Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Investor Presentation (September 2016)
18 slides from Mfa Financial's investor presentation, Sep 27, 2016
Slide 1: 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 2: Executive summary
Executive summary • In this low interest rate environment, we continue to generate attractive returns from residential mortgage credit assets. • In the second quarter we generated EPS and dividend per share of $0.20. • MFA continued to acquire credit sensitive residential mortgage assets such as 3 y
Slide 3: MFA has generated strong long term returns to investors
Through volatile markets and both interest rate and credit cycles, MFA has generated strong long term returns to investors (1) As of 9/15/16 assuming reinvestment of dividends 4 Time PeriodAnnualized MFA Shareholder Return (1) Since 200015.0% 10 Year13.4% 5 Year15.3% 1 Year20.3%
Slide 4: 2016 MFA strategy
2016 MFA strategy 1)Invest in high value-added assets A.Generate returns from investment in credit sensitive residential mortgage assets •MFA’s credit sensitive assets continue to perform well. Legacy Non-Agency MBS Credit Reserve has been reduced by $39.9 million over the 12 month period ended June
Slide 5: Q3 investment flows through August
Q3 investment flows through August 31 Our assets run off due to amortization and paydowns, allowing reinvestment opportunities in changing interest rate and credit environments. $ in Millions 3 Year Step-up RPL/NPL Securities$2,639$(244)$355 Legacy Non-Agency MBS$3,466$(128)$39 Totals$11,763$(569)$6
Slide 6: MFA's yields and spreads remain attractive
MFA’s yields and spreads remain attractive Earning Assets 4.19% 4.23% 4.15% Rate Spread 2.14% 2.18% 2.22% Equity Ratio 3.3x 3.4x 3.4x 7 SecondFirstFourth QuarterQuarterQuarter 201620162015 Yield on Interest Net Interest Debt EPS$0.20$0.20$0.19
Slide 7: Q2 2016 Yields and spreads by asset type
Q2 2016 Yields and spreads by asset type (1) Net of 37 bps of servicing costs. (2) Residential whole loans held at fair value produce GAAP income/loss based on changes in fair value in the current period and therefore results will vary on a quarter to quarter basis. The company expects to realize re
Slide 8: Undistributed REIT taxable income
Undistributed REIT taxable income • As of June 30, 2016 MFA had undistributed REIT taxable income of $0.22 per share. • Undistributed REIT taxable income includes the impact of the settlement of the Countrywide litigation. MFA received its share of the settlement proceeds during the second quarter (
Slide 9: 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 June 30, 2016 $ in Millions 10 AssetsMarket ValueAverage CouponDuration Non-Agency ARMs (12 months or less MTR)$2,5353.18%0.5 Non-Agency Hybrid (13-48 MTR)$924.79%1.0 NPL/RPL Securities$2,6393.84%0.4 Non-Agency Fixed Rate
Slide 10: Agency CPR & Non-Agency CRR
12 10 Agency CPR & Non-Agency CRR Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 10-Yr UST Prepayment speeds on MFA’s Legacy Non-Agency MBS and Agency MBS have trended together over time •MFA’s Agency MBS were acquired at an average premium of 4% and
Slide 11: Legacy Non-Agency MBS discount accretion has exceeded Agency premium amortization
Millions ($) Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Legacy Non-Agency MBS discount accretion has exceeded Agency MBS premium amortization since 2013 MFA's Agency MBS Premium Amortization and Legacy Non-Agency MBS Discount Accretion by quarter
Slide 12: Positive fundamentals for residential mortgage credit and home prices
While economic growth rate is uncertain, there are many positive fundamentals for residential mortgage credit and home prices • Strong fundamental and technical support for residential credit assets and home prices • Sales of existing homes rose 3% year over year to 5.57 million and remain at their
Slide 13: Continued growth in credit sensitive loan portfolio
Continued growth in credit sensitive loan portfolio • 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
Slide 14: Credit sensitive residential whole loans: growing asset class for MFA
Credit sensitive residential whole loans: growing asset class for MFA • Early results indicate returns to date are consistent with our expectation of 5-7%. • Utilizes the same residential mortgage credit expertise we have employed in Legacy Non-Agency MBS since 2008. • Ability to oversee servicing d
Slide 15: Second quarter RPL/NPL MBS holdings
Second quarter RPL/NPL MBS holdings • Current market yields of mid to high 3% • Well protected portfolio with current credit enhancement of 48% • Very short assets with an average of 21 months remaining to step-up ValueNetMonths toCreditCreditAverage 16 FairCurrentOriginal3 Month As of June 30, 2016
Slide 16: LTV breakdown of non-delinquent mortgage loans underlying Legacy Non-Agency MBS
17 Data as of June 30, 2016 $ (Millions) LTV breakdown of non-delinquent mortgage loans underlying MFA’s Legacy Non-Agency MBS 1,400 1,200 1,000 800 600 400 200 0 <= 60%61-80%81-90%91-100%101-110%111-125%> 125% LTV •These loans are up to date on all required mortgage payments. •Underlying loans are
Slide 17: Summary
Summary •We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. •Continued to acquire 3 Year step-up RPL/NPL securities and credit sensitive mortgage loans during the quarter. •Our credit sensitive assets continue to perform well. •MFA i
Slide 18: Summary
Summary * We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. * Continued to acquire 3 Year step-up RPL/NPL securities and credit sensitive mortgage loans during the quarter. * Our credit sensitive assets continue to perform well. * M
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