You are on the right track. Since NFI is a mortgage REIT, they hold mortgages in their portfolio. Not real estate. Therefore there is no depreciation expenses.
GAAP rules force them to expense expected loan losses up front. Taxable income (TI) only allows losses expensed as they actually occur. Another issue is the timing of the hedges/swaps they use to lock in their percentages.
The true earnings is between GAAP and TI, and the company often reports what it calls "core earnings". For the last few quarters, their "core earnings" have exceeded dividends, and if I'm not mistaken, the last quarter even the GAAP exceeded the dividend. As the portfolio matures and stops growing, eventually GAAP and TI will converge.
NFI definitely fits the "VALUE" category, but it isn't a "microcap". So I suppose this post is still OT.
