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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

Chimera Investment Corporation Reports Core EPS for the 1st Quarter 2011 of $0.15 Per Share16:05 EDT 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 Non-Agency RMBS 71.7 % 76.5 % 83.4 % Senior 0.1 % 15.7 % 4.0 % Senior, interest only 33.2 % 15.6 % 35.7 % Subordinated 25.6 % 25.8 % 29.8 % Subordinated, interest only 1.6 % 2.8 % 1.8 % Senior, non-retained 11.2 % 16.6 % 12.1 % Agency RMBS 25.1 % 15.4 % 12.6 % Securitized loans 3.2 % 8.1 % 4.0 % 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     Principal orNotionalValue atPeriod-End   WeightedAverageAmortizedCost Basis atPeriod-End   WeightedAverage FairValue atPeriod-End   WeightedAverageCoupon atPeriod-End   WeightedAverageYield (LossAdjusted) atPeriod-End   AnnualizedYield OverCurrentQuarter*   WeightedAverage 3Month CPRat Period-End Non-Agency Mortgage-Backed Securities             Senior $ 9,612 $ 98.86 $ 94.20 1.22 % 2.66 % 2.21 % 6 % Senior, interest only $ 6,352,256 $ 6.44 $ 5.05 2.02 % 12.91 % 4.78 % 17 % Subordinated $ 4,917,240 $ 46.88 $ 45.44 4.12 % 14.43 % 24.27 % 16 % Subordinated, interest only $ 303,427 $ 9.93 $ 10.56 2.97 % 26.06 % 35.83 % 14 % Senior, non-retained $ 2,136,669 $ 98.09 $ 110.84 5.21 % 4.88 % 3.50 % 16 % Agency Mortgage-Backed Securities $ 4,800,913 $ 102.76 $ 102.74 4.71 % 4.26 % 4.48 % 20 % Securitized loans Senior $ 273,178 $ 101.19 $ 101.19 5.46 % 5.50 % 4.92 % 25 % Senior, interest only $ 288,661 $ 0.01 $ 0.01 0.41 % 100.00 % 4586.67 % 24 % Subordinated $ 57,473 $ 100.66 $ 100.66 5.23 % -1.95 % 4.05 % 25 %   * 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 CORPORATIONCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except share and per share data)                 March 31,2011(unaudited)   December 31,2010 (1)   September 30,2010(unaudited)   June 30, 2010(unaudited)   March 31,2010(unaudited) Assets:                     Cash and cash equivalents $ 16,295 $ 7,173 $ 11,949 $ 236,214 $ 44,200 Non-Agency Mortgage-Backed Securities, at fair value Senior 329,782 987,685 1,065,145 817,736 1,429,530 Subordinated 2,266,560 2,210,858 1,866,911 1,465,905 947,963 Senior, non-retained 2,368,212 2,330,568 1,967,812 2,133,486 1,646,087 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 Other assets 1,270 1,212 360 923 1,451 Interest rate swaps, at fair value     5,876       -       -       -       -   Total assets   $ 10,258,434     $ 8,073,700     $ 7,233,452     $ 6,878,182     $ 6,156,195     Liabilities: 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 266,363 289,236 320,552 342,819 364,665 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 Dividends payable 143,676 174,445 158,811 130,420 113,793 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       -   Total liabilities   $ 6,716,044     $ 4,390,694     $ 4,331,105     $ 3,965,323     $ 3,861,248     Stockholders' Equity: 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 Additional paid-in-capital 3,602,339 3,601,890 3,056,659 3,056,566 2,290,636 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 CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except share and per share data) (unaudited)         March 31, 2011   December 31, 2010   September 30, 2010   June 30, 2010   March 31, 2010 Net Interest Income:           Interest income $ 206,574 $ 159,967 $ 140,405 $ 133,522 $ 128,984 Interest expense 10,849 12,076 10,527 7,198 7,374   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   Other-than-temporary impairments: 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   Other expenses: Management fee 12,750 12,229 11,318 9,263 8,114 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 Income taxes     698       3       752       1       -   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   Investor Relations1-866-315-9930www.chimerareit.com