Slide 1: 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 2: Executive summary
Executive summary In the third quarter of 2018, MFA generated GAAP EPS of $0.19. • • Q3 dividend to common stockholders was $0.20 per share. • Estimated REIT taxable income for the quarter was $0.21 per common share. Estimated undistributed taxable income was $0.11 per common share at September 30,
Slide 3: Executive summary (cont'd.)
Executive summary (cont’d.) Over $700 million of residential whole loan purchases included approximately $400 million of Non-QM loans, $190 million of Fix and Flip loans, nearly $25 million of Single Family Rental loans and nearly $80 million of Non-Performing and Re-Performing loans. • • Our strate
Slide 4: Investment strategy
Investment strategy Continue to grow investment assets • Newly originated loans should provide recurring (and increasing) portfolio growth. • Optimize capital structure associated with asset growth. • Produce attractive returns that are comparable to peers, but with less risk due to lower leverage,
Slide 5: Market conditions and investment activity
Market conditions and investment activity • Vigorous investment activity in the third quarter, particularly after our equity raise in early August. • Expand investment opportunities in the form of newly originated whole loans. Acquiring these assets is a unique process: • Long gestation periods • Cr
Slide 6: Q3 2018 net income per common share of $0.19
Q3 2018 net income per common share of $0.19 • Net income was higher on a sequential quarter basis primarily due to: $mm $mm • Higher net interest income from carrying value loans, reflecting ongoing portfolio growth, particularly in more recently originated loans. Higher net other income, reflectin
Slide 7: Third quarter 2018 investment flows
Third quarter 2018 investment flows • • Vigorous investment activity with asset acquisition in excess of $2.3 billion. Investment portfolio grew by $1.3 billion in the third quarter and by $1.6 billion year to date as new loan initiatives add meaningfully to investment flows. We opportunistically so
Slide 8: MFA's yields and spreads remain attractive
MFA’s yields and spreads remain attractive • Despite eight Fed Funds rate increases in almost three years, MFA’s interest rate spread is relatively unchanged and remains attractive. • During this period yield on interest earning assets has risen by approximately 140 bps. ◦ ◦ Yield on credit sensitiv
Slide 9: Third quarter 2018 yields and spreads by asset type
Third quarter 2018 yields and spreads by asset type Asset Allocated Net Spread Return Funds Equity Ratio (1) (2) Net of 16 bps of servicing costs. These residential whole loans produce GAAP income/loss based on changes in fair value in the current period, and therefore results will vary on a quarter
Slide 10: MFA's interest rate sensitivity remains low
MFA’s interest rate sensitivity remains low • • • • Excluding hedges, our asset duration remains relatively low at 1.68. Our assets continue to be primarily sensitive to mortgage credit fundamentals. In addition, our leverage remains low, with a debt-to-equity ratio of 2.3x. Due to the combination o
Slide 11: MFA's strategy continues to deliver book value stability
MFA’s strategy continues to deliver book value stability • MFA’s investment strategy has consistently minimized book value volatility. Since 2014 MFA’s average quarterly book value change has been less than 2%. Protecting book value gives MFA the ability to take advantage of new opportunities as the
Slide 12: Continued positive fundamentals
Continued positive fundamentals National HPA-YoY As of August 2018 for residential mortgage U-3 Unemployment Rate As of September 2018 credit 4% As of Q2-2018 Source: Zillow Source: FRB # of Units (millions) Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 J
Slide 13: Residential whole loan portfolio update
Residential whole loan portfolio update • We sourced over $700 million of residential whole loans in the third quarter. We continue to grow our portfolio of Non-QM, Fix & Flip and Single Family Rental loans adding origination partners and developing our existing relationships. Year to date flows in
Slide 14: RPL portfolio delinquency characteristics as of 9/30/2018
RPL portfolio delinquency characteristics as of 9/30/2018 • 88% of our RPL portfolio is less than 60 days delinquent. • On average, 28% of the 60+ days delinquent loans are making payments. • Prepay speeds have outperformed expectations maintaining a range between 6% and 14%. 15 Reflects 3 month tra
Slide 15: Performance of Non-Performing loans purchased before 9/30/17
Performance of Non-Performing1 loans purchased before 9/30/17 • Measured by UPB at purchase, 30% (or approximately 2,000) of loans that were non-performing at purchase are either performing or have paid in full as of September 2018. • Through diligent asset management we continue to improve outcomes
Slide 16: Non-QM investments
Non-QM investments • We are purchasing loans made to creditworthy borrowers who have limited conventional mortgage finance options. We have purchased over $1 billion UPB to date and are currently working with several origination partners. Able to achieve appropriate leverage through warehouse lines
Slide 17: Business purpose loans - Rehabilitation and SFR Loans
Business purpose loans - Rehabilitation and Single Family Rental (SFR) Loans We continue to grow our holdings of Rehabilitation and SFR loans as we expand our existing originator relationships and develop new ones. Since inception we have acquired (including undrawn commitments) close to $600mm of R
Slide 18: Summary
Summary • We remain active in the market and again grew the portfolio as we purchased more than $2.3 billion of investments in the third quarter. • We continue to expand our investment opportunity set within the residential mortgage space, utilizing the same disciplined approach to risk/reward as we
Slide 19: Summary
Summary e We remain active in the market and again grew the portfolio as we purchased more than $2.3 billion of investments in the third quarter. * Wecontinue to expand our investment opportunity set within the residential mortgage space, utilizing the same disciplined approach to risk/reward as we
Slide 20: Book value down 1% primarily due to discount accretion on Legacy Non-Agency MBS
Book value down 1% primarily due to discount accretion on Legacy Non-Agency MBS (resulting in lower unrealized gains) and price changes on Agency MBS (0.04) at a discount. Results in increased amortized cost and lower unrealized gains 21 Qtr ended 9/30/18 Book value per common share at the beginning
Slide 21: Book value per common share bridge
Qtr ended 9/30/18 IBook value per common share at the beginning of the period $7.54 INet income available to common shareholders 0.19 |common dividends declared (0.20) Net change attributable to Agency MBS (0.02) Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased 1.