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 the second quarter we generated EPS of $0.20. • Book value per share increased to $7.76 versus $7.66 at March 31, 2017. • MFA purchased (or committed to purchase) over $1 billion of assets in the second quarter, including $341 million of credit sensitive whole loans. • We comp
Slide 3: Executive summary: annualized shareholder returns
Executive summary Through volatile markets and both interest rate generated strong long term returns to investors and credit cycles, MFA has (1) As of 6/30/17 assuming reinvestment of dividends. 4 Time PeriodAnnualized MFA Shareholder Return (1) Since January 1, 200015.6% 10 Year14.9% 5 Year15.1% 1
Slide 4: 2017 investment strategy
2017 investment strategy Be positioned for less predictable fiscal and monetary policy. 1. Focus on shorter term, less interest rate sensitive assets. 2. Blend mortgage credit exposure with interest rate exposure. 3. Maintain staying power and the ability to invest in distressed, less liquid assets:
Slide 5: Market conditions and investment activity
Market conditions and investment activity • Despite a challenging investment environment, MFA purchased or committed to purchase over $1 billion in assets in the second quarter. Our investment team was able to identify attractive opportunities and execute transactions in all of our asset classes. •
Slide 6: Second quarter investment flows
Second quarter investment flows Our assets run off due to amortization, paydowns or sale, allowing reinvestment opportunities in changing interest rate and credit environments. $ in Millions March 31, 2017 Runoff Acquisitions changes June 30, 2017 Change $1,349 $(37) $341 $(8) $1,645 $296 performing
Slide 7: MFA's yields and spreads remain attractive
MFA’s yields and spreads remain attractive 4.61% 4.61% 4.34% 4.23% Earning Assets 2.10% 2.27% 2.12% 2.13% Rate Spread 2.5x 2.9x 3.1x 3.1x Equity Ratio 8 SecondFirstFourthThird QuarterQuarterQuarterQuarter 2017201720162016 Yield on Interest Net Interest Debt to
Slide 8: MFA's interest rate sensitivity remains low
MFA’s interest rate sensitivity remains low, as measured by estimated $ in Millions net duration MTR: Months to reset 10 AssetsMarket ValueAverage CouponDuration Non-Agency ARMs and CRTs (12 months or less MTR)$2,6063.62%0.4 3 Year Step-up Securities$1,6954.23%0.4 Non-Agency Fixed Rate$9285.80%3.0 R
Slide 9: Low sensitivity to prepayment rates
Low sensitivity to prepayment rates 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 $30 $25 $20 $15 $10 $5 $0 Agency MBS Premium Amortization Legacy Non-Age
Slide 10: Increasing Other Income contribution to Net Income
Increasing Other Income contribution to Net Income • Other Income is making a greater contribution to overall net income due to: $m $m • • Run-off in assets that generate net interest income; Continued acquisition of assets accounted for under the fair value option (changes in fair value are reflect
Slide 11: Continued positive fundamentals for residential mortgage credit
Continued positive fundamentals for residential mortgage credit Fundamental and technical support for residential credit assets and home prices. • • According to the National Association of Realtors: • Existing-home sales for June 2017 increased 0.7% year over year to a seasonally adjusted annual ra
Slide 12: Recent trends in credit sensitive loan trading
Recent trends in credit sensitive loan trading • Despite continued strong bid pricing for re-performing and non-performing whole loans, we identified some attractive investment opportunities, purchasing (or committing to purchase) four whole loans pools for a total investment of $341 million. • By s
Slide 13: Credit sensitive residential whole loan portfolio
Credit sensitive residential whole loan portfolio • Returns to date are consistent with our expectation of 5-7%. • We believe that our oversight of servicing decisions (loan modifications, short sales, etc.) produces better NPV outcomes. • Actively managing loan portfolio through in-house asset mana
Slide 14: 3 year step-up securities portfolio
3 year step-up securities portfolio • Current market yields of low to mid 3% for A1 classes and low to mid 5% for A2 classes. • Well protected portfolio with substantial credit enhancement. • Growing number of repo providers for this asset class. • Very short assets with an average of 20 months rema
Slide 15: 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 1,400 1,200 1,000 800 600 400 200 0 <= 60% 61-80% 81-90% 91-100% LTV 101-110% 111-125% > 125% • These loans are up to date on all required mortgage payments. • Underlying loans are nearly eleven years seasoned on a
Slide 16: Summary
Summary • We successfully invested or committed to purchase over $1 billion of investments. • We completed a rated securitization of re-performing loans, achieving attractive term financing for these assets. • We executed a well received follow-on equity offering in May. • Our credit sensitive asset
Slide 17: Summary
Summary ° Wesuccessfully invested or committed to purchase over $1 billion of investments. e Wecompleted arated securitization of re-performing loans, achieving attractive term financing for these assets. ° We executed a well received follow-on equity offering in May. e Our credit sensitive assets c
Slide 18: Book value increased due to impact of fair value changes in Legacy Non-Agency MBS
Book value increased due to impact of fair value changes in Legacy Non-Agency MBS 20 Book value per common share as of 3/31/17$7.66 Net income available to common shareholders0.20 Common dividend declared during the quarter(0.20) Net change attributable to Agency MBS(0.03) Net change attributable to
Slide 19: Second Quarter Non-Agency MBS impact on MFA book value per share
Second Quarter Non-Agency MBS impact on MFA book value Per Share(1) (0.05) a discount. This income increases amortized cost and lowers unrealized gains (1) Does not include impact of swap hedges. 21 Impact Impact of change in market prices$0.19 Realized gains from asset sales: Reallocation from OCI
Slide 20: Impact per share
Impact Per Share” impact of change in market prices Realized gains from asset sales: Reallocation from OC! to Retained Earnings Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased at la discount. This income increases amortized cost and lowers unrealized gains (oye e