MFA Financial, Inc. (MFA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Annual Meeting of Stockholders of MFA Financial, Inc. We are pleased that you are able to join us today at the first annual meeting that MFA is holding in a virtual setting via webcast over the Internet, which we are doing in light of the public health concerns relating to the COVID-19 pandemic. On our meeting screen, you will see several sections, which contain the agenda for the meeting, a place for you to vote or to update your previously submitted vote, should you so desire, a place for you to ask questions and the meeting materials, including the rules of conduct for the meeting. I am Hal Schwartz, the Senior Vice President and Secretary of MFA. Attending the meeting with me today are members of MFA's Board of Directors, including our Chairman, George Krauss, who is acting as the Chairman of this meeting. George has designated me to take you through the formal business to be conducted at today's meeting. Following the conclusion of the formal business, George and Craig Knutson, MFA's CEO, President and also a member of the Board and their fellow Board members, all of whom are here today as well as members of MFA's senior management will be available to respond to stockholder questions. Before taking you through the proceedings of today's meeting, I would like to introduce the current members of MFA's Board of Directors as well as some of the members of our senior management team, each of whom, as I mentioned, is in attendance today. Steve Blank is a Director; Jim Brodsky, Director; Laurie Goodman, Director; Robin Josephs, Director; as I mentioned, Craig Knutson, our CEO, who is -- and President, who is also a member of the Board; Frank Oelerich, a Director; Lisa Polsky, a Director; Steve Yarad, our CFO; and Kathleen Hanrahan, our Senior VP and Chief Accounting Officer. Steve Blank, Jim Brodsky, Laurie Goodman, Robin Josephs, George Krauss, Frank Oelerich and Lisa Polsky are the current independent directors serving on the company's Board. Also at this meeting are Matt McCuen and Joe Santucci, each of whom is a partner with KPMG, the company's independent registered public accounting firm, and each of whom will be available to answer any appropriate questions. Before turning to the business of the meeting, George and the Board have asked me to say a few words about one of our directors, Steve Blank, who is retiring today from the Board following this meeting. Steve has served on MFA's Board for the past 18 years since MFA's infancy as a public company. During that time, he has provided valuable advice and counsel to the Board and to management and has been a steadfast fiduciary to MFA's stockholders. We did not want to let the moment pass without wishing Steve well as he retires from the Board and want to thank him for his service to the company over the past almost 2 decades. With those introductions out of the way, we'll begin the formal business of the meeting. Beginning April 27, 2020, a notice of the annual meeting of stockholders, together with a proxy statement, the company's 2000 (sic) [ 2019 ] annual report to stockholders and the form of proxy were sent and/or made available to stockholders of record as of the close of business on March 27, 2020. The notice called this meeting for 2:00 p.m. local time on Wednesday, June 10, 2020, to be held via webcast over the Internet. I present to this meeting an affidavit of mailing of the notice of annual meeting stating that notice of this meeting has been duly given to all stockholders entitled to vote at the meeting. I also present copies of the notice of Annual Meeting of Stockholders, the proxy statement and the form of proxy. I will file this affidavit, the notice of annual meeting and the proxy with the records of this meeting. Tracy Oats, a representative of The Carideo Group, which is a third-party contractor of our proxy tabulator, Broadridge Financial Solutions, has been appointed to act as the inspector of elections for today's meeting for purposes of tabulating the votes cast at the meeting. On the meeting web page, you should see posted the meeting agenda and the rules of conduct, which will govern the meeting, as I mentioned earlier. Only stockholders will be permitted to post questions and comments on the meeting web page. We ask that any stockholder who wishes to address the meeting do so at an appropriate time or during the question-and-answer period following the meeting by typing in their question or comment in the appropriate space on the web page. We will address questions regarding matters being voted on at the meeting prior to the actual vote taking place. Questions regarding more general matters relating to the company will be addressed after the meeting has been adjourned. Any stockholder who desires to ask a question at this meeting may do so by typing in their question in the field provided on the meeting web page. Stockholders who have voted their shares prior to the meeting need not recast their votes. Any stockholder who wishes to vote their shares during the meeting or who wishes to change his or her previously cast vote, may do so by clicking on the voting link on the meeting web page. We will now turn to the actual -- the formal business. As set forth and described in the proxy statement mailed or made available to stockholders, the purposes of this annual meeting are: one, to elect 3 Class I directors to serve until the 2023 Annual Meeting of Stockholders and until their successors are duly elected and qualified; two, to ratify the appointment of KPMG as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020; three, to consider and vote on by advisory and nonbinding resolution to approve the company's executive compensation as disclosed in the proxy statement; four, to consider and vote on the MFA Financial equity compensation plan, which is an amendment and restatement to the company's existing compensation plan; and five, to transact such other business as may properly be presented at this annual meeting or any postponement or adjournment hereof. Mr. Chairman, George, as of the close of business on March 27, 2020, there were 451,115,673 shares of common stock outstanding and entitled to vote at this meeting. A majority of these shares or 225,557,837 shares constitutes a quorum. The inspector of elections has informed me that 385,542,584 shares are represented at this meeting either in person or by proxy, and therefore, a quorum is present. Each stockholder is entitled to 1 vote for each share of common stock owned on the record date. On the basis of this report, I declare that a quorum is present and that this meeting is competent to transact business. Mr. Krauss has directed me to file the proxies with the records of the company. We will now proceed to the proposals for the annual meeting. As I indicated a few moments ago, the first item of business before this meeting involves the election of 3 Class I directors to the company's Board, each to hold office until the 2023 Annual Meeting of Stockholders and until his or her successor is duly elected and qualifies. As set forth in the proxy statement, the 3 individuals nominated by the Board of Directors for election as Director of the company are: Laurie Goodman, Craig Knutson and Richard Wald. A majority of all the votes cast with respect to each director is sufficient to elect a Director. The company's bylaws and policies provide that stockholders may nominate candidates for election as Director by timely delivering the requisite notice of such nomination to the Corporate Secretary of the company. We have not received any notice of any stockholders' intention to nominate a candidate for election at this meeting, and therefore, the nominees named in the proxy statement are the only nominees for Director. The second item of business before this meeting calls for the ratification of the appointment of KPMG as the company's independent registered public accounting firm for the 2020 fiscal year. The Audit Committee of the Board of Directors has appointed KPMG as the company's independent registered public accounting firm for 2020. Even if this selection is ratified, the Audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the company's best interest. The company's Board of Directors has recommended that stockholders ratify this appointment, and a majority of all the votes cast on the proposal is sufficient to ratify the appointment of the company's public accounting firm. The third item of business before this meeting is to consider and vote on an advisory and nonbinding resolution to approve the company's executive compensation. A majority of all the votes cast on the proposal is sufficient to approve the company's executive compensation. The company's Board has recommended that stockholders approve this proposal. The fourth item of business before this meeting is to consider and vote on the MFA Financial, Inc. equity compensation plan, which is an amendment and restatement of the company's existing equity compensation plan. And the Board has recommended that stockholders approve this proposal as well. There being no other items of business to be brought before the meeting, which is item 1, the election of directors; item 2, the ratification of KPMG as the independent registered public accounting firm; item 3, the consideration by advisory and nonbinding vote of the resolution to approve the company's exec comp; and item 4, the amendment and restatement of the company's compensation plan, at this point, we'll pause for a few moments to entertain any questions and discussion regarding the items being voted on. I don't see any questions that have been posed regarding the proposals, so I now call for a vote on these proposals. As mentioned previously, any stockholder who has logged in as such and wishes to cast his or her vote or to change his or her vote from the instructions previously given in their proxy, please do so now by clicking on the vote button on their screen and following the instructions from there. In addition, as I also mentioned, stockholders who sent -- previously sent in proxies or voted via telephone or online and who do not want to change their votes do not need to take any further action. We'll pause briefly while the votes are being counted. [Voting]

Okay. Now that everyone has had an opportunity to vote, the polls are now closed. I believe the inspector of elections has completed the counting of the votes. And with that, Mr. Chairman, I can report the following. I have been informed by the inspector of elections that each of the nominees for election as a Class I Director has received on a per Director basis a majority of the votes cast at this meeting, either in person or by proxy in favor of election, and therefore, has been duly elected to serve as a Class I Director of the company until the 2023 Annual Meeting of Stockholders and until his or her successor has been elected and qualifies. Next, I have been informed by the inspector of elections that substantially in excess of the majority of the votes cast at this meeting, either in person or by proxy, has been voted in favor of the ratification of the appointment of KPMG as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020, and therefore, this proposal has been approved. Next, I have been informed by the inspector of elections that the advisory and nonbinding vote on the company's executive compensation has received in excess of the majority of the votes cast at this meeting, either in person or by proxy in favor of the proposal, and therefore, the advisory and nonbinding resolution on the company's executive compensation has been approved. And finally, I have been informed by the inspector of elections that the vote on the company's equity compensation plan, which is an amendment and restatement of the company's existing equity compensation plan has received in excess of the majority of the votes cast at this meeting, either in person or by proxy in favor of the proposal, and therefore, the company's equity comp plan as amended and restated has been approved. With that, ladies and gentlemen, we thank you. No notice of any other business was given to the corporation. Under our bylaws, the formal business of our meeting is now completed, and in his capacity as Chairman, Mr. Krauss has authorized me to declare the meeting adjourned. We would like to provide stockholder -- at this point, we would like to provide stockholders with an opportunity to ask questions. As I indicated earlier in the meeting, stockholders may type their questions and comments in the applicable area on their screen. We'll pause for a moment so as to give stockholders some time to type and submit their questions. And Craig -- I'm going to turn the meeting over to Craig Knutson, who also is able to see the questions that have been submitted. And Craig, why don't I allow you to begin to respond.

Okay. Thanks, Hal, and thanks, everyone, for joining us. So we have a question as to what is insider ownership. And on the proxy statement that was mailed out on Page 73, it indicates that all directors and executive officers of the group, totaled 16 people, own a little over 3.5 million shares of the company. So we also had a question about the company's potential to continue to finance the mortgage loan portfolio in the face of the viral pandemic. Is the company aware of any lawsuits relative to recent forbearance agreements? In likelihood, they will continue to be extended, existing or potential. As we've said publicly, and I think the most recent filing is on June 1, the forbearance agreements have been extended. They're extended through the 26th of June. And so we continue to work with our lenders to put in place more durable financing in the future. There's really been no additional public information about that since then. And Hal, I think that does it.

I think -- yes. I think that's it. If there are -- we'll give a moment just for any further questions. Okay. As there are no additional questions, I believe we can conclude this portion of the meeting. And at this point, the 2020 Annual Meeting of Stockholders is concluded, and we would like to thank everyone for attending. Thank you, operator.

Thank you. This concludes today's presentation. You may now disconnect your lines.