Slide 1: First Quarter 2015 Earnings Presentation
First Quarter 2015 Earnings Presentation
Slide 2: 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 3: Executive Summary
Executive Summary In this low interest rate environment, we continue to identify and acquire attractive credit sensitive residential mortgage assets. In the first quarter we generated EPS of $0.21 and dividend per share of $0.20. We remain positioned for a more flexible monetary policy by the Federa
Slide 4: First Quarter Investment Update
First 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. (1) $ in Millions 4 December 31, 2014(1) March 31, 2015 (1) Change 3 Year Step-up RPL/NPL Securities
Slide 5: MFA's Yields and Spreads Remain Attractive
MFA’s Yields and Spreads Remain Attractive 5 First Quarter 2015 Fourth Quarter 2014 GAAP Non-GAAP (1) GAAP Yield on Interest Earning Assets 4.22% 4.15% 4.24% Net Interest Rate Spread 2.44% 2.36% 2.41% Debt Equity Ratio 3.3x 3.3x 2.8x EPS $0.21 $0.20 $0.20 The Information presented on a non-GAAP basi
Slide 6: Yields and Spreads by Asset Type
Yields and Spreads by Asset Type 6 Quarter Ended March 31, 2015 Asset Yield/Return Cost of Funds Net Spread Debt/Net Equity Ratio Agency MBS 2.22% (1.13)% 1.09% 7.23x Non-Agency MBS 7.68% (2.85)% 4.83% 1.69x RPL/NPL MBS 3.56% (1.52)% 2.04% 3.85x RPL Whole Loans 5.84% (2.20)% 3.64% 0.24x NPL Whole Lo
Slide 7: Continued Evolution to More Credit Sensitive, Less Interest-Rate Sensitive Assets
Continued Evolution to More Credit Sensitive, Less Interest-Rate Sensitive Assets 7 $5,671,195 $4,537,132 $2,318,191 $127,182 $387,284 $259,483 March 2015 Agency Non-Agency RPL/NPL Securities CRT Residential Whole Loans Cash/Other $6,519,221 $4,852,137 $598,349 December 2013
Slide 8: Book Value Essentially Unchanged in the First Quarter
Book Value Essentially Unchanged in the First Quarter 8 Book value per common share as of 12/31/14 $ 8.12 Net income available to common shareholders 0.21 Common dividend declared during the quarter (0.20) Net change attributable to Agency MBS 0.03 Net change attributable to Non-Agency MBS and CRT s
Slide 9: 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) $2,757 2.68% 0.5 Non-Agency Hybrid (13-48 MTR) $ 467 5.09% 1.0 NPL/RPL Securities $2,318 3.54% 0.6 Non-Agency Fixed Rate $1,441 5.81% 3
Slide 10: Increased Holdings of RPL/NPL MBS in the First Quarter
Increased Holdings of RPL/NPL MBS in the First Quarter 10 Short Duration Deal structures contain a coupon step-up of 300 basis points after 36 months. 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 enhan
Slide 11: Credit Fundamentals on MFA's Legacy Non-Agency MBS
Credit Fundamentals on MFA’s Legacy Non-Agency MBS Home price appreciation and mortgage amortization has decreased the LTV ratio for many of the mortgages underlying MFA’s Legacy Non-Agency MBS portfolio. As a result, we have lowered our estimate of future losses within MFA’s Legacy Non-Agency MBS p
Slide 12: LTV Breakdown of Non-Delinquent Mortgage Loans Underlying 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 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 <= 60% 61- 80% 81- 90% 91-100%
Slide 13: Credit Reserve of $874 Million on a Current Face of $5.04 Billion
13 Credit Reserve of $874 Million on a Current Face of $5.04 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 14: Credit Sensitive Residential Whole Loans
Credit Sensitive Residential Whole Loans 14 Utilizes the same residential mortgage credit expertise we have employed in Legacy Non-Agency MBS since 2008 Significant expected future supply Ability to oversee servicing decisions (loan modifications, short sales, etc.) to produce better NPV outcomes Re
Slide 15: Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA
Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA 15 At today’s market prices, re-performing and non-performing residential mortgage loans generate higher yields than residential mortgage-backed securities. MFA has opportunistically acquired over 2,690 whole loans -- across 13 tr
Slide 16: Summary
Summary 16 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 securities and loans over the last year. Our credit sensitive assets continue to perform well. Future Federal Reserve d