Mfa Financial, Inc. · NYSE:MFA
Mfa Financial — Q4 2014 Earnings Presentation
16 slides from Mfa Financial's earnings presentation, 2015
Slide 1: Fourth Quarter 2014 Earnings Presentation
Fourth Quarter 2014 Earnings Presentation
Slide 2: Forward Looking Statements
Forward Looking Statements When used in this press release 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 fourth quarter we generated EPS and dividend per share of $0.20. • We remain positioned for a more flexible monetary policy by the Federal
Slide 4: Fourth Quarter Investment Update
Fourth Quarter Investment Update • We approximately doubled our holdings of MBS backed by re-performing/non- (1) performing loans (RPL/NPL MBS) to $2.0 billion. • Our credit sensitive residential whole loan holdings, acquired through our interests in consolidated trusts, grew to $351.4 million. • MF
Slide 5: MFA's Yields and Spreads Remain Attractive
MFA’s Yields and Spreads Remain Attractive GAAP Non-GAAP (1) Third Fourth Third Fourth Quarter Quarter Quarter Quarter 2014 2014 2014 2014 Yield on Interest Earning Assets 4.12% 4.24% 4.11% 4.15% Net Interest Rate Spread 2.30% 2.41% 2.30% 2.36% Debt Equity Ratio 2.7x 2.8x 3.0x 3.3x (1) The Informati
Slide 6: Book Value Declined Less Than 2% in the Fourth Quarter
Book Value Declined Less Than 2% in the Fourth Quarter Book value per common share as of 9/30/14 $ 8.28 Net income available to common shareholders 0.20 Common dividend declared during the quarter (0.20) Net change attributable to Agency MBS 0.05 (1) Net change attributable to Non-Agency MBS (0.15)
Slide 7: 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 Assets Market Value* Average Coupon Duration Non-Agency ARMs (12 months or less MTR) $2,758 2.65% 0.5 Non-Agency Hybrid (13-48 MTR) $538 5.08% 1.0 NPL/RPL Securities $2,008 3.55% 0.6 Non-Agency Fixed Rate $1,472 5.81% 3.0
Slide 8: Agency and Prepayment Speeds Tend to Move in the Same Direction
Agency and Legacy Non-Agency MBS Prepayment Speeds Tend to Move in the Same Direction • At December 31, 2014, Agency MBS net purchase premium was approximately 4% while Legacy Non-Agency MBS net purchase discount was approximately 25%. Quarterly Change in Agency MBS and Legacy Non-Agency MBS Prepaym
Slide 9: Discount Accretion is Now More than Double Agency MBS Premium Amortization
Legacy Non-Agency MBS Discount Accretion is Now More than Double Agency MBS Premium Amortization MFA's Agency MBS Premium Amortization and Legacy Non-Agency MBS Discount Accretion by quarter $30 Agency MBS Premium Amortization $25 Legacy Non-Agency MBS Discount Accretion Millions ($) $20 $15 $10 $5
Slide 10: Doubled Holdings of RPL/NPL MBS in the Fourth Quarter
Doubled Holdings of RPL/NPL MBS in the Fourth Quarter • Low 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
Slide 11: Credit Fundamentals on MFA's Legacy Non-Agency MBS Continue to Improve
Credit Fundamentals on MFA’s Legacy Non-Agency MBS Continue to Improve • Home price appreciation and mortgage amortization continue to decrease 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 withi
Slide 12: 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 1,800 1,600 1,400 1,200 <= 60% $ In Millions 61- 80% 1,000 81- 90% 800 91-100% 101-110% 600 111-125% 400 > 125% 200 - <= 60% 61- 80% 81- 90% 91-100% 101-110% 111-125% > 125% LTV • These loans are up to date on all
Slide 13: Credit Reserve of $916 Million on a Current Face of $5.23 Billion
Credit Reserve of $916 Million on a Current Face of $5.23 Billion 175 $163.9 $164.1 150 Principal Write-down ($ in Millions) 125 100 $90.3 75 50 25 0 2012 2013 2014 • Future estimated losses are due to: • Realized losses from liquidations of defaulted loans. • Principal losses from the use of princi
Slide 14: Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA
Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA • 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 • Resid
Slide 15: Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA
Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA • 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 2,300 whole loans -- across 10 t
Slide 16: 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 securities and loans. • Our credit sensitive assets continue to perform well. • Future Federal Reserve decisions on mo