MFA Financial, Inc. Announces Third Quarter 2017 Financial Results

NEW YORK, Nov. 2, 2017

Third Quarter 2017 and other highlights:

• MFA generated third quarter net income available to common shareholders of $60.1 million, or $0.15 per common share (based on 396.7 million weighted average common shares outstanding). As of September 30, 2017, book value per common share was $7.70.
• Earnings for the third quarter were negatively impacted principally by lower prices on CRT securities, primarily reflecting market concerns related to seasonal hurricanes, and by one-time contractual obligations of the Company related to the death of our former CEO, who passed away in August.
• On October 31, 2017, MFA paid its third quarter 2017 dividend of $0.20 per share of common stock to shareholders of record as of September 28, 2017.
• MFA purchased or committed to purchase nearly $600 million of residential mortgage assets in the third quarter, including $202 million of credit sensitive whole loans and REO.

Craig Knutson, MFA's President and CEO, said, "In the third quarter, we continued to execute our strategy of targeted investment within the residential mortgage universe with a focus on credit sensitive assets.  We made acquisitions in each of our credit sensitive investment asset classes during the quarter.  Further, we opportunistically sold $44.5 million of Non-Agency MBS issued prior to 2008 ("Legacy Non-Agency MBS"), realizing gains of $14.9 million for the quarter.  As we have for over five years now, we continue to manage this portfolio through selective and strategic sales of positions.

"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 0.76 at quarter-end.  MFA's book value per common share decreased modestly during the quarter from $7.76 to $7.70, but year-to-date has increased approximately 1% as our investment strategy continues to produce stable book value. Leverage, which reflects the ratio of our financing obligations to equity, was 2.4:1 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, MFA's Legacy Non-Agency MBS portfolio continues to outperform our credit assumptions.  In the third quarter of 2017, we reduced our credit reserve on this portfolio by $14.8 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."

During the third quarter, while MFA successfully purchased (or committed to purchase) nearly $600 million of investments in credit sensitive whole loans, RPL/NPL MBS, MSR related assets and CRT securities, we also experienced an elevated level of runoff in RPL/NPL MBS as issuers called a number of deals and refinanced at lower coupons.

MFA's Legacy Non-Agency MBS had a face amount of $2.9 billion with an amortized cost of $2.1 billion and a net purchase discount of $835.8 million at September 30, 2017.  This discount consists of a $593.1 million credit reserve and other-than-temporary impairments and a $242.7 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 11.8% are currently 60 or more days delinquent.