Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q3 2021 Earnings Presentation
24 slides from Mfa Financial's earnings presentation, Nov 5, 2021
Slide 1: Third Quarter 2021 Earnings Presentation
Third Quarter 2021 Earnings Presentation
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: Executive summary
Executive summary • Q3 2021 financial results • Integration of Lima One • Continued execution of securitizations • Corporate responsibility 3
Slide 4: 2021 third quarter financial results
2021 third quarter financial results • GAAP earnings of $124.3 million or $0.28 per basic common share • Includes gains of $43.9 million or $0.10 per share related to Lima One acquisition • Net interest income on residential whole loans increased by 15% from $48 million to $55 million • Paid $0.10 d
Slide 5: 2021 third quarter financial results (cont'd)
2021 third quarter financial results (cont’d) • Asset acquisitions of $2.0 billion of loans in third quarter • Highest quarterly loan purchase volume in MFA’s history • Loan portfolio increased by $1.5 billion to $7 billion after portfolio runoff • MFA’s loan portfolio has grown by 33% in 2021 from
Slide 6: Investment portfolio and asset based financing composition
Investment portfolio and asset based financing composition $7.5 billion Investment Portfolio at 9/30/21 Asset Based Financing at 9/30/21 Securities, $0.3 REO, $0.2 Agency Eligible Investor Non-QM Loans, $2.8 Loans, $1.1 Securitized Debt, $2.1 Mark-to-Market, $2.4 Purchased Non- performing loans(2),
Slide 7: Integration of Lima One
Integration of Lima One MFA closed the purchase of Lima One, a leading nationwide originator and servicer of business purpose loans, on July 1, 2021. • Loans held on Lima One’s balance sheet on July 1 and all Q3 originations now included in MFA’s portfolio at fair value • Reliable source of substant
Slide 8: Securitizations
Securitizations • MFA 2021-NQM2 ($289 million) priced August 12, 2021 • MFA’s fifth NQM securitization since September 2020 • $210 million AAA’s sold at 1.00% yield • Bonds sold represent 96% of UPB with blended cost of debt of 1.23% • MFA 2021-AEINV1 ($312 million) priced October 13, 2021 • MFA’s f
Slide 9: Corporate responsibility
Corporate responsibility The call for companies to address environmental, social and governance issues continues to grow. Increasingly, the investment community is taking ESG into consideration in their investment decisions. • MFA considers environmental, social and governance matters in our busines
Slide 10: Strong earnings reflects portfolio growth and impacts from Lima One acquisition
Strong earnings reflects portfolio growth and impacts from Lima One acquisition Q3 2021 Q2 2021 Key items impacting results: Summary Income Statement $ in mm $ in mm • Net interest income increased to $61.8 million: Net Interest Income: • Overall 5% increase compared to Q2 Loans (1) 55.2 48.2 Securi
Slide 11: Housing market and unemployment charts
# of Units (millions) 10% 12% 14% 16% 18% 20% 0% 2% 4% 6% 8% 0.8 1.2 1.4 1.6 1.8 2.2 1 2 Sep-14 Jan-18 Dec-14 Mar-18 Mar-15 May-18 Jun-15 Sep-15 Jul-18 Dec-15 Sep-18 Mar-16 Nov-18 Jun-16 Jan-19 Sep-16 Dec-16 Mar-19 Mar-17 May-19 Jun-17 Jul-19 Sep-17 Sep-19 Dec-17 Mar-18 Nov-19 Jun-18 Jan-20 Sep-18 M
Slide 12: Non-QM investments
Non-QM investments • The pace of origination remains elevated as the Portfolio Statistics (9/30/21) rates available to Non-QM borrowers became more WA LTV 64.4% attractive Total UPB (in millions) $2,738.0 WA FICO 725 • We purchased or committed to purchase over $695 WA Coupon 5.58% million of Non-QM
Slide 13: Non-QM portfolio performance
Non-QM portfolio performance June-20 Sep-20 Dec-20 Mar-21 June-21 Sep-21 • Steady improvement since the initial Loan Count 5,947 5,656 5,405 5,442 5,390 5,846 pandemic delinquency wave Total UPB ($ millions) 2,501.5 2,397.2 2,294.1 2,289.8 2,363.3 2,738.0 % Current 97.2 % 88.2 % 89.0 % 88.0 % 89.5 %
Slide 14: Agency eligible investor loans
Agency eligible investor loans • A recent letter from the FHFA and Treasury suspended the 7% cap on Fannie Mae and Portfolio Statistics (9/30/21) Freddie Mac investor loan purchases WA LTV 61.9% • The suspension will limit the size of this Total UPB (in millions) $1,082.1 opportunity going forward W
Slide 15: RPL portfolio delinquency characteristics as of 9/30/2021
RPL portfolio delinquency characteristics as of 9/30/2021 • 81% of our RPL portfolio is less than 60 days delinquent as of 9/30/2021 • On average, 29% of the 60+ days delinquent loans are making payments • Prepay speeds have steadily increased as borrowers have more opportunities to refinance • 28%
Slide 16: Performance of Non-Performing loans purchased before 9/30/20
Performance of Non-Performing(1) loans purchased before 9/30/20 Acquisition Year 2014 2015 2016 2017 2018 2019 Total Loan Count 743 2,353 1,007 3,124 1,848 1,264 10,339 UPB Purchased (in millions) 161.3 619.6 280.2 704.7 497.3 227.3 2,490.4 Status 9/30/2021 Performing(2)/PIF 36 % 29 % 30 % 41 % 50 %
Slide 17: Business purpose loans – Lima One
Business purpose loans – Lima One • We completed the acquisitions of Lima One, a leading nationwide originator and servicer of business purpose loans (BPLs), on July 1st. • Lima One originated over $400 million(1) in the third quarter, a 34% increase from the second quarter and a record quarter for
Slide 18: Business purpose loans – Rehabilitation loans
Business purpose loans – Rehabilitation loans • The Fix and Flip portfolio grew by $162 million to Portfolio Statistics (9/30/21) $594 million UPB at September 30, 2021. A 37% UPB (in millions) $594 increase over second quarter 2021 Undrawn commitments (millions) $185 Maximum Loan Amount (millions)
Slide 19: Business purpose loans – Single Family Rental Loans
Business purpose loans – Single Family Rental Loans • The SFR portfolio continues to exhibit strong performance, SFR Portfolio Statistics (9/30/21) delivering attractive yields and good credit performance: UPB (millions) $717 WA LTV 70 % • Third quarter yield: 5.76% WA FICO 732 • 60+ day delinquency
Slide 20: Summary
Summary • Strong third quarter 2021 results: • $0.28 EPS and 4% book value growth • Best loan investment quarter in MFA’s history • Robust growth in loan portfolio and in net interest income • Securitization strategy execution continues • Over $2 billion in 2021 with several more deals expected • Li
Slide 21: Additional Information
Additional Information
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 at carrying value are adjusted to their fair value, rather than the carrying value
Slide 23: Book value increase reflects excess of earnings over dividends distributed
Book value increase reflects excess of earnings over dividends distributed GAAP Economic Book value per common share as of 6/30/21 $4.65 $5.12 Net income available to common shareholders 0.28 0.28 Common stock dividends declared (0.10) (0.10) Fair value changes attributable to residential mortgage s
Slide 24: Allowance for credit losses - Loans held at carrying value
Allowance for credit losses - Loans held at carrying value Three Months Ended September 30, 2021 Purchased Seasoned Non-QM Rehabilitation Single-family Credit (Amounts In Thousands) Performing Totals Loans Loans (1) Rental Loans Deteriorated Loans Loans Allowance for credit losses at beginning of pe