Strong Performance in a Repositioned Portfolio Quarterly Summary Annual Summary Post-Quarter End Update
• • • Beginning common stockholders’ equity $ 2,018.4 $ 7.37 $ 3,969.2 $ 14.54 Ending common stockholders’ equity $ 2,087.7 $ 7.63 $ 2,087.7 $ 7.63 Ending total equity $ 3,089.0 $ 3,089.0
Core Earnings(1) 94.5 101.0 6.5 Core Earnings attributable to common stockholders(1) $ 75.6 $ 82.0 $ 6.4 Basic weighted average Core EPS $ 0.28 $ 0.30 Core Earnings annualized return on average common equity 15.7 % 15.9 % • ◦ ◦ ◦ ◦
Annualized portfolio yield(2) 2.42 % 2.26 % 2.23 % Annualized cost of funds(3) 0.64 % 0.50 % 0.50 % Annualized net spread for aggregate portfolio 1.78 % 1.76 % 1.73 % ◦ ◦
Total Assets: $19.5 billion
◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ A ss e ts Total Assets $ 19,516 $ 19,494 $ (22) Li a b ili ti e s Total Liabilities $ 16,427 $ 16,680 $ 253 E q u it y Total Equity $ 3,089 $ 2,814 $ (275) R a ti o s
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Special Topic: Stability of Agency + MSR Returns 14 AGENCY + MSR IS ESPECIALLY ATTRACTIVE VERSUS AGENCY-ONLY DURING TIGHT SPREAD ENVIRONMENTS • Historical returns of Agency MBS show a correlation between the initial spread level and ending spread level over a 1- year horizon ◦ When spreads are very low, they tend to widen ◦ When spreads are very high, they tend to tighten • Current option-adjusted spread is near the low end of the historical range ◦ Data suggests spreads may widen, however, magnitude and timing are unclear • Agency + MSR is constructed to deliver returns while reducing MBS spread risk, leading to a more stable return profile ◦ Return profile suggests significant advantage to Agency Only in low spread environments, and similar profile in high spread environments PROJECTED RETURNS GIVEN HISTORICAL SPREAD CHANGE(2) HISTORICAL CHANGE IN SPREAD FOR A GIVEN STARTING SPREAD(1) (1) Source: JPM MBS MAX Conventional 30-year Composite OAS to swaps. As of January 4, 2021. (2) Projected one-year returns are based on an internal assessment of prepayment rates, interest rates, leverage, mortgage and MSR prices, and other factors. Actual results may differ materially from our estimates.
P or tfo lio Expected Annualized Returns (%) RMBS (TBA) / MSR RMBS (Pools) / MSR RMBS (TBA) / Swaps RMBS (Pools) / Swaps 0 5 10 15
Net income (loss) 101.0 114.8 (4.6) 211.2 Net income (loss) attributable to common stockholders $ 82.0 $ 114.8 $ (4.6) $ 192.2
Net income (loss) 94.5 209.5 (102.1) 201.9 Net income (loss) attributable to common stockholders $ 75.6 $ 209.5 $ (102.1) $ 183.0
Comprehensive income attributable to common stockholders $ 219,180 $ 113,481 Net income attributable to common stockholders $ 182,964 $ 192,220 Core Earnings attributable to common stockholders(1) $ 75,571 $ 82,007
30-Year fixed Other P&I(2) IOs and IIOs(3) Total Agency RMBS $ 17,071 $ 14,699 96.7 % $ 14,070 TBA Positions Net TBA position $ 5,197 $ 5,481
Mortgage Servicing Rights Portfolio(1) 23 Number of Loans Unpaid Principal Balance ($ in millions) % Fannie Mae Gross Weighted Average Coupon Rate Weighted Average Loan Age (months) Weighted Average Original FICO(2) Weighted Average Original LTV 60+ Day Delinquencies 3-Month CPR Net Servicing Fee (bps) 30-Year Fixed < 3.25% 87,561 $ 29,305 50% 2.9% 4 769 72% 0.1% 9.0% 25.5 3.25% - 3.75% 148,065 39,634 68% 3.5% 30 764 73% 1.6% 38.2% 26.3 3.75% - 4.25% 188,805 43,124 64 % 3.9 % 44 757 76 % 3.8 % 49.1 % 27.5 4.25% - 4.75% 130,598 26,096 66 % 4.4 % 45 741 78 % 6.2 % 49.2 % 26.6 4.75% - 5.25% 64,424 11,727 67 % 4.9 % 39 727 80 % 8.5 % 46.5 % 27.8 > 5.25% 25,637 3,958 70 % 5.5 % 36 707 80 % 10.8 % 41.2 % 30.8 645,090 153,844 63 % 3.8 % 32 755 75 % 3.5 % 42.7 % 26.8 15-Year Fixed < 2.25% 1,996 665 88 % 2.0 % 2 780 60 % — % 7.8 % 25.0 2.25% - 2.75% 19,260 5,257 71 % 2.5 % 7 778 60 % 0.1 % 12.4 % 25.8 2.75% - 3.25% 47,710 8,571 72 % 2.9 % 37 771 62 % 1.1 % 27.6 % 26.1 3.25% - 3.75% 36,327 5,224 72 % 3.4 % 45 759 65 % 2.2 % 33.7 % 27.6 3.75% - 4.25% 17,611 2,148 64 % 3.9 % 43 745 66 % 3.4 % 35.1 % 29.2 > 4.25% 9,149 959 63 % 4.5 % 34 731 66 % 3.6 % 37.0 % 31.2 132,053 22,824 71 % 3.1 % 32 766 63 % 1.4 % 28.8 % 26.8 Total ARMs 4,762 1,193 62 % 3.3 % 47 762 67 % 4.3 % 45.4 % 25.2 Total Portfolio 781,905 $ 177,861 64 % 3.7 % 32 756 74 % 3.2 % 41.2 % 26.8 (1) Excludes residential mortgage loans for which the company is the named servicing administrator. (2) FICO represents a mortgage industry accepted credit score of a borrower.
$ in millions
Payers Receivers
Swaption Expiration Cost ($M) Fair Value ($M) Average Months to Expiration Notional Amount ($M) Average Pay Rate Average Receive Rate Average Term (Years)
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