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 historically low interest rate environment, we continue to generate attractive returns from residential credit mortgage assets. • In the fourth quarter we generated EPS of $0.18. • Despite recent interest rate increases, book value per share was little changed at $7.62 ve
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 12/31/16 assuming reinvestment of dividends. 4 Time PeriodAnnualized MFA Shareholder Return (1) Since January 1, 200015.0% 10 Year12.6% 5 Year16.2% 1 Year 28.8%
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. Recently, investor expectations of improved economic performance due to the potential
Slide 5: Fourth quarter investment flows
Fourth 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 2016RunoffAcquisitionsother changes2016Change performing Loans$1,348 $(40)$98$(1)$1,405$57 Securities (1)$2,5
Slide 6: MFA's yields and spreads remain attractive
MFA’s yields and spreads remain attractive Earning Assets 4.34% 4.23% 4.19% 4.23% Rate Spread 2.12% 2.13% 2.14% 2.18% Equity Ratio 3.1x 3.1x 3.3x 3.4x 7 FourthThirdSecondFirst QuarterQuarterQuarterQuarter 2016201620162016 Yield on Interest Net Interest Debt to
Slide 7: Fourth quarter 2016 yields and spreads by asset type
Fourth quarter 2016 yields and spreads by asset type (1) Net of 38 bps of servicing costs. (2) These residential whole loans are held at fair value and 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. MFA ex
Slide 8: MFA's interest rate sensitivity remains low, as measured by estimated net duration
MFA’s interest rate sensitivity remains low, as measured by estimated net duration $ in Millions MTR: Months to reset 9 AssetsMarket ValueAverage CouponDuration Non-Agency ARMs (12 months or less MTR)$2,5383.38%0.4 3 Year Step-up Securities$2,6553.92%0.4 Non-Agency Fixed Rate$1,0385.82%3.0 Residenti
Slide 9: MFA's book value changed little as rates rose dramatically in Q4
MFA’s book value changed little as rates rose dramatically in Q4 •Over the last few years, MFA has consistently pursued a strategy of maintaining low sensitivity to interest rates. We have achieved this through: Asset selection. Our assets have low duration and very little sensitivity to long-term i
Slide 10: Low sensitivity to prepayment rates
Millions ($) Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016 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
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: • Total existing-home sales for calendar year 2016 were 5.45 million units, the highest level since
Slide 12: 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 13: 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. • We believe that our oversight
Slide 14: Fourth quarter 3 Year Step-up Securities holdings
Fourth quarter 3 Year Step-up Securities holdings • Current market yields of mid to high 3% • Well protected portfolio with current credit enhancement of 49% • Very short assets with an average of 18 months remaining to step-up ValueNetMonths toCreditCreditAverage 15 As of December 31, 2016FairCurre
Slide 15: LTV breakdown of non-delinquent mortgage loans underlying Legacy Non-Agency MBS
16 $ (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 o
Slide 16: Summary
Summary •Wecontinuetoidentifyandacquireattractivecreditsensitiveresidential mortgage assets. •We continued to acquire 3 Year Step-Up Securities and credit sensitive mortgage loans during the fourth quarter of 2016. •Our credit sensitive assets continue to perform well. •MFA is well-positioned for ch
Slide 17: Summary
Summary * We continue to identify and acquire attractive credit sensitive residential mortgage assets. * We continued to acquire 3 Year Step-Up Securities and credit sensitive mortgage loans during the fourth quarter of 2016. * Our credit sensitive assets continue to perform well. * MFA is well-posi
Slide 18: Book value was largely unchanged for the quarter
Despite recent interest rate increases, book value was largely unchanged for the quarter 19 Book value per common share as of 9/30/16$7.64 Net income available to common shareholders0.18 Common dividend declared during the quarter(0.20) Net change attributable to Agency MBS(0.07) Net change attribut
Slide 19: Fourth Quarter Non-Agency MBS impact on MFA book value
Fourth Quarter Non-Agency MBS impact on MFA book value Per Share(1) a discount. This income increases amortized cost and lowers unrealized gains(0.05) (1) Does not include impact of swap hedges. 20 Impact Impact of change in market prices$(0.02) Realized gains from asset sales: Reallocation from OCI
Slide 20: 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 $(0.02) 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 p discount. T