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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 2, 2018

 

MFA FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

1-13991

 

13-3974868

(State or other jurisdiction

 

(Commission File Number)

 

(IRS Employer

of incorporation

 

 

 

Identification No.)

or organization)

 

 

 

 

 

350 Park Avenue, 20th Floor

 

 

New York, New York

 

10022

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (212) 207-6400

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Item 2.02 Results of Operations and Financial Condition and

Item 7.01 Regulation FD Disclosure

 

MFA Financial, Inc. (“MFA”) issued a press release, dated August 2, 2018, announcing its financial results for the quarter ended June 30, 2018, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  In addition, in conjunction with the announcement of its financial results, MFA issued additional information relating to its 2018 second quarter financial results.  Such additional information is attached to this report as Exhibit 99.2 and is incorporated herein by reference.

 

The information referenced in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is being “furnished” and, as such, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section.  The information set forth in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is and will not be incorporated by reference into any registration statement or other document filed by MFA pursuant to the Securities Act of 1933, as amended (the “Securities Act”), except as may be expressly set forth by specific reference in such filing.

 

As discussed therein, the press release contains forward-looking statements within the meaning of the Securities Act and the Exchange Act and, as such, may involve known and unknown risks, uncertainties and assumptions.  These forward-looking statements relate to MFA’s current expectations and are subject to the limitations and qualifications set forth in the press release as well as in MFA’s other documents filed with the SEC, including, without limitation, that actual events and/or results may differ materially from those projected in such forward-looking statements.

 

Exhibit

 

99.1        Press Release, dated August 2, 2018, announcing MFA’s financial results for the quarter ended June 30, 2018.

 

99.2        Additional information relating to the financial results of MFA for the quarter ended June 30, 2018.

 

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EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release, dated August 2, 2018, announcing MFA Financial Inc.’s financial results for the quarter ended June 30, 2018.

 

 

 

99.2

 

Additional information relating to the financial results of MFA Financial, Inc. for the quarter ended June 30, 2018.

 

3



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

MFA FINANCIAL, INC.

 

(REGISTRANT)

 

 

 

By:

/s/ Harold E. Schwartz

 

 

Name: Harold E. Schwartz

 

 

Title: Senior Vice President and General Counsel

 

Date:  August 2, 2018

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

 

 

 

 

MFA

 

 

FINANCIAL, INC.

 

 

 

 

 

350 Park Avenue-

 

 

New York, New York 10022

 

 

 

 

 

PRESS RELEASE

 

FOR IMMEDIATE RELEASE

 

 

 

August 2, 2018

 

NEW YORK METRO

 

 

 

INVESTOR CONTACT:

InvestorRelations@mfafinancial.com

NYSE: MFA

 

212-207-6488

 

 

www.mfafinancial.com

 

 

 

 

MEDIA CONTACT:

Abernathy MacGregor

 

 

Tom Johnson

 

 

212-371-5999

 

 

MFA Financial, Inc.

 

Announces Second Quarter 2018 Financial Results

 

NEW YORK - MFA Financial, Inc. (NYSE:MFA) today announced its financial results for the second quarter ended June 30, 2018.

 

Second Quarter 2018 and other highlights:

 

·                  MFA generated second quarter GAAP net income of $66.6 million, or $0.17 per common share.  As of June 30, 2018, book value per common share was $7.54.

 

·                  Asset acquisitions exceeded run-off during the quarter.  MFA purchased or committed to purchase in excess of $1.1 billion of residential mortgage assets in the second quarter, including $898 million of residential whole loans.

 

·                  Recent growth in MFA’s residential whole loan portfolio has been largely through purchases of newly originated performing whole loans, including Non-QM loans, rehabilitation or “fix and flip” loans and single family rental loans.

 

·                  Net Income was $0.03 per common share lower than the first quarter of 2018, primarily due to:

 

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·                  Lower income from residential whole loans held at fair value. While this portfolio continues to perform well and again delivered mark to market gains, they were less than in the prior quarter;

 

·                  Net interest income was lower as early quarter asset sales and run-off was not fully re-invested until later in the quarter, with closing of certain purchases of higher yielding loans held at carrying value, as well as a RPL/NPL MBS acquisition pending settlement at quarter-end; and

 

·                  Operating and other expenses this quarter were impacted by the timing of recognition of expenses associated with certain share-based compensation awards.

 

·                  On July 31, 2018, MFA paid its second quarter 2018 dividend of $0.20 per share of common stock to shareholders of record as of June 29, 2018.

 

Craig Knutson, MFA’s CEO and President, said, “In the second quarter, we continued to execute our strategy of targeted investment within the residential mortgage universe with a focus primarily on residential whole loans.  We again grew our portfolio this quarter, as acquisitions exceeded run-off and sales. To date in 2018, and particularly in the second quarter, much of the growth in the residential whole loan portfolio has been through purchases of newly originated performing whole loans, including Non-QM loans, fix and flip loans and single family rental loans.  We are pleased to have gained traction on these new acquisition efforts, which involve relationships cultivated over the past year or more.  Through our willingness and ability to explore and enter into various arrangements, including flow agreements, strategic alliances and also minority equity investments, we have been able to partner with originators to source attractive new investments, while enabling them to grow with support from MFA as a reliable provider of capital.

 

“MFA remains well-positioned to generate attractive returns despite higher funding cost due to Fed Funds increases and continued elevated asset prices.  Through our asset selection and hedging strategy, the estimated net effective duration, a gauge of our portfolio’s sensitivity to interest rates, remains relatively low and measured 1.19 at quarter-end.  MFA’s book value per common share decreased slightly to $7.54 from $7.62 as of March 31, 2018, due primarily to dividend distributions exceeding GAAP earnings by $0.03. Leverage, which reflects the ratio of our financing obligations to equity, was 2.3:1 at quarter-end.”

 

Mr. Knutson added, “MFA’s portfolio asset selection process continues to emphasize residential mortgage credit exposure while seeking to minimize sensitivity to interest rates.  As housing prices maintain their upward trend and borrowers repair their credit and balance sheets, the performance of our credit sensitive residential whole loan portfolio benefits from this fundamental strength.  MFA’s proactive asset management team has been able to shorten liquidation timelines and increase property sale proceeds, leading to improved outcomes and better returns.  Additionally, MFA’s Legacy Non-Agency MBS portfolio continues to outperform our credit assumptions.  In the second quarter of 2018, we reduced our credit reserve on this portfolio by $8.0 million and these assets generated a yield of 9.89% for the quarter.”

 

During the second quarter MFA purchased or committed to purchase more than $1.1 billion of residential mortgage assets, including $898 million of residential whole loans.  This acquisition activity exceeded portfolio run-off and sales by almost $150 million.

 

2



 

At June 30, 2018, our investments in residential whole loans totaled $3.4 billion.  Of this amount, $1.9 billion is recorded at carrying value and generated a yield of 5.84% (5.60% net of servicing costs) during the quarter, and $1.5 billion is recorded at fair value on our consolidated balance sheet.  On this portion of the portfolio, we recorded gains for the quarter of approximately $32.4 million, primarily reflecting coupon interest payments and other cash received during the quarter and changes in the fair value of the underlying loans.

 

MFA’s Legacy Non-Agency MBS had a face amount of $2.5 billion with an amortized cost of $1.8 billion and a net purchase discount of $754.0 million at June 30, 2018.  This discount consists of a $553.6 million credit reserve and other-than-temporary impairments and a $200.4 million net accretable discount.  We believe this credit reserve appropriately factors in remaining uncertainties regarding underlying mortgage performance and the potential impact on future cash flows.  Our Legacy Non-Agency MBS have underlying mortgage loans that are on average approximately twelve years seasoned and approximately 11.6% are currently 60 or more days delinquent.

 

As of June 30, 2018, the Agency MBS portfolio totaled $2.4 billion, had an amortized cost basis of 103.9% of par and generated a 2.03% yield in the second quarter.  During the quarter we sold $75.3 million of lower yielding 15-Year Fixed Rate Agency MBS, realizing $3.8 million in losses.  The Legacy Non-Agency MBS portfolio had an amortized cost of 70.0% of par as of June 30, 2018, and generated a loss-adjusted yield of 9.89% in the second quarter.  At the end of the second quarter, MFA held approximately $907.9 million of RPL/NPL MBS.  These securities had an amortized cost of 99.80% of par and generated a 4.52% yield for the quarter.  Our investments in CRT securities totaled $572.0 million at June 30, 2018, and generated a yield of 6.34% in the second quarter.  Pricing this quarter of CRT securities was again relatively stable.  During the quarter we opportunistically sold $104.0 million of CRT securities, realizing gains of $11.2 million.

 

For the three months ended June 30, 2018, MFA’s costs for compensation and benefits and other general and administrative expenses were $12.6 million, or an annualized 1.57% of stockholders’ equity as of June 30, 2018.

 

The following table presents the weighted average prepayment speed on MFA’s MBS portfolio.

 

Table 1

 

 

 

Second Quarter
2018 Average CPR

 

First Quarter
2018 Average CPR

 

Agency MBS

 

16.2

%

12.7

%

Legacy Non-Agency MBS

 

15.8

%

14.9

%

RPL/NPL MBS (1)

 

20.4

%

14.0

%

 


(1)   All principal payments are considered to be prepayments for conditional prepayment rate (“CPR”) purposes.  RPL/NPL MBS are securitized financial instruments that are primarily backed by securitized re-performing and non-performing loans.  The majority of these securities are structured such that the coupon increases up to 300 basis points at 36 months from issuance or sooner.

 

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As of June 30, 2018, under its swap agreements, MFA had a weighted average fixed-pay rate of interest of 2.07% and a floating receive rate of 2.08% on notional balances totaling $2.6 billion, with an average maturity of 22 months.

 

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The following table presents MFA’s asset allocation as of June 30, 2018, and the second quarter 2018 yield on average interest-earning assets, average cost of funds and net interest rate spread for the various asset types.

 

Table 2

 

ASSET ALLOCATION

 

At June 30, 2018

 

Agency
MBS

 

Legacy
Non-Agency
MBS

 

RPL/NPL
MBS

 

Credit Risk
Transfer
Securities

 

MSR
Related
Assets

 

Residential
Whole
Loans, at
Carrying
Value (1)

 

Residential
Whole
Loans, at
Fair
Value

 

Other,
net (2)

 

Total

 

($ in Millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value/Carrying Value

 

$

2,363

 

$

2,335

 

$

908

 

$

572

 

$

381

 

$

1,906

 

$

1,503

 

$

315

 

$

10,283

 

Less Payable for Unsettled Purchases

 

 

 

(61

)

 

 

(473

)

(34

)

 

(568

)

Less Repurchase Agreements

 

(2,112

)

(1,585

)

(499

)

(410

)

(297

)

(318

)

(671

)

 

(5,892

)

Less Securitized Debt

 

 

 

 

 

 

(167

)

(352

)

 

(519

)

Less Senior Notes

 

 

 

 

 

 

 

 

(97

)

(97

)

Net Equity Allocated

 

$

251

 

$

750

 

$

348

 

$

162

 

$

84

 

$

948

 

$

446

 

$

218

 

$

3,207

 

Debt/Net Equity Ratio (3)

 

8.4

x

2.1

x

1.6

x

2.5

x

3.5

x

1.0

x

2.4

x

 

 

2.3

x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Quarter Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yield on Average Interest Earning Assets (4)

 

2.03

%

9.89

%

4.52

%

6.34

%

6.88

%

5.84

%

N/A

 

%

5.35

%

Less Average Cost of Funds (5)

 

(2.04

)

(3.30

)

(3.19

)

(2.97

)

(3.16

)

(3.86

)

(3.91

)

 

(3.05

)

Net Interest Rate Spread

 

(0.01

)%

6.59

%

1.33

%

3.37

%

3.72

%

1.98

%

N/A

 

%

2.30

%

 


(1)   Includes $804.8 million of purchased credit impaired loans, $626.9 million of Non-QM loans, $162.7 million of Rehabilitation loans, $55.6 million of Single-family rental loans and $256.2 million of seasoned performing loans.  At June 30, 2018, the total fair value of these loans is estimated to be approximately $2.0 billion.

(2)   Includes cash and cash equivalents and restricted cash, other assets and other liabilities.

(3)   Represents the sum of borrowings under repurchase agreements, securitized debt and payable for unsettled purchases as a multiple of net equity allocated.  The numerator of our Total Debt/Net Equity Ratio also includes the obligation to return securities obtained as collateral of $253.7 million and Senior Notes.

(4)   Yields reported on our interest earning assets are calculated based on the interest income recorded and the average amortized cost for the quarter of the respective asset.  At June 30, 2018, the amortized cost of our interest earning assets were as follows: Agency MBS - $2.4 billion; Legacy Non-Agency MBS - $1.8 billion; RPL/NPL MBS - $907.5 million; Credit Risk Transfer securities - $528.7 million; and Residential Whole Loans at carrying value - $1.9 billion. In addition, the yield for residential whole loans at carrying value was 5.60% net of 24 basis points of servicing fee expense incurred during the quarter.  For GAAP reporting purposes, such expenses are included in Loan servicing and other related operating expenses in our statement of operations.  Interest payments received on residential whole loans at fair value is reported in Other Income as Net gain on residential whole loans held at fair value in our statement of operations.  Accordingly, no yield is presented as such loans are not included in interest earning assets for reporting purposes.

(5)   Average cost of funds includes interest on repurchase agreements, the cost of swaps, Senior Notes and securitized debt.  Agency cost of funds includes 28 basis points and Legacy Non-Agency cost of funds includes 31 basis points associated with swaps to hedge interest rate sensitivity on these assets.

 

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At June 30, 2018, MFA’s $4.7 billion of Agency and Legacy Non-Agency MBS were backed by hybrid, adjustable and fixed-rate mortgages.  Additional information about these MBS, including average months to reset and three-month average CPR, is presented below:

 

Table 3

 

 

 

Agency MBS

 

Legacy Non-Agency MBS (1)

 

Total (1)

 

Time to Reset

 

Fair
Value
(2)

 

Average
Months
to Reset
(3)

 

3 Month
Average
CPR (4)

 

Fair
Value

 

Average
Months
to Reset
(3)

 

3 Month
Average
CPR (4)

 

Fair
Value
(2)

 

Average
Months
to Reset
(3)

 

3 Month
Average
CPR (4)

 

($ in Millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

< 2 years (5)

 

$

1,276

 

6

 

21.2

%

$

1,539

 

5

 

16.2

%

$

2,815

 

5

 

18.4

%

2-5 years

 

147

 

45

 

13.2

 

 

 

 

147

 

45

 

13.2

 

> 5 years

 

10

 

84

 

11.5

 

 

 

 

10

 

84

 

11.5

 

ARM-MBS Total

 

$

1,433

 

11

 

20.3

%

$

1,539

 

5

 

16.2

%

$

2,972

 

8

 

18.1

%

15-year fixed (6)

 

$

929

 

 

 

10.4

%

$

2

 

 

 

4.0

%

$

931

 

 

 

10.3

%

30-year fixed (6)

 

 

 

 

 

758

 

 

 

15.2

 

758

 

 

 

15.2

 

40-year fixed (6)

 

 

 

 

 

36

 

 

 

14.2

 

36

 

 

 

14.2

 

Fixed-Rate Total

 

$

929

 

 

 

10.4

%

$

796

 

 

 

15.1

%

$

1,725

 

 

 

12.6

%

MBS Total

 

$

2,362

 

 

 

16.2

%

$

2,335

 

 

 

15.8

%

$

4,697

 

 

 

16.0

%

 


(1)   Excludes $907.9 million of RPL/NPL MBS.

(2)   Does not include principal payments receivable of $1.2 million.

(3)   Months to Reset is the number of months remaining before the coupon interest rate resets. At reset, the MBS coupon will adjust based upon the underlying benchmark interest rate index, margin and periodic or lifetime caps.  Months to Reset does not reflect scheduled amortization or prepayments.

(4)   3 month average CPR weighted by positions as of beginning of each month in the quarter.

(5)   Includes floating rate MBS that may be collateralized by fixed-rate mortgages.

(6)   Information presented based on data available at time of loan origination.

 

Webcast

 

MFA Financial, Inc. plans to host a live audio webcast of its investor conference call on Thursday, August 2, 2018, at 10:00 a.m. (Eastern Time) to discuss its second quarter 2018 financial results. The live audio webcast will be accessible to the general public over the internet at http://www.mfafinancial.com through the “Webcasts & Presentations” link on MFA’s home page.  To listen to the conference call over the internet, please go to the MFA website at least 15 minutes before the call to register and to download and install any needed audio software.  Earnings presentation materials will be posted on the MFA website prior to the conference call and an audio replay will be available on the website following the call.

 

Cautionary Language Regarding Forward-Looking Statements

 

When used in this press release 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,” “may” or similar expressions, are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. Statements regarding the following subjects, among others, may be forward-looking: changes in interest rates and the market (i.e., fair) value of MFA’s MBS, residential whole loans, CRT securities and other assets; changes in the prepayment rates on the mortgage loans securing MFA’s MBS, an increase of which could result in a reduction of the yield on MBS in our portfolio and

 

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an increase of which could require us to reinvest the proceeds received by us as a result of such prepayments in MBS with lower coupons; credit risks underlying MFA’s assets, including changes in the default rates and management’s assumptions regarding default rates on the mortgage loans securing MFA’s Non-Agency MBS and relating to MFA’s residential whole loan portfolio; MFA’s ability to borrow to finance its assets and the terms, including the cost, maturity and other terms, of any such borrowings; implementation of or changes in government regulations or programs affecting MFA’s business; MFA’s estimates regarding taxable income, the actual amount of which is dependent on a number of factors, including, but not limited to, changes in the amount of interest income and financing costs, the method elected by MFA to accrete the market discount on Non-Agency MBS and residential whole loans and the extent of prepayments, realized losses and changes in the composition of MFA’s Agency MBS, Non-Agency MBS and residential whole loan portfolios that may occur during the applicable tax period, including gain or loss on any MBS disposals and whole loan modification, foreclosure and liquidation; the timing and amount of distributions to stockholders, which are declared and paid at the discretion of MFA’s Board of Directors and will depend on, among other things, MFA’s taxable income, its financial results and overall financial condition and liquidity, maintenance of its REIT qualification and such other factors as MFA’s Board of Directors deems relevant; MFA’s ability to maintain its qualification as a REIT for federal income tax purposes; MFA’s ability to maintain its exemption from registration under the Investment Company Act of 1940, as amended (or the “Investment Company Act”), including statements regarding the Concept Release issued by the Securities and Exchange Commission (“SEC”) relating to interpretive issues under the Investment Company Act with respect to the status under the Investment Company Act of certain companies that are engaged in the business of acquiring mortgages and mortgage-related interests; MFA’s ability to successfully implement its strategy to grow its residential whole loan portfolio, which is dependent on, among other things, the supply of loans offered for sale in the market; expected returns on our investments in non-performing residential whole loans (“NPLs”), which are affected by, among other things, the length of time required to foreclose upon, sell, liquidate or otherwise reach a resolution of the property underlying the NPL, home price values, amounts advanced to carry the asset (e.g., taxes, insurance, maintenance expenses, etc. on the underlying property) and the amount ultimately realized upon resolution of the asset; risks associated with our investments in MSR related assets, including servicing, regulatory and economic risks, and risks associated with investing in real estate assets, including changes in business conditions and the general economy. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that MFA files with the SEC, could cause MFA’s actual results to differ materially from those projected in any forward-looking statements it makes. All forward-looking statements are based on beliefs, assumptions and expectations of MFA’s future performance, taking into account all information currently available.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect MFA. Except as required by law, MFA is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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MFA FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

 

(In Thousands, Except Per Share Amounts)

 

June 30,
2018

 

December 31,
2017

 

 

 

(Unaudited)

 

 

 

Assets:

 

 

 

 

 

Mortgage-backed securities (“MBS”) and credit risk transfer (“CRT”) securities:

 

 

 

 

 

Agency MBS, at fair value ($2,286,409 and $2,727,510 pledged as collateral, respectively)

 

$

2,362,897

 

$

2,824,681

 

Non-Agency MBS, at fair value ($2,447,432 and $2,379,523 pledged as collateral, respectively)

 

3,242,967

 

3,533,966

 

CRT securities, at fair value ($516,486 and $595,900 pledged as collateral, respectively)

 

571,955

 

664,403

 

Mortgage servicing rights (“MSR”) related assets ($381,390 and $482,158 pledged as collateral, respectively)

 

381,390

 

492,080

 

Residential whole loans, at carrying value ($396,856 and $448,689 pledged as collateral, respectively) (1)

 

1,906,242

 

908,516

 

Residential whole loans, at fair value ($952,335 and $996,226 pledged as collateral, respectively) (1)

 

1,502,986

 

1,325,115

 

Cash and cash equivalents

 

54,880

 

449,757

 

Restricted cash

 

3,298

 

13,307

 

Other assets

 

618,148

 

742,909

 

Total Assets

 

$

10,644,763

 

$

10,954,734

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Repurchase agreements

 

$

5,892,228

 

$

6,614,701

 

Payable for unsettled MBS and residential whole loans purchases

 

567,915

 

 

Other liabilities

 

978,007

 

1,078,397

 

Total Liabilities

 

$

7,438,150

 

$

7,693,098

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $.01 par value; 7.50% Series B cumulative redeemable; 8,050 shares authorized; 8,000 shares issued and outstanding ($200,000 aggregate liquidation preference)

 

$

80

 

$

80

 

Common stock, $.01 par value; 886,950 shares authorized; 398,533 and 397,831 shares issued and outstanding, respectively

 

3,985

 

3,978

 

Additional paid-in capital, in excess of par

 

3,230,055

 

3,227,304

 

Accumulated deficit

 

(592,218

)

(578,950

)

Accumulated other comprehensive income

 

564,711

 

609,224

 

Total Stockholders’ Equity

 

$

3,206,613

 

$

3,261,636

 

Total Liabilities and Stockholders’ Equity

 

$

10,644,763

 

$

10,954,734

 

 


(1)   Includes approximately $199.8 million and $183.2 million of Residential whole loans, at carrying value and $476.2 million and $289.3 million of Residential whole loans, at fair value transferred to consolidated VIEs at June 30, 2018 and December 31, 2017, respectively. Such assets can be used only to settle the obligations of each respective VIE.

 

8



 

MFA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

(In Thousands, Except Per Share Amounts)

 

2018

 

2017

 

2018

 

2017

 

 

 

(Unaudited)

 

Interest Income:

 

 

 

 

 

 

 

 

 

Agency MBS

 

$

13,170

 

$

16,587

 

$

28,463

 

$

34,481

 

Non-Agency MBS

 

55,043

 

70,269

 

111,145

 

149,477

 

CRT securities

 

8,695

 

7,846

 

18,191

 

14,222

 

MSR related assets

 

6,219

 

5,905

 

13,842

 

10,639

 

Residential whole loans held at carrying value

 

17,935

 

8,503

 

32,264

 

17,193

 

Cash and cash equivalent investments

 

685

 

1,047

 

1,594

 

1,402

 

Interest Income

 

$

101,747

 

$

110,157

 

$

205,499

 

$

227,414

 

 

 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

 

 

 

Repurchase agreements and other advances

 

$

46,234

 

$

46,802

 

$

91,951

 

$

95,141

 

Other interest expense

 

5,576

 

2,220

 

10,413

 

4,230

 

Interest Expense

 

$

51,810

 

$

49,022

 

$

102,364

 

$

99,371

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

$

49,937

 

$

61,135

 

$

103,135

 

$

128,043

 

 

 

 

 

 

 

 

 

 

 

Other-Than-Temporary Impairments:

 

 

 

 

 

 

 

 

 

Total other-than-temporary impairment losses

 

$

 

$

 

$

 

$

(63

)

Portion of loss reclassed from other comprehensive income

 

 

(618

)

 

(969

)

Net Impairment Losses Recognized in Earnings

 

$

 

$

(618

)

$

 

$

(1,032

)

 

 

 

 

 

 

 

 

 

 

Other Income, net:

 

 

 

 

 

 

 

 

 

Net gain on residential whole loans held at fair value

 

$

32,443

 

$

16,208

 

$

70,941

 

$

29,981

 

Net gain on sales of investment securities

 

7,429

 

5,889

 

16,246

 

15,597

 

Other, net

 

1,134

 

14,847

 

1,479

 

19,359

 

Other Income, net

 

$

41,006

 

$

36,944

 

$

88,666

 

$

64,937

 

 

 

 

 

 

 

 

 

 

 

Operating and Other Expense:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

7,038

 

$

7,573

 

$

13,786

 

$

15,366

 

Other general and administrative expense

 

5,582

 

5,754

 

9,414

 

9,979

 

Loan servicing and other related operating expenses

 

7,928

 

4,199

 

14,811

 

8,608

 

Operating and Other Expense

 

$

20,548

 

$

17,526

 

$

38,011

 

$

33,953

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

70,395

 

$

79,935

 

$

153,790

 

$

157,995

 

Less Preferred Stock Dividends

 

3,750

 

3,750

 

7,500

 

7,500

 

Net Income Available to Common Stock and Participating Securities

 

$

66,645

 

$

76,185

 

$

146,290

 

$

150,495

 

 

 

 

 

 

 

 

 

 

 

Earnings per Common Share - Basic and Diluted

 

$

0.17

 

$

0.20

 

$

0.36

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

Dividends Declared per Share of Common Stock

 

$

0.20

 

$

0.20

 

$

0.40

 

$

0.40

 

 

9


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

 

5GEQPF 3WCTVGT 2018 'CTPKPIU 2TGUGPVCVKQP

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GRAPHIC

 


'ZGEWVKXG UWOOCT[ +P VJG UGEQPF SWCTVGT QH 2018, /(# IGPGTCVGF )##2 '25 QH $0.17. d d 32 FKXKFGPF VQ EQOOQP UVQEMJQNFGTU YCU $0.20 RGT UJCTG. d 'UVKOCVGF 4'+6 VCZCDNG KPEQOG HQT VJG SWCTVGT YCU $0.22 RGT EQOOQP UJCTG. 'UVKOCVGFWPFKUVTKDWVGFVCZCDNGKPEQOG YCU$0.11RGTEQOOQPUJCTG CV ,WPG 30, 2018. d $QQM XCNWG RGT UJCTG FGENKPGF UNKIJVN[ VQ $7.54 HTQO $7.62 CV /CTEJ 31, 2018. d #UUGV CESWKUKVKQPU QH $1.1 DKNNKQP GZEGGFGF RQTVHQNKQ TWP-QHH CPF UCNGU D[ CNOQUV $150 OKNNKQP. &WTKPI VJG SWCTVGT YG RWTEJCUGF QT EQOOKVVGF VQ RWTEJCUG PGCTN[ $900 OKNNKQP KP TGUKFGPVKCN YJQNG NQCPU. 3

GRAPHIC

 


'ZGEWVKXG UWOOCT[ (EQPVcF.) 4GUKFGPVKCN YJQNG NQCPU (KPENWFKPI 4'1) CTG PQY QWT NCTIGUV CUUGV ENCUU, CPF VQVCNU $3.6 DKNNKQP, YKVJ CRRTQZKOCVGN[ $1.6 DKNNKQP, QT JCNH, QH /(#cU GSWKV[ CNNQECVGF VQ VJGUG CUUGVU. d d 6JG ITQYVJ KP QWT YJQNG NQCP RQTVHQNKQ KP VJG UGEQPF SWCTVGT YCU NCTIGN[ VJTQWIJ RWTEJCUGU QH PGYN[ QTKIKPCVGF RGTHQTOKPI NQCPU, KPENWFKPI 0QP-3/ NQCPU, TGJCDKNKVCVKQP QT aHKZ CPF HNKRb NQCPU CPF UKPING HCOKN[ TGPVCN NQCPU. d 1WT GHHQTVU VQ UQWTEG PGYN[ QTKIKPCVGF RGTHQTOKPI YJQNG NQCPU JCXG DGGP QPIQKPI HQT QXGT C [GCT CPF CTG PQY DGIKPPKPI VQ IGPGTCVG UKIPKHKECPV PGY XQNWOG. d /(#cU CUUGV OCPCIGOGPV VGCO EQPVKPWGU VQ QXGTUGG UGTXKEKPI QH QWT ETGFKV UGPUKVKXG NQCPU, RCTVKEWNCTN[ PQP-RGTHQTOKPI NQCPU, VQ KORTQXG QWVEQOGU CPF GZRGEVGF TGVWTPU. d 5VTQPI ETGFKV HWPFCOGPVCNU EQPVKPWG VQ FTKXG RGTHQTOCPEG QH QWT .GICE[ 0QP-#IGPE[ RQTVHQNKQ, YJKEJ IGPGTCVGF C [KGNF KP VJG UGEQPF SWCTVGT QH 9.89%. 4

GRAPHIC

 


+PXGUVOGPV UVTCVGI[ #EVKXGN[ GZRCPF QWT WPKXGTUG QH KPXGUVOGPV CUUGVU d 2TKOCT[ HQEWU QP ETGFKV-TGNCVGF CUUGVU YKVJ KPJGTGPVN[ NGUU KPVGTGUV TCVG UGPUKVKXKV[. d 2TQFWEG CVVTCEVKXG TGVWTPU VJCV CTG EQORCTCDNG VQ RGGTU, DWV YKVJ NGUU TKUM FWG VQ NQYGT NGXGTCIG, NGUU KPVGTGUV TCVG GZRQUWTG CPF TGFWEGF RTGRC[OGPV UGPUKVKXKV[. d 9G EQPVKPWG VQ GZRCPF QWT KPXGUVOGPV QRRQTVWPKV[ UGV YKVJKP VJG TGUKFGPVKCN OQTVICIG URCEG, WVKNK\KPI VJG UCOG FKUEKRNKPGF CRRTQCEJ VQ TKUM/TGYCTF CU YG JCXG KP VJG RCUV. d /CKPVCKP UVC[KPI RQYGT CPF RTGUGTXG VJG CDKNKV[ VQ KPXGUV QRRQTVWPKUVKECNN[: d 2GTOCPGPV GSWKV[ ECRKVCN CPF CXCKNCDNG NKSWKFKV[ d 5WDUVCPVKCN WPNGXGTGF CUUGVU EQWNF DG NGXGTGF KP VJG HWVWTG VQ GPCDNG RQTVHQNKQ ITQYVJ 5

GRAPHIC

 


/CTMGV EQPFKVKQPU CPF KPXGUVOGPV CEVKXKV[ d &GURKVG C EJCNNGPIKPI KPXGUVOGPV NCPFUECRG, /(# RWTEJCUGF QT EQOOKVVGF VQ RWTEJCUG OQTG VJCP $1 DKNNKQP KP CUUGVU KP VJG UGEQPF SWCTVGT. d 9G EQPVKPWG VQ UGG CFFKVKQPCN QRRQTVWPKVKGU VQ RWTEJCUG PQP-RGTHQTOKPI CPF TG-RGTHQTOKPI ETGFKV UGPUKVKXG YJQNG NQCPU. d 5KPEG GCTN[ 2017, YG JCXG DGGP RWTUWKPI PGY KPXGUVOGPV QRRQTVWPKVKGU KP VJG HQTO QH PGYN[ QTKIKPCVGF RGTHQTOKPI YJQNG NQCPU. #ESWKTKPI VJGUG CUUGVU KU C WPKSWG RTQEGUU: d .QPI IGUVCVKQP RGTKQFU d %TGCVKXG CRRTQCEJ VQ RCTVPGTKPI YKVJ QTKIKPCVQTU d (NQY XU DWNM CTTCPIGOGPVU

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32 2018 PGV KPEQOG RGT EQOOQP UJCTG QH $0.17 d 6JG UGEQPF SWCTVGT FGENKPG KP PGV KPEQOG YCU RTKOCTKN[ FWG VQ: $O $O .QYGT KPEQOG HTQO HCKT XCNWG NQCPU, YJKEJ EQPVKPWG VQ RGTHQTO YGNN CPF CICKP FGNKXGTGF OCTM VQ OCTMGV ICKPU, DWV NGUU VJCP VJG RTKQT SWCTVGT. d d 0GV KPVGTGUV KPEQOG YCU NQYGT CU RQTVHQNKQ TWP-QHH CPF UCNGU QEEWTTGF GCTN[ KP VJG SWCTVGT, YJKNG VJG OCLQTKV[ QH NQCP CPF /$5 CESWKUKVKQPU ENQUGF NCVGT KP VJG SWCTVGT QT YGTG RGPFKPI UGVVNGOGPV CV SWCTVGT-GPF. d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5GEQPF SWCTVGT 2018 KPXGUVOGPV HNQYU d d #PQVJGT CEVKXG SWCTVGT YKVJ CUUGV CESWKUKVKQPU GZEGGFKPI TWP-QHH. 9G EQPVKPWG VQ ITQY QWT TGUKFGPVKCN YJQNG NQCPU RQTVHQNKQ, RWTEJCUKPI QT EQOOKVVKPI VQ RWTEJCUG PGCTN[ $900 OKNNKQP KP VJG SWCTVGT. 9G QRRQTVWPKUVKECNN[ UQNF $104 OKNNKQP QH %46 UGEWTKVKGU CPF $75 OKNNKQP QH #IGPE[ /$5 KP VJG SWCTVGT. d 2PF 3WCTVGT 2PF 3WCTVGT 2PF 3WCTVGT $ KP /KNNKQPU /CTEJ 31, 2018 ,WPG 30, 2018 CPF QVJGT $2,838 $(155) $898 $20 $3,601 $763 CPF 4'1 $679 $(4) $e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e$7$2,335$(128) #IGPE[ /$5$2,647$(193)$e$(91)$2,363$(284) 6QVCNU$10,017$(777)$1,088$(168)$10,160$143

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/(#cU d [KGNFU CPF URTGCFU TGOCKP CVVTCEVKXG &GURKVG UGXGP (GF (WPFU TCVG KPETGCUGU KP VYQ CPF C JCNH [GCTU: /(#cU KPVGTGUV TCVG URTGCF KU TGNCVKXGN[ WPEJCPIGF CPF TGOCKPU CVVTCEVKXG. ;KGNFU QP OCP[ QH QWT ETGFKV UGPUKVKXG CUUGVU JCXG TKUGP CU ETGFKV HWPFCOGPVCNU JCXG EQPVKPWGF VQ KORTQXG. 9G JCXG UWEEGUUHWNN[ KFGPVKHKGF JKIJGT [KGNFKPI CUUGVU KP C TKUKPI TCVG GPXKTQPOGPV. (WPFKPI EQUVU JCXG TKUGP OQTG UNQYN[ VJCP (GF (WPFU. d d d d 6% 5% 4% 3% 2% 1% 0% 33 '1534 '1531 '1632 '1633 '1634 '1631 '1732 '1733 '1734 '17 31c18 32 '18 9 ;KGNF (%)

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5GEQPF SWCTVGT 2018 [KGNFU CPF URTGCFU D[ CUUGV V[RG #UUGV #NNQECVGF 0GV 5RTGCF 4GVWTP (WPFU 'SWKV[ 4CVKQ (1) (2) 0GV QH 24 DRU QH UGTXKEKPI EQUVU. 6JGUG TGUKFGPVKCN YJQNG NQCPU RTQFWEG )##2 KPEQOG/NQUU DCUGF QP EJCPIGU KP HCKT XCNWG KP VJG EWTTGPV RGTKQF, CPF VJGTGHQTG TGUWNVU YKNN XCT[ QP C SWCTVGT-VQ-SWCTVGT DCUKU. /(# GZRGEVU VQ TGCNK\G TGVWTPU QXGT VKOG QP VJGUG YJQNG NQCP KPXGUVOGPVU QH 5-7%. #IGPE[ EQUV QH HWPFU KPENWFGU 28 DCUKU RQKPVU CPF .GICE[ 0QP-#IGPE[ EQUV QH HWPFU KPENWFGU 31 DCUKU RQKPVU CUUQEKCVGF YKVJ UYCRU VQ JGFIG KPVGTGUV TCVG UGPUKVKXKV[ QP VJGUG CUUGVU. (3) 10 0GV 'SWKV[;KGNF/%QUV QH&GDV/0GV (OKNNKQP) 9JQNG .QCPU CV %CTT[KPI 8CNWG$948 5.60% (1)(3.86)%1.74%1.0Z .GICE[ 0QP-#IGPE[ /$5$750 9.89% (3.30)% (3)6.59% 2.1Z 9JQNG .QCPU CV (CKT 8CNWG$446(2)(3.91)% 2.4Z 42./02. /$5 $3484.52%(3.19)%1.33%1.6Z #IGPE[ /$5$251 2.03% (2.04)% (3)(0.01)%8.4Z %TGFKV 4KUM 6TCPUHGT 5GEWTKVKGU$1626.34%(2.97)%3.37%2.5Z /54 4GNCVGF #UUGVU $846.88%(3.16)%3.72%3.5Z

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/(#cU KPVGTGUV TCVG UGPUKVKXKV[ TGOCKPU NQY d d 'ZENWFKPI JGFIGU, QWT CUUGV FWTCVKQP TGOCKPU TGNCVKXGN[ NQY CV 1.61. 1WT CUUGVU JCXG NKOKVGF GZRQUWTG VQ NQPI VGTO KPVGTGUV TCVGU CPF VJGKT FWTCVKQP EJCPIGU NKVVNG YJGP NQPI VGTO KPVGTGUV TCVGU EJCPIG. +P CFFKVKQP, QWT NGXGTCIG TGOCKPU NQY, YKVJ C FGDV-VQ-GSWKV[ TCVKQ QH 2.3Z. &WG VQ VJG EQODKPCVKQP QH NQY NGXGTCIG CPF NQY FWTCVKQP, C 100DR RCTCNNGN KPETGCUG KP KPVGTGUV TCVGU YQWNF TGUWNV KP CP GZRGEVGF FGENKPG QH /(#cU GSWKV[ QH CRRTQZKOCVGN[ 4%. $ JO .JMMJPOT d d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/(#cU UVTCVGI[ EQPVKPWGU VQ FGNKXGT DQQM XCNWG UVCDKNKV[. d /(#cU KPXGUVOGPV UVTCVGI[ JCU EQPUKUVGPVN[ OKPKOK\GF DQQM XCNWG XQNCVKNKV[. 5KPEG 2014 /(#cU CXGTCIG SWCTVGTN[ DQQM XCNWG EJCPIG JCU DGGP NGUU VJCP 2%. 2TQVGEVKPI DQQM XCNWG IKXGU /(# VJG CDKNKV[ VQ VCMG CFXCPVCIG QH PGY QRRQTVWPKVKGU CU VJG[ CTKUG. 3WCTVGTN[ EJCPIG KP /(# U $QQM 8CNWG (NGHV CZKU) CPF /(# U #UUGV &WTCVKQP (TKIJV CZKU) D[ 3WCTVGT 15% 2.5 10% 2.0 d 5% 1.5 0% 1.0 -5% 0.5 -10% -15% 0.0 d 12 32-2014 33-2014 34-2014 31-2015 32-2015 33-2015 34-2015 31-2016 32-2016 33-2016 34-2016 31-2017 32-2017 33-2017 34-2017 31-2018 32-2018

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n 0 :::J U Units (millions) r-+ 0 #. ,...., fR 00 fl!. ;::::; #. N N N :C:. ,.:..,_ 'CI! C.. 'il! 0'1 #. --*' A 1-& .-Oo IV 0 a. -• o rv :::J Jan-10 May-10 Sep-10 Jan-11 1 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep 1S Jan-16 M•y-16 Sep·16 Jan-17 May-17 Sep-17 Jan-18 Oec-11 Mar-12 Jun-12 Sep-12 C ro "'7""-.:: I .. {. Mar-13 Jun-13 Sep l3 Oec-13 Mar 14 Jun-14 Sep-14 Oec-14 Mar 15 Jun-15 Sep-15 Dec 15 Mar 16 Jun 16 Sep 16 Oec-16 Mar-17 Jun-17 Sep-17 Oec 17 "-"' 0 z 0' (.f) - • ,.-+ < 2 Q1 .0.. -· ., Q ,. 0 1 ""' \ Ll ; VI o - ::S c:u : DJ ......a... C - < - I'D < % S oo :;; :J < l> (!) I :I ....J "!( 2: S' .<! Q_ OJ 3 (0 :::J r-+ i-> '" § O-J (.f) 5 ..., Q * * * * * * 0 ';1. 0'1 ';1. 0 "'-. 1:1-0"1 00 * JV ';1. (X) ';1. ';1. ';1. ';1. ro Apr·01 Dec-01 Aug 02 Apr-0 3 Dec-03 Jun-()2 Jan-03 Aug-03 Mar-04 Oct 04 -, (.f) _ • Q_ C I'D ::S c: May-05 Dec-05 Ju-l06 Feb-07 Sep-07 "\ "L'l :::J Dec-05 Aug-06 I:':Ds <n !!:, C --'-w c :I ,. tD r--•. ' Dec 07 Aug OS Apr-09 Dec 09 Aug-10 Apl'll Dec·ll Aug-12 Apr·13 Dec·13 Aug-14 Nov-08 Jun-09 Jan 10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 3 0 ..., ::S !:!! § 0-::S CJQ tp :3:5 < 00 tD :I ;; ,.-+ 0Q OJ OQ IT\ 3 < ,. !!!, tD S:: e 0 \ 1J Apr· S n 1 Oec-15 ,:., Soo CDIQl - 1 IT\ Apl'l7 Oec-17 w '!R CIQ \LI I'D Ill -· Mar-lB r-+ I w

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4GUKFGPVKCN YJQNG NQCP RQTVHQNKQ WRFCVG 9G RWTEJCUGF QT EQOOKVVGF VQ RWTEJCUG PGCTN[ $900 OKNNKQP QH TGUKFGPVKCN YJQNG d NQCPU KP VJG UGEQPF SWCTVGT. #UUGVU RWTEJCUGF KPENWFG PGYN[ QTKIKPCVGF KP CFFKVKQP VQ NGICE[ NQCPU. d 'ZGEWVGF VYQ PQP-TCVGF UGEWTKVK\CVKQPU QH 02./42. NQCPU (QPG FWTKPI 32 CPF VJG d QVJGT UWDUGSWGPV VQ SWCTVGT GPF) VQVCNKPI CRRTQZKOCVGN[ $420 OKNNKQP QH UGPKQT UGEWTKVKGU UQNF. 8QNWOGU KP VJG NGICE[ NQCP OCTMGV [GCT-VQ-FCVG JCXG GZEGGFGF NCUV [GCTcU RCEG. d 4GVWTPU VQ FCVG QP PQP-RGTHQTOKPI NQCPU EQPVKPWG VQ DG EQPUKUVGPV YKVJ QWT d GZRGEVCVKQP QH 5-7%. 14

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RPL portfolio delinquency characteristics as of 6/30/2018 • 89% of our RPL portfolio is less than 60 days delinquent. • On average over the last 12 months, 29% of the 60+ days delinquent loans are making payments. • Prepay speeds have outperformed expectations maintaining a range between 6% and 12%. 15 Reflects 3 month trailing average voluntary prepayments

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2GTHQTOCPEG QH PQP-RGTHQTOKPI NQCPU RWTEJCUGF DGHQTG 6/30/17 d /GCUWTGF D[ RGTEGPVCIG QH VQVCN NQCP EQWPV, 33% (QT PGCTN[ 1,500) QH NQCPU VJCV YGTG PQP-RGTHQTOKPI CV RWTEJCUG CTG GKVJGT RGTHQTOKPI QT JCXG RCKF KP HWNN CU QH ,WPG 2018. d 81% QH /(# OQFKHKGF NQCPU CTG GKVJGT RGTHQTOKPI VQFC[ QT JCXG RCKF KP HWNN. (1)&GHKPGF CU 60-FC[U FGNKPSWGPV QT OQTG CV VJG VKOG QH RWTEJCUG (2)&GHKPGF CU EWTTGPV, 30-FC[U FGNKPSWGPV QT OCFG C RC[OGPV KP ,WPG 2018 1 &GNKPSWGPV CV RWTEJCUG(1); JGNF QXGT QPG [GCT % D[ NQCP EQWPV 5VCVWU CU QH 6/30/18%QWPV% QH 6QVCN 2GTHQTOKPI (2)1,16826% 2CKF KP HWNN3077% 0QP-RGTHQTOKPI1,05424% 4'1 50011% .KSWKFCVGF1,42532% 6QVCN4,454100%

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NPL asset management performance(1) • Through diligent asset management we continue to improve outcomes for our NPL portfolio by returning loans to performing or paid-in-full status, and through other forms of resolution. % Performing or Paid-in-Full by Year of Acquisition 2014 2015 2016 30% 25% 20% 15% 10% 5% 0% • After 15 months since transfer to our servicer, 27% of NPLs acquired in 2016 either started performing or paid in full versus 18% for 2015 and 17% for 2014. 1 4 7 10 13 16 19 22 25 28 31 34 Months since Boarded % Other Forms of Resolution by Year of Acquisition 2014 2015 2016 40% 35% 30% 25% 20% 15% 10% 5% 0% • After 15 months since transfer to our servicer, 31% of NPLs acquired in 2016 completed non-retention resolution versus 22% for 2015 and 18% for 2014. 1 4 7 10 13 16 19 22 25 28 31 34 17 Months since Boarded (1) Non-Performing defined as 60 days delinquent or more at purchase. Performing over time defined as current, 30 days delinquent or made a P&I payment in June 2018.

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0QP-3/ KPXGUVOGPVU d 9G CTG RWTEJCUKPI NQCPU OCFG VQ ETGFKVYQTVJ[ DQTTQYGTU YJQ JCXG NKOKVGF EQPXGPVKQPCN OQTVICIG HKPCPEG QRVKQPU. 9G JCXG RWTEJCUGF QT EQOOKVVGF VQ RWTEJCUG QXGT $700 OKNNKQP 72$ VQ FCVG. %WTTGPVN[ YQTMKPI YKVJ UGXGTCN QTKIKPCVKQP RCTVPGTU. #DNG VQ CEJKGXG CRRTQRTKCVG NGXGTCIG VJTQWIJ YCTGJQWUG NKPGU CPF RQVGPVKCNN[ VJTQWIJ ECRKVCN OCTMGVU VTCPUCEVKQPU. 6CTIGVGF [KGNF QP 0QP-3/ CUUGVU QH 5% CPF 41' QH NQY FQWDNG FKIKVU. d d d d 18 0QP-3/ 2QTVHQNKQ 5VCVKUVKEU CU QH 6/30/18 9# .6867% 9# (+%1704 9# %QWRQP6.60% #XI $CNCPEG$402,380 *[DTKF #4/U83% (KZGF 4CVG17% 6QR 2 5VCVGU %#54% (.15%

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Business purpose loans - Rehabilitation and Single Family Rental (SFR) Loans MFA has started acquiring Rehabilitation and SFR loans from a select group of origination partners. As of the end of Q2 we held $163 million of Rehabilitation loans (with an additional $30 million of undrawn commitments) and $56 million of SFR loans. Rehabilitation loans (“Fix and Flip”) • Fixed rate short term loans collateralized by residential property. Term is generally less than 24 months. Borrower intends to rehabilitate property and resell. Non-owner occupied business purpose loans. Expected yield between 6.75% and 8.25%. • • • SFR Loans • Hybrid and fixed rate loans collateralized by residential property/properties. Term is 30 years. Borrower intends to rent out property. Non-owner occupied business purpose loans. Expected yield between 5.50% and 6.00%. • • • * WA ARV-LTV: Weighted average after repair loan to value ** WA LTP: Weighted average initial loan proceeds to purchase price (when available) *** WA DSCR: Weighted average debt service coverage ratio 19 SFR Portfolio Statistics WA LTV68% WA FICO739 WA DSCR***1.5x WA Coupon6.05% 5/1 Hybrid Loans96% Rehabilitation Statistics WA ARV-LTV*64% WA LTP**81% WA FICO705 WA Term13 months WA Passthrough Rate7.65%

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#FFKVKQPCN +PHQTOCVKQP 21

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