MFA Financial, Inc. Announces First Quarter 2017 Financial Results

NEW YORK, May 4, 2017

First Quarter 2017 and other highlights:

• MFA generated first quarter net income available to common shareholders of $74.3 million, or $0.20 per common share (based on 372.6 million weighted average common shares outstanding). As of March 31, 2017, book value per common share was $7.66.
• On April 28, 2017, MFA paid its first quarter 2017 dividend of $0.20 per share of common stock to shareholders of record as of March 29, 2017.
• MFA acquired $150.0 million of 3 year step-up securities and $87.4 million of Credit Risk Transfer securities during the quarter.

William Gorin, MFA's CEO, said, "In the first quarter, we continued to execute our strategy of targeted investment within the residential mortgage universe with a focus on credit sensitive assets.  We acquired 3 year step-up securities and Credit Risk Transfer securities during the quarter.  Further, we opportunistically sold $21.6 million of Non-Agency MBS issued prior to 2008 ("Legacy Non-Agency MBS"), realizing gains of $10.0 million for the quarter.  This is the nineteenth consecutive quarter we have realized gains through selected sales of Legacy Non-Agency MBS based on our projections of future cash flows relative to market pricing.

"MFA remains well-positioned to generate attractive returns despite historically low interest rates.  Through asset selection and hedging strategy, the estimated net effective duration, a gauge of MFA's interest rate sensitivity, remains low and measured 0.69 at quarter-end.  MFA's book value per common share increased to $7.66 versus $7.62 at the end of 2016.  Leverage, which reflects the ratio of our financing obligations to equity, was 2.9:1 at quarter-end."

Craig Knutson, MFA's President and COO, 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, MFA's Legacy Non-Agency MBS portfolio continues to outperform our credit assumptions.  In the first quarter of 2017, we reduced our credit reserve on this portfolio by $9.3 million.  Also, our credit sensitive residential whole loans offer additional exposure to residential mortgage credit while affording us the opportunity to improve outcomes through sensible and effective servicing decisions."

MFA's Legacy Non-Agency MBS had a face amount of $3.3 billion with an amortized cost of $2.4 billion and a net purchase discount of $921.6 million at March 31, 2017.  This discount consists of a $653.3 million credit reserve and other-than-temporary impairments and a $268.2 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 eleven years seasoned and approximately 12.4% are currently 60 or more days delinquent.

The Agency MBS portfolio had an amortized cost basis of 103.8% of par as of March 31, 2017, and generated a 1.98% yield in the first quarter.  The Legacy Non-Agency MBS portfolio had an amortized cost of 72.4% of par as of March 31, 2017, and generated a loss-adjusted yield of 8.90% in the first quarter.  At the end of the first quarter, MFA held approximately $2.5 billion of 3 year step-up securities.  These securities had an amortized cost of 99.9% of par and generated a 4.02% yield for the quarter.