Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q3 2023 Earnings Presentation
23 slides from Mfa Financial's earnings presentation, Nov 7, 2023
Slide 1: Company Update Third Quarter 2023
Company Update THIRD QUARTER 2023
Slide 2: Forward-looking statements
2 Q3 202 2 Financial Snapshot Forward - looking statements When used in this presentation or other written or oral communications, statements that are not historical in nature, including those containing words such as “will,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend
Slide 3: MFA at a glance
3 MFA at a glance 3 $1.8B Total equity $4.7B Common dividends Leading hybrid mortgage REIT with extensive experience in managing residential mortgage assets through economic cycles $10.1B Total assets paid since IPO in 1998 1998 Listed on NYSE in as of Sept. 30, 2023 as of Sept. 30, 2023 NYSE: MFA 6
Slide 4: Q3 financial snapshot
4 Q 3 202 3 financial snapshot MFA generated strong Distributable earnings during another difficult quarter for fixed - income markets $13.48 $13.84 GAAP net income 2 $(0.64) per common share Distributable earnings 3 $0.40 per common share Q3 dividend $0.35 per common share GAAP book value Economic
Slide 5: Q3 2023 Company Highlights
5 Q3 2023 Company Highlights □ Higher interest rates and elevated rate volatility impacted book value and GAAP earnings ▪ GAAP and Economic book value declined by 6.5% and 8.5%, respectively □ Distributable earnings of $0.40 and declared $0.35 dividend ▪ Net interest spread rose to 2.17%, up from 2.
Slide 6: Q3 2023 Investment Activity
6 □ Acquired $955M of loans and securities, growing our investment portfolio to $9.3B ▪ Lima One funded $646M of new business purpose loans (BPLs) and draws on existing loans 7 ▪ Purchased $156M of non - qualified mortgage (Non - QM) loans ▪ Added $152M of Agency MBS during Q3, bringing that portfol
Slide 7: Q3 2023 Liability Highlights
7 Q3 2023 Liability Highlights □ Our borrowing costs remain relatively stable due to securitizations and interest rate swaps used for hedging purposes ▪ Effective cost of funds of 4.18%, a rise of just 128 bps over past 18 months despite 500 bps increase in Fed Funds Rate over that period ▪ Net inte
Slide 8: Q3 2023 Interest Rate Swaps
8 Q3 2023 Interest Rate Swaps □ Positive carry on our interest rate swaps exceeds 350 bps ▪ We continue to benefit from our $3.1B interest rate hedge placed primarily in late 2021 and early 2022 before the Federal Reserve began aggressively raising the Fed Funds Rate in mid - 2022 ▪ Weighted average
Slide 9: Q3 2023 Credit Highlights
9 □ Loan delinquencies and loan - to - value (LTV) ratios remain low ▪ We continue to benefit from accumulated home price appreciation and principal paydowns ▪ 60+ day delinquency rate on Purchased Performing Loans rose slightly to 3.1% from 2.8% in Q2 □ Realized losses have been rare due to low LTV
Slide 10: Q3 2023 Lima One Highlights
10 □ 15% increase in origination volume from Q2 and continued emphasis on high quality credit ▪ Record $671M of originations 6 with an average LTV 14 of 65% and FICO score of 754 ▪ Combination of sector upheaval and MFA’s strong balance sheet has enabled Lima to gain market share from competing l en
Slide 11: Q3 2023 Transitional Loan Highlights
11 Portfolio s tatistics ( 09/30 /2 3 ) UPB ($M) $2,106 Maximum Loan Amount ($M) $2,693 Average Maximum Loan Amount $788K WA Coupon 8.92% Third Quarter Yield 8.35% WA As - Is/Purchased LTV 16 66% WA Original ARV - LTV 17 64% WA Current ARV - LTV 18 63% WA FICO 746 WA Loan Age (Months) 11 Multifamily
Slide 12: Q3 2023 SFR Loan Highlights
12 P ortfolio s tatistics ( 09 /3 0 /2 3 ) UPB ($M) $1,668 Average Balance $249K WA Coupon 6. 22% Third Quarter Yield 5.88% WA Original LTV 70% WA Current LTV 7 62% WA FICO 737 WA DSCR 20 1.48x WA Loan Age (Months) 20 Hybrid ARMs 25% 3 - Month Prepayment Rate 6 CPR 60+ Days Delinquent 3.8% Top 2 sta
Slide 13: Q3 2023 Non-QM Highlights
13 Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ‘22 Q4 ‘22 Q1 ‘23 Q2 ‘23 Q3 ‘23 Loan count 6,706 7,240 7,137 7,199 7,253 7,337 7,873 7,887 Total UPB ($M) 3,361 3,671 3,637 3,669 3,671 3,684 3,918 3,963 % Current 94.2% 93.4% 95.3% 96.3% 95.9% 95.3% 95.8% 96.1% % 30 days DQ 2.3% 3.3% 2.1% 1.4% 1.5% 2.0% 1.8% 1.7% % 60+ da
Slide 14: Legacy Non-Performing and Re-Performing Loans
14 Legacy Non - Performing and Re - Performing Loans Non - Performing L oans (NPL) 21 □ Remaining UPB of $672M for loans purchased as NPLs □ 93% of these loans were performing, paid in full, liquidated or REO at Sept. 30 □ Achieving excellent outcomes due to home price appreciation and intensive ass
Slide 15: Appendix
15 Appendix James Casebere , Landscape with Houses ( Dutchess County, NY) #2, 2010 (detail)
Slide 16: MFA Financial Overview
16 MFA Financial Overview □ MFA Financial, Inc. (NYSE: MFA) is a leading specialty finance company that invests primarily in residential mortgage loans and mortgage - backed securities □ MFA currently owns a diversified portfolio of transitional and term business purpose loans (BPLs), non - qualifie
Slide 17: Lima One: Leading Nationwide BPL Originator and Servicer
17 Lima One: Leading Nationwide BPL Originator and Servicer Product Offerings □ Lima One offers a diverse selection of both short - term and long - term financing solutions to experienced real estate investors across the U.S. □ Current products include fix/flip loans, construction loans, single - fa
Slide 18: Reconciliation of GAAP net income to non-GAAP Distributable earnings
18 Reconciliation of GAAP net income to non - GAAP Distributable earnings “Distributable earnings” is a non - GAAP financial measure of our operating performance, within the meaning of Regulation G and Item 10 (e) of Regulation S - K, as promulgated by the Securities and Exchange Commission . Distri
Slide 19: Reconciliation of GAAP Book Value to Economic Book Value
19 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 and securitized debt( 1 ) held at carrying value are adjusted to their fair
Slide 20: Book Value and Economic Book Value Rollforward
20 Book Value and Economic Book Value Rollforward GAAP Economic Book value per common share as of 6/30/23 $14.42 $15.12 Net income available to common shareholders (0.63) (0.63) Common stock dividends declared (0. 35 ) (0. 35 ) Fair value changes attributable to residential mortgage securities and o
Slide 21: GAAP Segment Reporting
21 GAAP Segment Reporting (Dollars in m illions) Mortgage - Related Assets Lima One Corporate Total Three months ended Sept .30, 2023 Interest Income 94.8 61.1 3.2 159.1 Interest Expense 64.8 44.3 3.9 113.0 Net Interest Income /(Expense) $ 30.0 $ 16.8 $ (0.7) $ 46.1 (Provision)/Reversal of Provision
Slide 22: Distributable Earnings by Operating Segment
22 Distributable Earnings by Operating Segment (Dollars in m illions) Mortgage - Related Assets Lima One Corporate Total Three months ended Sept. 30, 202 3 GAAP Net (loss)/income used in the calculation of basic EPS $ (33.4) $ (1.0) $ (30.4) $ (64.8) Adjustments: Unrealized and realized gains and lo
Slide 23: Endnotes
23 Endnotes 1) Economic book value is a non - GAAP financial measure. Refer to slide 19 for further information regarding the calculation of this measure and a reco nciliation to GAAP book value. 2) GAAP net income presented per basic and diluted common share. 3) Distributable earnings is a non - GA