Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q1 2021 Earnings Presentation
24 slides from Mfa Financial's earnings presentation, Aug 5, 2021
Slide 1: First Quarter 2021 Earnings Presentation
First 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 • Q1 2021 financial results • Continued execution of securitizations • Investment portfolio and financing composition • Strong housing fundamentals • Share repurchase program • Investment portfolio and asset based financing composition • Acquisition of Lima One Holdings, LLC 3
Slide 4: 2021 first quarter financial results
2021 first quarter financial results • GAAP earnings of $0.17 per common share ▪ Another strong contribution from whole loans accounted for at fair value: $49.8 million ◦ Approximately $18 million reflects coupon interest and other cash income ▪ $22.8 million of net reversal of provision for credit
Slide 5: 2021 first quarter financial results (continued)
2021 first quarter financial results (continued) • Interest expense declined to $30 million from $41 million in Q4 2020 ▪ 27% reduction in interest expense ▪ Securitizations continue to materially reduce interest expense ▪ Due to timing of 2021 securitizations, the impact on Q1 2021 was limited • Ne
Slide 6: Securitizations
Securitizations • MFRA 2021-INV1 ($217 mil) closed February 4, 2021 ▪ MFA’s first single family rental (SFR) securitization ▪ $149 million AAA’s sold at 0.83% yield ▪ Bonds sold represent 91% of UPB with blended cost of debt of 1.06% • MFRA 2021-NPL1 ($367 mil) closed March 25, 2021 ▪ Re-lever of MF
Slide 7: Strong housing fundamentals
Strong housing fundamentals Housing fundamentals continue to support residential mortgage credit • Rising housing prices ▪ According to Zillow, the typical US home price has increased by 10.6% in the last year. • Low supply ▪ Robust demand for single family residential housing ▪ National housing sup
Slide 8: MFA share repurchase program
MFA share repurchase program • MFA Board of Directors authorized $250 million share repurchase program in November 2020 • $50.7 million of common stock repurchases during Q4 2020 ▪ 14.1 million shares at an average price of $3.61 (including commissions) • Adopted 10b5-1 plan in March 2021 ▪ 10b5-1 p
Slide 9: Investment portfolio and asset based financing composition
Investment portfolio and asset based financing composition $5.8 billion Investment Portfolio at 3/31/21 Asset Based Financing at 3/31/21 Securities, $0.4 REO, $0.2 Non-QM Loans, $2.2 Mark-to-Market, $1.2 Fair Value loans(2), $1.3 Securitized Debt, $1.5 PCD(3) and Other Loans, $0.8 Non Mark-to-Market
Slide 10: Acquisition of Lima One Holdings, LLC
Acquisition of Lima One Holdings, LLC MFA has entered into a definitive agreement to acquire Lima One Holdings, LLC, (Lima One), a leading nationwide originator and servicer of Business Purpose Loans (BPLs). • MFA purchased over $1 billion of BPLs from Lima One since 2017 • MFA has made several inve
Slide 11: Higher earnings driven by portfolio performance and lower financing costs
Higher earnings driven by portfolio performance and lower financing costs Q1 2021 Q4 2020 Key items impacting results: Summary Income Statement $ in mm $ in mm • Net interest income reflects: Net Interest Income: ▪ 27% reduction in interest expense quarter Residential whole loans (RWL) (1) $ 20.4 $
Slide 12: Strong economic fundamentals support mortgage credit
# of Units (millions) 10% 12% 0% 2% 4% 6% 8% 0.8 1.2 1.4 1.6 1.8 2.2 1 2 Apr-14 Jan-18 Jul-14 Oct-14 Apr-18 Jan-15 Apr-15 Jul-18 Jul-15 Oct-15 Oct-18 Jan-16 Apr-16 Jan-19 Jul-16 Oct-16 Jan-17 Apr-19 Apr-17 Jul-17 Jul-19 Oct-17 Jan-18 Oct-19 Apr-18 Jul-18 National HPA-YoY Jan-20 Oct-18 Jan-19 Nationa
Slide 13: Non-QM investments
Non-QM investments(1) • Origination of Non-QM loans slowed down Non-QM Portfolio Statistics (3/31/21) materially in the second quarter, but has begun WA LTV 63.5% to pickup once again with the stabilization of the Total UPB (in millions) $2,289.76 securitization market WA FICO 713 WA Coupon 6.116% •
Slide 14: Non-QM COVID-19 pandemic impact
Non-QM COVID-19 pandemic impact • A material percentage of our Non-QM loans Mar-20 June - 20 Sep-20 Dec-20 Mar-21 Loan Count 7,670 5,947 5,656 5,405 5,442 Total UPB ($ millions) 3,424.6 2,501.5 2,397.2 2,294.1 2,289.8 have been impacted by the pandemic % Current 97.5 % 97.2 % 88.2 % 89.0 % 88.0 % %
Slide 15: RPL portfolio delinquency characteristics as of 3/31/2021
RPL portfolio delinquency characteristics as of 3/31/2021 • 80% of our RPL portfolio is less than 60 days delinquent as of March 31, 2021. • On average, 25% of the 60+ days delinquent loans are making payments. • Prepay speeds have historically maintained between 6% and 16%, with an uptick in the la
Slide 16: Performance of Non-Performing loans purchased before 3/31/20
Performance of Non-Performing(1) loans purchased before 3/31/20 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 3/31/2021 Performing(2)/PIF 37 % 28 % 29 % 40 % 50 %
Slide 17: Business purpose loans – Rehabilitation loans
Business purpose loans – Rehabilitation loans • The Fix and Flip portfolio continued to experience elevated Portfolio Statistics (3/31/21) paydowns in the first quarter, declining $117 million to $464 UPB (in millions) $464 million at March 31, 2021. Undrawn commitments $54 mm WA ARV-LTV* 64 % ▪ $14
Slide 18: Business purpose loans – Rehabilitation loans (cont.)
Business purpose loans – Rehabilitation loans (cont.) • Portfolio delinquency 60+ Day DQ Loan Statistics (3/31/21) ▪ 60+ day DQ UPB decreased $13 million to $149 million at the end of UPB (in million) $149 the quarter. Undrawn commitments $8 ◦ $18 million paid off in full. WA ARV-LTV* 65 % ◦ $5 mill
Slide 19: Business purpose loans – Single Family Rental Loans
Business purpose loans – Single Family Rental Loans • The SFR portfolio performed well through the COVID-19 SFR Portfolio Statistics (3/31/21) pandemic and continued to exhibit strong performance in the UPB (in millions) $447 WA LTV 70 % first quarter. WA FICO 730 ▪ First quarter yield: 5.61% (inclu
Slide 20: Summary
Summary • First quarter 2021 results and book value growth primarily reflect continued strength in mortgage asset values and lower CECL credit reserves. • Successful execution of securitization transactions has generated substantial liquidity and positively impacted our cost of funds. Securitized de
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 increased reflecting strong mortgage asset performance during the quarter
Book value increased reflecting strong mortgage asset performance during the quarter GAAP Economic Book value per common share as of 12/31/20 $4.54 $4.92 Net income available to common shareholders 0.17 0.17 Common stock dividends declared(1) (0.08) (0.08) Fair value changes attributable to resident
Slide 24: Allowance for credit losses - Loans held at carrying value
Allowance for credit losses - Loans held at carrying value Three Months Ended March 31, 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 period