Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q4 2023 Earnings Presentation
26 slides from Mfa Financial's earnings presentation, Feb 22, 2024
Slide 1: Company Update Fourth Quarter 2023
Company Update FOURTH QUARTER 2023
Slide 2: Forward-looking statements
Q3 2022 Financial Snapshot Forward-looking statements When used in this presentation or other written or oral communications, statements that are not historical in nature, including those containing words such as “will,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “s
Slide 3: MFA at a glance
MFA at a glance Leading hybrid mortgage REIT with extensive experience in managing residential mortgage assets through economic cycles Total assets Total equity Total economic Total shareholder return1 return2 $10.8B as of Dec. 31, 2023 $1.9B as of Dec. 31, 2023 7.8% Q4 2023 30.7% FY 2023 Listed on
Slide 4: Q4 2023 financial snapshot
Q4 2023 financial snapshot GAAP Economic Distributable GAAP net income5 book value book value4 earnings6 $13.98 $14.57 $0.80 per basic common share $0.49 per common share per common share per common share Recourse leverage7 Unrestricted cash Q4 Dividend Average coupon 1.7x $318M $0.35 10% per common
Slide 5: Q4 2023 Company Highlights
Strong earnings and book value performance during another volatile quarter Q4 2023 GAAP and Economic book value rose by 3.7% and 5.3%, respectively Company Distributable earnings of $0.49 per share, which includes $0.08 per share due to release of CECL reserve Highlights Declared $0.35 divid
Slide 6: Q4 2023 Investment Activity
Investment Portfolio as of Dec. 3111 Acquired $882M of loans and Agency MBS, growing investment Agency MBS $0.6B Q4 2023 portfolio to $9.9B Other Lima One funded $573M10 of new business purpose loans (BPLs) Investment and draws on existing loans $0.4B Legacy RPL/NPL Activity $1.1B Non-QM Loans
Slide 7: Q4 2023 Liability Highlights
Liabilities ($B) as of Dec. 31 Our borrowing costs have been relatively stable due to fixed-rate $9.0 Q4 2023 Agency Repo securitizations and interest rate swaps $8.0 Liability Effective cost of funds in Q4 was 4.33% and 4.11% for FY 2023 MTM $2.4B MTM Warehouse MTM Lines Issued $452M of securit
Slide 8: Q4 2023 Interest Rate Swaps
Positive carry on our interest rate swap position exceeds 350 bps Q4 2023 We continue to benefit from our $3.3B interest rate hedge placed primarily in late 2021 and early 2022 before the Federal Reserve began aggressively raising the Fed Funds Rate in mid-2022 Interest Weighted average fixed
Slide 9: Q4 2023 Credit Highlights
Loan delinquencies and loan-to-value (LTV) Loan Portfolio LTV15 Purchased Performing 60+ day delinquency Legacy RPL/NPL16 60+ day delinquency Q4 2023 ratios remain low 56% 64% 54% 59% 3.8% 32% 25% We continue to benefit from accumulated Credit home price appreciation and principal 3.1% Highlight
Slide 10: Q4 2023 Lima One Highlights
Strong origination volume in Q4 and FY 2023 Q4 2023 $594M of originations8 in Q4 with average LTV18 of 64% and FICO score of 749 Lima One $2.3B originated in 2023, exceeding $2B for second consecutive year Highlights Origination fees, servicing fees and other fee income totaled $10.8M Lima
Slide 11: Q4 2023 Transitional Loan Highlights
Transitional loan portfolio grew to $2.4B UPB Portfolio statistics 12/31/23 9/30/23 Q4 2023 Lima One originated loans with a maximum UPB of $498M8 at UPB ($M) Maximum loan amount ($M) $2,368 $2,954 $2,106 $2,693 average ARV-LTV of 63% and average coupon of 10.9% Transitional Average maximum loan
Slide 12: Q4 2023 SFR Loan Highlights
Portfolio statistics 12/31/23 9/30/23 Single-family rental (SFR) loan portfolio grew by 4% Q4 2023 UPB ($M) $1,730 $1,668 Lima One originated $96M of SFR loans in Q4 with average Average loan balance $247K $249K LTV of 67% and average coupon of 8.6% SFR Loan WA gross coupon 6.36% 6.22% $364M o
Slide 13: Q4 2023 Non-QM Highlights
Acquired $282M UPB of Non-QM loans in Q4 with average LTV Portfolio statistics 12/31/2323 9/30/23 of 71% and average coupon of 8.8% Q4 2023 UPB ($M) $3,935 $3,963 Average loan balance $496K $503K Acquired $863M of loans in FY 2023 with average LTV of 67% Non-QM and average coupon of 8.8% WA gros
Slide 14: Legacy Non-Performing and Re-Performing Loans
Legacy Non-Performing and Re-Performing Loans Non-Performing Loans (NPLs)24 Re-Performing Loans (RPL)25 Remaining UPB of $651M for loans purchased as NPLs Remaining UPB of $704M for loans purchased as RPLs 94% of loans purchased as NPLs were performing, paid in full 86% of RPL portfolio was
Slide 15: Appendix
Appendix 15with Houses James Casebere, Landscape (Dutchess County, NY) #2, 2010 (detail)
Slide 16: MFA Financial Overview
MFA Financial, Inc. (NYSE: MFA) is an internally managed real estate investment trust (REIT) that invests in U.S. residential mortgage loans and mortgage-backed securities MFA Financial MFA focuses primarily on mortgage subsectors in which it tries to avoid direct competition with banks and gove
Slide 17: Lima One: Leading Nationwide BPL Originator and Servicer
Lima One: Leading Nationwide BPL Originator and Servicer Fully Integrated BPL Platform Product Offerings Lima One, a wholly-owned subsidiary of MFA, is an industry-leading, Lima One offers a diverse selection of both short-term and long-term fully integrated business purpose lending platform fin
Slide 18: Book Value Upside
Book Value Upside Economic book value has over $3 per share of potential Potential upside in Economic book value (EBV) upside $22 $20 Our loan portfolio is marked at a substantial discount to $5.43 $(2.35) par largely due to impact of higher interest rates $18 $17.65 $3.08 potential $16 We rec
Slide 19: MFA-Issued Securitizations Outstanding
MFA-Issued Securitizations Outstanding Original Collateral Current Collateral Bonds Sold Original UPB Outstanding Balance Weighted Average Coupon WAC of Underlying Securitization Name Loan Product Type Settlement Date Callable Date UPB ($M)28 UPB ($M)28 ($M) Sold (%)29 of Bonds Sold ($M) (WAC) of Ou
Slide 20: Select Financial Metrics
Select Financial Metrics Asset Yield Net Interest Spread Distributable Earnings vs. Dividend 2.50% 7.00% 6.46% 2.17% $0.50 6.35% 2.14% 2.13% 6.10% 6.00% 5.69% 2.00% 1.74% $0.40 5.00% 1.50% $0.30 4.00% 3.00% 1.00% $0.20 2.00% 0.50% $0.10 1.00% 0.00% 0.00% $- Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2023 Q2
Slide 21: Reconciliation of GAAP net income to non-GAAP Distributable earnings
Reconciliation of GAAP net income to non-GAAP Distributable earnings “Distributable earnings” is a non-GAAP financial measure of our operating performance, within the meaning of Regulation G and Item 10(e) of Regulation S-K, as promulgated by the Securities and Exchange Commission. Distributable ear
Slide 22: 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 and securitized debt(1) held at carrying value are adjusted to their fair value, r
Slide 23: Book Value and Economic Book Value Rollforward
Book Value and Economic Book Value Rollforward GAAP Economic Book value per common share as of 9/30/23 $13.48 $13.84 Net income available to common shareholders 0.80 0.80 Common stock dividends declared (0.35) (0.35) Fair value changes attributable to residential mortgage securities and other 0.05 0
Slide 24: GAAP Segment Reporting
GAAP Segment Reporting (Dollars in millions) Mortgage-Related Lima One Corporate Total Assets Three months ended Dec. 31, 2023 Interest Income 94.5 71.9 3.5 169.9 Interest Expense 68.7 51.0 3.7 123.4 Net Interest Income/(Expense) $ 25.8 $ 20.9 $ (0.2) $ 46.5 (Provision)/Reversal of Provision for Cre
Slide 25: Distributable Earnings by Operating Segment
Distributable Earnings by Operating Segment (Dollars in millions) Mortgage- Lima One Corporate Total Related Assets Three months ended Dec. 31, 2023 GAAP Net income/(loss) used in the calculation of basic EPS $ 93.1 $ 14.1 $ (25.7) $ 81.5 Adjustments: Unrealized and realized gains and losses on: Res
Slide 26: Endnotes
1) Total economic return is calculated as the quarterly change in Economic Book Value (EBV) plus common dividends declared during the quarter divided by EBV at the start of the quarter. Endnotes 2) Total shareholder return includes dividends paid. Assumes dividends reinvested in MFA shares. 3) Purch