MFA Financial, Inc. : Announces Second Quarter 2012 Financial Results
08/06/2012| 08:35am US/Eastern
Recommend:
NEW YORK, Aug. 6, 2012 /PRNewswire/ -- MFA Financial, Inc. (NYSE:MFA) today announced financial results for the second quarter ended June 30, 2012.
Second Quarter 2012 and other recent highlights:
-- Second quarter net income per common share of $0.20 and Core Earnings
(as defined below) per common share of $0.20.
-- Book value per common share of $7.45 as of June 30, 2012, compared to
$7.49 as of March 31, 2012.
-- We continue to focus on adding longer-term financing for our Non-Agency
MBS holdings. On June 29, 2012 we added a $350 million 3-year
repurchase agreement to finance Non-Agency MBS assets.
-- On July 31, 2012, MFA paid its second quarter 2012 dividend of $0.23 per
share of common stock to stockholders of record as of July 13, 2012.
-- MFA's REIT taxable income exceeded Core Earnings in the first half of
2012, primarily due to the fact that for Non-Agency MBS acquired at a
discount, Core Earnings are reduced by credit reserves for estimated
future losses while taxable income is reduced by realized losses only
when they actually occur. MFA typically distributes annually
approximately 100% of its REIT taxable income and consequently,
dividends exceeded Core Earnings in the first two quarters of 2012. We
currently anticipate that MFA's REIT taxable income and Core Earnings
will trend closer together in the second half of 2012.
For the second quarter ended June 30, 2012, MFA generated net income allocable to common stockholders of $72.3 million, or $0.20 per share of common stock. Core Earnings for the second quarter were $73.0 million, or $0.20 per share of common stock. "Core Earnings" is a Non-GAAP financial measure, which reflects net income excluding $280,000 of other-than-temporary impairment charges and a $425,000 decrease 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 (including the liabilities underlying our Linked Transactions) was 3.6:1. In this low interest rate environment, core earnings per share was $0.20 versus $0.21 in the first quarter. Our Agency portfolio had an average amortized cost basis of 102.9% of par as of June 30, 2012, and generated a 2.95% yield in the second quarter. Our Non-Agency portfolio had an average amortized cost of 73.0% of par as of June 30, 2012, and generated a loss-adjusted yield of 6.75% in the second quarter (Non-Agency average cost and loss-adjusted yield are adjusted for the impact of MBS Linked Transactions)."
"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 June 30, 2012, MFA's cost for compensation and benefits and other general and administrative expenses were $8.4 million or an annualized 1.21% of stockholders' equity as of June 30, 2012."
William Gorin, MFA's President, added, "While housing fundamentals remain moderate to weak, we believe that we have appropriately factored this into our cash flow projections and credit reserve estimates. Our Non-Agency MBS loss adjusted yield of 6.75% is based on projected defaults that are approximately twice the amount of underlying mortgage loans that are presently 60+ days delinquent. These underlying mortgage loans were originated on average more than 6 years ago so that we have access to an average of 74 months of payment history. In the second quarter we continued to add multi-year financing that serves to reduce our reliance on short-term funding for Non-Agency MBS. While this longer-term financing is incrementally more expensive than short-term financing by approximately 100 basis points, we believe the certainty of the committed term more than justifies the additional cost."
MFA's $4.741 billion fair market value of Non-Agency MBS had a face amount of $6.360 billion, an amortized cost of $4.643 billion and a net purchase discount of $1.718 billion (all amounts adjusted for the impact of MBS Linked Transactions) at June 30, 2012. This discount consists of a $1.448 billion credit reserve and other-than-temporary impairments and a $269.7 million net accretable discount. In addition, at June 30, 2012, these Non-Agency MBS had 4.0% average structured credit enhancement in the form of subordination (subordinated bonds which absorb losses before MFA's Non-Agency MBS are impacted). This structured credit enhancement, together with the purchase discount, mitigates MFA's risk of loss on these investments. Subsequent to June 30, 2012, market prices of Non-Agency MBS have, in general, increased.
Prepayments for MFA's MBS portfolio did trend up in the second quarter. Unlike MFA's Agency MBS, due to their discounted purchase prices, the return on Non-Agency MBS is generally positively impacted if prepayment rates increase. The following table presents the weighted average prepayment speed on MFA's MBS portfolio (including MBS underlying Linked Transactions).
Table 1
Second First
Quarter Quarter
2012 Average 2012
CPR Average
CPR
------------ -------
MBS Portfolio 18.17% 16.43%
Agency MBS 20.39% 17.90%
Non-Agency MBS 14.86% 13.98%
As of June 30, 2012, under its swap agreements, MFA has a weighted average fixed pay rate of interest of 2.75% and a floating receive rate of 0.28% on notional balances totaling $2.948 billion, with an average maturity of 18 months. In the third quarter $187.7 million notional amount of existing swaps with a weighted average fixed pay rate of 4.41% is scheduled to expire, while in the fourth quarter $341.2 million notional amount with a weighted average fixed pay rate of 4.43% is scheduled to expire.
The following table presents MFA's asset allocation as of June 30, 2012 and the second quarter 2012 yield on average interest earning assets, average MBS cost of funds and net interest rate spread for the various asset types.
Table 2
ASSET ALLOCATION (1)
At June 30, 2012 Agency MBS Non-Agency MBS (2) MBS Portfolio Cash (3) Other, (4) Total
net
--- ---
($ in Thousands)
Amortized Cost $6,815,584 $4,642,653 $11,458,237 $602,385 $(32,475) $12,028,147
-------------- ---------- ---------- ----------- -------- -------- -----------
Market Value $7,014,611 $4,741,281 $11,755,892 $602,385 $(32,475) $12,325,802
Less Payable for Unsettled Purchases (99,272) - (99,272) - - (99,272)
Less Repurchase Agreements (6,056,139) (1,863,013) (7,919,152) - - (7,919,152)
Less Multi-year Collateralized Financing
Arrangements (5) - (500,499) (500,499) - - (500,499)
Less Securitized Debt - (861,255) (861,255) - - (861,255)
Less Senior Notes - - - - (100,000) (100,000)
----------------- --- --- --- --- -------- --------
Equity Allocated $859,200 $1,516,514 $2,375,714 $602,385 $(132,475) $2,845,624
Less Swaps at Market Value - - - - (89,823) (89,823)
-------------------------- --- --- --- --- ------- -------
Net Equity Allocated $859,200 $1,516,514 $2,375,714 $602,385 $(222,298) $2,755,801
-------------------- -------- ---------- ---------- -------- --------- ----------
Debt/Net Equity
Ratio (6) 7.16 x 2.13 x 3.63 x
--------------- --- ---- --- ---- --- ----
For the Quarter Ended June 30, 2012
-----------------------------------
Yield on Average Interest Earning Assets 2.95% 6.75% 4.49% 0.04% - 4.37%
Less Average MBS
Cost of Funds (7) (1.63) (2.30) (1.85) - - (1.85)
Less Cost of Senior
Notes (8) - - - - (8.02)% (8.02)
------------------- --- --- --- --- --- ------ -----
Net Interest Rate Spread 1.32% 4.45% 2.64% 0.04% (8.02)% 2.46%
------------------------ ---- ---- ---- ---- ------ ----
(1) Information presented with respect to
Non-Agency MBS, related repurchase
agreement borrowings and resulting
totals are presented on a non-GAAP
basis. See the accompanying
Reconciliation of non-GAAP Financial
Measures.
(2) Includes Non-Agency MBS and
repurchase agreements underlying
Linked Transactions. The purchase of
a Non-Agency MBS and 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 purchase and
associated borrowings under a
repurchase agreement) are evaluated
on a combined basis and are presented
net as "Linked Transactions" on MFA's
consolidated balance sheet.
(3) Includes cash, cash equivalents and
restricted cash.
(4) Includes securities obtained and
pledged as collateral, interest
receivable, goodwill, prepaid and
other assets, obligation to return
securities obtained as collateral,
Senior Notes, interest payable,
derivative hedging instruments at
fair value, dividends payable and
accrued expenses and other
liabilities.
(5) Multi-year collateralized financing
arrangements are viewed by management
as having an effective term of 2.5
years, but for GAAP reporting
purposes are disclosed within
repurchase agreements and as having a
contractual term of over 30 days to
90 days.
(6) Represents the sum of borrowings
under repurchase agreements, multi-
year collateralized financing
arrangements, payable for unsettled
purchases, obligation to return
securities obtained as collateral,
securitized debt, and Senior Notes
as a multiple of net equity
allocated.
(7) Includes effect of swaps.
(8) Includes amortization of Senior Notes
issuance costs.
At June 30, 2012, MFA's $11.756 billion of Agency and Non-Agency MBS, which includes MBS underlying Linked Transactions, were backed by hybrid, adjustable and fixed-rate mortgages. Additional information about these MBS, including months to reset and three-month average CPR, is presented below:
Table 3
Agency MBS Non-Agency MBS Total
---------- --------------
($ in thousands) Market Avg Avg Market Avg Avg Market Avg Avg
Time to Reset Value MTR (1) CPR (2) Value MTR (1) CPR (2) Value MTR (1) CPR (2)
------------- ----- --- --- --- --- ----- --- --- --- --- ----- --- --- --- ---
< 2 years (3) $1,576,125 6 14.79% $2,657,190 4 13.34% $4,233,315 5 13.91%
2-5 years 2,604,936 38 27.74 612,459 46 16.46 3,217,395 40 25.46
> 5 years 1,286,885 72 15.84 25,498 61 23.04 1,312,383 71 16.25
--------- --------- --- ----- ------ --- ----- --------- --- -----
ARM-MBS Total $5,467,946 35 21.47% $3,295,147 14 14.17% $8,763,093 27 18.71%
------------- ---------- --- ----- ---------- --- ----- ---------- --- -----
15-year fixed $1,546,665 16.77% $13,762 0.69% $1,560,427 16.63%
30-year fixed - - 1,426,437 16.60 1,426,437 16.60
40-year fixed - - 5,935 16.96 5,935 16.96
--- --- ----- ----- ----- -----
Fixed-Rate Total $1,546,665 16.77% $1,446,134 16.44% $2,992,799 16.62%
---------------- ---------- ----- ---------- ----- ---------- -----
MBS Total $7,014,611 20.39% $4,741,281 14.86% $11,755,892 18.17%
========= ========== ===== ========== ===== =========== =====
(1) MTR or 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 MTR does not reflect
scheduled amortization or prepayments.
(2) Average CPR weighted by positions as of the beginning of each month in the quarter.
(3) Includes floating rate MBS that may be collateralized by fixed-rate mortgages.
MFA plans to hold a conference call on Monday, August 6, 2012, at 10:00 a.m. (Eastern Time) to discuss its second quarter 2012 financial results. The number to dial in order to listen to the conference call is (800) 288-8960 in the U.S. and Canada. International callers must dial (612) 332-0228. A replay of the call will be available through Monday, August 13, 2012, and can be accessed by dialing (800) 475-6701 in the U.S. and Canada or (320) 365-3844 internationally and entering access code 256398. Live audio of the conference call will also be accessible over the internet at http://www.mfa-reit.com through the appropriate link on MFA's Investor Information page or, alternatively, over the Thomson Reuters Investor Distribution Network at http://www.earnings.com. 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 "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; 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 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 otherwise.
CONTACT: MFA Investor Relations
800-892-7547
www.mfa-reit.com
MFA FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2012 2011
---- ----
(In Thousands, Except Per Share
Amounts) (Unaudited)
------------------------------- ----------
Assets:
Mortgage-backed securities ("MBS"):
Agency MBS, at fair value ($6,470,099
and $6,666,963 pledged $7,014,611 $7,137,531
as collateral, respectively)
Non-Agency MBS, at fair value
($1,318,240 and $692,534 pledged 2,129,359 1,492,376
as collateral, respectively)
Non-Agency MBS transferred to
consolidated variable interest
entities ("VIEs") 2,546,534 2,283,070
Securities obtained and pledged as
collateral, at fair value 512,907 306,401
Cash and cash equivalents 593,376 394,022
Restricted cash 9,009 15,502
MBS linked transactions, net ("Linked
Transactions"), at fair value 14,295 55,801
Interest receivable 44,569 42,837
Derivative hedging instruments, at
fair value - 26
Goodwill 7,189 7,189
Prepaid and other assets 19,774 15,879
------------------------ ------ ------
Total Assets $12,891,623 $11,750,634
------------ ----------- -----------
Liabilities:
Repurchase agreements $8,368,407 $7,813,159
Securitized debt 861,255 875,520
Obligation to return securities
obtained as collateral, at fair value 512,907 306,401
8% Senior Notes due 2042 ("Senior
Notes") 100,000 -
Accrued interest payable 13,402 9,112
Derivative hedging instruments, at
fair value 89,823 114,220
Dividends and dividend equivalents
rights ("DERs") payable 83,263 97,525
Payable for unsettled purchases 99,272 27,056
Accrued expenses and other liabilities 7,493 9,881
-------------------------------------- ----- -----
Total Liabilities $10,135,822 $9,252,874
----------------- ----------- ----------
Stockholders' Equity:
Preferred stock, $.01 par value;
series A 8.50% cumulative redeemable; $38 $38
5,000 shares authorized; 3,840 shares
issued and outstanding ($96,000
aggregate liquidation preference)
Common stock, $.01 par value; 895,000
shares authorized; 3,569 3,561
356,866 and 356,112 issued and
outstanding, respectively
Additional paid-in capital, in excess
of par 2,802,293 2,795,925
Accumulated deficit (256,283) (243,061)
Accumulated other comprehensive
income/(loss) 206,184 (58,703)
------------------------------- ------- -------
Total Stockholders' Equity $2,755,801 $2,497,760
-------------------------- ---------- ----------
Total Liabilities and Stockholders'
Equity $12,891,623 $11,750,634
----------------------------------- ----------- -----------
MFA FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(In Thousands, Except Per Share Amounts) 2012 2011 2012 2011
--------------------------------------- ---- ---- ---- ----
(Unaudited)
Interest Income:
Agency MBS $49,550 $65,982 $102,850 $126,157
Non-Agency MBS 32,674 28,825 58,468 51,719
Non-Agency MBS transferred to consolidated VIEs 43,280 37,275 87,690 64,030
Cash and cash equivalent investments 27 27 46 81
--- --- --- ---
Interest Income 125,531 132,109 249,054 241,987
--------------- ------- ------- ------- -------
Interest Expense:
Repurchase agreements 36,252 34,535 72,322 67,589
Securitized debt 4,652 2,660 8,709 4,259
Senior Notes 1,784 - 1,784 -
------------ ----- --- ----- ---
Interest Expense 42,688 37,195 82,815 71,848
---------------- ------ ------ ------ ------
Net Interest Income 82,843 94,914 166,239 170,139
------------------- ------ ------ ------- -------
Other-Than-Temporary Impairments:
Total other-than-temporary impairment losses - (637) (879) (637)
Portion of loss reclassified from other (280) (1,755) (321) (1,755)
comprehensive income
--------------------
Net Impairment Losses Recognized
in Earnings (280) (2,392) (1,200) (2,392)
--------------------------------- ---- ------ ------ ------
Other Income/(Loss), net:
Unrealized net gains/(losses) and net interest income 568 (5,613) 8,267 9,237
from Linked Transactions
Gains on sales of MBS - - 2,953 -
Revenue from operations of real estate held-for-sale - 375 - 756
Other, net 1 12 1 12
--- --- --- ---
Other Income/(Loss), net 569 (5,226) 11,221 10,005
------------------------ --- ------ ------ ------
Operating and Other Expense:
Compensation and benefits 5,156 4,991 10,768 10,114
Other general and administrative expense 3,210 2,789 6,013 4,950
Real estate held-for-sale operating expense - 230 - 537
--- --- --- ---
Operating and Other Expense 8,366 8,010 16,781 15,601
--------------------------- ----- ----- ------ ------
Net Income 74,766 79,286 159,479 162,151
Less: Preferred Stock Dividends 2,040 2,040 4,080 4,080
-------------------------------- ----- ----- ----- -----
Net Income Available to Common
Stock and $72,726 $77,246 $155,399 $158,071
Participating Securities
------------------------
Earnings per Common Share - Basic and Diluted $0.20 $0.22 $0.43 $0.48
--------------------------------------------- --- ----- ----- ----- -----
Dividends Declared per Share of Common Stock $0.23 $0.25 $0.47 $0.49
-------------------------------------------- --- ----- ----- ----- -----
Reconciliations of Non-GAAP Financial Measures
This press release contains disclosures related to MFA's Core Earnings, Core Earnings per common share, investments in Non-Agency MBS, and returns on such assets for the three months ended June 30, 2012, which constitute non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. MFA's management believes that these non-GAAP financial measures presented in this press release, when considered together with GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results and balance sheet composition. An analysis of any non-GAAP financial measures should be made in conjunction with results presented in accordance with GAAP.
Core Earnings and Core Earnings per common share for the three months ended June 30, 2012, are not measures of performance in accordance with GAAP, as they exclude impairment losses recognized through earnings and changes in fair value of MBS underlying our Linked Transactions.
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 June 30, 2012, are as follows:
Table 4
Three Months Ended
June 30, 2012
-------------
(In Thousands,
Except Per
Share Amounts) Reconciliation Basic and
Diluted EPS
-----------
GAAP Net Income
Available to
Common Stock
and $72,726 -
Participating Securities
Less: Dividends
and Dividend
Equivalent
Rights on (395) -
Participating Securities
------------------------
GAAP Net Income
Allocable to
Common
Stockholders $72,331 $0.20
---------------- ------- -----
Non-GAAP
Adjustments:
Impairment Losses Recognized in
Earnings $280 -
Changes in Net Unrealized Gains
on Linked Transactions 425 -
-------------------------------- --- ---
Total
Adjustments to
Arrive at Core
Earnings $705 $ -
--------------- ---- --- ---
Core Earnings $73,036 $0.20
------------- ------- -----
Weighted Average
Common Shares
Outstanding -
Basic and
Diluted 356,598
---------------- -------
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 June 30, 2012. 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 impairment charges on Non-Agency MBS which are reflected in GAAP earnings.
Information pertaining to MFA's Non-Agency MBS that are a component of Linked Transactions are reconciled below as of and for the three months ended June 30, 2012, with the most directly comparable financial measure calculated in accordance with GAAP, as follows:
Table 5
Adjustments to
Include
Assets/Liabilities of
GAAP Based Underlying Linked Non-GAAP
(Dollars in Thousands) Information Transactions Presentation
--------------------- ----------- ------------ ------------
At June 30, 2012:
-----------------
Repurchase Agreement Borrowings $8,368,407 $51,244 (1) $8,419,651
Securitized Debt 861,255 - 861,255
Obligation to Return Securities Obtained as
Collateral 512,907 - 512,907
Senior Notes 100,000 - 100,000
Payable for Unsettled MBS
Purchases 99,272 - 99,272
------------------------- ------ --- ------
Total Borrowings (Debt) $9,941,841 $51,244 (1) $9,993,085
Stockholders' Equity $2,755,801 $ - $2,755,801
Debt-to-Equity (Debt/Stockholders' Equity) 3.6 x - 3.6 x
For the Three Months Ended June 30, 2012:
-----------------------------------------
Average Interest Earning Assets $11,511,357 $85,552 (2) $11,596,909
Interest Income $125,531 $1,286 $126,817
Yield on Average Interest Earning Assets 4.36% 6.02% 4.37%
Average Total Borrowings $8,981,553 $69,670 (1) $9,051,223
Interest Expense $42,688 $293 $42,981
Average Cost of Funds 1.91% 1.69% 1.91%
Net Interest Rate Spread 2.45% 4.33% 2.46%
(1) Represents borrowings under repurchase agreements underlying Linked Transactions.
(2) Represents Non-Agency MBS underlying Linked Transactions.
The table below reconciles MFA's Non-Agency MBS and related repurchase agreement borrowings and securitized debt on a GAAP basis to reflect on a combined basis its Non-Agency MBS and related repurchase agreements underlying
its Linked Transactions, which is a non-GAAP financial measure. Based on this non-GAAP presentation, MFA has also presented certain resulting performance measures (reflected in the table below) on a Non-GAAP basis.
Table 6
Adjustments to Include
Assets/Liabilities
GAAP Based Underlying Linked Non-GAAP
(Dollars in Thousands) Information (1) Transactions (2) Presentation
--------------------- ----------- --- ------------ --- ------------
At June 30, 2012:
-----------------
Amortized Cost of Non-Agency MBS $4,578,913 $63,740 $4,642,653
Fair Value of Non-Agency MBS $4,675,893 $65,388 $4,741,281
Face/Par Value of Non-Agency MBS $6,283,837 $76,433 $6,360,270
Purchase (Discount) Designated as Credit Reserve
and OTTI $(1,440,752) (3) $(7,152) $(1,447,904) (4)
Net Purchase (Discount) Designated as Accretable (264,172) (5,541) (269,713)
------------------------------------------------ -------- ------ --------
Total Purchase (Discount) on Non-Agency MBS $(1,704,924) (3) $(12,693) $(1,717,617) (4)
------------------------------------------- ----------- --- -------- ----------- ---
Non-Agency Repurchase Agreements and $3,173,523 $51,244 $3,224,767
Securitized Debt
For the Three Months Ended June 30, 2012:
-----------------------------------------
Non-Agency MBS Average Amortized Cost $4,490,141 $85,552 $4,575,693
Non-Agency Average Total Borrowings $2,820,831 $69,670 $2,890,501
Coupon Interest on Non-Agency MBS $66,144 $962 $67,106
Effective Yield Adjustment (5) 9,810 324 10,134
----------------------------- ----- --- ------
Interest Income on Non-Agency MBS $75,954 $1,286 $77,240
--------------------------------- ------- ------ -------
Interest Expense on Non-Agency Total Borrowings $16,267 $293 $16,560
Yield on Average Interest Earning Non-Agency MBS 6.77% 6.02% 6.75%
Non-Agency Average Cost of Funds 2.32 1.69 2.30
-------------------------------- ---- ---- ----
Non-Agency Interest Rate Spread 4.45% 4.33% 4.45%
------------------------------- ---- ---- ----
(1) Includes Non-Agency MBS transferred
to consolidated VIEs.
(2) Adjustment to reflect Non-Agency MBS
underlying Linked Transactions and
borrowings under repurchase
agreements underlying Linked
Transactions.
(3) Amounts disclosed reflect purchase
discount designated as credit
reserve of $1.388 billion and OTTI
of $52.9 million.
(4) Amounts disclosed reflect purchase
discount designated as credit
reserve of $1.395 billion and OTTI
of $52.9 million.
(5) The effective yield adjustment on
Non-Agency MBS is the difference
between net income calculated using
the net yield on average interest
earning Non-Agency MBS, which is
based on management's estimates of
future cash flows for Non-Agency
MBS, less the current coupon yield.
SOURCE MFA Financial, Inc.
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