Press release from Business Wire
Chimera Investment Corporation Reports Core EPS for the 1st Quarter 2011 of $0.15 Per Share
Wednesday, May 04, 2011
NEW YORK (Business Wire) -- Chimera Investment Corporation (NYSE: CIM) today reported Core Earnings for the quarter ended March 31, 2011 of $153.5 million or $0.15 per average share as compared to Core Earnings for the quarter ended March 31, 2010 of $127.9 million or $0.19 per average share and Core Earnings for the quarter ended December 31, 2010 of $136.2 million or $0.14 per average share. “Core Earnings” is a non-GAAP measure that approximates distributable income, and is defined as GAAP net income (loss) excluding non-cash equity compensation expense, unrealized gains and losses, realized gains and losses on sales and other items that do not affect distributable net income, regardless of whether such items are included in other comprehensive income (loss) or in net income (loss). The Company reported GAAP net income of $163.4 million or $0.16 per average share for the quarter ended March 31, 2011, as compared to $125.6 million or $0.19 per average share for the quarter ended March 31, 2010, and $156.2 million or $0.16 per average share for the quarter ended December 31, 2010.
During the quarter ended March 31, 2011, the Company sold residential mortgage-backed securities (RMBS) with a carrying value of $649.8 million for realized gains of $2.7 million. During the quarter ended March 31, 2010, the Company sold RMBS with a carrying value of $89.6 million for realized gains of $342 thousand. During the quarter ended December 31, 2010, the Company sold RMBS with a carrying value of $590.3 million for realized gains of $7.7 million.
During the quarter ended March 31, 2011, the Company financed on a permanent non-recourse basis $306.6 million of AAA-rated fixed rate bonds for net proceeds of $311.0 million in re-securitization transactions which were accounted for as financings in the Company's statement of financial condition. During the quarter ended March 31, 2010, the Company financed on a permanent non-recourse basis $497.4 million of AAA-rated fixed rate bonds for net proceeds of $498.7 million. During the quarter ended December 31, 2010, the Company financed on a permanent non-recourse basis $165.7 million of AAA-rated fixed rate bonds for net proceeds of $167.8 million. Assets, liabilities, interest income and interest expense associated with these transactions are identified throughout the consolidated financial statements as “non-retained” items.
The Company declared common stock dividends of $0.14, $0.17, and $0.17 per share for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010, respectively. The annualized dividend yield on the Company's common stock for the quarter ended March 31, 2011 based on the March 31, 2011 closing price of $3.96 was 14.14%. On a Core Earnings basis, the Company provided an annualized return on average equity of 17.00%, 23.15%, and 16.54% for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010, respectively. On a GAAP basis, the Company provided an annualized return on average equity of 18.09%, 22.73% and 18.98%, for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010, respectively.
Matthew J. Lambiase, Chief Executive Officer and President of the Company, commented on the quarter. “In the first quarter, we took advantage of attractive opportunities in the marketplace while enhancing returns on our existing portfolio. The Company continues to deliver a high return on equity while operating with low leverage and retaining the flexibility and liquidity for future opportunities.”
For the quarter ended March 31, 2011, the annualized yield on average interest earning assets, including the effect of principal write-downs, was 7.41% and the annualized cost of funds on the average borrowed funds balance was 2.70% for an interest rate spread of 4.71%. This is a 78 basis point decrease from the 5.49% annualized interest rate spread for the quarter ended March 31, 2010, and a 64 basis point increase from the 4.07% annualized interest rate spread for the quarter ended December 31, 2010. Leverage was 1.8:1, 1.6:1, and 1.1:1 at March 31, 2011, March 31, 2010, and December 31, 2010, respectively. Recourse leverage was 1.1:1, 0.7:1 and 0.5:1 at March 31, 2011, March 31, 2010, and December 31, 2010, respectively.
The following table summarizes portfolio information for the Company:
|March 31, 2011||March 31, 2010||December 31, 2010|
|Interest earning assets at period-end *||$||10,170,231||$||6,023,722||$||8,016,227|
|Interest bearing liabilities at period-end||$||6,228,141||$||3,687,339||$||4,054,112|
|Leverage at period-end||1.8:1||1.6:1||1.1:1|
|Leverage at period-end (recourse)||1.1:1||0.7:1||0.5:1|
|Portfolio Composition, at principal value|
|Senior, interest only||33.2||%||15.6||%||35.7||%|
|Subordinated, interest only||1.6||%||2.8||%||1.8||%|
|Fixed-rate percentage of portfolio||79.8||%||66.2||%||51.7||%|
|Adjustable-rate percentage of portfolio||20.2||%||33.8||%||48.3||%|
|Annualized yield on average earning assets for the quarter ended**||7.41||%||9.99||%||8.17||%|
|Annualized cost of funds on average borrowed funds for the quarter ended||2.70||%||4.50||%||4.10||%|
* Excludes cash and cash equivalents.
** Includes the effect of realized loss on principal write-downs.
The following table summarizes characteristics for each asset class:
|March 31, 2011|
|Non-Agency Mortgage-Backed Securities|
|Senior, interest only||$||6,352,256||$||6.44||$||5.05||2.02||%||12.91||%||4.78||%||17||%|
|Subordinated, interest only||$||303,427||$||9.93||$||10.56||2.97||%||26.06||%||35.83||%||14||%|
|Agency Mortgage-Backed Securities||$||4,800,913||$||102.76||$||102.74||4.71||%||4.26||%||4.48||%||20||%|
|Senior, interest only||$||288,661||$||0.01||$||0.01||0.41||%||100.00||%||4586.67||%||24||%|
|* Includes the effect of realized loss on principal write-downs.|
The Company's portfolio is comprised of RMBS and securitized whole residential mortgage loans. During the quarter ended March 31, 2011, the Company recorded a loan loss provision of $1.4 million as compared to a provision of $606 thousand for the quarter ended March 31, 2010 and $577 thousand for the quarter ended December 31, 2010.
The Constant Prepayment Rate on the Company's portfolio was 18%, 17%, and 17% as of March 31, 2011, March 31, 2010, and December 31, 2010, respectively. The net accretion of discounts was $64.4 million, $59.8 million and $59.6 million for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010, respectively. The total net discount remaining was $2.1 billion, $2.0 billion and $2.3 billion at March 31, 2011, March 31, 2010, and December 31, 2010, respectively.
General and administrative expenses, including the management fee and loan loss provision, as a percentage of average interest earning assets were 0.56%, 0.55%, and 0.62% for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010, respectively. At March 31, 2011, March 31, 2010, and December 31, 2010, the Company had a GAAP common stock book value per share of $3.45, $3.42, and $3.59, respectively. At March 31, 2011, March 31, 2010, and December 31, 2010, the Company had an estimated economic book value per share of $3.18, $3.41, and $3.23, respectively. Estimated economic book value considers the fair values of only the assets the Company owns or is able to dispose of, pledge, or otherwise monetize, and specifically excludes the non-retained non-Agency Mortgage-Backed Securities and the corresponding securitized debt, non-retained as presented in the Company's consolidated statements of financial condition. The Company's estimate of economic book value has important limitations. Should the Company sell the assets in its portfolio, it may realize materially different proceeds from the sale than estimated as of the reporting date.
The Company is a specialty finance company that invests in residential mortgage-backed securities, residential mortgage loans, commercial mortgage loans, real estate-related securities and various other asset classes. The Company's principal business objective is to generate net income from the spread between the yields on its investments and the cost of borrowing to finance their acquisition and secondarily to provide capital appreciation. The Company, a Maryland corporation that has elected to be taxed as a real estate investment trust (REIT), is externally managed by Fixed Income Discount Advisory Company.
The Company will hold the first quarter 2011 earnings conference call on Thursday, May 5, 2011, at 12:00 p.m. EDT. The number to call is 866-843-0890 for domestic calls and 412-317-9250 for international calls and the pass code is 5699836. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the pass code is 450685. The replay is available for 48 hours after the earnings call. There will be a web cast of the call on www.chimerareit.com. If you would like to be added to the email distribution list, please visit www.chimerareit.com, click on EMail Alerts, complete the email notification form and click the Submit button. For further information, please contact Investor Relations at 1-866-315-9930 or visit www.chimerareit.com.
This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements which are based on various assumptions (some of which are beyond our control) may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may,” “would,” “will” or similar expressions, or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, our business and investment strategy; our projected financial and operating results; our ability to maintain existing financing arrangements, obtain future financing arrangements and the terms of such arrangements; general volatility of the securities markets in which we invest; the implementation, timing and impact of, and changes to, various government programs, our expected investments; changes in the value of our investments; interest rate mismatches between our investments and our borrowings used to fund such purchases; changes in interest rates and mortgage prepayment rates; effects of interest rate caps on our adjustable-rate investments; rates of default or decreased recovery rates on our investments; prepayments of the mortgage and other loans underlying our mortgage-backed or other asset-backed securities; the degree to which our hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters; availability of investment opportunities in real estate-related and other securities; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; market trends in our industry, interest rates, the debt securities markets or the general economy; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; and our ability to maintain our qualification as a REIT for federal income tax purposes. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our Annual Report on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim all obligations, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
|CHIMERA INVESTMENT CORPORATION|
|CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION|
|(dollars in thousands, except share and per share data)|
June 30, 2010
|Cash and cash equivalents||$||16,295||$||7,173||$||11,949||$||236,214||$||44,200|
|Non-Agency Mortgage-Backed Securities, at fair value|
|Agency Mortgage-Backed Securities, at fair value||4,879,382||2,133,584||1,884,193||1,761,732||1,558,795|
|Securitized loans held for investment, net of allowance for loan losses of $8.0 million, $6.6 million, $6.0 million, $5.6 million and $4.6 million, respectively||326,295||353,532||389,315||416,504||441,347|
|Receivable for investments sold||6,192||-||-||-||47,185|
|Accrued interest receivable||58,570||49,088||47,767||45,682||39,637|
|Interest rate swaps, at fair value||5,876||-||-||-||-|
|Repurchase agreements, Agency RMBS||$||3,870,407||$||1,600,078||$||1,359,504||$||1,133,036||$||1,343,111|
|Repurchase agreements, non-Agency RMBS||-||208,719||208,719||204,769||195,709|
|Repurchase agreements with affiliates, non-Agency RMBS||-||-||-||-||147,417|
|Securitized debt, non-retained||2,091,371||1,956,079||1,955,665||2,120,861||1,636,437|
|Payable for investments purchased||311,610||127,693||279,649||-||41,822|
|Accrued interest payable||12,543||11,641||11,164||12,145||9,691|
|Accounts payable and other liabilities||1,234||393||810||679||489|
|Investment management fees payable to affiliate||12,807||12,422||11,411||9,357||8,114|
|Interest rate swaps, at fair value||6,033||9,988||24,820||11,237||-|
|Common stock: par value $0.01 per share; 1,500,000,000 shares authorized, 1,027,107,362, 1,027,034,357, 883,169,403, 883,151,028, and 670,371,002 shares issued and outstanding, respectively||$||10,262||$||10,261||$||8,822||$||8,822||$||6,694|
|Accumulated other comprehensive income (loss)||113,899||274,651||22,444||673||144,978|
|Retained earnings (accumulated deficit)||(184,110||)||(203,796||)||(185,578||)||(153,202||)||(147,361||)|
|Total stockholders' equity||$||3,542,390||$||3,683,006||$||2,902,347||$||2,912,859||$||2,294,947|
|Total liabilities and stockholders' equity||$||10,258,434||$||8,073,700||$||7,233,452||$||6,878,182||$||6,156,195|
|(1) Derived from the audited consolidated financial statements at December 31, 2010.|
|CHIMERA INVESTMENT CORPORATION|
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)|
|(dollars in thousands, except share and per share data)|
|March 31, 2011||December 31, 2010||September 30, 2010||June 30, 2010||March 31, 2010|
|Net Interest Income:|
|Interest income, non-retained||21,159||33,780||58,090||49,829||50,861|
|Interest expense, non-retained||27,575||27,573||32,237||21,421||33,830|
|Net interest income (expense)||189,309||154,098||155,731||154,732||138,641|
|Total other-than-temporary impairment losses||(4,205||)||(5,596||)||(1,314||)||(24,746||)||(22,687||)|
|Non-credit portion of loss recognized in other comprehensive income (loss)||1,580||3,233||436||17,853||20,143|
|Net other-than-temporary credit impairment losses||(2,625||)||(2,363||)||(878||)||(6,893||)||(2,544||)|
|Other gains (losses):|
|Unrealized gains (losses) on interest rate swaps||9,831||14,831||(13,583||)||(11,237||)||-|
|Realized gains (losses) on sales of investments, net||2,744||7,711||2,032||-||342|
|Realized losses on principal write-downs of non-Agency RMBS||(19,520||)||(3,593||)||(2,517||)||(326||)||(949||)|
|Total other gains (losses)||(6,945||)||18,949||(14,068||)||(11,563||)||(607||)|
|Net investment income (loss)||179,739||170,684||140,785||136,276||135,490|
|Provision for loan losses||1,442||577||482||1,024||606|
|General and administrative expenses||1,487||1,648||1,798||1,409||1,160|
|Total other expenses||15,679||14,454||13,598||11,696||9,880|
|Income (loss) before income taxes||164,060||156,230||127,187||124,580||125,610|
|Net income (loss)||$||163,362||$||156,227||$||126,435||$||124,579||$||125,610|
|Net income (loss) per share-basic and diluted||$||0.16||$||0.16||$||0.14||$||0.16||$||0.19|
|Weighted average number of shares outstanding-basic and diluted||1,027,063,055||967,544,377||883,147,726||765,475,340||670,371,022|
|Comprehensive income (loss):|
|Net income (loss)||$||163,362||$||156,227||$||126,435||$||124,579||$||125,610|
|Other comprehensive income (loss):|
|Unrealized gains (losses) on available-for-sale securities, net||(180,153||)||253,962||20,408||(151,524||)||241,581|
|Reclassification adjustment for net losses included in net income (loss) for other-than-temporary credit impairment losses||2,625||2,363||878||6,893||2,544|
|Reclassification adjustment for realized losses (gains) included in net income (loss)||16,776||(4,118||)||485||326||607|
|Other comprehensive income (loss)||(160,752||)||252,207||21,771||(144,305||)||244,732|
|Comprehensive income (loss)||$||2,610||$||408,434||$||148,206||$||(19,726||)||$||370,342|