Slide 1: Second Quarter 2020 Earnings Presentation
Second Quarter 2020 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 • 2020 second quarter financial results • Apollo/Athene capital transaction • Restructured liabilities with more durable financing • Exited forbearance on June 26 with substantial liquidity • Securitization of Non-QM loans • Reinstated preferred dividends and declared common divide
Slide 4: 2020 second quarter financial results
2020 second quarter financial results • GAAP earnings of $0.19 per common share • GAAP book value was $4.51, up 3.9% from $4.34 at March 31 • Economic book value was $4.46, up 9.1% from $4.09 at March 31 • Elected fair value option accounting for all new and reinstated financing • Leverage (debt to
Slide 5: Apollo/Athene capital transaction
Apollo/Athene capital transaction • $500 million senior secured term loan closed June 26, 2020 ▪ Warrants to purchase 7.5% of MFA common stock outstanding at May 31, 2020 • $2 billion of new non-mark-to-market term financing ▪ $1.6 billion provided by Barclays, Apollo and Athene ▪ $475 million provi
Slide 6: Restructured liabilities with more durable financing
Restructured liabilities with more durable financing • $5.0 billion of total liabilities at June 30, 2020 ▪ $4.7 billion is asset-based (secured) financing ◦ $3.0 billion, or approximately 65%, is non-mark-to-market ◦ $0.8 billion is “under-levered” by approximately $55 million, creating a margin cu
Slide 7: Exited forbearance on June 26 with substantial liquidity
Exited forbearance on June 26 with substantial liquidity • MFA exited from forbearance arrangements on June 26, 2020 ▪ Initial forbearance agreement on April 10, extended on April 27 and again on June 1 ▪ All outstanding margin calls satisfied and lenders repaid in full • Forbearance provided meanin
Slide 8: Substantial liquidity, securitization, preferred dividends reinstated
Substantial liquidity MFA is well-positioned with substantial liquidity • $666 million in unrestricted cash and cash equivalents as of June 30 • $55 million of additional borrowing capacity on under-levered financing Securitization MFA will pursue securitizations for Non-QM loan portfolio • Spreads
Slide 9: Estimated REIT taxable income and implications for common dividends in 2020
Estimated REIT taxable income, undistributed income and implications for common dividends in 2020 • Prior year undistributed REIT taxable income was approximately $0.05 per share. To avoid paying corporate income tax, we are required to declare a dividend for this income prior to filing our REIT tax
Slide 10: Second quarter portfolio activity
Second quarter portfolio activity • Second quarter portfolio activity was focused on stabilizing the balance sheet, reducing leverage and generating liquidity ▪ Sold $3.2 billion of assets. Exited all Agency MBS positions and virtually all Legacy Non-Agency MBS positions in the quarter. Substantial
Slide 11: Second quarter financing activity
Second quarter financing activity • Reduced mark-to-market repurchase financing by $6.1 billion in the second quarter. ▪ Paid down $4.1 billion through asset sales as we de-levered and de-risked our portfolio. ▪ Replaced $2.0 billion of mark-to-market repurchase agreements with $2.0 billion of term
Slide 12: Non-QM loans
Non-QM loans • Origination of Non-QM loans slowed down Non-QM Portfolio Statistics (6/30/20) materially in the second quarter, but has begun WA LTV 63.6% to pick up once again with the stabilization of the Total UPB ($mm) $2,501.55 WA FICO 712 securitization market. WA Coupon 6.19% • We completed a
Slide 13: Non-QM COVID-19 pandemic impact
Non-QM COVID-19 pandemic impact Dec-19 Mar-20 Apr -20 May - 20 June - 20 • A material percentage of our Non-QM Loan Count 7,429 7,871 7,769 5,947 5,844 loans have been impacted by the Total UPB ($mm) 3,517.3 3,500.9 3,464.1 2,501.4 2,460.1 % Current 97.2% 97.2% 97.2% 97.2% 87.2% pandemic. % 30 Days
Slide 14: RPL portfolio delinquency characteristics as of 6/30/2020
RPL portfolio delinquency characteristics as of 6/30/2020 • 83% of our RPL portfolio is less than 60 days delinquent as of 6/30/2020. • On average, 22% 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 15: Performance of Non-Performing loans purchased before 6/30/19
Performance of Non-Performing(1) loans purchased before 6/30/19 Acquisition Year 2014 2015 2016 2017 2018 2019 Total Loan Count 743 2,354 1,069 3,124 1,848 721 9,859 UPB Purchased (in millions) $161.3 $619.9 $301.3 $704.7 $497.3 $124.1 $2,408.6 Status 6/30/2020 Performing(2)/PIF 34% 26% 25% 38% 44%
Slide 16: Business purpose loans – Rehabilitation (or Fix and Flip) loans
Business purpose loans – Rehabilitation (or Fix and Flip) loans • Fix and Flip portfolio declined $116 million to $863 million Portfolio Statistics (6/30/20) at the end of the second quarter. WA ARV-LTV* 63% ▪ $135 million of principal payments WA As-Is/Purch. LTV** 70% ◦ Paydowns slowed in April an
Slide 17: Business purpose loans – Fix and Flip delinquency
Business purpose loans – Fix and Flip delinquency • Portfolio delinquency 60+ Day DQ Loan Statistics (6/30/20) ▪ 60+ day DQ % increased during the quarter by $70 WA ARV-LTV* 63% million, or 10% to $182 million, or 21% of UPB. WA As-Is/Purch. LTV** 70% ◦ 7.5% of the increase was due to new loans beco
Slide 18: Business purpose loans – Single family rental loans
Business purpose loans – Single family rental loans • SFR portfolio declined $12 million to $490 million at the SFR Portfolio Statistics (06/30/20) WA LTV 71% end of the second quarter. WA FICO 734 ▪ Prepayment rates remained low due to strong WA DSCR* 1.46x WA Coupon 6.64% prepayment protection WA
Slide 19: Summary
Summary • Second quarter results and book value reflect the continued recovery in residential mortgage asset prices following the COVID-19 driven disruption experienced in the first quarter. • Management’s focus was to take the actions necessary to stabilize our balance sheet, generate liquidity, pr
Slide 20: Additional Information
SSS Additional Information
Slide 21: Q2 Results reflect portfolio restructuring and impact of forbearance agreements
Q2 Results reflect portfolio restructuring and impact of forbearance agreements Q2 2020 Q1 2020 Key items impacting results: Summary Income Statement $ in mm $ in mm • Net interest income significantly reduced due Net Interest Income: to asset sales and higher funding costs while Residential mortgag
Slide 22: Second quarter portfolio activity positively impacted net income and book value
Second quarter portfolio activity positively impacted second quarter net income and book value of realized and unrealized investment portfolio net gains (Amounts In Millions) Legacy Non- MSR-Related CRT RPL/NPL MBS Agency MBS Other Total Agency Assets Securities MBS Realized gains/(losses) on securi
Slide 23: Allowance for credit losses
Allowance for credit losses Three Months Ended June 30, 2020 Purchased Seasoned Non-QM Rehabilitation Single-family Credit (Amounts In Millions) Performing Totals Loans Loans (1) Rental Loans Deteriorated Loans Loans Allowance for credit and valuation losses at $103,831 $35,633 $7,431 $249 $70,867 $
Slide 24: GAAP and Economic book value increased as residential mortgage assets partially recovered
GAAP and Economic book value increased as residential mortgage assets partially recovered, following COVID-19 related market disruptions in Q1 GAAP Economic Book value per common share as of 3/31/20 $4.34 $4.09 Net income available to common shareholders 0.19 0.19 Impact of discount accretion and re
Slide 25: 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