Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q3 2015 Earnings Presentation
21 slides from Mfa Financial's earnings presentation, Nov 4, 2015
Slide 1: Forward Looking Statements
Forward Looking Statements 2 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,” “may” or similar
Slide 2: Executive Summary
Executive Summary In this low interest rate environment, we continue to transition to more credit sensitive, less interest-rate sensitive residential mortgage assets. In the third quarter we generated EPS and dividend per share of $0.20. MFA substantially grew its credit sensitive loan portfolio in
Slide 3: Third Quarter Investment Update
Third Quarter Investment Update We have continued to identify and acquire credit sensitive residential mortgage assets that generate earnings without increasing MFA’s overall interest rate exposure. At the same time we are allowing more interest rate sensitive Agency MBS assets to pay down. $ in Mil
Slide 4: MFA's Yields and Spreads Remain Attractive
MFA’s Yields and Spreads Remain Attractive 5 Third Quarter 2015 Second Quarter 2015 Yield on Interest Earning Assets 4.05% 4.07% Net Interest Rate Spread 2.24% 2.33% Debt Equity Ratio 3.3x 3.3x EPS $0.20 $0.20
Slide 5: Yields and Spreads by Asset Type
Yields and Spreads by Asset Type 6 Quarter Ended September 30, 2015 Asset Yield/Return Cost of Funds Net Spread Debt/Net Equity Ratio Agency MBS 1.84% (1.13)% 0.71% 7.32x Non-Agency MBS 7.60% (2.76)% 4.84% 1.81x RPL/NPL MBS 3.74% (1.73)% 2.01% 3.81x RPL Whole Loans 6.52% (2.48)% 4.04% 0.23x NPL Whol
Slide 6: Substantial Growth in Credit Sensitive Loan Portfolio
Substantial Growth in Credit Sensitive Loan Portfolio 7 Re-Performing and Non-Performing Loan Portfolio $ in Millions At today’s market prices, re-performing and non-performing residential mortgage loans generate higher yields than residential MBS. Residential whole loans are qualifying interests fo
Slide 7: Distributable Income / Items Expected to Impact Future Taxable Income
Distributable Income / Items Expected to Impact Future Taxable Income 8 As of September 30, 2015 MFA had undistributed REIT taxable income of $0.04 per share. Items that we anticipate may significantly impact future taxable income (though not GAAP income) over the next quarters include: Re-securitiz
Slide 8: MFA's Interest Rate Sensitivity Remains Below 1.0, as Measured by Net Duration
MFA’s Interest Rate Sensitivity Remains Below 1.0, as Measured by Net Duration 9 Assets Market Value Average Coupon Duration Non-Agency ARMs (12 months or less MTR) $2,605 2.84% 0.5 Non-Agency Hybrid (13-48 MTR) $ 301 5.00% 1.0 NPL/RPL Securities $2,488 3.64% 0.5 Non-Agency Fixed Rate $1,281 5.81% 3
Slide 9: FHLB Membership
FHLB Membership 10 In July 2015, MFA’s wholly-owned subsidiary, MFA Insurance, Inc., located in Salt Lake City, UT, became a member of the Federal Home Loan Bank of Des Moines. MFA Insurance owns membership stock in the FHLB DM and shares in the risks and benefits of this relationship. MFA’s residen
Slide 10: Third Quarter RPL/NPL MBS Holdings
Third Quarter RPL/NPL MBS Holdings 11 Short Duration Deal structures generally contain a coupon step-up of 300 basis points at 36 months or sooner. Issuer can call bonds after 12 months. We expect that the securities will be redeemed prior to the step-up date. Low Credit Risk Average credit enhancem
Slide 11: LTV Breakdown of Non-Delinquent Mortgage Loans Underlying MFA's Legacy Non-Agency MBS
LTV Breakdown of Non-Delinquent Mortgage Loans Underlying MFA’s Legacy Non-Agency MBS 12 These loans are up to date on all required mortgage payments. Underlying loans are nine years seasoned on average. Source: CoreLogic Data as of September 30, 2015 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800
Slide 12: MFA Portfolio Top California County Concentrations
13 MFA Portfolio Top 5 California County Concentrations County % of MFA Legacy Non-Agency MBS Portfolio 12 Month Home Price Appreciation Los Angeles 10.4% + 6.17% Orange 5.4% + 4.04% San Diego 4.6% + 5.64% Santa Clara 2.8% + 10.63% Riverside 2.2% + 4.97% 10.4% of portfolio 5.4% of portfolio 4.6% of
Slide 13: MFA Portfolio Top Florida County Concentrations
14 MFA Portfolio Top 5 Florida County Concentrations County % of MFA Legacy Non-Agency MBS Portfolio 12 Month Home Price Appreciation Miami-Dade 1.2% + 8.31% Broward 1.1% + 5.58% Palm Beach 0.8% + 7.58% Orange 0.5% + 5.47% Hillsborough 0.4% + 7.02% Florida makes up MFA’s second largest Legacy Non-Ag
Slide 14: Credit Reserve of $815 Million on a Current Face of $4.54 Billion
15 Credit Reserve of $815 Million on a Current Face of $4.54 Billion Future estimated losses are due to: Realized losses from liquidations of defaulted loans. Principal losses from the use of principal to pay interest on fixed rate bonds collateralized by loans receiving rate reduction modifications
Slide 15: Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA
16 Utilizes the same residential mortgage credit expertise we have employed in Legacy Non-Agency MBS since 2008. Ability to oversee servicing decisions (loan modifications, short sales, etc.) to produce better NPV outcomes. As of September 30, 2015, MFA held $777.4 million of loans: $245.9 million o
Slide 16: Home Price Appreciation Remains Robust for the Credit Sensitive Whole Loan Portfolio
17 Home Price Appreciation Remains Robust for the Credit Sensitive Whole Loan Portfolio The top five largest geographic concentrations by state of the credit sensitive whole loan portfolio are CA, NY, FL, NJ and MD. Source: CoreLogic, 1010 data HPA=Home Price Appreciation HPI Data as of August 2015
Slide 17: Summary
Summary 18 We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. We have substantially grown our holdings of RPL/NPL mortgage loans in 2015. Our credit sensitive assets continue to perform well. Future Federal Reserve decisions on monet
Slide 18: Summary
Summary * We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. * We have substantially grown our holdings of RPL/NPL mortgage loans in 2015. * Our credit sensitive assets continue to perform well. + Future Federal Reserve decisions on
Slide 19: Book Value Down Approximately 3% Primarily Due to Slightly Weaker Legacy Non-Agency Prices
Book Value Down Approximately 3% Primarily Due to Slightly Weaker Legacy Non-Agency Prices 20 Book value per common share as of 6/30/15 $ 7.96 Net income available to common shareholders 0.20 Common dividend declared during the quarter (0.20) Net change attributable to Agency MBS (0.01) Net change a
Slide 20: Third Quarter Non-Agency MBS Impact on MFA Book Value
Third Quarter Non-Agency MBS Impact on MFA Book Value (1) 21 Impact Per Share Impact of change in market prices ($0.06) Realized gains from asset sales: Reallocation from OCI to Retained Earnings ($0.03) Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased at a discou
Slide 21: Third Quarter Non-Agency MBS Impact on MFA Book Value
Third Quarter Non-Agency MBS Impact on MFA Book Value () Impact Per Share Impact of change in market prices ($0.06) Realized gains from asset sales: Reallocation from OCI to Retained Earnings ($0.03) Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased at a discount.