MFA Financial (MFA)

Management Discussion

• We have elected to present our current quarter results of operations in comparison to the immediately preceding quarter, instead of the corresponding quarter of the prior year, which we believe offers a better basis for comparison due to a higher degree of similarity in our business model and investments. Because this is our first report reflecting this election, we are also presenting our current quarter results of operations in comparison to the corresponding quarter of the prior year. For our future reports, we will present a discussion of our results of operations for the current quarter compared to the immediately preceding prior quarter only.
• For the second quarter of 2022, we had a net loss available to our common stock and participating securities of $108.6 million, or $(1.06) per basic and diluted common share, compared to a net loss available to common stock and participating securities of $91.1 million, or $(0.86) per basic and diluted common share, for the first quarter of 2022. The net loss available to common stock and participating securities in the current period reflects lower net gains of $46.3 million on derivatives used for risk management purposes, a $28.6 million provision for Credit Losses on Other Assets recorded during the current quarter and lower net interest income, partially offset by lower mark-to-market losses on our residential whole loans measured at fair value through earnings of $72.0 million as well as $20.5 million higher unrealized gains on securitized debt measured at fair value through earnings. For the second quarter of 2022, the net loss on our residential whole loans measured at fair value through earnings totaled $216.4 million, compared to a net loss of $288.4 million in the first quarter of 2022. The provision recorded for credit losses on residential whole loans in the second quarter of 2022 primarily reflects adjustments to lower future
• estimates of prepayment speeds given recent and expected future increases in market interest rates, partially offset by the run-off of loans held at carrying value. The reversal of provision recorded in the first quarter of 2022 primarily reflects the run-off of loans held at carrying value and adjustments to certain macroeconomic and loan prepayment speed assumptions used in our credit loss forecasts.