10-Q 1 d21740_10q.htm FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

[X]    
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

[    ]    
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-13991

MFA MORTGAGE INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)
    
350 Park Avenue, 21st Floor, New York, New York
(Address of principal executive offices)		     13-3974868
(I.R.S. Employer
Identification No.)
    
10022
(Zip Code)
 

(212) 207-6400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X  No    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [    ] Accelerated filer [ X ] Non-accelerated filer [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No  X 

82,936,712 shares of the registrant’s common stock, $0.01 par value, were outstanding as of July 30, 2007.


TABLE OF CONTENTS

            Page
PART I
Financial Information
                   
Item 1.
            
Financial Statements
                
                   
 
            
Consolidated Balance Sheets as of June 30, 2007 (Unaudited) and December 31, 2006
          1    
                   
 
            
Consolidated Statements of Results of Operations (Unaudited) for the Three and Six Months Ended June 30, 2007 and June 30, 2006
          2    
                   
 
            
Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the Six Months Ended June 30, 2007
          3    
                   
 
            
Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2007 and June 30, 2006
          4    
                   
 
            
Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2007 and June 30, 2006
          5    
                   
 
            
Notes to the Consolidated Financial Statements (Unaudited)
          6    
                   
Item 2.
            
Management’s Discussion and Analysis of Financial Condition and Results of Operations
          24    
                   
Item 3.
            
Quantitative and Qualitative Disclosures About Market Risk
          32    
                   
Item 4.
            
Controls and Procedures
          35    
                   
PART II
Other Information
                   
Item 1.
            
Legal Proceedings
          36    
                   
Item 1A.
            
Risk Factors
          36    
                   
Item 4.
            
Submission of Matters to a Vote of Security Holders
          36    
                   
Item 6.
            
Exhibits
          37    
                   
Signatures
      39    

MFA MORTGAGE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Amounts)
         June 30,
2007
     December 31,
2006
        (Unaudited)    
Assets:
                                       
Mortgage-backed securities (“MBS”), at fair value (including pledged MBS of $6,713,606 and $6,065,021 at June 30, 2007 and December 31, 2006, respectively) (Notes 3 and 6)
               $ 6,994,244          $ 6,340,668   
Income notes (Note 3)
                  1,890             —    
Cash and cash equivalents
                  54,329             47,200   
Accrued interest receivable
                  36,352             33,182   
Interest rate cap agreements (“Caps”), at fair value (Note 4)
                  —              361    
Swap agreements (“Swaps”), at fair value (Note 4)
                  15,759             2,412   
Real estate (Note 5)
                  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 (Note 6)
               $ 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 (Note 4)
                  735              1,893   
Dividends payable
                  —              4,899   
Accrued expenses and other liabilities
                  2,460             3,136   
Total Liabilities
                  6,418,523             5,765,409   
 
Commitments and contingencies (Note 7)
                                        
 
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) (Note 8)
                  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 (Note 8)
                  829              807    
Additional paid-in capital, in excess of par
                  793,308             776,743   
Accumulated deficit
                  (59,249 )            (68,637 )  
Accumulated other comprehensive loss (Note 10)
                  (30,623 )            (30,393 )  
Total Stockholders’ Equity
                  704,303             678,558   
Total Liabilities and Stockholders’ Equity
               $ 7,122,826          $ 6,443,967   
 

The accompanying notes are an integral part of the consolidated financial statements.

1


MFA MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF RESULTS OF OPERATIONS

        Three Months Ended
June 30,
     Six Months Ended
June 30,
    
        2007
     2006
     2007
     2006
(In Thousands, Except Per Share Amounts)
         (Unaudited)    
Interest Income:
                                                                        
MBS income (Note 3)
               $ 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 (Note 3)
                  (116 )            (24,746 )            (113 )            (23,149 )  
Revenue from operations of real estate (Note 5)
                  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: (Note 5)
                                                                       
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: (Note 9)
                                                                        
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 )  
Dividends declared per share of common stock (Note 8c)
               $ 0.08          $ 0.05          $ 0.08          $ 0.05   
 

The accompanying notes are an integral part of the consolidated financial statements.

2


MFA MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

        For the
Six Months
Ended
June 30, 2007
(In Thousands, Except Per Share Amounts)
         (Unaudited)
Preferred Stock, Series A 8.50% Cumulative Redeemable — Liquidation Preference $25.00 per share:
                       
Balance at June 30, 2007 and December 31, 2006 (3,840 shares)
               $ 38    
 
Common Stock, Par Value $0.01:
                       
Balance at December 31, 2006 (80,695 shares)
          &nbs