Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q2 2021 Earnings Presentation
24 slides from Mfa Financial's earnings presentation, Aug 5, 2021
Slide 1: Second Quarter 2021 Earnings Presentation
Second Quarter 2021 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,” “could,” “would,
Slide 3: Executive summary
Executive summary 3 • Q 2 2021 financial results • Lima One purchase • Continued execution of securitizations • Investment portfolio and asset - based financing composition
Slide 4: 2021 second quarter financial results
2021 second quarter financial results 4 • GAAP earnings of $ 0 . 13 per common share ▪ Net interest income increased by 16 % to $ 59 million from $ 51 million in Q 1 2021 • Net loan portfolio growth of $ 360 million for the quarter - first time that portfolio acquisitions have exceeded runoff since
Slide 5: 2021 second quarter financial results (continued)
2021 second quarter financial results (continued) • Interest expense declined to $ 25 . 5 million from $ 30 million in Q 1 2021 ▪ Securitizations continue to materially reduce interest expense ▪ Additional securitizations expected in Q 3 • Net interest income increased 16 % to $ 59 . 0 million from
Slide 6: Lima One purchase completed July 1, 2021
Lima One purchase completed July 1, 2021 6 Closed the purchase of Lima One Capital, a leading nationwide originator and servicer of business purpose loans (BPLs) . • Integration is progressing efficiently • Lima One’s financial results will be consolidated into MFA’s financial results during the thi
Slide 7: Securitizations
Securitizations 7 • MFA 2021 - NQM 1 ( $ 394 million) priced April 9 , 2021 ▪ MFA’s fourth NQM securitization since September 2020 ▪ $ 279 million AAA’s sold at 1 . 12 % yield ▪ Bonds sold represent 94 % of UPB with blended cost of debt of 1 . 37 % • MFA 2021 - RPL 1 ( $ 473 million) priced June 10
Slide 8: Q2 asset acquisitions exceeded run off with net loan portfolio growth
8 • Q2 Asset acquisitions exceeded run off with net loan portfolio growth of $360 million : ▪ $857 million of loan purchases approaching levels last achieved pre - COVID onset ▪ $374 million of Non - QM, $175 million BPL and $308 million of Agency Eligible Investor loans • At 6/30/21, 67% of our ass
Slide 9: Earnings reflects continued solid portfolio performance and lower financing costs
Earnings reflects continued solid portfolio performance and lower financing costs Summary Income Statement Q2 2021 $ in mm Q1 2021 $ in mm Net Interest Income: Residential whole loans (RWL) (1) $ 48.2 $ 39.5 Residential mortgage securities (2) 14.5 15.4 Other interest earning assets and interest bea
Slide 10: Strong economic fundamentals support mortgage credit
Strong economic fundamentals support mortgage credit 10 15% 5.9% 0.59% 1.02mm Source: Zillow Source: NY FED Source: BLS Source: Zillow
Slide 11: Non-QM investments
Non - QM investments • Origination has picked up as many of our partners volumes are higher now than pre - pandemic • We purchased or committed to purchase over $370 million of Non - QM loans in the 2nd quarter of 2021, which is our highest Non - QM quarterly purchase volume since Q1 2020 • We close
Slide 12: Non-QM COVID-pandemic impact
Non - QM COVID - 19 pandemic impact • Portfolio performing well through the pandemic • Many of our borrowers are self - employed and run small businesses • 26.0% of the Non - QM portfolio was previously impacted by COVID assistance as of 6/30/2021 • The level of borrowers currently receiving COVID a
Slide 13: Agency eligible investor loans
Agency eligible investor loans • Agency preferred stock purchase agreement limited the number of loans secured by investment properties and second homes to 7% of acquisitions • A dislocation in the market allowed us to participate at attractive levels in the short term, and can become a stable sourc
Slide 14: RPL portfolio delinquency characteristics as of 6/30/2021
RPL portfolio delinquency characteristics as of 6/30/2021 • 81% of our RPL portfolio is less than 60 days delinquent as of 6/30/2021 • On average, 26% of the 60+ days delinquent loans are making payments • Prepay speeds have steadily increased as borrowers have more opportunities to refinance • 31%
Slide 15: Performance of non-performing loans purchased before 6/30/20
• Measured by UPB at purchase, 38% (or approximately 4,200) of loans that were non - performing at purchase are either performing or have paid in full as of June 2021. • 75% of MFA modified loans are either performing today or have paid in full. Performance of Non - Performing (1) loans purchased be
Slide 16: Business purpose loans – Lima One acquisition
Business purpose loans – Lima One acquisition • We completed the previously announced acquisition of Lima One on July 1, 2021 • Lima One is a leading nationwide originator and servicer of BPLs with a long relationship with MFA • Lima One has originated in excess of $3 billion of BPLs since inception
Slide 17: Business purpose loans – Rehabilitation loans
Business purpose loans – Rehabilitation loans • The Fix and Flip portfolio declined by about $32 million to $432 million at June 30, 2021 ▪ $ 101 million of principal payments ▪ $ 68 million of new investments • Purchase activity continues to meaningfully increase ▪ We purchased $ 68 million UPB ( $
Slide 18: Business purpose loans – Single Family Rental Loans
Business purpose loans – Single Family Rental Loans • The SFR portfolio performed well, delivering attractive yields and strong credit performance ▪ Second quarter yield: 5.76% ▪ 60+ day delinquency rate decreased 0.9% to 4.9% ▪ Three month prepayment rate of 27% • Purchase activity has increased me
Slide 19: Summary
Summary • Very solid second quarter 2021 results in a difficult quarter for mortgage investors ▪ Stable book value ▪ Continued improvement in net interest income ▪ Portfolio acquisitions exceeded runoff for first time since COVID onset • Successful execution of securitization transactions has genera
Slide 20: Additional Information
MPA Additional Information
Slide 21: MFA share repurchase program
• MFA Board of Directors authorized $ 250 million share repurchase program in November 2020 • Adopted 10 b 5 - 1 plan in March 2021 ▪ 10 b 5 - 1 plan permits share repurchases during closed window periods ▪ Share repurchases in Q 2 2021 of 5 . 7 million shares at an average price of $ 4 . 19 (includ
Slide 22: Reconciliation of GAAP book value to Economic book value
22 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
Slide 23: Book value per common share rollforward
23 GAAP Economic Book value per common share as of 3/31/21 $4.63 $5.09 Net income available to common shareholders 0.13 0.13 Common stock dividends declared (0.10) (0.10) Fair value changes attributable to residential mortgage securities and MSR term notes (0.02) (0.02) Impact of share repurchases 0
Slide 24: Allowance for credit losses - Loans held at carrying value
Allowance for credit losses - Loans held at carrying value • Allowance for credit losses for residential whole loans held at carrying value decreased during the quarter by $8.9 million , primarily due to lower loan balances and adjustments to macro - economic assumptions used in our credit loss fore