Form: 8-K

Current report filing

February 14, 2008


MFA
 
  MORTGAGE INVESTMENTS, INC.
 
350 Park Avenue
New York, New York 10022
 
 

 
PRESS RELEASE
FOR IMMEDIATE RELEASE        
     
February 14, 2008
NEW YORK METRO
     
CONTACT:   
MFA Investor Relations
800-892-7547
www.mfa-reit.com
NYSE: MFA
 
MFA Mortgage Investments, Inc.
Announces Fourth Quarter 2007 Financial Results
 
MFA Mortgage Investments, Inc. (NYSE:MFA) today reported earnings available to common stockholders of $18.6 million, or $0.16 per share of common stock, for the fourth quarter ended December 31, 2007.  On December 13, 2007, MFA announced its fourth quarter dividend of $0.145 per share of common stock.  The dividend was paid on January 31, 2008 to stockholders of record as of December 31, 2007. 
 
Stewart Zimmerman, MFA’s Chairman of the Board, Chief Executive Officer and President, said, “In light of continuing concerns regarding the residential mortgage and housing market, we are pleased with both our strategy of investing in high-quality assets and our fourth quarter 2007 financial results.  Our portfolio spread and dividend have trended up in each of the last four quarters.  At December 31, 2007, approximately 99% of our assets consisted of MBS issued or guaranteed by an agency of the U.S. government or a federally chartered corporation, other MBS rated “AAA” by Standard & Poor’s Corporation, MBS-related receivables and cash.”
 
Mr. Zimmerman added, “Concerns about increased mortgage delinquencies have led investors to question the underlying risk and value of MBS across the ratings spectrum.  Banks, brokers and insurers have announced billions in losses from exposure to the U.S. mortgage credit market.  These losses have reduced financial industry capital and have led to reduced liquidity.  This reduced liquidity has led to forced asset sales creating attractive investment opportunities for MFA.”
 
Mr. Zimmerman continued, “In the fourth quarter, we completed two public offerings of our common stock.  On October 5, 2007, we completed a public offering of 8,050,000 shares priced at $7.90 and received net proceeds of approximately $60.2 million, and on November 14, 2007 we completed a public offering of 17,250,000 shares priced at $7.95 and received net proceeds of approximately $130.0 million.  Subsequent to yearend, on January 23, 2008, we completed an additional public offering of 28,750,000 shares priced at $9.25 and received net proceeds of approximately $253.0 million.  We have invested these equity proceeds on a leveraged basis in additional Agency MBS.  The investment of this equity along with our reduced funding costs due to declines in interest rates should lead to increased earnings and portfolio spreads in the first quarter of 2008.”
 
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During the fourth quarter of 2007, MFA acquired or committed to purchase approximately $1.837 billion of Agency MBS.  These transactions increased MFA’s concentration in Agency MBS and positively impacted our portfolio spread.  At December 31, 2007, Agency MBS and related receivables constituted approximately 92% of MFA’s assets (or approximately $7.911 billion), “AAA” MBS and related receivables were approximately 5% (or approximately $427 million), and total cash was approximately 3% (or approximately $234 million).  The weighted average cost basis of our MBS portfolio was 101.25% of par at December 31, 2007.   MFA’s MBS assets are relatively liquid and continue to be financed with multiple funding providers through repurchase agreements. MFA’s leverage as measured by assets-to-equity was 9.3x on December 31, 2007.
 
MFA’s primary focus is Agency, higher coupon hybrid and adjustable-rate MBS assets.  The MBS in MFA’s portfolio are primarily adjustable-rate or hybrids, which have an initial fixed interest rate for a specified period of time and, thereafter, generally reset annually.    Assuming a 20% Constant Prepayment Rate (or CPR), approximately 31% of the MBS in MFA’s portfolio are expected to prepay or have their interest rates reset within the next 12 months, with a total of 85% expected to reset or prepay during the next 60 months.
 
MFA takes into account both coupon resets and expected prepayments when measuring the sensitivity of its MBS portfolio to changing interest rates.  In measuring its assets-to-borrowing repricing gap, MFA measures the difference between:  (a) the weighted average months until coupon adjustment or projected prepayment on its MBS portfolio; and (b) the months remaining on its repurchase agreements including the impact of interest rate swap agreements.  Assuming a 20% CPR, the weighted average time to repricing or assumed prepayment for MFA’s MBS portfolio, as of December 31, 2007, was approximately 33 months and the average term remaining on its repurchase agreements, including the impact of interest rate swaps, was approximately 23 months, resulting in a repricing gap of approximately ten months. The prepayment speed on MFA’s MBS portfolio averaged 13.4% CPR during the fourth quarter of 2007.
 
During the fourth quarter of 2007, the gross yield on MFA’s interest-earning assets was approximately 6.08%, while the net yield on interest-earning assets was 5.70%, primarily reflecting the cost of premium amortization on MFA’s MBS portfolio. The portfolio spread, which is the difference between MFA’s interest-earning asset portfolio net yield of 5.70% and its 5.05% cost of funds, was 0.65% for the fourth quarter of 2007.  By comparison, the portfolio spread in the third quarter of 2007 was 0.36%.  MFA’s costs for compensation and benefits and other general and administrative expense were $3.2 million or 0.16% of average assets for the quarter ended December 31, 2007.  As of December 31, 2007, MFA’s book value per share of common stock was $6.76.
 
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Stockholders interested in participating in MFA’s Discount Waiver, Direct Stock Purchase and Dividend Reinvestment Plan (or the Plan) or receiving a Plan prospectus may do so by contacting BNY Mellon Shareowner Services, the Plan administrator, at 1-866-249-2610 (toll free).  For more information about the Plan, interested stockholders may also go to the website established for the Plan at http://www.melloninvestor.com or visit MFA’s website at www.mfa-reit.com. 
 
MFA will hold a conference call on Thursday, February 14, 2008, at 10:00 a.m. (New York City time) to discuss its fourth quarter 2007 financial results.  The number to dial in order to listen to the conference call is (800) 762-7308 in the U.S. and Canada.  International callers must dial (480) 629-9025.  The replay will be available through Thursday, February 21, 2008, at 11:59 p.m., and can be accessed by dialing (800) 475-6701 in the U.S. and Canada or (320) 365-3844 internationally and entering access code:  911216.  The conference call will also be webcast over the internet and can be accessed at http://www.mfa-reit.com through the appropriate link on MFA’s Investor Relations page or, alternatively, at http://www.ccbn.com.  To listen to the call over the internet, go to the applicable website at least 15 minutes before the call to register and to download and install any needed audio software.
 
 
When used in this press release or other written or oral communications, statements which are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend” and similar expressions, are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. These forward-looking statements are subject to various risks and uncertainties, including, but not limited to, those relating to: changes in interest rates and the market value of MFA’s MBS; changes in the prepayment rates on the mortgage loans securing MFA’s MBS; MFA’s ability to use borrowings to finance its assets; changes in government regulations affecting MFA’s business; MFA’s ability to maintain its qualification as a REIT for federal income tax purposes; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that MFA files with the SEC, could cause MFA’s actual results to differ materially from those projected in any forward-looking statements it makes. All forward-looking statements speak only as of the date they are made and MFA does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
 
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MFA MORTGAGE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEETS
 
       
   
At December 31,
 
   
2007
   
2006
 
(In Thousands, Except Per Share Amounts)
           
Assets:
           
  MBS, at fair value (including pledged MBS of $8,046,947 and
   $6,065,021 at December 31, 2007 and 2006, respectively)
  $ 8,301,183     $ 6,340,668  
  Income notes
    1,614        
  Cash and cash equivalents
    234,410       47,200  
  Restricted cash
    4,517        
  Interest receivable
    43,610       33,182  
  Interest rate cap agreements, at fair value
          361  
  Swap agreements, at fair value
    103       2,412  
  Real estate, net
    11,611       11,789  
  Goodwill
    7,189       7,189  
  Prepaid and other assets
    1,622       1,166  
           Total Assets
  $ 8,605,859     $ 6,443,967  
                 
Liabilities:
               
  Repurchase agreements
  $ 7,526,014     $ 5,722,711  
  Accrued interest payable
    20,212       23,164  
  Mortgage payable on real estate
    9,462       9,606  
  Swaps, at fair value
    99,836       1,893  
  Dividends and dividend equivalents payable
    18,005       4,899  
  Accrued expenses and other liabilities
    5,067       3,136  
           Total Liabilities
    7,678,596       5,765,409  
                 
Commitments and contingencies
               
                 
Stockholders’ Equity:
               
   Preferred stock, $.01 par value; series A 8.50% cumulative redeemable;
     5,000 shares authorized; 3,840 shares issued and outstanding at
     December 31, 2007 and 2006 ($96,000 aggregate liquidation
     preference)
    38       38  
  Common stock, $.01 par value; 370,000 shares authorized;
     122,887 and 80,695 issued and outstanding at December 31,
     2007 and 2006, respectively
    1,229       807  
  Additional paid-in capital, in excess of par
    1,085,760       776,743  
  Accumulated deficit
    (89,263 )     (68,637 )
  Accumulated other comprehensive loss
    (70,501 )     (30,393 )
           Total Stockholders’ Equity
    927,263       678,558  
           Total Liabilities and Stockholders’ Equity
  $ 8,605,859     $ 6,443,967  
 
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MFA MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF RESULTS OF OPERATIONS
 
   
Three Months Ended
   
For the Year Ended
 
   
December 31,
   
December 31,
 
   
2007
   
2006
   
2007
   
2006
 
(In Thousands, Except Per Share Amounts)
 
(Unaudited)
             
                         
Interest Income:
                       
MBS income
  $ 109,948     $ 70,836     $ 380,170     $ 216,871  
Interest income on short-term cash investments
    2,285       644       4,493       2,321  
Interest income on income notes
    51             158        
      Interest Income
    112,284       71,480       384,821       219,192  
                                 
Interest Expense
    88,881       62,114       321,305       181,922  
                                 
      Net Interest Income
    23,403       9,366       63,516       37,270  
                                 
Other Income:
                               
Net gain (loss) on sale of MBS
    347             (21,793 )     (23,113 )
Revenue from operations of real estate
    407       396       1,638       1,556  
Loss on early termination of Swaps
                (384 )      
Miscellaneous other income, net
    95       121       422       708  
      Other Income (Loss)
    849       517       (20,117 )     (20,849 )
                                 
Operating and Other Expense:
                               
Compensation and benefits
    1,775       1,191       6,615       5,725  
Real estate operating expense and mortgage interest
    464       369       1,764       1,617  
Other general and administrative
    1,398       823       5,067       3,843  
      Operating and Other Expense
    3,637       2,383       13,446       11,185  
                                 
      Income from Continuing Operations
    20,615       7,500       29,953       5,236  
                                 
Discontinued Operations:
                               
(Loss) gain on sale of real estate, net of tax
          (408 )     257       4,432  
Loss from discontinued operations, net
          (64 )           (198 )
Mortgage prepayment penalty
          (577 )           (712 )
      (Loss) Income from Discontinued Operations
          (1,049 )     257       3,522  
                                 
Income Before Preferred Stock Dividends
    20,615       6,451       30,210       8,758  
Less:  Preferred Stock Dividends
    2,040       2,040       8,160       8,160  
      Net Income to Common Stockholders
  $ 18,575     $ 4,411     $ 22,050     $ 598  
                                 
Earnings Per Share of Common Stock:
                               
Earnings (loss) from continuing operations – basic and diluted
  $ 0.16     $ 0.07     $ 0.24     $ (0.03 )
(Loss) earnings from discontinued operations – basic and diluted
          (0.01 )           0.04  
Earnings per share – basic and diluted
  $ 0.16     $ 0.06     $ 0.24     $ 0.01  
                                 
Dividends declared per share of common stock
  $ 0.145     $ 0.060     $ 0.415     $ 0.210  
 
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MFA MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
   
Three Months Ended
   
Year Ended
 
   
December 31,
   
December 31,
 
   
2007
   
2006
   
2007
   
2006
 
(In Thousands)
 
(Unaudited)
   
 
 
                         
Net income before preferred stock dividends
  $ 20,615     $ 6,451     $ 30,210     $ 8,758  
Other Comprehensive Income:
                               
  Unrealized gain/(loss) on investment securities arising during
    the period, net
    44,647       (8,935 )     49,352       6,165  
  Reclassification adjustment for net losses included in net
    income from MBS
    634             10,875       24,568  
  Unrealized loss on Caps arising during the period, net
          (155 )     (83 )     (342 )
  Unrealized (loss)/gain on Swaps arising during the period, net
    (72,296 )     934       (100,252 )     (2,573 )
      Comprehensive (loss)/income before preferred stock
         dividends
    (6,400 )     (1,705 )     (9,898 )     36,576  
Dividends on preferred stock
    (2,040 )     (2,040 )     (8,160 )     (8,160 )
      Comprehensive (Loss)/Income to Common Stockholders
  $ (8,440 )   $ (3,745 )   $ (18,058 )   $ 28,416  
                                 
 
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