Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial information is based on the historical financial information of ZAIS Financial Corp. (“ZFC” or the “Company”) and GMFS, LLC (“GMFS”) and has been prepared to reflect the acquisition of GMFS on October 31, 2014 by a wholly-owned subsidiary of ZAIS Financial Corp., the Transaction. The pro forma data in the unaudited pro forma condensed combined balance sheet as of September 30, 2014 assumes that the Transaction had occurred on September 30, 2014. The data in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2013 and the nine months ended September 30, 2014 assumes that the Transaction had occurred on January 1, 2013. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the acquisition of GMFS, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the following historical consolidated financial statements and accompanying notes:

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not intended to reflect the results of operations or the financial position of the combined company that would have resulted had the Transaction been effective during the periods presented or the results that may be obtained by the combined company in the future. The unaudited pro forma condensed combined financial information as of and for the periods presented does not reflect future events that may occur after the Transaction, including, but not limited to, synergies or revenue enhancements arising from the Transaction. Future results may vary significantly from the results reflected in the unaudited pro forma condensed combined financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2014
(in thousands)

See notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands, except shares and per share data)

See notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(in thousands, except shares and per share data)

See notes to unaudited pro forma condensed combined financial statements

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Description of Acquisition

On August 5, 2014, ZAIS Financial Corp. (“ZFC” or the “Company”) entered into a definitive merger agreement to acquire GMFS, LLC, (“GMFS”). While subject to a final reconciliation of October 31, 2014 values, the preliminary purchase price was approximately $62.8 million at closing. This closing payment included the fair market value of GMFS's mortgage servicing rights portfolio at October 31, 2014, estimated at $34.8 million, and the actual value of GMFS's net tangible assets at closing. In addition to cash paid at closing, two contingent $1 million deferred premium payments payable in cash over two years, plus potential additional consideration based on future loan production and profits will be payable over a four year period if certain conditions are met. The $2 million of deferred premium payments is contingent on GMFS remaining profitable and retaining certain key employees. The additional contingent consideration is dependent on GMFS achieving certain profitability and loan production goals and is capped at $20 million. Up to 50% of the additional contingent consideration may be paid in common stock of the Company, at the Company's option. ZFC funded the closing cash payment through a combination of available cash and the liquidation of a portion of its non-agency RMBS portfolio.

2. Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical financial statements of ZFC and GMFS. The acquisition method of accounting is based on the accounting guidance on business combinations and uses the fair value concepts defined in the accounting guidance on fair value measurements. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. In addition, the acquisition method of accounting requires that the consideration transferred be measured at the date the acquisition is completed at its then-current market price. Accordingly, the assets acquired and liabilities assumed are recorded as of the acquisition date at their respective fair values and added to those of ZFC. The financial statements and reported results of operations of ZFC issued after completion of the Transaction will reflect these values. Prior periods will not be retroactively restated to reflect the historical financial position or results of operations of GMFS.

Pro forma adjustments reflected in the unaudited pro forma condensed combined balance sheet are based on items that are directly attributable to the Transaction and are factually supportable. Pro forma adjustments reflected in the unaudited pro forma condensed combined statements of operations are based on items directly attributable to the Transaction, factually supportable and expected to have a continuing impact on the combined results. As a result, the unaudited pro forma condensed combined statements of operations exclude acquisition costs and other costs that will not have a continuing impact on the combined results, although these items are reflected in the unaudited pro forma condensed combined balance sheet.

The pro forma adjustments reflecting the Transaction under the acquisition method of accounting are based on estimates and assumptions. The Company’s management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the Transaction and that the pro forma adjustments give appropriate effect to those assumptions that are applied in the unaudited pro forma condensed combined financial statements.

Certain amounts in GMFS's historical balance sheet and statements of operations have been conformed to ZFC's presentation.

3. Accounting Policies

GMFS is in the process of being integrated with the Company. This integration includes a review by ZFC of GMFS's accounting policies. As a result of that review, ZFC may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, ZFC is not aware of any differences that would have a material impact on the combined financial statements that have not been adjusted for in the pro forma financial information. Accounting policy differences may be identified after completion of the integration.

4. Purchase Price

The purchase price of the Transaction is as follows:

Contingent consideration represents the estimated present value of future earn-out payments as defined in the definitive merger agreement. Contingent consideration was estimated based on future earnings projections of GMFS over the four year earn-out period. The valuation considers assumptions that a market participant would consider in valuing a company similar to GMFS.

5. Pro Forma Adjustments