Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q4 2022 Earnings Presentation
22 slides from Mfa Financial's earnings presentation, Feb 23, 2023
Slide 1: Company Update Fourth Quarter 2022
Company Update THIRD QUARTER FOURTH QUARTER2022 2022 DRAFT 10/27
Slide 2: Forward looking statements
Q2 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 Equity allocation Total assets Total equity (As of December 31, 2022) $9.1B as of December 31, 2022 $2.0B as of December 31, 2022 14% 17% Common dividends Listed on
Slide 4: Q4 2022 financial snapshot
Q4 2022 financial snapshot MFA protected book value during Q4 through hedging and securitization activities undertaken during the past year GAAP Economic Net interest book value book value1 income GAAP loss of $14.87 $15.55 $55.7M ($0.02) per common share per common share per common share Substantia
Slide 5: Active portfolio management
• Strategic focus on hedging and liability management during 2022 limited the impact of volatile markets in Q4 2022. Active • Q4 2022 cost of funds (including impact of swaps) was essentially unchanged from Q3 2022 at 3.7%, despite the Fed raising rates 125 bps in the quarter and 200 bps since its S
Slide 6: Balance sheet strength
Balance sheet metric 12 month Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 ($ in millions) change % non-MTM financing 58% 57% 63% 71% 67% +9% % of effective fixed-rate financing 58% 78% 95% 99% 99% +41% Balance Securitized debt par outstanding $2,645 $2,920 $3,532 $4,116 $3,5861 +$941 Swap notional $900
Slide 7: Balance sheet strength: loan financing
• $4.6B of non-MTM loan financing (including securitized debt) at December 31, 2022. • $3.1B of loan financing (excluding securitized debt) of which $2.0B (or 65%) had maturity greater than six months and $0.7B (or 22%) had maturity greater than 12 months at December 31, 2022. • Loan financing terms
Slide 8: Strong credit fundamentals support potential book value upside
Strong credit fundamentals support potential book value upside • Strong credit fundamentals. Current LTV Purchased Performing Legacy RPL/NPL 60+ • MFA’s loan portfolio has benefited from strong home price 60+ day delinquency day delinquency 80% appreciation (HPA) and loan amortization, with Current
Slide 9: Q4 2022 portfolio highlights
Q4 2022 portfolio highlights • Acquired $481M of higher yielding BPL and Non-QM loans. Opportunistically Average coupon on loan acquisitions by quarter exited majority of lower yielding Agency Eligible Investor loans. 10% • Q4 loan acquisitions include $379M of funded originations and draws on BPLs
Slide 10: Successful integration of Lima One Capital during 2022
Successful integration of Lima One Capital during 2022 Fully Integrated BPL Platform Product Offerings • Lima One, a wholly owned subsidiary of MFA, is an industry leading, fully • Lima One offers a diverse selection of both short-term and long-term financing integrated business purpose lending plat
Slide 11: Lima One: Q4 and 2022 highlights
• Record origination volume of $2.3B1 in 2022, Transitional Rental FICO LTV2 a 42% increase over 2021 volume. $1.6B $0.7B 747 67% Lima One: • MFA’s BPL portfolio grew over 70% in 2022 to $2.9B. Represents more than one-third of MFA’s investment portfolio as of December 31, 2022. Q4 and 2022 highligh
Slide 12: Business purpose loans: Transitional loans
Business purpose loans: Transitional loans Portfolio statistics (12/31/22) The Transitional Loan (TL) portfolio grew by over $170M to $1.4B Q4 2022 UPB at December 31, 2022, a 14% increase over Q3 2022. UPB ($M) Maximum Loan Amount ($M) $1,432 $1,985 highlights • Lima One originated $193M UPB ($331M
Slide 13: Business purpose loans: Single-Family Rental loans
Business purpose loans: Single-Family Rental loans SFR portfolio statistics (12/31/22) Single-Family Rental (SFR) loan portfolio is performing strongly, UPB ($M) $1,486 Q4 2022 delivering attractive yields and good credit performance. WA LTV 69% highlights • Lima One originated $75M in Q4 2022, resu
Slide 14: Non-QM loans Q4 2022 highlights
Non-QM loans Portfolio statistics (12/31/22) Total UPB ($M) $3,671 Q4 2022 • Purchased $102M of Non-QM loans in Q4 2022, down from $179M in Q3 2022. • Loans purchased in the quarter had a weighted average coupon of 8.17%. Average balance WA LTV1 $506,200 65% highlights • Portfolio credit performance
Slide 15: Legacy Non-Performing and Re-Performing Loans
Legacy Non-Performing1 and Re-Performing2 Loans Non-Performing Loans (NPL) Re-Performing Loans (RPL) • Improving outcomes for NPL portfolio by returning loans to performing or • Remaining UPB of $783M. paid-in-full status. • 83% of RPL portfolio is less than 60 days delinquent as of December 31, 202
Slide 16: Appendix
Appendix James Casebere, Lands16cape with Houses (Dutches s County, NY) #2, 2010
Slide 17: MFA overview
• MFA Financial, Inc. is a leading specialty finance company that invests in and MFA finances residential mortgage assets. • Residential mortgage asset portfolio comprised of both transitional and term overview Business Purpose Loans (BPLs), Non-QM, Re-Performing and Non-Performing Loans and residen
Slide 18: 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 19: 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 20: Book value and economic book value rollforward
Book value and economic book value rollforward GAAP Economic Book value per common share as of 9/30/22 $15.31 $15.82 Net income available to common shareholders (0.02) (0.02) Common stock dividends declared (0.35) (0.35) Fair value changes attributable to residential mortgage securities and other (0
Slide 21: GAAP segment reporting
GAAP segment reporting Mortgage- (Dollars in millions) Related Assets Lima One Corporate Total Three months ended December 31, 2022 Interest Income $ 100.8 $ 39.4 $ 2.7 $ 142.9 Interest Expense 56.0 27.2 4.0 87.2 Net Interest Income/(Expense) $ 44.8 $ 12.2 $ (1.3) $ 55.7 Reversal of Provision/(Provi
Slide 22: Distributable earnings by operating segment
Distributable earnings by operating segment Mortgage- Lima One Corporate Total Related Assets (Dollars in millions) Three months ended December 31, 2022 GAAP Net income used in the calculation of basic EPS $ 2.8 $ 25.9 $ (30.3) $ (1.6) Adjustments: Unrealized and realized gains and losses on: Reside