Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q1 2020 Earnings Presentation
17 slides from Mfa Financial's earnings presentation, Jun 16, 2020
Slide 1: June 2020 Company Update
June 2020 Company Update • Capital Raise • Q1 2020 Financial Results Review • Q2 Portfolio activity through May 31, 2020
Slide 2: Forward Looking Statements
Forward Looking Statements When used in this presentation or other written or oral communications, statements which are not historical in nature, including those containing words such as “will,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “could,” “would,”
Slide 3: Capital Raise and Committed Term Borrowing Facility
Capital Raise and Committed Term Borrowing Facility • MFA has reached an agreement for a $500 million capital raise through a private senior secured loan to be funded by certain funds and accounts managed by subsidiaries of Apollo Global Management, Inc. (“Apollo”) including subsidiaries of Athene H
Slide 4: Strategic partnership with Apollo bolsters balance sheet
Strategic partnership with Apollo bolsters balance sheet • MFA is excited about this new partnership that we believe provides strategic potential. • Apollo’s deep institutional relationships and affiliate network provides potential synergies that can significantly assist our business. • In addition
Slide 5: Overview of Q1 2020 results
Overview of Q1 2020 results • Unprecedented disruption in residential mortgage markets, due to COVID-19 concerns, resulted in MFA generating a loss in the first quarter of 2020 of $2.02 per common share. GAAP book value decreased to $4.34 per share at March 31, 2020, while Economic book value (1) de
Slide 6: Estimated REIT taxable income, undistributed income and implications for dividends in 2020
Estimated REIT taxable income, undistributed income and implications for common and preferred dividends in 2020 • Undistributed REIT taxable income at the start of 2020 was approximately $0.05 per share. To avoid paying corporate income tax, we are required to declare a dividend for this income prio
Slide 7: First and second quarter (through May) Portfolio Activity
First and second quarter (through May) Portfolio Activity • In response to the market illiquidity caused by the COVID-19 pandemic, asset sales resulted in de- leveraging and reduced risk: ◦ First quarter asset sales of $2.3 billion (amortized cost basis) included: ▪ $988 million of Agency MBS; ▪ $50
Slide 8: First and second quarter (through May) Financing Activity
First and second quarter (through May) Financing Activity • Repurchase agreement obligations have declined by $5.4 billion in the first 5 months of 2020: ◦ $1.4 billion reduction during the first quarter: ▪ $1.1 billion of Agency MBS repo ▪ $300 million of Non-Agency MBS, MSR Notes and CRT Securitie
Slide 9: Results impacted by asset impairments, sales, fair value changes and CECL
Results impacted by asset impairments, sales, fair value changes and CECL Q1 2020 Q4 2019 Significant and unusual items include: Summary Income Statement $ in mm $ in mm • $419.7 million impairment losses on securities Net Interest Income: Residential mortgage securities (1) $ 31.1 $ 45.8 and other
Slide 10: Impact on second quarter net income and book value of investment portfolio net gains
(1) Impact on second quarter net income and book value of realized and unrealized investment portfolio net gains Legacy Non- MSR-Related CRT (Amounts In Millions) RPL/NPL MBS Agency MBS Other Total Agency Assets Securities MBS Realized gains/(losses) on securities sold $163.8 $53.3 $(25.0) $(12.7) $
Slide 11: Summary
Summary • Closing of the $500 million term loan and committed non-mark-to-market financing of approximately $1.65 billion is expected to stabilize the balance sheet and facilitate exit from forbearance. • Strategic relationship with Apollo and Athene provide significant potential opportunities for o
Slide 12: Additional Information
SSS Additional Information
Slide 13: First quarter 2020 portfolio activity
First quarter 2020 portfolio activity • Through mid March, investment activity continued to be robust with approximately $1.3 billion of asset acquisitions. • Acquired over $1.1 billion of purchased performing loans, including $0.9 billion of Non-QM loans. • Majority of sales activity occurred in th
Slide 14: Second quarter portfolio activity through May 31, 2020
Second quarter portfolio activity through May 31, 2020 • Sales of securities and loans generating proceeds of $3.2 billion. • Improvement in pricing since end of Q1, particularly in MSR notes and CRT securities. • As of May 31, 2020 our $6.6 billion investment portfolio, was funded by $3.8 billion i
Slide 15: Allowance for credit and valuation losses
Allowance for credit and valuation losses Three Months Ended March 31, 2020 Purchased Seasoned Non-QM Rehabilitation Single-family Credit (Amounts In Millions) Performing Totals Loans (1) Loans (2) Rental Loans Deteriorated Loans Loans Allowance for credit losses at beginning of period $388 $2,331 $
Slide 16: GAAP and Economic book value declined due to COVID-19 market disruptions
GAAP and Economic book value declined primarily due to the impact of COVID-19 related market disruptions QTR 3/31/20 GAAP book value per common share at the beginning of the period $7.04 Net income available to common shareholders (2.02) Net change attributable to Agency MBS 0.03 Impact of discount
Slide 17: Reconciliation of GAAP Book Value to Economic Book Value
Reconciliation of GAAP Book Value to Economic Book Value “Economic book value” is a non-GAAP financial measure of our financial position. To calculate our Economic book value, our portfolios of Residential whole loans at carrying value are adjusted to their fair value, rather than the carrying value