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MFA Financial's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: MFA

At April 30, 2012, we paid our first quarter 2012 dividend of $0.24 per share of common stock to stockholders of record as of April 4, 2012. In the first quarter, we added multi-year Non-Agency MBS financing; including an expanded collateralized financing arrangement and a re-securitization, reducing our reliance on short-term repurchase arrangements for Non-Agency mortgage-backed securities.

We increased $500 million in existing collateralized financing arrangement that effectively provides three year financing again for Non-Agency mortgage-backed securities. As part of a re-securitization, $186 million of senior bonds rated "AAA" by DBRS, were issued to third-party investors via a trust. These bonds, with an average life of 1.9 years, were priced at a 2.75% yield.

At quarter-end our debt to equity ratio including the liabilities underlying our Linked Transactions was 3.5:1. Our Agency portfolio had an average amortized cost of 102.8% of par as of March 31, and generated a 3.15% yield in the first quarter. Our Non-Agency portfolio had an average amortized cost of 73.1% of par as of March 31, 2012, and generated a loss-adjusted yield of 6.92% in the first quarter.

In the first quarter, book value per share increased by approximately 11% due primarily to appreciation within our Non-Agency portfolio. While housing fundamentals remain weak, we believe that we have appropriately factored this into our cash flow projections and credit reserve estimates.

These underlying mortgage loans were originated on average more than five years ago, so that we have access to more than 60 months of payment history. In the first quarter, we continued to add multi-year financing that serves to reduce our reliance on short-term repurchase agreements for Non-Agency mortgage-backed securities. While this financing is incrementally more expensive than short-term repo financing by approximately 100 to 150 basis points, we believe the certainty of the committed term outweighs the additional costs.

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