Slide 1: 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,” “may” or similar
Slide 2: Executive Summary
Executive Summary In this low interest rate environment, we continue to generate attractive returns from residential credit mortgage assets. In the fourth quarter we generated EPS of $0.19 and dividend per share of $0.20. MFA continued to grow its credit sensitive loan portfolio and its 3 year step-
Slide 3: Long Term Annualized MFA Shareholder Returns
4 Time Period Annualized MFA Shareholder Return (1) Since 2000 14.2% 10 Year 13.5% 5 Year 9.3% Through Volatile Markets and Both Interest Rate and Credit Cycles, MFA has Generated Strong Long Term Returns to Investors (1) As of 12/31/15 assuming reinvestment of dividends
Slide 4: 2016 MFA Strategy
Invest in high value-added assets Generate returns from investment in credit sensitive residential mortgage assets MFA’s credit assets continue to perform well. Legacy Non-Agency MBS Credit Reserve was reduced $41.1 million in 2015. Acquire assets with less interest rate sensitivity 73% of MFA MBS a
Slide 5: Fourth Quarter Investment Update
Fourth Quarter Investment Update We have continued to identify and acquire credit sensitive residential mortgage assets that generate earnings without materially increasing MFA’s overall interest rate exposure. $ in Millions 6 December 31, 2015 September 30, 2015 Fourth Quarter Change December 31, 2
Slide 6: Yields and Spreads by Asset Type
Yields and Spreads by Asset Type 8 Quarter Ended December 31, 2015 Asset Yield/Return Cost of Funds Net Spread Debt/Net Equity Ratio Agency MBS 2.04% (1.17)% 0.87% 8.06x Non-Agency MBS 7.64% (2.90)% 4.74% 1.90x RPL/NPL MBS 3.70% (1.81)% 1.89% 3.81x RPL Whole Loans 5.96%(1) (2.64)% 3.32% 0.33x NPL Wh
Slide 7: Distributable Income / Items Expected to Impact Future Taxable Income
Distributable Income / Items Expected to Impact Future Taxable Income 9 As of December 31, 2015 MFA had undistributed REIT taxable income of $0.02 per share. Items expected to significantly impact future taxable income (though not GAAP income) over the next two quarters include: Re-securitization un
Slide 8: 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 10 Assets Market Value Average Coupon Duration Non-Agency ARMs (12 months or less MTR) $2,527 2.85% 0.5 Non-Agency Hybrid (13-48 MTR) $ 237 4.93% 1.0 NPL/RPL Securities $2,626 3.71% 0.4 Non-Agency Fixed Rate $1,214 5.81%
Slide 9: FHLB Membership
FHLB Membership 11 On January 20, 2016, FHFA adopted a final rule (effective 2/19/16) revising its regulations governing FHLBank membership, excluding captive insurance companies. For captives (such as MFA Insurance) gaining membership after September 12, 2014, this FHLBank membership will terminate
Slide 10: 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 12 Strong Fundamental and Technical Support for Residential Credit assets and Home Prices Continued home price appreciation (nationally and locally) Sales of existing homes ro
Slide 11: Continued Growth in Credit Sensitive Loan Portfolio
Continued Growth in Credit Sensitive Loan Portfolio 13 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 for
Slide 12: Credit Sensitive Residential Whole Loans: Growing Asset Class for MFA
14 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. As of December 31, 2015, MFA held $895.1 million of loans: $271.8 million of
Slide 13: Fourth Quarter RPL/NPL MBS Holdings
Fourth Quarter RPL/NPL MBS Holdings 15 Short Duration Deal structures generally contain a coupon step-up of 300 basis points at 36 months or sooner. 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 enhance
Slide 14: 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 16 These loans are up to date on all required mortgage payments Underlying loans are ten years seasoned on average Source: CoreLogic Data as of December 31, 2015 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 <= 6
Slide 15: Summary
Summary 17 We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. We substantially grew our holdings of credit sensitive mortgage loans and 3 Year step-up RPL/NPL securities in 2015. Our credit sensitive assets continue to perform well.
Slide 16: Summary
Summary * We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. * We substantially grew our holdings of credit sensitive mortgage loans and 3 Year step-up RPL/NPL securities in 2015. * Our credit sensitive assets continue to perform wel
Slide 17: Book Value Down Approximately 3% Primarily Due to Slightly Weaker Legacy Non-Agency Prices
Book Value Down Approximately 3% Primarily Due to Slightly Weaker Legacy Non-Agency Prices 19 Book value per common share as of 9/30/15 $ 7.70 Net income available to common shareholders 0.19 Common dividend declared during the quarter (0.20) Net change attributable to Agency MBS (0.10) Net change a
Slide 18: Fourth Quarter Non-Agency MBS Impact on MFA Book Value
Fourth Quarter Non-Agency MBS Impact on MFA Book Value (1) 20 Impact Per Share Impact of change in market prices ($0.14) Realized gains from asset sales: Reallocation from OCI to Retained Earnings ($0.03) Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased at a disco
Slide 19: Fourth Quarter Non-Agency MBS Impact on MFA Book Value
Fourth Quarter Non-Agency MBS Impact on MFA Book Value |) Impact Per Share Impact of change in market prices ($0.14) Realized gains from asset sales: Reallocation from OCI to Retained Earnings ($0.03) Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased at a discount.