Chimera Investment Corporation Reports Core EPS for the 1st Quarter 2011 of $0.15 Per Share
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 $ 10,170,231 $ 6,023,722 $ 8,016,227
period-end *
Interest bearing liabilities $ 6,228,141 $ 3,687,339 $ 4,054,112
at period-end
Leverage at period-end 1.8:1 1.6:1 1.1:1
Leverage at period-end 1.1:1 0.7:1 0.5:1
(recourse)
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 79.8 % 66.2 % 51.7 %
portfolio
Adjustable-rate percentage of 20.2 % 33.8 % 48.3 %
portfolio
Annualized yield on average
earning assets for the 7.41 % 9.99 % 8.17 %
quarter ended**
Annualized cost of funds on
average borrowed funds for 2.70 % 4.50 % 4.10 %
the quarter ended
* 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
Weighted Weighted
Principal Weighted Weighted Average Average
or Average Average Weighted Yield Annualized 3
Notional Amortized Fair Average (Loss Yield Over Month
Value at Cost Basis Value at Coupon at Adjusted) Current CPR
Period-End at Period-End Period-End at Quarter* at
Period-End Period-End Period-
End
Non-Agency
Mortgage-Backed
Securities
Senior $ 9,612 $ 98.86 $ 94.20 1.22 % 2.66 % 2.21 % 6 %
Senior, $ 6,352,256 $ 6.44 $ 5.05 2.02 % 12.91 % 4.78 % 17 %
interest only
Subordinated $ 4,917,240 $ 46.88 $ 45.44 4.12 % 14.43 % 24.27 % 16 %
Subordinated, $ 303,427 $ 9.93 $ 10.56 2.97 % 26.06 % 35.83 % 14 %
interest only
Senior, $ 2,136,669 $ 98.09 $ 110.84 5.21 % 4.88 % 3.50 % 16 %
non-retained
Agency
Mortgage-Backed $ 4,800,913 $ 102.76 $ 102.74 4.71 % 4.26 % 4.48 % 20 %
Securities
Securitized
loans
Senior $ 273,178 $ 101.19 $ 101.19 5.46 % 5.50 % 4.92 % 25 %
Senior, $ 288,661 $ 0.01 $ 0.01 0.41 % 100.00 % 4586.67 % 24 %
interest only
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 CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except share and per share data)
March 31, December 31, September 30, June 30, 2010 March 31,
2011 2010 (1) 2010 (unaudited) 2010
(unaudited) (unaudited) (unaudited)
Assets:
Cash and cash $ 16,295 $ 7,173 $ 11,949 $ 236,214 $ 44,200
equivalents
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, 2,368,212 2,330,568 1,967,812 2,133,486 1,646,087
non-retained
Agency
Mortgage-Backed 4,879,382 2,133,584 1,884,193 1,761,732 1,558,795
Securities, at
fair value
Securitized
loans held for
investment, net
of allowance
for loan losses
of $8.0 326,295 353,532 389,315 416,504 441,347
million, $6.6
million, $6.0
million, $5.6
million and
$4.6 million,
respectively
Receivable for
investments 6,192 - - - 47,185
sold
Accrued
interest 58,570 49,088 47,767 45,682 39,637
receivable
Other assets 1,270 1,212 360 923 1,451
Interest rate
swaps, at fair 5,876 - - - -
value
Total assets $ 10,258,434 $ 8,073,700 $ 7,233,452 $ 6,878,182 $ 6,156,195
Liabilities:
Repurchase
agreements, $ 3,870,407 $ 1,600,078 $ 1,359,504 $ 1,133,036 $ 1,343,111
Agency RMBS
Repurchase
agreements, - 208,719 208,719 204,769 195,709
non-Agency RMBS
Repurchase
agreements with - - - - 147,417
affiliates,
non-Agency RMBS
Securitized 266,363 289,236 320,552 342,819 364,665
debt
Securitized
debt, 2,091,371 1,956,079 1,955,665 2,120,861 1,636,437
non-retained
Payable for
investments 311,610 127,693 279,649 - 41,822
purchased
Accrued
interest 12,543 11,641 11,164 12,145 9,691
payable
Dividends 143,676 174,445 158,811 130,420 113,793
payable
Accounts
payable and 1,234 393 810 679 489
other
liabilities
Investment
management fees 12,807 12,422 11,411 9,357 8,114
payable to
affiliate
Interest rate
swaps, at fair 6,033 9,988 24,820 11,237 -
value
Total $ 6,716,044 $ 4,390,694 $ 4,331,105 $ 3,965,323 $ 3,861,248
liabilities
Stockholders'
Equity:
Common stock:
par value $0.01
per share;
1,500,000,000
shares
authorized,
1,027,107,362,
1,027,034,357, $ 10,262 $ 10,261 $ 8,822 $ 8,822 $ 6,694
883,169,403,
883,151,028,
and 670,371,002
shares issued
and
outstanding,
respectively
Additional 3,602,339 3,601,890 3,056,659 3,056,566 2,290,636
paid-in-capital
Accumulated
other 113,899 274,651 22,444 673 144,978
comprehensive
income (loss)
Retained
earnings (184,110 ) (203,796 ) (185,578 ) (153,202 ) (147,361 )
(accumulated
deficit)
Total
stockholders' $ 3,542,390 $ 3,683,006 $ 2,902,347 $ 2,912,859 $ 2,294,947
equity
Total
liabilities and $ 10,258,434 $ 8,073,700 $ 7,233,452 $ 6,878,182 $ 6,156,195
stockholders'
equity
(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)
(unaudited)
March 31, 2011 December 31, September 30, June 30, 2010 March 31, 2010
2010 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, 21,159 33,780 58,090 49,829 50,861
non-retained
Interest expense, 27,575 27,573 32,237 21,421 33,830
non-retained
Net interest income 189,309 154,098 155,731 154,732 138,641
(expense)
Other-than-temporary
impairments:
Total
other-than-temporary (4,205 ) (5,596 ) (1,314 ) (24,746 ) (22,687 )
impairment losses
Non-credit portion
of loss recognized
in other 1,580 3,233 436 17,853 20,143
comprehensive income
(loss)
Net
other-than-temporary (2,625 ) (2,363 ) (878 ) (6,893 ) (2,544 )
credit impairment
losses
Other gains
(losses):
Unrealized gains
(losses) on interest 9,831 14,831 (13,583 ) (11,237 ) -
rate swaps
Realized gains
(losses) on sales of 2,744 7,711 2,032 - 342
investments, net
Realized losses on
principal (19,520 ) (3,593 ) (2,517 ) (326 ) (949 )
write-downs of
non-Agency RMBS
Total other gains (6,945 ) 18,949 (14,068 ) (11,563 ) (607 )
(losses)
Net investment 179,739 170,684 140,785 136,276 135,490
income (loss)
Other expenses:
Management fee 12,750 12,229 11,318 9,263 8,114
Provision for loan 1,442 577 482 1,024 606
losses
General and
administrative 1,487 1,648 1,798 1,409 1,160
expenses
Total other expenses 15,679 14,454 13,598 11,696 9,880
Income (loss) before 164,060 156,230 127,187 124,580 125,610
income taxes
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 $ 0.16 $ 0.16 $ 0.14 $ 0.16 $ 0.19
diluted
Weighted average
number of shares 1,027,063,055 967,544,377 883,147,726 765,475,340 670,371,022
outstanding-basic
and diluted
Comprehensive income
(loss):
Net income (loss) $ 163,362 $ 156,227 $ 126,435 $ 124,579 $ 125,610
Other comprehensive
income (loss):
Unrealized gains
(losses) on (180,153 ) 253,962 20,408 (151,524 ) 241,581
available-for-sale
securities, net
Reclassification
adjustment for net
losses included in
net income (loss) 2,625 2,363 878 6,893 2,544
for
other-than-temporary
credit impairment
losses
Reclassification
adjustment for
realized losses 16,776 (4,118 ) 485 326 607
(gains) included in
net income (loss)
Other comprehensive (160,752 ) 252,207 21,771 (144,305 ) 244,732
income (loss)
Comprehensive income $ 2,610 $ 408,434 $ 148,206 $ (19,726 ) $ 370,342
(loss)
Source: Chimera Investment Corporation
Released May 4, 2011