Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q1 2021 Earnings Presentation
24 slides from Mfa Financial's earnings presentation, May 6, 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 losses G
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 Net interest
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 MFRA 2018-NPL1
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 supply at 2.1
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 plan permit
Slide 9: Investment portfolio and asset based financing composition
Investment portfolio and asset based financing composition Amounts in the pie charts are in billions as of 3/31/21 No significant changes in portfolio composition during the quarter: 95% residential whole loans and REO at 3/31/21 $253 million of loan purchases in Q1 No sales of CRT securities or MSR
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 investme
Slide 11: Higher earnings driven by portfolio performance and lower financing costs
Higher earnings driven by portfolio performance and lower financing costs Summary Income Statement Q1 2021 Q4 2020 $ in mm $ in mm Net Interest Income: Residential whole loans (RWL) (1) $ 20.4 $ 22.6 Residential mortgage securities (2) 15.4 6.7 Apollo senior secured financing — (1.7) Other interest
Slide 12: Strong economic fundamentals support mortgage credit
t r c i c f t l s s 1 2 S ong eonom undamen a upport mortgage credit % 6
Slide 13: Non-QM Portfolio Statistics (3/31/21)
Non-QM Portfolio Statistics (3/31/21) WA LTV 63.5% Total UPB (in millions) $2,289.76 WA FICO 713 WA Coupon 6.116% Avg Balance $420,758 Hybrid ARM’s 67% Fixed Rate 33% Current 92.1% 60+Days DQ 7.9% 3-Month CPR 30% Top 2 States CA 53% FL 19% Origination of Non-QM loans slowed down materially in the se
Slide 14: Non-QM COVID-19 pandemic impact
Non-QM COVID-19 pandemic impact Mar-20June - 20 Sep-20 Dec-20 Mar-21 Loan Count 7,670 5,947 5,656 5,405 5,442 Total UPB ($ millions) 3,424.6 2,501.5 2,397.2 2,294.1 2,289.8 % Current 97.5 % 97.2 % 88.2 % 89.0 % 88.0 % % 30 Days 1.4 % 1.0 % 3.0 % 3.1 % 4.1 % % 60+ Days 1.1 % 1.8 % 8.8 % 7.9 % 7.9 % L
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 last few
Slide 16: Performance of Non-Performing loans purchased before 3/31/20
Performance of Non-Performing(1) loans purchased before 3/31/20 Through diligent asset management, we continue to improve outcomes for our NPL portfolio by returning loans to performing or paid-in-full status, and through other forms of resolution. 46% of our NPL portfolio has liquidated or reverted
Slide 17: Business purpose loans – Rehabilitation loans
Business purpose loans – Rehabilitation loans Portfolio Statistics (3/31/21) UPB (in millions) $464 Undrawn commitments $54 mm WA ARV-LTV* 64 % WA As-Is/Purch. LTV** 69 % WA FICO 719 WA Loan Age (months) 20 WA Passthrough Rate 7.23 % 3 mth Repayment Rate 69 % Current and 30 Days DQ 68 % 60+ Days DQ
Slide 18: Business purpose loans – Rehabilitation loans (cont.)
Business purpose loans – Rehabilitation loans (cont.) 60+ Day DQ Loan Statistics (3/31/21) UPB (in million) $149 Undrawn commitments $8 WA ARV-LTV* 65 % WA As-Is/Purch. LTV** 71 % WA FICO 713 WA Loan Age (months) 24 WA Passthrough Rate 7.62 % 60 day DQ 3 % 90 day DQ 1 % 120+ day DQ 28 % 60+ day DQ U
Slide 19: Business purpose loans – Single Family Rental Loans
Business purpose loans – Single Family Rental Loans SFR Portfolio Statistics (3/31/21) UPB (in millions) $447 WA LTV 70 % WA FICO 730 WA DSCR* 1.48x WA Coupon 6.64 % WA Loan Age (months) 21 5/1 Hybrid Loans 54 % 1st Quarter Yield 5.61 % 3 mth Prepayment Rate (CPR) 12 % DQ 60+ 5.8 % First quarter yie
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 debt h
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 Common stock dividends declared during Q4 2020 and Q1 2021 were $0.075 per share, which rounds to $0.08 for purposes of this presentation. 23
Slide 24: Allowance for credit losses - Loans held at carrying value
Allowance for credit losses - Loans held at carrying value (1) In connection with purchased Rehabilitation loans, the Company had unfunded commitments of $54.4 million, with a separately recorded liability for expected losses of $0.8 million. Allowance for credit losses for residential whole loans h