NEW YORK, Aug. 2 /PRNewswire-FirstCall/ -- MFA Mortgage Investments,Inc. (NYSE: MFA) today reported earnings available to common stockholdersof $8.1 million, or $0.10 per share of common stock, for the second quarterended June 30, 2007. On July 2, 2007, MFA announced its second quarterdividend of $0.09 per share of common stock. The dividend was paid on July31, 2007 to stockholders of record as of July 13, 2007. Stewart Zimmerman, MFA's Chairman of the Board, Chief Executive Officerand President, said, "In light of continuing concerns regarding theresidential mortgage and housing market, we are pleased with our strategyof investing in high-quality assets and our second quarter 2007 financialresults. At June 30, 2007, 99% of our assets were agency MBS, otherAAA-rated MBS, MBS-receivables and cash. We continue to predominatelyinvest in high quality assets as we remain concerned about negative housingprice trends and increasing mortgage default rates." Mr. Zimmerman continued, "The prolonged period of monetary tighteningincreased the target federal funds rate from 1.00% to 5.25%. With one monthLIBOR rates at approximately 5.30% and the ten-year treasury rate atapproximately 4.80%, the yield curve relevant to the mortgage marketcontinues to be inverted. Despite this, we have been able to increase ourcommon stock dividend in each of the last three quarters. Historically, theyield curve has predominately had a positive slope and we believe that thisperiod of yield curve inversion will not continue over the long term. Whenwe again have a more normal yield curve, with short-term rates lower thanlong-term rates, we foresee a return to higher spreads for MFA." "Based on Federal Reserve statements and publicly released minutes, itis their view that core inflation has improved modestly though a sustainedmoderation in inflation has yet to be demonstrated. In addition, theFederal Reserve has stated that high level of resource utilization has thepotential to sustain inflationary pressures. We share this view and remainconcerned that overall inflation measures, including food and energyprices, have continuously exceeded core inflation which excludes theseitems. Considering the weaker housing market and the recent moderate GDPgrowth rate, but with inflation risks still the predominant concern, futureFederal Reserve actions remain dependent on future incoming data." In the second quarter of 2007, MFA was able to identify attractiveinvestment opportunities to replace its MBS prepayments and to grow theportfolio. MFA's MBS portfolio increased to $6.99 billion as of June 30,2007. MFA's leverage as measured by debt-to-equity was 9.1:1 as of June 30,2007 compared with 8.3:1 as of March 31, 2007. MFA's primary focus is high quality, higher coupon hybrid andadjustable- rate MBS assets. The MBS in MFA's portfolio are primarilyadjustable-rate or hybrids, which have an initial fixed interest rate for aspecified period of time and, thereafter, generally reset annually. Theaverage coupon on MFA's MBS portfolio was 6.08% as of June 30, 2007.Assuming a 25% Constant Prepayment Rate ("CPR"), approximately 40% of theMBS in MFA's portfolio are expected to prepay or have their interest ratesreset within the next 12 months, with a total of 93% expected to reset orprepay during the next 60 months. MFA takes into account both coupon resets and expected prepayments whenmeasuring the sensitivity of its MBS portfolio to changing interest rates.In measuring its assets-to-borrowing repricing gap (the "Repricing Gap"),MFA measures the difference between: (a) the weighted average months untilcoupon adjustment or projected prepayment on its MBS portfolio; and (b) themonths remaining on its repurchase agreements including the impact ofinterest rate swap agreements. Assuming a 25% CPR, the weighted averagetime to repricing or assumed prepayment for MFA's MBS portfolio, as of June30, 2007, was approximately 25.3 months and the average term remaining onits repurchase agreements, including the impact of interest rate swaps, wasapproximately 17.8 months, resulting in a Repricing Gap of approximately7.4 months. The prepayment speed on MFA's MBS portfolio averaged 22.5% CPRduring the second quarter of 2007. During the second quarter of 2007, the gross yield on MFA's interest-earning assets was approximately 6.09%, while the net yield on interest-earning assets was 5.39%, primarily reflecting the cost of premiumamortization on MFA's MBS portfolio. The portfolio spread, which is thedifference between MFA's interest-earning asset portfolio net yield of5.39% and its 5.19% cost of funds, was 0.20% for the second quarter of2007. MFA's costs for compensation and benefits and other general andadministrative expense were $2.7 million for the quarter ended June 30,2007. As of June 30, 2007, MFA's book value per share of common stock was$7.33. Stockholders interested in participating in MFA's Discount Waiver,Direct Stock Purchase and Dividend Reinvestment Plan (the "Plan") orreceiving a Plan prospectus may do so by contacting Mellon InvestorServices, the Plan administrator, at 1-866-249-2610 (toll free). For moreinformation about the Plan, interested stockholders may also go to thewebsite established for the Plan at http://www.melloninvestor.com or visitMFA's website at http://www.mfa-reit.com. MFA will hold a conference call on Thursday, August 2, 2007, at 10:00a.m. (New York City time) to discuss its second quarter 2007 financialresults. The number to dial in order to listen to the conference call is(800) 762-4717 in the U.S. and Canada. International callers must dial(480) 629-9025. The replay will be available through Thursday, August 9,2007, at 11:59 p.m., and can be accessed by dialing (800) 475-6701 in theU.S. and Canada or (320) 365- 3844 internationally and entering accesscode: 882413. The conference call will also be webcast over the internetand can be accessed at http://www.mfa- reit.com through the appropriatelink on MFA's Investor Relations page or, alternatively, athttp://www.ccbn.com. To listen to the call over the internet, go to theapplicable website at least 15 minutes before the call to register and todownload and install any needed audio software. When used in this press release or other written or oralcommunications, statements which are not historical in nature, includingthose containing words such as "anticipate," "estimate," "should,""expect," "believe," "intend" and similar expressions, are intended toidentify "forward-looking statements" within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended, and, as such, may involve known andunknown risks, uncertainties and assumptions. These forward-lookingstatements are subject to various risks and uncertainties, including, butnot limited to, those relating to: changes in interest rates and the marketvalue of MFA's MBS; changes in the prepayment rates on the mortgage loanssecuring MFA's MBS; MFA's ability to use borrowings to finance its assets;changes in government regulations affecting MFA's business; MFA's abilityto maintain its qualification as a REIT for federal income tax purposes;and risks associated with investing in real estate assets, includingchanges in business conditions and the general economy. These and otherrisks, uncertainties and factors, including those described in the annual,quarterly and current reports that MFA files with the SEC, could causeMFA's actual results to differ materially from those projected in anyforward-looking statements it makes. All forward-looking statements speakonly as of the date they are made and MFA does not undertake, andspecifically disclaims, any obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after thedate of such statements. CONTACT: MFA Investor Relations 800-892-7547 http://www.mfa-reit.com MFA MORTGAGE INVESTMENTS, INC. CONSOLIDATED BALANCE SHEETS June 30, December 31, (In Thousands, Except Per Share Amounts) 2007 2006 (Unaudited) Assets: MBS, at fair value (including pledged MBS of $6,713,606 and $6,065,021 at June 30, 2007 and December 31, 2006, respectively) $6,994,244 $6,340,668 Income notes 1,890 - Cash and cash equivalents 54,329 47,200 Accrued interest receivable 36,352 33,182 Interest rate cap agreements, at fair value - 361 Swap agreements, at fair value 15,759 2,412 Real estate 11,693 11,789 Goodwill 7,189 7,189 Prepaid and other assets 1,370 1,166 Total Assets $7,122,826 $6,443,967 Liabilities: Repurchase agreements $6,379,485 $5,722,711 Accrued interest payable 26,311 23,164 Mortgages payable on real estate 9,532 9,606 Swaps, at fair value 735 1,893 Dividends payable - 4,899 Accrued expenses and other liabilities 2,460 3,136 Total Liabilities 6,418,523 5,765,409 Stockholders' Equity: Preferred stock, $.01 par value; series A 8.50% cumulative redeemable; 5,000 shares authorized; 3,840 shares issued and outstanding at June 30, 2007 and December 31, 2006 ($96,000 aggregate liquidation preference) 38 38 Common stock, $.01 par value; 370,000 shares authorized; 82,937 and 80,695 issued and outstanding at June 30, 2007 and December 31, 2006, respectively 829 807 Additional paid-in capital, in excess of par 793,308 776,743 Accumulated deficit (59,249) (68,637) Accumulated other comprehensive loss (30,623) (30,393) Total Stockholders' Equity 704,303 678,558 Total Liabilities and Stockholders' Equity $7,122,826 $6,443,967 MFA MORTGAGE INVESTMENTS, INC. CONSOLIDATED STATEMENTS OF RESULTS OF OPERATIONS Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 (In Thousands, Except Per Share Amounts) (Unaudited) Interest Income: MBS income $90,341 $45,645 $174,682 $98,974 Interest income on short-term cash investments 634 540 1,082 1,206 Interest income on income notes 51 - 57 - Interest Income 91,026 46,185 175,821 100,180 Interest Expense 78,348 38,818 150,608 81,603 Net Interest Income 12,678 7,367 25,213 18,577 Other Income: Net loss on sale of MBS (116) (24,746) (113) (23,149) Revenue from operations of real estate 413 388 826 770 Gain on termination of Swap 176 - 176 - Miscellaneous other income, net 109 205 224 444 Other Income (Loss) 582 (24,153) 1,113 (21,935) Operating and Other Expense: Compensation and benefits 1,409 1,530 3,021 3,088 Mortgage interest and real estate operating expense 429 400 849 818 Other general and administrative expense 1,244 961 2,428 2,078 Operating and Other Expense 3,082 2,891 6,298 5,984 Income (Loss) from Continuing Operations 10,178 (19,677) 20,028 (9,342) Discontinued Operations: Loss from discontinued operations, net - (56) - (133) Mortgage prepayment penalty - - - (135) Gain on sale of real estate, net of tax - - - 4,840 Income (Loss) from Discontinued Operations - (56) - 4,572 Income (Loss) Before Preferred Stock Dividends 10,178 (19,733) 20,028 (4,770) Less: Preferred Stock Dividends 2,040 2,040 4,080 4,080 Net Income (Loss) Available to Common Stockholders $8,138 $(21,773) $15,948 $(8,850) Earnings (Loss) Per Share of Common Stock: Income (loss) from continuing operations - basic and diluted $0.10 $(0.27) $0.20 $(0.17) Income from discontinued operations - basic and diluted - - - 0.06 Earnings (loss) per share - basic and diluted $0.10 $(0.27) $0.20 $(0.11)
