Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q4 2020 Earnings Presentation
24 slides from Mfa Financial's earnings presentation, Feb 23, 2021
Slide 1: Fourth Quarter 2020 Earnings Presentation
Fourth 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 fourth quarter financial results and other highlights • Investment portfolio and asset based financing composition • Non-QM and BPL securitizations • Apollo/Athene warrant position repurchased/exercised • MFA share repurchase program • 8% senior note redemption • MFA recogni
Slide 4: 2020 fourth quarter financial results
2020 fourth quarter financial results • GAAP earnings of $0.08 per common share ▪ Continued strong contribution from whole loans accounted for at fair value ▪ $15.7 million net reversal of provision for credit losses ▪ Expenses of $25.3 million recognized on Apollo debt repayment • GAAP book value w
Slide 5: Other highlights
Other highlights • Net interest income again increased and nearly doubled compared to Q3 ▪ Securitizations materially reduce interest expense ▪ Apollo/Athene debt paid off in October ▪ 8% senior notes redeemed on January 6, 2021 • Took advantage of strong housing market to liquidate REO properties ▪
Slide 6: Investment portfolio and asset based financing composition
Investment portfolio and asset based financing composition Investment Portfolio Asset Based Financing REO, $0.3 MSR-Related Assets, $0.2 Residential Mortgage Securities, $0.2 Mark-to-Market, $1.3 Fair Value loans(2), $1.2 Securitized Debt, $1.5 Non-QM Loans, $2.4 PCD(3) and Other Loans, $0.8 Non Mar
Slide 7: Non-QM and BPL securitizations
Non-QM and BPL securitizations • MFRA 2020-NQM2 ($570 mil) closed October 28, 2020 ▪ $405.4 million AAA’s sold at 1.34% yield ▪ Bonds sold represent 93.8% of UPB ▪ Blended cost of debt sold of 1.64% • MFRA 2020-NQM3 ($381 mil) closed December 11, 2020 ▪ $264.5 mil AAA’s sold at 0.98% yield ▪ Bonds s
Slide 8: Apollo/Athene warrant position repurchased/exercised
Apollo/Athene warrant position repurchased/exercised • No warrants outstanding as of December 31, 2020 ▪ Apollo/Athene own 12.3 million shares (approximately 2.7%) ▪ Total dilution attributable to warrant package of less than 4% • MFA repurchased 47.5% of warrants on December 10, 2020 ▪ 17.6 million
Slide 9: MFA share repurchase program
MFA share repurchase program • MFA Board of Directors authorized $250 million share repurchase program ▪ 10b-18 program permits share repurchase during “open window” periods • $50.7 million of common stock repurchases during the fourth quarter ▪ 14.1 million shares at an average price of $3.61 (incl
Slide 10: Senior note redemption
Senior note redemption • $100 million 8% senior notes due 2042 ▪ Originally issued in 2012 ▪ Redemption announced on December 22, 2020 ▪ Redemption completed on January 6, 2021 ▪ Interest savings of $8 million per year ▪ One-time non-cash charge in December 2020 of $3.1 million for unamortized issua
Slide 11: MFA recognition
MFA recognition • MFA Financial included in 2021 Bloomberg Gender Equality Index ▪ Second consecutive year of inclusion for MFA ▪ One of 380 global public companies in 11 sectors across 44 countries and regions ▪ Attestation of MFA’s commitment to and support of gender equality • MFA Financial certi
Slide 12: Q4 earnings continued to normalize, but were impacted by non-recurring items
Q4 earnings continued to normalize, but were impacted by non-recurring items Q4 2020 Q3 2020 Key items impacting results: Summary Income Statement $ in mm $ in mm • Net interest income reflects: Net Interest Income: ▪ Improved net interest spreads for RWL as Residential mortgage securities (1) $ 6.7
Slide 13: Non-QM investments
Non-QM investments • Origination of Non-QM loans slowed materially in Non-QM Portfolio Statistics (12/31/20) the second quarter, but has begun to pickup once WA LTV 63.8% again with the stabilization of the securitization Total UPB (in millions) $2,294 market WA FICO 712 WA Coupon 6.15% • We purchas
Slide 14: Non-QM COVID-19 pandemic impact
Non-QM COVID-19 pandemic impact Mar-20 June - 20 Sep-20 Dec-20 • A material percentage of our Non-QM loans Loan Count 7,670 5,947 5,656 5,405 Total UPB ($ millions) 3,424.6 2,501.5 2,397.2 2,294.1 have been impacted by the COVID-19 pandemic % Current 97.5 % 97.2 % 88.2 % 89.0 % % 30 Days 1.4 % 1.0 %
Slide 15: RPL portfolio delinquency characteristics as of 12/31/2020
RPL portfolio delinquency characteristics as of 12/31/2020 • 81% of our RPL portfolio is less than 60 days delinquent as of December31, 2020. • On average, 24% of the 60+ days delinquent loans are making payments. • Prepay speeds have generally maintained between 6% and 16%. • 30% of the RPL portfol
Slide 16: Performance of Non-Performing loans purchased before 12/31/19
Performance of Non-Performing(1) loans purchased before 12/31/19 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 12/31/2020 Performing(2)/PIF 37 % 27 % 30 %
Slide 17: Business purpose loans – Rehabilitation loans
Business purpose loans – Rehabilitation loans • The Fix and Flip portfolio continued to experience elevated Portfolio Statistics (12/31/20) paydowns in the fourth quarter, declining $118 million to $581 UPB (in millions) $581 million at December 31, 2020. Undrawn commitments $61 WA ARV-LTV* 63 % ▪ $
Slide 18: Business purpose loans – Rehabilitation loans (cont)
Business purpose loans – Rehabilitation loans (cont) • Portfolio delinquency 60+ Day DQ Loan Statistics (12/31/20) ▪ 60+ day DQ UPB increased $19 million to $162 million at the end of UPB (in million) $162 the quarter. Undrawn commitments $7 ◦ $25 million paid off in full. WA ARV-LTV* 66 % WA As-Is/
Slide 19: Business purpose loans – Single Family Rental Loans
Business purpose loans – Single Family Rental Loans • The SFR portfolio has performed well through the COVID-19 pandemic and continued to exhibit strong performance in SFR Portfolio Statistics (12/31/20) the fourth quarter. UPB (in millions) $442 WA LTV 70 % ▪ 4th quarter yield: 5.27% (including pre
Slide 20: Summary
Summary • Fourth quarter results and book value primarily reflect stabilizing mortgage markets, resulting in continued recovery of asset vales and lower CECL credit reserves. • Successful execution of securitization transactions has generated substantial liquidity and positively impacted our cost of
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 changes for the quarter were modest
Book value changes for the quarter were modest as fair value increases and share repurchases largely offset dilution from warrant transactions GAAP Economic Book value per common share as of 9/30/20 $4.61 $4.92 Net income available to common shareholders 0.08 0.08 Common stock dividends declared(1)
Slide 24: Allowance for credit losses - Loans held at carrying value
Allowance for credit losses - Loans held at carrying value Three Months Ended December 31, 2020 Purchased Seasoned Non-QM Rehabilitation Single-family Credit (Amounts In Thousands) Performing Totals(2) Loans Loans (1) Rental Loans Deteriorated Loans Loans Allowance for credit losses at beginning of