close to historical lows at 3.7% |
| Our ability to source high-yielding high-quality loans has led to significant benefits for our shareholders |
| This combined with a relatively stable cost of funds have positively impacted our distributable earnings throughout the year |
| We expect our fourth quarter acquisitions to deliver around mid-teens s return on equity and continue to see similar attractive returns in 2024 |
| DE also benefited from a $3.2 million, or $0.03 per share reduction in our G&A expenses in the fourth quarter related to the finalization of incentive compensation accruals for 2023 |
| Since our acquisition 2.5 years ago, Lima has originated about $5.6 billion of BPLs for our balance sheet, it’s robust origination activity has been key to growing our portfolio and asset yields in 2022 and 2023 with Lima One originated loans accounting for over 70% of our loan acquisitions in 2023 |
| Appreciate everybody's comments this morning and congrats again on a really strong close and to a good year |
| It was a very successful transaction on |
| Statement |
|---|
| The market outlook for the economy continues to shift quickly, which has led to significant interest rate volatility and challenges from interest rate risk management |
| I mean, office is still the real problem, but we've seen a lot of multifamily distress out there |
| The fourth quarter of 2023 was yet another volatile period for fixed income markets, as 10-year treasury yields rose about 40 basis points in the first two and a half weeks of the quarter before a furious rally that brought them down by about 110 basis points by the end of the year |
| Finally, subsequent to year end, we estimate that as of earlier this week, our economic book value declined by approximately 1% to 2% as a result of higher market interest rates |
| The first quarter has historically been the slowest quarter for BPO origination and we expect volumes to be lower at around $450 million in the first quarter |
| While 2023 was another extremely challenging year for fixed income investors and for levered mortgage investors in particular, MFA's prudent risk management and continued execution of our strategy produced a 2.7% economic return for the year and a total shareholder return of 30.7% |
| Prepayment speeds in our portfolio declined slightly in the quarter reflecting the higher interest rate environment |
| Lastly, we continued to reduce our REO portfolio |
| So I'm just curious, if you've got any -- any concerns about your multifamily bridge book that you may have through Lima One |
| Subsequently in December we opportunistically issued our 13th non-QM deal after a significant spreads rallied selling $268 million of bonds with a coupon in the low mid-sixes, which as Craig previously mentioned was 100 basis points lower than other non-QM deals issued just a couple of months prior |
| These risks, uncertainties, and other factors could cause MFA's actual results to differ materially from those projected, expressed, or implied in any forward-looking statements it makes |
| Although, markets were experiencing the most aggressive Fed tightening cycle of the last four decades |
| And to-date like you know from a performance perspective the 60-plus day delinquency on the multifamily part is about 2%, so is fairly low |
| The 60-plus day delinquency rate on our BPL loans originated by Lima One ticked up to 3.9% in the quarter, but remained low and consistent with our modeling expectations for this asset class |
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