MFA Financial, Inc. Announces First Quarter 2013 Financial Results

      MFA Financial, Inc. Announces First Quarter 2013 Financial Results

PR Newswire

NEW YORK, May 1, 2013

NEW YORK, May 1, 2013 /PRNewswire/ --MFA Financial, Inc. (NYSE: MFA) today
announced financial results for the first quarter ended March 31, 2013.

First Quarter 2013 and other highlights:

  oFirst quarter net income per common share of $0.21 and Core Earnings (as
    defined below) per common share of $0.20.
  oBook value per common share was $8.84 as of March 31, 2013, compared to
    $8.99 at December 31, 2012. Excluding the impact of the $0.50 per share
    special dividend declared March 4, 2013, book value would have increased
    in the quarter due primarily to continued appreciation within the
    Non-Agency MBS portfolio.
  oOn April 30, 2013, MFA paid its first quarter 2013 dividend of $0.22 per
    share of common stock to stockholders of record as of April 12, 2013.
  oA combination of both home price appreciation and mortgage amortization
    has led to a decrease in the Loan-to-Value ratio ("LTV") for many of the
    mortgages underlying MFA's Non-Agency portfolio. Due to this lower LTV,
    MFA has reduced its estimate of future losses within its Non-Agency
    portfolio. As a result, in the first quarter MFA transferred $34.5 million
    to accretable discount from credit reserve, bringing the total transferred
    over the last nine (9) months to $169.6 million. This increase in
    accretable discount prospectively increases the yield on Non-Agency MBS
    and will be realized in income over the life of the assets.

For the first quarter ended March 31, 2013, MFA generated net income allocable
to common stockholders of $75.0 million, or $0.21 per share of common stock.
Core Earnings for the first quarter were $72.3 million, or $0.20 per share of
common stock. "Core Earnings" is a Non-GAAP financial measure, which
reflects net income excluding $1.6 million of gains on sale of MBS and U.S.
Treasury securities, net and a $1.0 million increase in the fair value of the
securities underlying our Linked Transactions.

Stewart Zimmerman, MFA's Chairman of the Board and CEO, said, "MFA continues
to provide stockholders with attractive returns through what we believe to be
appropriately leveraged investments in both Agency and Non-Agency residential
MBS. At quarter-end our debt to equity ratio was 3.1:1. Our Agency portfolio
had an average amortized cost basis of 103.4% of par as of March 31, 2013, and
generated a 2.42% yield in the first quarter. Our Non-Agency portfolio had an
average amortized cost of 73.2% of par as of March 31, 2013, and generated a
loss-adjusted yield of 6.80% in the first quarter."

"We believe MFA, an internally managed REIT, continues to be a very efficient
vehicle for delivering the benefits of residential MBS investment to
stockholders. For the three months ended March 31, 2013, MFA's costs for
compensation and benefits and other general and administrative expenses were
$8.5 million or an annualized 1.1% of stockholders' equity as of March 31,

William Gorin, MFA's President, added, "The Fed continues to combat
deflationary pressures through its monetary policy. A combination of low
mortgage rates, rising multifamily rents, limited housing supply, capital
flows into own-to-rent foreclosure purchases and demographic-driven U.S.
household formation, has led to home price appreciation on a nationwide basis.
We believe that MFA's $1.313 billion credit reserve appropriately factors in
remaining uncertainties regarding housing fundamentals and the potential
impact on future cash flows. Our Non-Agency MBS loss adjusted yield of 6.80%
is based on projected defaults that are approximately twice the amount of
underlying mortgage loans that are presently 60+ days delinquent. MFA's
Non-Agency MBS prices increased, on average, approximately three points in the
first quarter. We believe this reflects the continued impact of a shrinking
universe of seasoned Non-Agency MBS and improvement in fundamental assumptions
as investors assign lower probabilities to the more pessimistic housing

MFA's $5.388 billion fair market value of Non-Agency MBS had a face amount of
$6.313 billion, an amortized cost of $4.619 billion and a net purchase
discount of $1.694 billion at March 31, 2013. This discount consists of a
$1.313 billion credit reserve and other-than-temporary impairments and a
$381.1 million net accretable discount. At March 31, 2013, MFA's Non-Agency
MBS had 2.9% average structured credit enhancement in the form of
subordination (subordinated bonds which absorb losses before MFA's Non-Agency
MBS are impacted).

Prepayments for MFA's MBS portfolio declined modestly in the first quarter.
The following table presents the weighted average prepayment speed on MFA's
MBS portfolio.

Table 1
                         First Quarter     Fourth Quarter

                         2013 Average CPR  2012 Average CPR
         MBS Portfolio   17.34%            17.67%
         Agency MBS      19.08%            19.23%
         Non-Agency MBS  15.06%            15.53%

As of March 31, 2013, under its swap agreements, MFA has a weighted average
fixed pay rate of interest of 2.24% and a floating receive rate of 0.21% on
notional balances totaling $2.514 billion, with an average maturity of 18

The following table presents MFA's asset allocation as of March 31, 2013 and
the first quarter 2013 yield on average interest earning assets, average cost
of funds and net interest rate spread for the various asset types.

 Table 2
                                          Non-Agency                                   Other, Net
 At March 31, 2013          Agency MBS                      MBS            Cash (2)    (3)           Total
                                          MBS (1)
 ($ in Thousands)
 Amortized Cost           $ 6,980,253     $ 4,660,606     $ 11,640,859   $ 606,587   $ (200,762)   $ 12,046,684
 Market Value             $ 7,153,905     $ 5,434,860     $ 12,588,765   $ 606,587   $ (200,762)   $ 12,994,590
 Less Repurchase            (6,338,378)     (2,189,948)   (8,528,326)      -           -             (8,528,326)
 Less Multi-year
 CollateralizedFinancing   -               (508,187)       (508,187)      -           -             (508,187)
 Less Securitized Debt      -               (542,014)       (542,014)      -           -             (542,014)
 Less Senior Notes          -               -               -              -           (100,000)     (100,000)
 Equity Allocated         $ 815,527       $ 2,194,711     $ 3,010,238    $ 606,587   $ (300,762)   $ 3,316,063
 Less Swaps at Market       -               -             -                -           (50,515)      (50,515)
 Net Equity Allocated     $ 815,527       $ 2,194,711     $ 3,010,238    $ 606,587   $ (351,277)   $ 3,265,548
 Debt/Net Equity Ratio      7.77        x   1.48        x   3.18       x   -           -             3.09        x
 For the Quarter Ended March 31, 2013
 Yield on Average Interest  2.42        %   6.80        % 4.17         %   0.03    %   -             4.02        %
 Earning Assets
 Less Average Cost of       (1.24)          (2.45)        (1.63)           -           -             (1.63)
 Funds (5)
 Senior Notes (6)           -               -               -              -           (8.03)    %   (8.03)
 Net Interest Rate Spread   1.18        %   4.35        % 2.54         %   0.03    %   (8.03)    %   2.32        %

(1) Information presented with respect to Non-Agency MBS, related repurchase
agreement borrowings and resulting totals are presented on a non-GAAP basis.
Includes $46.6 million Non-Agency MBS and $34.1 million repurchase agreements
underlying Linked Transactions. The purchase of a Non-Agency MBS and
contemporaneous repurchase borrowing of this MBS with the same counterparty
are accounted for under GAAP as a "linked transaction." The two components of
a linked transaction (MBS and associated borrowings under a repurchase
agreement) are evaluated on a combined basis and are presented net as "Linked
Transactions" on our consolidated balance sheet. 
(2) Includes cash, cash equivalents and restricted cash.
(3) Includes securities obtained and pledged as collateral, interest
receivable, goodwill, prepaid and other assets, borrowings under repurchase
agreements of $408.6 million for which U.S. Treasury securities are pledged as
collateral, interest payable, dividends payable, excise tax and interest
payable and accrued expenses and other
(4) For the Agency and Non-Agency MBS portfolio, represents the sum of
borrowings under repurchase agreements, multi-year collateralized financing
arrangements of $508.2 million and securitized debt as a multiple of net
equity allocated. The numerator of the total Debt/Net Equity ratio for the
Company also includes borrowings under repurchase agreements of $408.6 million
for which U.S. Treasury securities are pledged as collateral and Senior
(5) Average cost of funds includes interest on repurchase agreements,
including the cost of swaps, and securitized debt.
(6) Includes amortization of Senior Notes issuance costs.

At March 31, 2013, MFA's $12.589 billion of Agency and Non-Agency MBS, which
includes MBS underlying Linked Transactions, were backed by hybrid, adjustable
and fixed-rate mortgages. Additional information about these MBS, including
months to reset and three month average CPR, is presented below:

 Table 3
               Agency MBS                    Non-Agency MBS (1)            Total
 ($ in                   Avg     Avg                   Avg     Avg                    Avg     Avg
 Time to       Market    MTR (2) CPR  (3)    Market    MTR (2) CPR  (3)    Market     MTR (2) CPR  (3)
 Reset         Value                         Value                         Value
 < 2    (4)  $ 1,853,840 9       20.7 %    $ 3,124,155 3       13.6 %    $ 4,977,995  6       16.2 %
 2-5 years     1,541,388 36      28.7        637,966   40      18.5        2,179,354  37      25.9
 > 5           1,099,647 71      17.2        -         -       -           1,099,647  71      17.2
 ARM-MBS     $ 4,494,875 33      22.8 %    $ 3,762,121 10      14.5 %    $ 8,256,996  23      19.0 %
 15-year     $ 2,659,030         12.2 %    $ 15,064            25.5 %    $ 2,674,094          12.3 %
 30-year       -                 -           1,651,364         16.4        1,651,364          16.4
 40-year       -                 -           6,311             13.1        6,311              13.1
 Fixed-Rate  $ 2,659,030         12.2 %    $ 1,672,739         16.4 %    $ 4,331,769          13.9 %
 MBS Total   $ 7,153,905         19.1 %    $ 5,434,860         15.1 %    $ 12,588,765         17.3 %
 (1) Information presented based on data available at time of loan origination.

 (2) 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. The months to reset do not reflect scheduled amortization or

 (3) Average CPR weighted by positions as of the beginning of each month in the

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


MFA plans to hold a conference call on Wednesday May 1, 2013 at 10:00 a.m.
(Eastern Time) to discuss its first quarter 2013 financial results. The number
to dial in order to listen to the conference call is (800) 230-1085 in the
U.S. and Canada. International callers must dial (612) 332-0107. A replay of
the call will be available through August 1, 2013 and can be accessed by
dialing (800) 475-6701 in the U.S. and Canada or (320) 365-3844
internationally and entering access code 291991. Live audio of the conference
call will also be accessible over the internet at
http://www.mfafinancial.comthrough the appropriate link on MFA's Investor
Information page. To listen to the call over the internet, go to the
applicable website at least 15 minutes before the call to register and to
download and install any needed audio software. An audio replay of the call
will also be available on MFA's website following the call.

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," "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
value of MFA's MBS; changes in the prepayment rates on the mortgage loans
securing MFA's MBS; changes in the default rates and management's assumptions
regarding default rates on the mortgage loans securing MFA's Non-Agency MBS;
MFA's ability to borrow to finance its assets and the terms, including the
cost, maturity and other terms, of any such borrowing; implementation of or
changes in government regulations or programs affecting MFA's business; MFA's
estimates regarding taxable income and the timing and amount of distributions
to stockholders; 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 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 in engaged in the business of acquiring mortgages and
mortgage-related interests; 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 Securities
and Exchange Commission, could cause MFA's actual results to differ materially
from those projected in any forward-looking statements it makes. All
forward-looking statements 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


                                                   March 31,      December 31,
                                                   2013           2012
(In Thousands, Except Per Share Amounts)           (Unaudited)
Mortgage-backed securities ("MBS"):
 Agency MBS, at fair value ($6,739,499 and     $ 7,153,905    $ 7,225,460
$6,747,299 pledged
 as collateral, respectively)
 Non-Agency MBS, at fair value ($1,851,879       2,795,645      2,762,006
and $1,602,953 pledged as
 collateral, respectively)
 Non-Agency MBS transferred to consolidated      2,592,632      2,620,159
variable interest
 entities ("VIEs")
Securities obtained and pledged as collateral,     408,118        408,833
at fair value
Cash and cash equivalents                          601,570        401,293
Restricted cash                                    5,017          5,016
MBS linked transactions, net ("Linked              12,572         12,704
Transactions"), at fair value
Interest receivable                                42,106         44,033
Derivative hedging instruments, at fair value      324            203
Goodwill                                           7,189          7,189
Prepaid and other assets                           33,674         30,654
 Total Assets                                $ 13,652,752   $ 13,517,550
Repurchase agreements                            $ 8,902,827    $ 8,752,472
Securitized debt                                   542,014        646,816
Obligation to return securities obtained as        508,187        508,827
collateral, at fair value
8% Senior Notes due 2042 ("Senior Notes")          100,000        100,000
Accrued interest payable                           12,867         16,104
Derivative hedging instruments, at fair value      50,839         63,034
Dividends and dividend equivalents rights          259,607        72,222
("DERs") payable
Payable for unsettled purchases                    -              33,479
Excise tax and interest payable                    5,000          7,500
Accrued expenses and other liabilities             5,863          6,090
 Total Liabilities                           $ 10,387,204   $ 10,206,544
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; series A 8.50%  $ 38           $ 38
cumulative redeemable
 5,000 shares authorized; 3,840 shares issued
and outstanding ($96,000
 aggregate liquidation preference)
Common stock, $.01 par value; 895,000 shares
authorized;                                        3,584          3,575
 358,419 and 357,546 issued and outstanding,
Additional paid-in capital, in excess of par       2,813,878      2,805,724
Accumulated deficit                                (444,324)      (260,308)
Accumulated other comprehensive income             892,372        761,977
 Total Stockholders' Equity                  $ 3,265,548    $ 3,311,006
 Total Liabilities and Stockholders' Equity  $ 13,652,752   $ 13,517,550


                                                           Three Months Ended
                                                           March 31,
(In Thousands, Except Per Share Amounts)                   2013       2012
Interest Income:
Agency MBS                                               $ 42,787   $ 53,300
Non-Agency MBS                                             41,047     25,794
Non-Agency MBS transferred to consolidated VIEs            38,868     44,410
Cash and cash equivalent investments                       36         19
Interest Income                                          $ 122,738  $ 123,523
Interest Expense:
Repurchase agreements                                    $ 34,675   $ 36,070
Securitized debt                                           3,476      4,057
Senior Notes                                               2,007      -
Total Interest Expense                                   $ 40,158   $ 40,127
Net Interest Income                                      $ 82,580   $ 83,396
Other-Than-Temporary Impairments:
Total other-than-temporary impairment losses             $ -        $ (879)
Portion of loss reclassed from other comprehensive income  -          (41)
Net Impairment Losses Recognized in Earnings             $ -        $ (920)
Other Income, net:
Unrealized net gains and net interest income from        $ 1,536    $ 7,699
Linked Transactions
Gain on sales of MBS and U.S. Treasury Securities, net     1,633      2,953
Other, net                                                 55         -
Other Income, net                                        $ 3,224    $ 10,652
Operating and Other Expense:
Compensation and benefits                                $ 5,273    $ 5,612
Other general and administrative expense                   3,180      2,803
Operating and Other Expense                              $ 8,453    $ 8,415
Net Income                                               $ 77,351   $ 84,713
Less: Preferred Stock Dividends                           2,040      2,040
Net Income Available to Common Stock and Participating   $ 75,311   $ 82,673
Earnings per Common Share - Basic and Diluted            $ 0.21     $ 0.23
Dividends Declared per Share of Common Stock             $ 0.72     $ 0.24

Reconciliations of Non-GAAP Financial Measures

This press release contains disclosures related to MFA's Core Earnings and
Core Earnings per common share, for the three months ended March 31, 2013,
which constitute non-GAAP financial measures within the meaning of Regulation
G as promulgated by the Securities and Exchange Commission. MFA's management
believes that these non-GAAP financial measures presented in its press
release, when considered together with GAAP financial measures, provide
information that is useful to investors in understanding period-over-period
operating results. An analysis of any non-GAAP financial measure should be
used in conjunction with results presented in accordance with GAAP.

Core Earnings and Core Earnings per common share for the three months ended
March 31, 2013 are not measures of performance in accordance with GAAP, as
they exclude gain on sale of MBS and U.S. Treasury securities, net and changes
in fair value of MBS underlying our Linked Transactions. Management excludes
these items as it believes that they are not reflective of the underlying
performance of our portfolio or the way the portfolio is managed by the

MFA believes that Core Earnings and Core Earnings per share provides investors
with a useful measure to assess the performance of the Company's ongoing
business and useful supplemental information to both management and investors
in evaluating our financial results. A reconciliation of the GAAP items
discussed above to their non-GAAP measures for the three months ended March
31, 2013, are as follows:

 Table 4
                                                  Three Months Ended
                                                  March 31, 2013
                                                                  Basic and
 (In Thousands, Except Per Share Amounts)         Reconciliation
                                                                  Diluted EPS
 GAAP Net Income Available to Common Stock and    $   75,311
      Participating Securities
 Less: Dividends and Dividend Equivalent Rights       (321)
      Participating Securities
 GAAP Net Income Allocable to Common Stockholders $   74,990      $  0.21
 Non-GAAP Adjustments:
      Gain on Sale of MBS and U.S. Treasury       $   (1,633)
      Securities, net
      Changes in Net Unrealized Gains on Linked       (1,008)
 Total Adjustments to Arrive at Core Earnings     $   (2,641)     $  (0.01)
 Core Earnings                                    $   72,349      $  0.20
 Weighted Average Common Shares Outstanding -         358,110
 Basic and Diluted

As noted above, certain Non-Agency MBS purchases are presented as a component
of Linked Transactions in MFA's GAAP financial statements for the three months
ended March 31, 2013. In assessing the performance of the Non-Agency MBS
portfolio, MFA's management does not view these transactions as linked, but
rather views the performance of the linked Non-Agency MBS and the related
repurchase agreement borrowings as it would any other Non-Agency MBS that is
not part of a linked transaction. Consequently, MFA considers that these
non-GAAP financial measures assist investors in analyzing the performance of
MFA's Non-Agency MBS in the same way that MFA's management assesses such
assets. However, as noted above, these non-GAAP financial measures do not
take into account the effect of the changes in fair value of MBS underlying
Linked Transactions and gains on sale of MBS and U.S. Treasury Securities, net
which are reflected in GAAP earnings.

CONTACT: MFA Investor Relations

SOURCE MFA Financial, Inc.

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