Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q3 2020 Earnings Presentation
23 slides from Mfa Financial's earnings presentation, Nov 5, 2020
Slide 1: Third Quarter 2020 Earnings Presentation
Third Quarter 2020 Earnings Presentation
Slide 2: Forward looking statements
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,” “could,” “would,”
Slide 3: Executive summary
Executive summary • 2020 third quarter financial results • Non-QM securitizations • Paid off $500 million Apollo/Athene 11% senior secured term loan • Future expected securitization activity • Stock repurchase authorization 3
Slide 4: 2020 third quarter financial results
2020 third quarter financial results • GAAP earnings of $0.17 per common share ▪ Strong contribution from whole loans accounted for at fair value ▪ $27.2 million net reversal of provision for credit losses • GAAP book value was $4.61, up 2.2% from $4.51 at June 30 • Economic book value was $4.92, up
Slide 5: 2020 third quarter financial results (continued)
2020 third quarter financial results (continued) • Investment portfolio primarily consists of $5.6 billion of residential whole loans1 • Third quarter results reflect continued improvement in values of our residential whole loan portfolio, which have recovered a substantial portion of the declines i
Slide 6: Non-QM Securitizations
Non-QM Securitizations • MFRA Trust 2020-NQM1 ($391 million) closed September 3, 2020 ▪ $276.6 million AAA’s sold at 1.48% yield ▪ Bonds sold represent 95.35% of UPB ▪ Blended cost of debt sold of 1.77% ▪ Replaced debt with approximate cost of 3.42% • MFRA Trust 2020-NQM2 ($570 million) closed Octob
Slide 7: Pay-off of $500 million 11% senior secured term loan
Pay-off of $500 million 11% senior secured term loan • Obtaining this financing was critical to forbearance exit and negotiation of non- mark-to-market term financing on loan portfolio • Loan terms permitted repayment without penalty or yield maintenance • Scheduled amortization payment of $18.75 mi
Slide 8: Additional liability management opportunities
Additional liability management opportunities • SFR Rated Securitization ▪ Approximately $475 million of existing unsecuritized SFR loans • Additional Non-QM Rated Securitizations ▪ Approximately $1.5 billion of existing unsecuritized Non-QM loans • Existing NPL MBS Outstanding ▪ We have three trans
Slide 9: Stock repurchase authorization
Stock repurchase authorization MFA’s Board of Directors has authorized $250 million stock repurchase program • Replaces existing authorization in the amount of 6.6 million shares • 10b-18 program permits share repurchase during “open window” periods • $250 million represents approximately 20% of MFA
Slide 10: Q3 earnings driven by ongoing recovery in loan values and CECL reserve release
Q3 earnings driven by ongoing recovery in loan values and CECL reserve release Q3 2020 Q2 2020 Key items impacting results: Summary Income Statement $ in mm $ in mm • Net interest income reflects: Net Interest Income: ▪ Improved net interest spreads for both Residential mortgage securities (1) $ 6.5
Slide 11: Non-QM loans
Non-QM loans • Origination has begun to ramp up again in the Non-QM Portfolio Statistics (9/30/20) 3rd quarter. We were able to acquire WA LTV 63.6% approximately $40 million of loans in the quarter Total UPB (in millions) $2,397.3 from our existing origination partners. WA FICO 712 WA Coupon 6.18%
Slide 12: Non-QM COVID-19 pandemic impact
Non-QM COVID-19 pandemic impact Mar-20 June - 20 Sep-20 • A material percentage of our Non-QM Loan Count 7,670 5,647 5,656 Total UPB ($ millions) 3,424.6 2,501.5 2,397.3 loans have been impacted by the % Current 97.5 % 97.2 % 88.2 % pandemic. % 30 Days 1.4 % 1.0 % 3.0 % % 60+ Days 1.1 % 1.8 % 8.8 %
Slide 13: RPL portfolio delinquency characteristics as of 9/30/2020
RPL portfolio delinquency characteristics as of 9/30/2020 • 80% of our RPL portfolio is less than 60 days delinquent as of 9/30/2020. • On average, 23% of the 60+ days delinquent loans are making payments. • Prepay speeds have maintained between 6% and 14%. • 30% of the RPL portfolio has been grante
Slide 14: Performance of Non-Performing loans purchased before 9/30/19
Performance of Non-Performing(1) loans purchased before 9/30/19 Acquisition Year 2014 2015 2016 2017 2018 2019 Total Loan Count 743 2,354 1,007 3,124 1,848 1,264 10,340 UPB Purchased (in millions) $161.3 $619.9 $280.2 $704.7 $497.3 $227.3 $2,490.7 Status 7/31/2020 Performing(2)/PIF 35 % 27 % 28 % 38
Slide 15: Business purpose loans – Rehabilitation loans
Business purpose loans – Rehabilitation loans • The Fix and Flip portfolio experienced robust paydowns in the third Portfolio Statistics (9/30/20) quarter, declining $164 million to $699 million at the end of Q3. UPB (in millions) $699 ▪ $175 million of principal payments Undrawn commitments $73 ▪ $
Slide 16: Business purpose loans – Fix and Flip delinquency
Business purpose loans – Fix and Flip delinquency • Portfolio delinquency 60+ Day DQ Loan Statistics (9/30/20) UPB (in million) $143 ▪ 60+ day DQ decreased by $39 million to $143 million at the end of the Undrawn commitments $9 quarter WA ARV-LTV* 64 % ◦ $18 million paid in full WA As-Is/Purch. LTV*
Slide 17: Business purpose loans – Single family rental loans
Business purpose loans – Single family rental loans • SFR portfolio has performed well through the COVID-19 SFR Portfolio Statistics (09/30/20) UPB (in millions) $475 pandemic and continued to exhibit strong performance WA LTV 70 % WA FICO 734 in the third quarter. WA DSCR* 1.46x WA Coupon 6.64 % ▪
Slide 18: Summary
Summary • Third quarter results and book value primarily reflect the continued recovery in residential mortgage asset prices and a net reversal of CECL credit loss reserves. • Executing on strategies to optimize the “right side” of the balance sheet through securitization has generated substantial a
Slide 19: Additional Information
Additional Information
Slide 20: Investment portfolio and asset based financing composition
Investment portfolio and asset based financing composition Investment Portfolio Asset Based Financing MSR-Related Assets, $0.3 Senior Secured Note, $0.5 Residential Mortgage Securities, $0.2 Market-to-Market, $1.5 Securitized Debt, $0.8 Residential Whole Non-Market-to-Market, $1.7 Loans and REO, $5.
Slide 21: GAAP and Economic book value increased as values of residential mortgage assets recover
GAAP and Economic book value increased as values of residential mortgage assets continue to recover and earnings exceeded dividends declared GAAP Economic Book value per common share as of 6/30/20 $4.51 $4.46 Net income available to common shareholders 0.17 0.17 Common stock dividends declared (0.05
Slide 22: Allowance for credit losses - Loans held at carrying value
Allowance for credit losses - Loans held at carrying value Three Months Ended September 30, 2020 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
Slide 23: 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