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December 7, 2007

Equity Research
www.zacks.com

Greg Sukenik

111 North Canal Street, Chicago, IL 60606

Thornburg Mortgage
TMA: Zacks Company Report - HOLD

(TMA-NYSE)

OUTLOOK
Shares of TMA have dropped over 50% in the past year as mortgage REITs continue to tank amid turmoil in credit markets. TMA reported a net loss of $1.084 billion or $8.83 per common share in the 3rdquarter, due mostly to large losses on asset sales. Asset sales have reduced debt levels, and the company has been selling equity to raise cash. TMA recently announced several steps to shore up its balance sheet to try to maintain liquidity in a still uncertain environment for residential lenders. We think the company has taken the necessary steps to remain solvent. In addition, the industry led subprime bailout that is being proposed should help stabilize mortgage markets in the coming months. Risk Level Type of Stock Industry Zacks Rank in Industry Low Mid-Value Reit-Mtge Trust 16 of 17

Current Recommendation Prior Recommendation Date of Last Change Current Price (12/06/07) Six- Month Target Price

Hold Sell 09/27/2006 $10.91 $10.50

SUMMARY DATA
52-Week High 52-Week Low One-YearReturn (%) Beta Average Daily Volume (sh) Shares Outstanding (mil) Market Capitalization ($mil) Short Interest Ratio (days) Institutional Ownership (%) Insider Ownership (%) Annual Cash Dividend Dividend Yield (%) 5-Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2007 Estimate P/E using 2008 Estimate Zacks Rank $28.11 $7.61 -32.35 0.53 2,246,636128 $1,396 5.25 23 2 $0.00 0.00

ZACKS ESTIMATES
Revenue
(in millions of $)

Q1 (Mar) 2005 2006 2007 2008 314 A 534 A 737 A

Q2 (Jun) 342 A 593 A 758 A

Q3 (Sep) 402 A 678 A 627 A

Q4 (Dec) 480 A 704 A 76 E

Year (Dec) 1537 A 2474 A 2,198 E 2,464 E

57.1 -0.4 3.0 N/A N/A 7.3 5

Earnings per Share
(EPS is operating earnings before non recurring items)

2005 2006 2007 2008

Q1(Mar) $0.72 A $0.66 A $0.62 A

Q2 (Jun) $0.70 A $0.61 A $0.66 A

Q3 (Sep) $0.70 A $0.64 A -$8.83 A

Q4 (Dec) $0.68 A $0.68 A $0.20 E

Year (Dec) $2.79 A $2.58 A -$7.35 E $1.50 E 4

Zacks Projected EPS Growth Rate - Next 5 Years %

© Copyright 2007, Zacks Investment Research. All Rights Reserved.

OVERVIEW
Thornburg Mortgage (TMA) is a residential mortgage lender that originates,acquires, and makes investments in ARM (adjustable-rate mortgage) assets. The company elects to be treated as a REIT (Real Estate Investment Trust) for federal income tax purposes. The company s ARM assets consist of purchased ARM assets and ARM loans. Purchased ARM assets are mortgage-backed securities that represent interests in pools of ARM loans. The company s ARM loans are either loans that wereoriginated by TMA, loans used as collateral to support the issuance of CDO s (collateralized debt obligations) or loans pending securitization. The company finances its loan purchases and originations through various sources including equity issuance, unsecured debt, CDO s and short term borrowings. When the company borrows short-term funds, they generally enter into interest hedging transactionsto mitigate the impact of fluctuations in short-term rates. The company originates its mortgage loans through 313 correspondent lenders and directly to consumers in all 50 states. The company also has 18 field executives and 541 brokerage firms to facilitate its wholesale business. TMA outsources most of its standardized origination functions, loan processing, closing, and servicing, tothird-party providers. As a result, the company does not have a nationwide branch network. The company makes money from the net spread, or the difference between income from interest on ARM assets and the cost of borrowings. As of September 30, 2007, the company had total assets of $36.3 billion, short-term borrowings in the form of commercial paper, reverse repurchase agreements and whole loan financing...
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