Slide 1: MFA Financial, Inc. – May 2012
May 2012 FINANCIAL, INC
Slide 2: Forward-looking statements
2 When used in this presentation or other written or oral communications, statements that are not historical in nature, including those containing words such as “will,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “could,” “would,” “may” or similar expressio
Slide 3: MFA is an internally managed REIT investing in Agency and Non-Agency RMBS
3 MFA is an internally managed REIT positioned to benefit from investment in both Agency and Non-Agency Residential MBS
Slide 4: Investment opportunities in RMBS, particularly Non-Agency
4 Investment opportunities exist in RMBS, particularly in the Non-Agency sector. Agency MBS investment returns continue to benefit from a steep yield curve. Despite governmental actions, refinancing rates are not spiking. In this period of economic uncertainty, our goal remains to generate double-di
Slide 5: 14.5% Annual Return Since January 2000
5 14.5% Annual Return Since January 2000 Source: Bloomberg *Through December 31, 2011. Includes reinvestment of dividends. Total Return*
Slide 6: MFA Asset Allocation Strategy
6 MFA Asset Allocation Strategy Investment in Residential MBS Including Both Agency MBS and Non-Agency MBS At March 31, 2012 Total ($ in Thousands) Amortized Cost $ 6,849,432 $ 4,415,482 $ 387,626 $ (38,700) $ 11,613,840 Market Value $ 7,059,629 $ 4,519,944 $ 387,626 $ (38,700) $ 11,928,499 Less Pay
Slide 7: MFA Strategy – Agency MBS
7 Low premium exposure: Agency Portfolio average amortized cost basis is 102.8%. MFA’s Agency MBS portfolio has limited exposure to HARP 2.0: The majority of MFA’s securities that could be affected have underlying mortgages that are currently in their interest-only period (limiting the incentive to
Slide 8: MFA Strategy – Non-Agency MBS: Increasing Portfolio
8 MFA owned $4.5 billion market value of Non-Agency MBS with an average amortized cost of 73% of par. In the first quarter of 2012, these assets generated a loss adjusted yield of 6.92% on an unlevered basis. These assets are less sensitive to changes in the yield curve and interest rates. Returns o
Slide 9: Non-Agency MBS – Largest Positions
9 Non-Agency MBS – 20 Largest Positions * * Data as of March 31, 2012. FICO scores as of deal origination date. Projections Assume Continued Housing Market Weakness with Defaults Well in Excess of Currently Delinquent Mortgages % of Total Portfolio Collateral Type FICO WALA Credit Support (%) 60+ DQ
Slide 10: Example of Loss-Adjusted Yield
10 Example of Loss-Adjusted Yield In general, MFA’s yields are based on estimated future cash flows utilizing credit assumptions similar to those used in the slow speed, loss-adjusted illustration. MFA Strategy – Non-Agency MBS For Illustrative Purposes Only Prepay Scenario Price Coupon Defaults Sev
Slide 11: MFA Strategy – Non-Agency MBS credit reserve estimates
11 MFA Strategy – Non-Agency MBS While Housing Fundamentals Remain Weak, We Have Factored This Into Our Credit Reserve Estimates* Credit enhancement: Average credit enhancement of 4.6% absorbs realized losses before the securities owned by MFA are impacted. Discounted purchase price: On average, cap
Slide 12: Discounted Purchase Price, Credit Reserve and Credit Enhancement Mitigate Credit Risk
12 MFA Strategy – Non-Agency MBS Deeply Discounted Purchase Price, Substantial Credit Reserve and 4.6% Credit Enhancement mitigate Credit Risk * Information regarding Non-Agency MBS is presented on a non-GAAP basis. For a GAAP reconciliation of such items, see Annex 1. Non-Agency Portfolio As of Mar
Slide 13: Less Than One-Third of Non-Agency MBS Funded with Short-Term Repo
13 Less Than One-Third of MFA Non-Agency MBS Funded with Short-Term Repo* * Data as of March 31, 2012. Non- Agency Financing $ Avg. First Quarter Borrowing Cost % Market value of Non-Agency MBS $ 4.5 Billion 100% Repo (less than 12 months) $ 1.2 Billion 2.08% 27% Repo (12 months) $ .2 Billion 2.64%
Slide 14: MFA Financial, Inc. summary
14 MFA Financial, Inc. Internally managed. Goal is to generate double-digit returns on equity. 14.5% annual return since 2000 (including reinvestment of dividends). While housing fundamentals do remain weak, we believe this has been appropriately factored into our cash flow projections and credit re
Slide 15: MFA Financial, Inc.
MFA FINANCIAL, INC
Slide 16: Annex 1 – Reconciliations of Non-GAAP Financial Measures
Information pertaining to MFA’s Non-Agency MBS that are a component of Linked Transactions are reconciled below as of and for the three months ended March 31, 2012 with the most directly comparable financial measure calculated in accordance with GAAP, as follows: 16 ANNEX 1 – Reconciliations of Non-
Slide 17: Annex 1 – Reconciliations of Non-GAAP Financial Measures (cont)
The table below reconciles MFA’s Non-Agency MBS and related repurchase agreement borrowings and securitized debt on a GAAP basis to reflect on a combined basis its Non-Agency MBS and related repurchase agreements underlying its Linked Transactions, which is a Non-GAAP financial measure. Based on thi
Slide 18: MFA Financial, Inc.
MFA FINANCIAL, INC