Chimera Investment Corporation Reports Core EPS for the 3rd Quarter 2010 of $0.16 Per Share
NEW YORK--(BUSINESS WIRE)-- Chimera Investment Corporation (NYSE: CIM) today reported Core Earnings for the quarter ended September 30, 2010, of $139.0 million or $0.16 per average share as compared to Core Earnings for the quarter ended September 30, 2009, of $85.9 million or $0.13 per average share and Core Earnings for the quarter ended June 30, 2010, of $142.8 million or $0.19 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 realized net income, regardless of whether such items are included in other comprehensive income or loss, or in net income. The Company reported GAAP net income of $126.4 million or $0.14 per average share for the quarter ended September 30, 2010, as compared to GAAP net income of $158.0 million or $0.24 per average share for the quarter ended September 30, 2009, and GAAP net income of $124.6 million or $0.16 per average share for the quarter ended June 30, 2010.
During the quarter ended September 30, 2010, the Company sold residential mortgage-backed securities (RMBS) with a carrying value of $206.0 million for realized gains of $2.0 million. During the quarter ended September 30, 2009, the Company sold RMBS, including transactions involving re-securitizations, with a carrying value of $920.4 million for realized gains of $74.5 million. During the quarter ended June 30, 2010, the Company had no sales of RMBS.
During the quarters ended September 30, 2010 and 2009, the Company did not record transactions treated as financings on a permanent non-recourse basis. During the quarter ended June 30, 2010, the Company financed on a permanent non-recourse basis $627.9 million of AAA-rated fixed rate bonds for net proceeds of $629.2 million in re-securitization transactions which were accounted for as financings. 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 $0.18, $0.12, and $0.17 per share for the quarters ended September 30, 2010, September 30, 2009, and June 30, 2010, respectively. The annualized dividend yield on the Company's common stock for the third quarter, based on the September 30, 2010, closing price of $3.95 was 18.23%. On a Core Earnings basis, the Company provided an annualized return on average equity of 19.12%, 16.60%, and 21.94% for the quarters ended September 30, 2010, September 30, 2009, and June 30, 2010, respectively. On a GAAP basis, the Company provided an annualized return on average equity of 17.39%, 30.55% and 19.14%, for the quarters ended September 30, 2010, September 30, 2009, and June 30, 2010, respectively.
Matthew J. Lambiase, Chief Executive Officer and President of the Company, commented on the quarter. "Chimera's results reflect that the capital from our recent offering was deployed largely over the latter part of the third quarter. Market conditions are evolving on a number of fronts. Regulatory and technical dynamics continue to develop, and monetary policy initiatives, including the prospect of large scale asset purchases by the Federal Reserve, continue to support asset prices and lower yields across a wide range of market sectors, including ours. Looking ahead, in this environment we continue to be encouraged by the relative attractiveness of the investment opportunities before us."
For the quarter ended September 30, 2010, the annualized yield on average earning assets was 9.02% and the annualized cost of funds on the average borrowed funds balance was 4.58% for an interest rate spread of 4.44%. This is a 160 basis point decrease from the 6.04% annualized interest rate spread for the quarter ended September 30, 2009, and a 112 basis point decrease from the 5.56% annualized interest rate spread for the quarter ended June 30, 2010. Leverage was 1.3:1, 0.9:1, and 1.3:1 at September 30, 2010, September 30, 2009, and June 30, 2010, respectively. Recourse leverage was 0.5:1, 0.7:1 and 0.5:1 at September 30, 2010, September 30, 2009, and June 30, 2010, respectively.
RMBS comprised approximately 95.1%, 91.8%, and 93.9% of the Company's investment portfolio at September 30, 2010, September 30, 2009, and June 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:
September 30, 2010 September 30, 2009 June 30, 2010
Interest earning $7,173,376 $4,318,682 $6,595,363
assets at period-end *
Interest bearing
liabilities at $3,844,440 $2,011,658 $3,801,485
period-end
Leverage at period-end 1.3:1 0.9:1 1.3:1
Leverage at period-end 0.5:1 0.7:1 0.5:1
(recourse)
Portfolio Composition,
at principal value
Non-Agency RMBS 82.8% 63.0% 80.5%
Senior 5.7% 32.2% 5.2%
Senior, interest only 32.2% 0.0% 25.9%
Subordinated 29.6% 26.2% 30.2%
Subordinated, interest 2.0% 4.6% 2.2%
only
Senior, non-retained 13.3% 0.0% 17.0%
Agency RMBS 12.3% 28.8% 13.4%
Securitized loans 4.9% 8.2% 6.1%
Fixed-rate percentage 55.9% 59.0% 72.4%
of portfolio
Adjustable-rate
percentage of 44.1% 41.0% 27.6%
portfolio
Annualized yield on
average earning assets 9.02% 7.71% 8.49%
during the period
Annualized cost of
funds on average 4.58% 1.67% 2.93%
borrowed funds during
the period
* Excludes cash and cash equivalents
The following table summarizes characteristics for each asset class:
September 30, 2010
Weighted Weighted Weighted
Average Average Fair Average Weighted
Amortized Value Coupon Average Yield
Cost Basis
Non-Agency
Mortgage-Backed
Securities
Senior $ 96.78 $ 98.00 4.76% 5.38%
Senior, interest only $ 6.67 $ 4.84 2.01% 14.13%
Subordinated $ 40.02 $ 41.34 4.31% 16.98%
Subordinated, interest $ 9.93 $ 10.09 3.03% 25.87%
only
Senior, non-retained $ 97.83 $ 97.73 5.25% 4.96%
Agency Mortgage-Backed $ 103.29 $ 105.73 5.30% 3.54%
Securities
Securitized loans
Senior $ 101.20 $ 101.20 5.49% 5.60%
Senior, interest only $ 0.01 $ 0.01 0.49% 100.00%
Subordinated $ 100.55 $ 100.55 5.58% 4.25%
The Company's portfolio is comprised of RMBS and securitized whole residential mortgage loans. During the quarter ended September 30, 2010, the Company recorded a loan loss provision of $482 thousand as compared to a provision of $47 thousand for the quarter ended September 30, 2009 and $1.0 million for the quarter ended June 30, 2010.
The Constant Prepayment Rate on the Company's portfolio was 16%, 17%, and 16% as of September 30, 2010, September 30, 2009, and June 30, 2010, respectively. The net accretion of discounts was $69.1 million, $23.7 million and $65.0 million for the quarters ended September 30, 2010, September 30, 2009, and June 30, 2010, respectively. The total net discount remaining was $2.3 billion, $1.7 billion and $2.2 billion at September 30, 2010, September 30, 2009, and June 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 0.54% for the quarters ended September 30, 2010, September 30, 2009, and June 30, 2010, respectively. At September 30, 2010, September 30, 2009, and June 30, 2010, the Company had a common stock book value per share of $3.29, $3.27, and $3.30, respectively.
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 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 and currently has 883,168,113 shares of common stock outstanding.
The Company will hold the third quarter 2010 earnings conference call on Tuesday, October 26, 2010, at 10:00 a.m. EST. The number to call is 800-591-6945 for domestic calls and 617-614-4911 for international calls and the pass code is 20941086. The replay number is 888-286-8010 for domestic calls and 617-801-6888 for international calls and the pass code is 61985205. 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, including the Term Asset-Backed Securities Loan Facility and the Public-Private Investment Program; 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)
September 30, June 30, 2010 March 31, December 31, September 30,
2010 2010 2009 (1) 2009
(unaudited) (unaudited) (unaudited) (unaudited)
Assets:
Cash and cash $ 11,949 $ 236,214 $ 44,200 $ 24,279 $ 21,023
equivalents
Non-Agency
Mortgage-Backed
Securities, at
fair value
Senior 1,065,145 817,736 1,429,530 2,022,406 1,618,116
Subordinated 1,866,911 1,465,905 947,963 376,459 378,344
Senior, 1,967,812 2,133,486 1,646,087 - -
non-retained
Agency
Mortgage-Backed 1,884,193 1,761,732 1,558,795 1,690,029 1,823,308
Securities, at
fair value
Securitized
loans held for
investment, net
of allowance
for loan losses
of $6.0 389,315 416,504 441,347 470,533 498,915
million, $5.6
million, $4.6
million, $4.6
million, and
$3.0 million,
respectively
Receivable for
investments - - 47,185 - -
sold
Accrued
interest 47,767 45,682 39,637 33,128 29,444
receivable
Other assets 360 923 1,451 1,494 330
Total assets $ 7,233,452 $ 6,878,182 $ 6,156,195 $ 4,618,328 $ 4,369,480
Liabilities:
Repurchase $ 1,568,223 $ 1,337,805 $ 1,538,820 $ 1,716,398 $ 1,444,243
agreements
Repurchase
agreements with - - 147,417 259,004 153,076
affiliates
Securitized 320,552 342,819 364,665 390,350 414,339
debt
Securitized
debt, 1,955,665 2,120,861 1,636,437 - -
non-retained
Payable for
investments 279,649 - 41,822 - 73,460
purchased
Accrued
interest 11,164 12,145 9,691 3,235 3,199
payable
Dividends 158,811 130,420 113,793 113,788 80,311
payable
Accounts
payable and 810 679 489 472 752
other
liabilities
Investment
management fees 11,411 9,357 8,114 8,519 9,071
payable to
affiliate
Interest rate
swaps, at fair 24,820 11,237 - - -
value
Total $ 4,331,105 $ 3,965,323 $ 3,861,248 $ 2,491,766 $ 2,178,451
liabilities
Stockholders'
Equity:
Common stock:
par value $0.01
per share;
1,000,000,000
shares
authorized,
883,169,403,
883,151,028, $ 8,822 $ 8,822 $ 6,694 $ 6,693 $ 6,693
670,371,002,
670,371,587,
and 670,324,854
shares issued
and
outstanding,
respectively
Additional 3,056,659 3,056,566 2,290,636 2,290,614 2,290,328
paid-in-capital
Accumulated
other 22,444 673 144,978 (99,754 ) (53,322 )
comprehensive
income (loss)
Retained
earnings (185,578 ) (153,202 ) (147,361 ) (70,991 ) (52,670 )
(accumulated
deficit)
Total
stockholders' $ 2,902,347 $ 2,912,859 $ 2,294,947 $ 2,126,562 $ 2,191,029
equity
Total
liabilities and $ 7,233,452 $ 6,878,182 $ 6,156,195 $ 4,618,328 $ 4,369,480
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)
For the quarters ended
September 30, June 30, 2010 March 31, 2010 December 31, September 30,
2010 2009 2009
Net Interest Income:
Interest income $ 140,405 $ 133,522 $ 128,984 $ 100,765 $ 104,690
Interest expense 10,527 7,198 7,374 8,530 9,197
Interest income, 58,090 49,829 50,861 - -
non-retained
Interest expense, 32,237 21,421 33,830 - -
non-retained
Net interest income 155,731 154,732 138,641 92,235 95,493
(expense)
Other-than-temporary
impairments:
Total
other-than-temporary (1,314 ) (24,746 ) (22,687 ) (1,480 ) (6,209 )
impairment losses
Non-credit portion
of loss recognized
in other 436 17,853 20,143 164 4,024
comprehensive income
(loss)
Net
other-than-temporary (878 ) (6,893 ) (2,544 ) (1,316 ) (2,185 )
credit impairment
losses
Other gains
(losses):
Unrealized gains
(losses) on interest (13,583 ) (11,237 ) - - -
rate swaps
Realized gains
(losses) on sales of 2,032 - 342 16,191 74,508
investments, net
Realized losses on
principal (2,517 ) (326 ) (949 ) (195 ) (61 )
write-downs of
non-Agency RMBS
Total other gains (14,068 ) (11,563 ) (607 ) 15,996 74,447
(losses)
Net investment 140,785 136,276 135,490 106,915 167,755
income (loss)
Other expenses:
Management fee 11,318 9,263 8,114 8,516 8,649
Provision for loan 482 1,024 606 1,692 47
losses
General and
administrative 1,798 1,409 1,160 1,238 1,057
expenses
Total other expenses 13,598 11,696 9,880 11,446 9,753
Income (loss) before 127,187 124,580 125,610 95,469 158,002
income taxes
Income taxes 752 1 - - -
Net income (loss) $ 126,435 $ 124,579 $ 125,610 $ 95,469 $ 158,002
Net income (loss)
per share-basic and $ 0.14 $ 0.16 $ 0.19 $ 0.14 $ 0.24
diluted
Weighted average
number of shares 883,147,726 765,475,340 670,371,022 670,324,435 670,324,864
outstanding-basic
and diluted
Comprehensive income
(loss):
Net income (loss) $ 126,435 $ 124,579 $ 125,610 $ 95,469 $ 158,002
Other comprehensive
income (loss):
Unrealized gains
(losses) on 20,408 (151,524 ) 241,581 (31,753 ) 238,969
available-for-sale
securities, net
Reclassification
adjustment for net
losses included in
net income (loss) 878 6,893 2,544 1,316 2,185
for
other-than-temporary
credit impairment
losses
Reclassification
adjustment for
realized losses 485 326 607 (15,996 ) (74,447 )
(gains) included in
net income (loss)
Other comprehensive 21,771 (144,305 ) 244,732 (46,433 ) 166,707
income (loss):
Comprehensive income $ 148,206 $ (19,726 ) $ 370,342 $ 49,036 $ 324,709
(loss)
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except share and per share data)
(unaudited)
For the nine months ended
September 30, 2010 September 30, 2009
Net Interest Income:
Interest income $ 402,911 $ 197,774
Interest expense 25,099 26,552
Interest income, non-retained 158,780 -
Interest expense, non-retained 87,488 -
Net interest income (expense) 449,104 171,222
Other-than-temporary impairments:
Total other-than-temporary impairment (48,747 ) (14,784 )
losses
Non-credit portion of loss recognized 38,432 6,104
in other comprehensive income (loss)
Net other-than-temporary credit (10,315 ) (8,680 )
impairment losses
Other gains (losses):
Unrealized gains (losses) on interest (24,820 ) -
rate swaps
Realized gains (losses) on sales of 2,374 87,456
investments, net
Realized losses on principal (3,792 ) (61 )
write-downs of non-Agency RMBS
Total other gains (losses) (26,238 ) 87,395
Net investment income (loss) 412,551 249,937
Other expenses:
Management fee 28,695 17,188
Provision for loan losses 2,112 1,410
General and administrative expenses 4,367 2,823
Total other expenses 35,174 21,421
Income (loss) before income taxes 377,377 228,516
Income taxes 753 1
Net income (loss) $ 376,624 $ 228,515
Net income (loss) per share-basic and $ 0.49 $ 0.51
diluted
Weighted average number of shares 773,777,431 452,016,981
outstanding-basic and diluted
Comprehensive income (loss):
Net income (loss) $ 376,624 $ 228,515
Other comprehensive income (loss):
Unrealized gains (losses) on 110,465 292,061
available-for-sale securities, net
Reclassification adjustment for net
losses included in net income (loss) 10,315 8,680
for other-than-temporary credit
impairment losses
Reclassification adjustment for
realized losses (gains) included in 1,418 (87,395 )
net income (loss)
Other comprehensive income (loss): 122,198 213,346
Comprehensive income (loss) $ 498,822 $ 441,861
Source: Chimera Investment Corporation
Released October 25, 2010