Chimera Investment Corporation Reports Core EPS for the 4th Quarter 2010 of $0.14 Per Share and for the Year of $0.66 Per Share
NEW YORK--(BUSINESS WIRE)-- Chimera Investment Corporation (NYSE: CIM) today reported Core Earnings for the quarter ended December 31, 2010, of $136.2 million or $0.14 per average share as compared to Core Earnings for the quarter ended December 31, 2009, of $80.7 million or $0.12 per average share and Core Earnings for the quarter ended September 30, 2010, of $139.0 million or $0.16 per average share. Core Earnings for the year ended December 31, 2010 was $545.9 million or $0.66 per average share as compared to $230.7 million or $0.46 per average share for the year ended December 31, 2009. "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 realized 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 $156.2 million or $0.16 per average share for the quarter ended December 31, 2010, as compared to GAAP net income of $95.5 million or $0.14 per average share for the quarter ended December 31, 2009, and GAAP net income of $126.4 million or $0.14 per average share for the quarter ended September 30, 2010. GAAP net income for the year ended December 31, 2010 was $532.9 million or $0.65 per average share as compared to $324.0 million or $0.64 per average share for the year ended December 31, 2009.
During the quarter ended December 31, 2010, the Company sold residential mortgage-backed securities (RMBS) with a carrying value of $590.3 million for realized gains of $7.7 million. During the quarter ended December 31, 2009, the Company sold RMBS, including transactions involving re-securitizations, with a carrying value of $213.0 million for realized gains of $16.2 million. During the quarter ended September 30, 2010, the Company sold RMBS with a carrying value of $206.0 million for realized gains of $2.0 million. During the year ended December 31, 2010, the Company sold RMBS with a carrying value of $885.4 million for realized gains of $10.1 million. During the year ended December 31, 2009, the Company sold RMBS, including transactions involving re-securitizations, with a carrying value of $1.8 billion for realized gains of $103.6 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 in re-securitization transactions which were accounted for as financings in the Company's statement of financial condition. During the quarters ended December 31, 2009 and September 30, 2010, the Company did not record any transactions which were accounted for as financings on a permanent non-recourse basis. During the year ended December 31, 2010, the Company financed on a permanent non-recourse basis $1.3 billion of AAA-rated fixed rate bonds for net proceeds of $1.3 billion in re-securitization transactions which were accounted for as financings in the Company's statement of financial condition. During the year ended December 31, 2009, the Company did not record any transactions which were accounted for as financings on a permanent non-recourse basis. 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 $0.17, $0.17, and $0.18 per share for the quarters ended December 31, 2010, December 31, 2009, and September 30, 2010, respectively. The annualized dividend yield on the Company's common stock for the quarter ended December 31, 2010 based on the December 31, 2010 closing price of $4.11 was 16.55%. The Company declared common stock dividends for the year ended December 31, 2010, of $0.69 per share, as compared to $0.43 per share for the year ended December 31, 2009. The dividend yield on the Company's common stock for the year ended December 31, 2010, based on the December 31, 2010 closing price of $4.11 was 16.79%. On a Core Earnings basis, the Company provided an annualized return on average equity of 17.51%, 14.96%, and 19.12% for the quarters ended December 31, 2010, December 31, 2009, and September 30, 2010, respectively. On a Core Earnings basis, the Company provided a return on average equity of 20.05% and 15.80% for the years ended December 31, 2010, and December 31, 2009, respectively. On a GAAP basis, the Company provided an annualized return on average equity of 20.09%, 17.69% and 17.39%, for the quarters ended December 31, 2010, December 31, 2009, and September 30, 2010, respectively. On a GAAP basis, the Company provided a return on average equity of 19.57% and 22.19% for the years ended December 31, 2010, and December 31, 2009, respectively.
Matthew J. Lambiase, Chief Executive Officer and President of the Company, commented on the quarter. "Chimera's results continue to reflect our ability to identify attractive investment opportunities. The fourth quarter results reflect the successful capital raise that settled in November. Looking ahead, the evolving regulatory and policy process will continue to affect the investment landscape. In this environment we remain positive on the relative attractiveness of opportunities we see in our market."
For the quarter ended December 31, 2010, the annualized yield on average earning assets was 8.32% and the annualized cost of funds on the average borrowed funds balance was 4.10% for an interest rate spread of 4.22%. This is a 64 basis point decrease from the 4.86% annualized interest rate spread for the quarter ended December 31, 2009, and a 22 basis point decrease from the 4.44% annualized interest rate spread for the quarter ended September 30, 2010. Leverage was 1.2:1, 1.1:1, and 1.3:1 at December 31, 2010, December 31, 2009, and September 30, 2010, respectively. Recourse leverage was 0.5:1, 0.9:1 and 0.5:1 at December 31, 2010, December 31, 2009, and September 30, 2010, respectively.
RMBS comprised approximately 96.0%, 92.7%, and 95.1% of the Company's investment portfolio at December 31, 2010, December 31, 2009, and September 30, 2010, respectively. The balance of the portfolio was comprised of securitized loans that collateralized the secured debt.
The following table summarizes portfolio information for the Company:
December 31, 2010 December 31, 2009 September 30, 2010
Interest earning
assets at $ 7,651,077 $ 4,559,427 $ 7,173,376
period-end *
Interest bearing
liabilities at $ 4,054,112 $ 2,365,752 $ 3,844,440
period-end
Leverage at 1.2:1 1.1:1 1.3:1
period-end
Leverage at
period-end 0.5:1 0.9:1 0.5:1
(recourse)
Portfolio
Composition, at
principal value
Non-Agency RMBS 83.4 % 64.6 % 82.8 %
Senior 4.0 % 37.5 % 5.7 %
Senior, interest 35.7 % 0.0 % 32.2 %
only
Subordinated 29.8 % 22.0 % 29.6 %
Subordinated, 1.8 % 5.1 % 2.0 %
interest only
Senior, 12.1 % 0.0 % 13.3 %
non-retained
Agency RMBS 12.6 % 23.3 % 12.3 %
Securitized loans 4.0 % 12.1 % 4.9 %
Fixed-rate
percentage of 51.7 % 52.7 % 55.9 %
portfolio
Adjustable-rate
percentage of 48.3 % 47.3 % 44.1 %
portfolio
Annualized yield on
average earning 8.32 % 6.37 % 9.02 %
assets during the
period
Annualized cost of
funds on average 4.10 % 1.51 % 4.58 %
borrowed funds
during the period
* Excludes cash and
cash equivalents
The following table summarizes characteristics for each asset class:
December 31, 2010
Weighted Weighted Weighted
Average Average Fair Average Weighted
Amortized Value Coupon Average Yield
Cost Basis
Non-Agency Mortgage-Backed
Securities
Senior $ 99.64 $ 101.56 4.48% 4.65%
Senior, interest only $ 6.98 $ 5.28 1.74% 14.71%
Subordinated $ 44.35 $ 43.88 4.11% 16.78%
Subordinated, interest $ 9.93 $ 10.81 3.03% 27.60%
only
Senior, non-retained $ 98.51 $ 97.87 5.17% 4.36%
Agency Mortgage-Backed $ 103.30 $ 104.80 5.05% 4.51%
Securities
Securitized loans
Senior $ 101.19 $ 101.19 5.50% 5.54%
Senior, interest only $ 0.01 $ 0.01 0.41% 100.00%
Subordinated $ 100.93 $ 100.93 5.36% 2.85%
The Company's portfolio is comprised of RMBS and securitized whole residential mortgage loans. During the quarter ended December 31, 2010, the Company recorded a loan loss provision of $577 thousand as compared to a provision of $1.7 million for the quarter ended December 31, 2009 and $482 thousand for the quarter ended September 30, 2010.
The Constant Prepayment Rate on the Company's portfolio was 17%, 18%, and 16% as of December 31, 2010, December 31, 2009, and September 30, 2010, respectively. The net accretion of discounts was $59.6 million, $10.7 million and $69.1 million for the quarters ended December 31, 2010, December 31, 2009, and September 30, 2010, respectively. The total net discount remaining was $2.3 billion, $1.8 billion and $2.3 billion at December 31, 2010, December 31, 2009, and September 30, 2010, respectively.
General and administrative expenses, including the management fee and loan loss provision, as a percentage of average interest earning assets were 0.62%, 0.72%, and 0.62% for the quarters ended December 31, 2010, December 31, 2009, and September 30, 2010, respectively. At December 31, 2010, December 31, 2009, and September 30, 2010, the Company had a common stock book value per share of $3.23, $3.17, and $3.29, respectively.
On November 2, 2010 the Company announced the sale of 125,000,000 shares of common stock at $3.80 per share for estimated proceeds, less the underwriters' discount and offering expenses, of $474.8 million. In addition, on November 8, 2010, the underwriters exercised the option to purchase up to an additional 18,750,000 shares of common stock to cover over-allotments for proceeds, less the underwriters' discount, of approximately $71.3 million. The sale was completed on November 8, 2010. In all, the Company raised net proceeds of approximately $546.1 million in this offering.
The Company is a specialty finance company that invests in residential mortgage-backed securities, residential mortgage loans, real estate-related securities and various other asset classes. The Company's principal business objective is to generate net income for distribution to investors from the spread between the yields on its investments and the cost of borrowings 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"), and is externally managed by Fixed Income Discount Advisory Company.
The Company will hold the fourth quarter 2010 earnings conference call on Thursday, February 10, 2011, at 10:00 a.m. EST. The number to call is 866-843-0890 for domestic calls and 412-317-9250 for international calls and the pass code is 4014079. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the pass code is 448264. 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)
December 31, September 30, June 30, March 31, December 31,
2010 2010 2010 2010 2009 (1)
(unaudited) (unaudited) (unaudited) (unaudited)
Assets:
Cash and cash $ 7,173 $ 11,949 $ 236,214 $ 44,200 $ 24,279
equivalents
Non-Agency
Mortgage-Backed
Securities, at
fair value
Senior 987,685 1,065,145 817,736 1,429,530 2,022,406
Subordinated 2,210,858 1,866,911 1,465,905 947,963 376,459
Senior, 1,965,418 1,967,812 2,133,486 1,646,087 -
non-retained
Agency
Mortgage-Backed 2,133,584 1,884,193 1,761,732 1,558,795 1,690,029
Securities, at
fair value
Securitized
loans held for
investment, net
of allowance
for loan losses
of $6.6 353,532 389,315 416,504 441,347 470,533
million, $6.0
million, $5.6
million, $4.6
million, and
$4.6 million,
respectively
Receivable for
investments - - - 47,185 -
sold
Accrued
interest 49,088 47,767 45,682 39,637 33,128
receivable
Other assets 1,212 360 923 1,451 1,494
Total assets $ 7,708,550 $ 7,233,452 $ 6,878,182 $ 6,156,195 $ 4,618,328
Liabilities:
Repurchase $ 1,808,797 $ 1,568,223 $ 1,337,805 $ 1,538,820 $ 1,716,398
agreements
Repurchase
agreements with - - - 147,417 259,004
affiliates
Securitized 289,236 320,552 342,819 364,665 390,350
debt
Securitized
debt, 1,956,079 1,955,665 2,120,861 1,636,437 -
non-retained
Payable for
investments 127,694 279,649 - 41,822 -
purchased
Accrued
interest 11,641 11,164 12,145 9,691 3,235
payable
Dividends 174,445 158,811 130,420 113,793 113,788
payable
Accounts
payable and 393 810 679 489 472
other
liabilities
Investment
management fees 12,422 11,411 9,357 8,114 8,519
payable to
affiliate
Interest rate
swaps, at fair 9,988 24,820 11,237 - -
value
Total $ 4,390,695 $ 4,331,105 $ 3,965,323 $ 3,861,248 $ 2,491,766
liabilities
Stockholders'
Equity:
Common stock:
par value $0.01
per share;
1,500,000,000
shares
authorized,
1,027,034,357,
883,169,403, $ 10,261 $ 8,822 $ 8,822 $ 6,694 $ 6,693
883,151,028,
670,371,002,
and 670,371,587
shares issued
and
outstanding,
respectively
Additional 3,601,890 3,056,659 3,056,566 2,290,636 2,290,614
paid-in-capital
Accumulated
other (90,500 ) 22,444 673 144,978 (99,754 )
comprehensive
income (loss)
Retained
earnings (203,796 ) (185,578 ) (153,202 ) (147,361 ) (70,991 )
(accumulated
deficit)
Total
stockholders' $ 3,317,855 $ 2,902,347 $ 2,912,859 $ 2,294,947 $ 2,126,562
equity
Total
liabilities and $ 7,708,550 $ 7,233,452 $ 6,878,182 $ 6,156,195 $ 4,618,328
stockholders'
equity
(1) Derived from the audited consolidated financial statements at December 31, 2009.
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except share and per share data)
(unaudited)
December September June 30, March 31, December
31, 30, 2010 2010 31,
2010 2010 2009
Net Interest Income:
Interest income $ 159,967 $ 140,405 $ 133,522 $ 128,984 $ 100,765
Interest expense 12,076 10,527 7,198 7,374 8,530
Interest income, 33,780 58,090 49,829 50,861 -
non-retained
Interest expense, 27,573 32,237 21,421 33,830 -
non-retained
Net interest income 154,098 155,731 154,732 138,641 92,235
(expense)
Other-than-temporary
impairments:
Total
other-than-temporary (5,596) (1,314) (24,746) (22,687) (1,480)
impairment losses
Non-credit portion
of loss recognized
in other 3,233 436 17,853 20,143 164
comprehensive income
(loss)
Net
other-than-temporary (2,363) (878) (6,893) (2,544) (1,316)
credit impairment
losses
Other gains
(losses):
Unrealized gains
(losses) on interest 14,831 (13,583) (11,237) - -
rate swaps
Realized gains
(losses) on sales of 7,711 2,032 - 342 16,191
investments, net
Realized losses on
principal (3,593) (2,517) (326) (949) (195)
write-downs of
non-Agency RMBS
Total other gains 18,949 (14,068) (11,563) (607) 15,996
(losses)
Net investment 170,684 140,785 136,276 135,490 106,915
income (loss)
Other expenses:
Management fee 12,229 11,318 9,263 8,114 8,516
Provision for loan 577 482 1,024 606 1,692
losses
General and
administrative 1,648 1,798 1,409 1,160 1,238
expenses
Total other expenses 14,454 13,598 11,696 9,880 11,446
Income (loss) before 156,230 127,187 124,580 125,610 95,469
income taxes
Income taxes 3 752 1 - -
Net income (loss) $ 156,227 $ 126,435 $ 124,579 $ 125,610 $ 95,469
Net income (loss)
per share-basic and $ 0.16 $ 0.14 $ 0.16 $ 0.19 $ 0.14
diluted
Weighted average
number of shares 967,544,377 883,147,726 765,475,340 670,371,022 670,324,435
outstanding-basic
and diluted
Comprehensive income
(loss):
Net income (loss) $ 156,227 $ 126,435 $ 124,579 $ 125,610 $ 95,469
Other comprehensive
income (loss):
Unrealized gains
(losses) on (111,189) 20,408 (151,524) 241,581 (31,753)
available-for-sale
securities, net
Reclassification
adjustment for net
losses included in
net income (loss) 2,363 878 6,893 2,544 1,316
for
other-than-temporary
credit impairment
losses
Reclassification
adjustment for
realized losses (4,118) 485 326 607 (15,996)
(gains) included in
net income (loss)
Other comprehensive (112,944) 21,771 (144,305) 244,732 (46,433)
income (loss)
Comprehensive income $ 43,283 $ 148,206 $ (19,726) $ 370,342 $ 49,036
(loss)
(1) Derived from the audited consolidated financial statements at December 31, 2009.
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except share and per share data)
(unaudited)
For the year ended
December 31, 2010 December 31, 2009 (1)
Net Interest Income:
Interest income $ 562,878 $ 298,539
Interest expense 37,175 35,083
Interest income, non-retained 192,560 -
Interest expense, non-retained 115,061 -
Net interest income (expense) 603,202 263,456
Other-than-temporary impairments:
Total other-than-temporary (54,343 ) (16,264 )
impairment losses
Non-credit portion of loss
recognized in other comprehensive 41,665 6,268
income (loss)
Net other-than-temporary credit (12,678 ) (9,996 )
impairment losses
Other gains (losses):
Unrealized gains (losses) on (9,989 ) -
interest rate swaps
Realized gains (losses) on sales of 10,085 103,646
investments, net
Realized losses on principal (7,385 ) (255 )
write-downs of non-Agency RMBS
Total other gains (losses) (7,289 ) 103,391
Net investment income (loss) 583,235 356,851
Other expenses:
Management fee 40,924 25,704
Provision for loan losses 2,689 3,102
General and administrative expenses 6,015 4,061
Total other expenses 49,628 32,867
Income (loss) before income taxes 533,607 323,984
Income taxes 756 1
Net income (loss) $ 532,851 $ 323,983
Net income (loss) per share-basic $ 0.65 $ 0.64
and diluted
Weighted average number of shares 822,617,319 507,042,421
outstanding-basic and diluted
Comprehensive income (loss):
Net income (loss) $ 532,851 $ 323,983
Other comprehensive income (loss):
Unrealized gains (losses) on (724 ) 260,309
available-for-sale securities, net
Reclassification adjustment for net
losses included in net income (loss) 12,678 9,996
for other-than-temporary credit
impairment losses
Reclassification adjustment for
realized losses (gains) included in (2,700 ) (103,391 )
net income (loss)
Other comprehensive income (loss) 9,254 166,914
Comprehensive income (loss) $ 542,105 $ 490,897
(1) Derived from the audited consolidated financial statements at December 31,
2009.
Source: Chimera Investment Corporation
Released February 9, 2011