Company overview
Understand the business
MFA earns income from the interest and cash flows generated by its mortgage investments, including residential mortgage-backed securities and residential whole loans. It funds much of this portfolio with borrowings and other financing arrangements. Cash available for distributions therefore depends on the spread between asset income and funding costs, portfolio leverage, hedging results, credit performance, prepayments, and realized gains or losses. As a REIT, MFA generally seeks to distribute a substantial portion of its taxable income, but taxable income and distributable earnings can differ from accounting results in a given period.
Primary earnings measures
MFA’s key recurring earnings measure for distribution analysis is distributable earnings per share. This measure is more useful than generic accounting earnings for assessing the cash-generating performance of a mortgage REIT because it is intended to better reflect recurring portfolio income and financing costs, while excluding or adjusting for certain non-recurring and mark-to-market items.
How the company supports its distribution
The distribution is supported by net interest income and other portfolio cash flows: MFA collects interest and principal cash flows from mortgage assets, pays interest and other costs on its financing, manages interest-rate exposure with hedges, and retains the residual cash generation after expenses. The durability of that process depends heavily on funding availability, borrowing costs, mortgage prepayments, asset values, and credit outcomes in the residential-loan portfolio.