MFA Financial, Inc. (MFA)

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MFA Financial, Inc. (MFA)

Q3 2012 Earnings Call

November 6, 2012 10:00 a.m. ET


Stewart Zimmerman – Chairman and CEO

William S. Gorin – President

Stephen D. Yarad – CFO

Craig L. Knutson – EVP

Ron Freydberg – EVP

Harold Schwartz – SVP and General Counsel

Kathleen Hanrahan – SVP and CAO

Shira Finkel – SVP

Goodmunder Christiansen – VP

Danielle Rosatelli – Accounting/Operations Assistant


Jason Weaver – Sterne, Agee & Leach

Ryan O'Steen – KBW

Stephen Laws – Deutsche Bank

Steven Delaney – JMP Securities

Jason Arnold – RBC Capital Markets

Rick Shane – JPMorgan

Christopher Donat – Sandler O'Neill

Daniel Furtado – Jefferies & Co.

Michael Widner – Stifel Nicolaus

Jim Young – West Family Investments



Ladies and gentlemen, thank you for standing by. Welcome to the MFA Financial Inc. Third Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host Ms. Danielle Rosatelli. Please go ahead.

Danielle Rosatelli

Good morning. The information discussed on this conference call today may contain or refer to forward-looking statements regarding MFA Financial, Inc., which reflects management’s beliefs, expectations and assumptions as to MFA’s future performance and operations.

When used, statements that are not historical in nature including those containing words such as will, believe, expect, anticipate, estimate, plan, continue, intend, should, could, would, may or similar expressions are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they’re made.

These types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors including, but not limited to those relating to changes in interest rates and the market value of MFA’s investment securities; changes in the prepayment rates on the mortgage loans securing MFA’s investment securities; changes in the default rate and management’s assumptions regarding default rate on the mortgage loans securing MFA’s MBS, MFA’s ability to borrow to finance its assets; implementation of or changes in government regulations or programs affecting MFA’s business; MFA’s ability to maintain its qualification as a real estate investment trust for federal income tax purposes; MFA’s ability to maintain its exemption from registration under the Investment Company Act of 1940, and risks associated with investing in real estate related assets, including changes in business conditions and the general economy.

These and other risks, uncertainties and factors, including those described in MFA’s Annual Report on Form 10-K for the year ended December 31, 2011, its quarterly report from 10-Q for the quarters ended March 31, 2011 and June 30th 2012 and other reports that it may file from time-to-time with the Securities and Exchange Commission could cause MFA’s actual results to differ materially from those projected, expressed, or implied in any forward-looking statements it makes.

For additional information regarding MFA’s use of forward-looking statements, please see the relevant disclosure in the press release announcing MFA’s third quarter 2012 financial results. Thank you for your time.

I would now like to turn this call over to Stewart Zimmerman, MFA’s Chief Executive Officer.

Stewart Zimmerman

Good morning everybody and thank you for joining our third quarter 2012 earnings call. Before we begin the call I would like to express our condolences to our friends at Annaly on the passing of Mike Farrell a noted leader in our industry. We do express our condolences and we hope that with the passing of time the pain somewhat eases.

As far as MFA is concerned again I would like to welcome to our third quarter 2012 earnings call. Joining me this morning on the call are Bill Gorin, President; Steven Yarad, Chief Financial Officer; Ron Freydberg, Executive Vice President; Craig Knutson, Executive Vice President; Harold Schwartz, Senior Vice President and General Counsel; Kathleen Hanrahan, Senior Vice President and Chief Accounting Officer; Shira Finkel, Senior Vice President.

Today we announced financial results for the third quarter ended September 30, 2012. Recent financial results and other significant highlights for MFA include the following, and I’m still going to go over the couple of bullet points that we have in the press release that you have seen and then kind of open the call for questions.

The third quarter net income per common share of $0.21 or core earnings per common share of $0.19. Book value per common share grew to $8.80 as of September 30, 2012 compared to $7.45 as of June 30, 2012, and $6.74 as of December 31st, 2011. This 18% increase in book value per share in the third quarter and the 30% increase in book value per share in the first nine months 2012, are the results of our total return strategy of investing in both Agency and discounted Non-Agency mortgage backed securities.

On October 31, 2012 we paid our third quarter 2012 dividend of $0.21 per share to stockholders of record as of October 12, 2012. Couple of other items I would just like to go over with you quickly is that at quarter end our debt to equity ratio was 3.2 to 1, and in this low interest rate environment core earnings per share were $0.19 versus $0.20 in the second quarter. Our Agency portfolio with an average amortized cost of 103.2% of par as of September 30, 2012, and generated 2.66% yield in the third quarter.

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