Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Investor Presentation (January 2014)
19 slides from Mfa Financial's investor presentation, Jan 14, 2014
Slide 1: MFA Financial, Inc. January 2014
FINANCIAL, INC. January 2014
Slide 2: Forward-looking statements
When used in this press release 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,” “may” or similar expressions, are intended t
Slide 3: MFA Financial, Inc.
3 MFA Financial, Inc. MFA is an internally managed REIT that seeks to deliver shareholder value through both the generation of distributable income and through asset performance linked to improvement in residential mortgage credit fundamentals.
Slide 4: Our Strategy is to Identify the Best Investment Opportunities Throughout the Residential MBS Universe
4 Our Strategy is to Identify the Best Investment Opportunities Throughout the Residential MBS Universe Non-Agency MBS selection is driven by credit analysis and expected return. Agency MBS selection is driven by analysis of interest rate sensitivity, prepayment exposure and expected return.
Slide 5: MFA has a Long Track Record of Delivering Attractive Shareholder Returns
5 MFA has a Long Track Record of Delivering Attractive Shareholder Returns 15.19% Annual Return since January 2000 625.7% Total Stockholder Return since January 2000 Source: Bloomberg As of December 31, 2013 Includes reinvestment of dividends.
Slide 6: Despite Changing Interest Rates and Prepayment Speeds, MFA's Key Metrics Have Remained Consistent
Fourth Quarter 2012 First Quarter 2013 Second Quarter 2013 Third Quarter 2013 Yield on Interest Earning Assets 4.10% 4.02% 4.01% 4.05% Net Interest Rate Spread 2.33% 2.32% 2.38% 2.24% Debt Equity Ratio 3.04x 3.09x 3.14x 3.07x 6 Despite Changing Interest Rates and Prepayment Speeds, MFA’s Key Metrics
Slide 7: Investment in Residential MBS
7 Investment in Residential MBS Including both Agency MBS and Non-Agency MBS (1)Information presented with respect to Non-Agency MBS, related repurchase agreement borrowings and resulting totals are presented on a non-GAAP basis. Includes $106.2 million Non-Agency MBS and $82.4 million repurchase ag
Slide 8: Interest Rate Risk Mitigated by Asset Selection
8 Interest Rate Risk Mitigated by Asset Selection Our seasoned Non-Agency MBS acquired at a discount are sensitive to mortgage credit fundamentals and have less sensitivity to changes in interest rates than Agency MBS of similar term. Additionally, 70% of MFA’s Non-Agency MBS are Hybrid ARMs further
Slide 9: MFA's Interest Rate Sensitivity
9 MFA’s Interest Rate Sensitivity Assets Market Value Average Coupon Duration Non-Agency ARMs (12 months or less MTR) $2,873 2.95% 0.5 Non-Agency Hybrid (12-48 MTR) $628 4.92% 1.1 Non-Agency Fixed Rate $1,474 5.81% 3.5 Agency ARMs (12 months or less MTR) $1,237 2.73% 0.8 Agency ARMs (12-120 MTR) $2,
Slide 10: MFA Strategy: Significant Investment in Non-Agency MBS
10 MFA Strategy: Significant Investment in Non-Agency MBS MFA owns approximately $4.97 billion market value ($5.87 billion face amount) of Non-Agency MBS, with an average amortized cost of 73.4% of par. In the third quarter, these assets generated a loss-adjusted yield of 7.33% on an unlevered basis
Slide 11: Credit Reserve Reductions: What is the Impact on Financial Statements?
Credit Reserve Reductions: What is the Impact on Financial Statements? 11 Credit Reserve Reductions Increase Future Earnings Interest income on MFA’s Non-Agency RMBS will increase by the amount of the Credit Reserve transfer over the remaining life of these assets Additional interest income on Non-A
Slide 12: Non-Agency MBS: Largest Positions
12 Non-Agency MBS: 20 Largest Positions MFA’s Non-Agency yields are based on projections that assume defaults well in excess of currently delinquent mortgages Data as of September 30, 2013 FICO scores as of deal origination date. Source: RBS Research % of Total Portfolio Collateral Type FICO WALA Cr
Slide 13: LTVs Continued to Decline in 2013
13 LTV’s Continued to Decline in 2013 Weighted average LTV of the portfolio continued to trend downward in 2013 The amount of loans in the portfolio that are under water is decreasing Lower LTV’s lessen the likelihood of defaults and simultaneously decrease loss severities Data as of 11/30/13 Source
Slide 14: Improving Credit: Home Price Appreciation Drives LTVs Down (California)
14 Improving Credit: Home Price Appreciation Drives LTVs Down 45.1% of the underlying loans in the Non-Agency portfolio are in California Source: CoreLogic, 1010 data HPA=Home Price Appreciation HPI Data as of October 2013. October 2012 12 Month HPA >20% 16 - 20% 11 - 15% 6 - 10% 0 - 5% -2 - 0% -5 -
Slide 15: Improving Credit: Home Price Appreciation Drives LTVs Down (Florida)
15 Improving Credit: Home Price Appreciation Drives LTVs Down Florida makes up MFA’s second largest Non-Agency geographic concentration with 7.9% of the portfolio Source: CoreLogic, 1010 data HPA=Home Price Appreciation HPI Data as of October 2013. MFA Portfolio Top 5 Florida County Concentrations C
Slide 16: Improving Credit: Current to 60 Days Delinquency Transition Rate Has Trended Down
16 Improving Credit: Current to 60 Days Delinquency Transition Rate for MFA’s Non-Agency Portfolio has Trended Down MFA’s Non-Agency Portfolio Current to 60 Days Delinquency Transition Rate as of November 30, 2013 Source: CoreLogic, 1010 Data Nov-13
Slide 17: Improving Credit: Yet Substantial Credit Reserves
17 Improving Credit: Yet Substantial Credit Reserves We maintain a substantial credit reserve of $1.1 Billion. Credit assumption changes would impact earnings over time. Dollars in Millions Non-Agency Portfolio as of September 30, 2013.
Slide 18: MFA Financial, Inc. summary
18 MFA Financial, Inc. Strategy is to identify the best investment opportunities within the Residential MBS universe. Internally managed. 15.19% annual return and 625.7% total return since 2000 (including reinvestment of dividends). Significant $4.97 billion market value investment in Non-Agency MBS
Slide 19: MFA Financial
MFA FINANCIAL,