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 this low interest rate environment, we continue to generate attractive returns from residential credit mortgage assets. • In the second quarter we generated EPS and dividend per share of $0.20. • MFA continued to acquire credit sensitive residential mortgage assets such as 3 y
Slide 3: MFA has generated strong long term returns to investors
Through volatile markets and both interest rate and credit cycles, MFA has generated strong long term returns to investors (1) As of 6/30/16 assuming reinvestment of dividends 4 Time PeriodAnnualized MFA Shareholder Return (1) Since 200014.8% 10 Year13.0% 5 Year12.3% 1 Year9.2%
Slide 4: 2016 MFA strategy
2016 MFA strategy 1)Invest in high value-added assets A.Generate returns from investment in credit sensitive residential mortgage assets •MFA’s credit sensitive assets continue to perform well. Legacy Non-Agency MBS Credit Reserve has been reduced by $39.9 million over the past 12 months. B.Acquire
Slide 5: Second quarter investment flows
$2,496 $(337) $466 $14 $2,639 $143 NPL Securities $3,605 $(211) $33 $39 $3,466 $(139) MBS 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 2016RunoffAcquisiti
Slide 6: MFA's yields and spreads remain attractive
MFA’s yields and spreads remain attractive Earning Assets 4.19% 4.23% 4.15% Rate Spread 2.14% 2.18% 2.22% Equity Ratio 3.3x 3.4x 3.4x 7 SecondFirstFourth QuarterQuarterQuarter 201620162015 Yield on Interest Net Interest Debt EPS$0.20$0.20$0.19
Slide 7: Yields and spreads by asset type
Yields and spreads by asset type (1) Net of 37 bps of servicing costs. (2) Residential whole loans held at fair value produce GAAP income/loss based on changes in fair value in the current period and therefore results will vary on a quarter to quarter basis. The company expects to realize returns ov
Slide 8: Undistributed REIT taxable income
Undistributed REIT taxable income • As of June 30, 2016 MFA had undistributed REIT taxable income of $0.22 per share. • Undistributed REIT taxable income includes the impact of the settlement of the Countrywide litigation. MFA received its share of the settlement proceeds during the second quarter (
Slide 9: 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 $ in Millions 10 Net Duration0.50 AssetsMarket ValueAverage CouponDuration Non-Agency ARMs (12 months or less MTR)$2,5353.18%0.5 Non-Agency Hybrid (13-48 MTR)$924.79%1.0 NPL/RPL Securities$2,6393.84%0.4 Non-Agency Fixed R
Slide 10: Agency CPR & Non-Agency CRR prepayment speeds
12 10 Agency CPR & Non-Agency CRR Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 10-Yr UST Prepayment speeds on MFA’s Legacy Non-Agency MBS and Agency MBS have trended together over time •MFA’s Agency MBS were acquired at an average premium of 4% and
Slide 11: Legacy Non-Agency MBS discount accretion exceeds Agency premium amortization
Millions ($) Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 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
Slide 12: 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 • Strong fundamental and technical support for residential credit assets and home prices • Sales of existing homes rose 3% year over year to 5.57 million and remain at their
Slide 13: Continued growth in credit sensitive loan portfolio
Continued growth in credit sensitive loan portfolio • 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
Slide 14: Credit sensitive residential whole loans: growing asset class for MFA
Credit sensitive residential whole loans: growing asset class for MFA • Early results indicate returns to date are consistent with our expectation of 5-7% • Utilizes the same residential mortgage credit expertise we have employed in Legacy Non-Agency MBS since 2008. • Ability to oversee servicing de
Slide 15: LTV breakdown of non-delinquent mortgage loans underlying Legacy Non-Agency MBS
$ (Millions) 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%101-110%111-125%> 125% LTV •These loans are up to date on all required mortgage payments. •Underlying loans are over ten years seasoned on a
Slide 16: Summary
Summary •We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. •Continued to acquire 3 Year step-up RPL/NPL securities and credit sensitive mortgage loans during the quarter. •Our credit sensitive assets continue to perform well. •MFA i
Slide 17: Summary
Summary We continue to utilize our expertise to identify and acquire attractive credit sensitive residential mortgage assets. * Continued to acquire 3 Year step-up RPL/NPL securities and credit sensitive mortgage loans during the quarter. * Our credit sensitive assets continue to perform well. MFA i
Slide 18: Book value increased 3% primarily due to fair value changes in Legacy Non-Agency MBS
Book value increased 3% primarily due to impact of fair value changes in Legacy Non-Agency MBS 20 Book value per common share as of 3/31/16$7.17 Net income available to common shareholders0.20 Common dividend declared during the quarter(0.20) Net change attributable to Agency MBS0.04 Net change attr
Slide 19: Second Quarter Non-Agency MBS impact on MFA book value
Second Quarter Non-Agency MBS impact on MFA book value Per Share(1) a discount. This income increases amortized cost and lowers unrealized gains$(0.05) (1) Does not include impact of swap hedges. 21 Impact Impact of change in market prices$0.29 Realized gains from asset sales: Reallocation from OCI
Slide 20: Second Quarter Non-Agency MBS impact on MFA book value
Second Quarter Non-Agency MBS impact on MFA book value Impact Per Share” Impact of change in market prices $0.29 Realized gains from asset sales: Reallocation from OC! to Retained Earnings $(0.02) Discount Accretion: Primarily income in excess of coupon on Non-Agency MBS purchased at ¢( 5) a discoun