Chimera Investment Corporation Reports Core EPS for the 2nd Quarter 2010 of $0.19 Per Share
NEW YORK--(BUSINESS WIRE)-- Chimera Investment Corporation (NYSE: CIM) today reported Core Earnings for the quarter ended June 30, 2010, of $142.8 million or $0.19 per average share as compared to Core Earnings for the quarter ended June 30, 2009, of $48.9 million or $0.10 per average share and Core Earnings for the quarter ended March 31, 2010, of $127.9 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 $124.6 million or $0.16 per average share for the quarter ended June 30, 2010, as compared to GAAP net income of $51.6 million or $0.10 per average share for the quarter ended June 30, 2009, and GAAP net income of $125.6 million or $0.19 per average share for the quarter ended March 31, 2010.
During the quarter ended June 30, 2010, the Company had no sales of residential mortgage-backed securities ("RMBS"). The Company sold RMBS with a carrying value of $75.3 million for realized gains of $9.3 million during the quarter ended June 30, 2009. During the quarter ended March 31, 2010, the Company sold RMBS with a carrying value of $89.6 million for net realized gains of $342 thousand.
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. During the quarter ended June 30, 2009, the Company did not execute any re-securitization transactions. 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 in re-securitization transactions which were accounted for as financings.
The Company declared common stock dividends of $0.17, $0.08, and $0.17 per share for the quarters ended June 30, 2010, June 30, 2009, and March 31, 2010, respectively. The annualized dividend yield on the Company's common stock for the second quarter, based on the June 30, 2010, closing price of $3.61 was 18.84%. On a Core Earnings basis, the Company provided an annualized return on average equity of 21.94%, 16.45%, and 23.15% for the quarters ended June 30, 2010, June 30, 2009, and March 31, 2010, respectively. On a GAAP basis, the Company provided an annualized return on average equity of 19.14%, 17.36% and 22.73%, for the quarters ended June 30, 2010, June 30, 2009, and March 31, 2010, respectively.
Matthew J. Lambiase, Chief Executive Officer and President of the Company, commented on the quarter. "The window of opportunity remains open for investing in attractively-priced residential mortgage-backed securities and enhancing returns through the re-securitization process. Our successful capital raise at the end of the quarter will be deployed into this market, and we believe that we are building a portfolio that can deliver long-term performance. We appreciate investors' confidence in our ability to take advantage of this and future opportunities as the economic, regulatory and market environment for housing and residential mortgages continues to evolve."
For the quarter ended June 30, 2010, the annualized yield on average earning assets was 8.49% and the annualized cost of funds on the average borrowed funds balance was 2.93% for an interest rate spread of 5.56%. This is a 113 basis point increase over the 4.43% annualized interest rate spread for the quarter ended June 30, 2009, and a 2 basis point increase over the 5.54% annualized interest rate spread for the quarter ended March 31, 2010. Leverage was 1.3:1, 1.0:1, and 1.6:1 at June 30, 2010, June 30, 2009, and March 31, 2010, respectively. Recourse leverage was 0.5:1, 0.8:1 and 0.7:1 at June 30, 2010, June 30, 2009, and March 31, 2010, respectively.
RMBS comprised approximately 93.9%, 90.0%, and 91.9% of the Company's investment portfolio at June 30, 2010, June 30, 2009, and March 31, 2010, respectively. The balance of the portfolio was comprised of loans collateralizing secured debt.
The following table summarizes portfolio information for the Company:
June 30, 2010 June 30, 2009 March 31, 2010
Interest earning assets at $ 6,595,363 $ 4,166,731 $ 6,023,722
period-end
Interest bearing liabilities at $ 3,801,485 $ 1,943,413 $ 3,687,339
period-end
Leverage at period-end 1.3:1 1.0:1 1.6:1
Leverage at period-end (recourse) 0.5:1 0.8:1 0.7:1
Portfolio Composition, at
principal value
Non-Agency RMBS 80.5 % 55.5 % 76.5 %
Senior 5.2 % 49.1 % 15.7 %
Senior, interest only 25.9 % 4.3 % 15.6 %
Subordinated 30.2 % 2.1 % 25.8 %
Subordinated, interest only 2.2 % 0.0 % 2.8 %
Senior, non-retained 17.0 % 0.0 % 16.6 %
Agency RMBS 13.4 % 34.5 % 15.3 %
Securitized loans 6.1 % 10.0 % 8.1 %
Fixed-rate percentage of portfolio 72.4 % 59.7 % 66.2 %
Adjustable-rate percentage of 27.6 % 40.3 % 33.8 %
portfolio
Annualized yield on average 8.49 % 6.83 % 10.04 %
earning assets during the period
Annualized cost of funds on
average borrowed funds during the 2.93 % 2.40 % 4.50 %
period
The following table summarizes characteristics for each asset class:
June 30, 2010
Weighted Weighted Weighted
Average Average Fair Average Weighted Average
Amortized Value Coupon Yield
Cost Basis
Non-Agency Mortgage-Backed
Securities
Senior $ 94.21 $ 96.27 5.30 % 6.14 %
Senior, interest only $ 7.51 $ 5.25 2.01 % 17.46 %
Subordinated $ 38.45 $ 37.78 4.65 % 17.37 %
Subordinated, interest $ 0.93 $ 1.49 1.00 % 49.93 %
only
Senior, non-retained $ 96.59 $ 97.79 5.26 % 6.22 %
Agency Mortgage-Backed $ 103.27 $ 106.95 5.44 % 3.93 %
Securities
Securitized loans $ 101.19 $ 101.19 5.91 % 6.49 %
The Company's portfolio is comprised of RMBS and securitized whole residential mortgage loans. During the quarter ended June 30, 2010, the Company recorded a loan loss provision of $1.0 million as compared to a provision of $1.1 million for the quarter ended June 30, 2009 and $606 thousand for the quarter ended March 31, 2010.
The Constant Prepayment Rate on the Company's portfolio was 16%, 19%, and 17% during the quarters ended June 30, 2010, June 30, 2009, and March 31, 2010, respectively. The net accretion of discounts was $65.0 million, $14.8 million and $53.8 million for the quarters ended June 30, 2010, June 30, 2009, and March 31, 2010, respectively. The total net discount remaining was $2.2 billion, $913.5 million and $2.0 billion at June 30, 2010, June 30, 2009, and March 31, 2010, respectively.
General and administrative expenses, including the management fee and loan loss provision, as a percentage of average interest earning assets were 0.54%, 0.83%, and 0.55% for the quarters ended June 30, 2010, June 30, 2009, and March 31, 2010, respectively. At June 30, 2010, June 30, 2009, and March 31, 2010, the Company had a common stock book value per share of $3.30, $2.90, and $3.42, respectively.
On March 31, 2010 the Company announced the sale of 85,000,000 shares of common stock at $3.61 per share for estimated proceeds, less the underwriters' discount and offering expenses, of $306.7 million. In addition, on April 1, 2010, the underwriters exercised the option to purchase up to an additional 12,750,000 shares of common stock to cover over-allotments for proceeds, less the underwriters' discount, of approximately $46.0 million. The sale was completed on April 7, 2010. In all, the Company raised net proceeds of approximately $352.7 million in this offering.
On June 22, 2010 the Company announced the sale of 100,000,000 shares of common stock at $3.61 per share for estimated proceeds, less the underwriters' discount and offering expenses, of $360.8 million. In addition, on June 25, 2010, the underwriters exercised the option to purchase up to an additional 15,000,000 shares of common stock to cover over-allotments for proceeds, less the underwriters' discount, of approximately $54.2 million. The sale was completed on June 28, 2010. In all, the Company raised net proceeds of approximately $415.0 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 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 883,161,353 shares of common stock outstanding.
The Company will hold the second quarter 2010 earnings conference call on Tuesday, August 3, 2010, at 10:00 a.m. EST. The number to call is 866-543-6411 for domestic calls and 617-213-8900 for international calls and the pass code is 30982244. The replay number is 888-286-8010 for domestic calls and 617-801-6888 for international calls and the pass code is 69000781. 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.
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)
(unaudited)
June 30, 2010 March 31, December 31, September 30, June 30, 2009
2010 2009 (1) 2009
Assets:
Cash and cash $ 236,214 $ 44,200 $ 24,279 $ 21,023 $ 13,121
equivalents
Non-Agency
Mortgage-Backed
Securities, at
fair value
Senior 817,736 1,429,530 2,022,406 1,618,116 1,720,832
Subordinated 1,465,905 947,963 376,459 378,344 25,711
Senior, 2,133,486 1,646,087 - - -
non-retained
Agency
Mortgage-Backed 1,761,732 1,558,795 1,690,029 1,823,308 1,889,550
Securities, at
fair value
Securitized
loans held for
investment, net
of allowance
for loan losses
of $5.6 416,504 441,347 470,533 498,915 530,638
million, $4.6
million, $4.6
million, $3.0
million, and
$3.0 million,
respectively
Receivable for
investments - 47,185 - - -
sold
Accrued
interest 45,682 39,637 33,128 29,444 27,055
receivable
Other assets 923 1,451 1,494 330 798
Total assets $ 6,878,182 $ 6,156,195 $ 4,618,328 $ 4,369,480 $ 4,207,705
Liabilities:
Repurchase $ 1,337,805 $ 1,538,820 $ 1,716,398 $ 1,444,243 $ 1,377,148
agreements
Repurchase
agreements with - 147,417 259,004 153,076 123,483
affiliates
Securitized 342,819 364,665 390,350 414,339 442,782
debt
Securitized
debt, 2,120,861 1,636,437 - - -
non-retained
Payable for
investments - 41,822 - 73,460 270,735
purchased
Accrued
interest 12,145 9,691 3,235 3,199 2,801
payable
Dividends 130,420 113,793 113,788 80,311 37,705
payable
Accounts
payable and 679 489 472 752 487
other
liabilities
Investment
management fees 9,357 8,114 8,519 9,071 5,955
payable to
affiliate
Interest rate
swaps, at fair 11,237 - - - -
value
Total $ 3,965,323 $ 3,861,248 $ 2,491,766 $ 2,178,451 $ 2,261,096
liabilities
Stockholders'
Equity:
Common stock:
par value $0.01
per share;
1,000,000,000
shares
authorized,
883,151,028,
670,371,002, $ 8,822 $ 6,694 $ 6,693 $ 6,693 $ 6,692
670,371,587,
670,324,854,
and 670,325,786
shares issued
and
outstanding,
respectively
Additional 3,056,566 2,290,636 2,290,614 2,290,328 2,290,308
paid-in-capital
Accumulated
other 673 144,978 (99,754 ) (53,322 ) (220,029 )
comprehensive
income (loss)
Accumulated (153,202 ) (147,361 ) (70,991 ) (52,670 ) (130,362 )
deficit
Total
stockholders' $ 2,912,859 $ 2,294,947 $ 2,126,562 $ 2,191,029 $ 1,946,609
equity
Total
liabilities and $ 6,878,182 $ 6,156,195 $ 4,618,328 $ 4,369,480 $ 4,207,705
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)
June 30, 2010 March 31, 2010 December 31, September 30, June 30, 2009
2009 2009
Net Interest Income:
Interest income $ 133,522 $ 128,984 $ 100,765 $ 104,690 $ 65,077
Interest expense 7,198 7,374 8,530 9,197 8,313
Interest income, 49,829 50,861 - - -
non-retained
Interest expense, 21,421 33,830 - - -
non-retained
Net interest income 154,732 138,641 92,235 95,493 56,764
Other-than-temporary
impairments:
Total
other-than-temporary (24,746 ) (22,687 ) (1,480 ) (6,209 ) (8,575 )
impairment losses
Non-credit portion
of loss recognized
in other 17,853 20,143 164 4,024 2,080
comprehensive income
(loss)
Net
other-than-temporary (6,893 ) (2,544 ) (1,316 ) (2,185 ) (6,495 )
credit impairment
losses
Other gains
(losses):
Unrealized gains
(losses) on interest (11,237 ) - - - -
rate swaps
Realized gain (loss)
on sales of - 342 16,191 74,508 9,321
investments, net
Realized losses on
principal (326 ) (949 ) (195 ) (61 ) -
write-downs of
non-Agency RMBS
Total other gains (11,563 ) (607 ) 15,996 74,447 9,321
(losses)
Net investment 136,276 135,490 106,915 167,755 59,590
income (loss)
Other expenses:
Management fee 9,263 8,114 8,516 8,649 5,955
Provision for loan 1,024 606 1,692 47 1,130
losses
General and
administrative 1,409 1,160 1,238 1,057 861
expenses
Total other expenses 11,696 9,880 11,446 9,753 7,946
Income (loss) before 124,580 125,610 95,469 158,002 51,644
income taxes
Income taxes 1 - - - -
Net income (loss) $ 124,579 $ 125,610 $ 95,469 $ 158,002 $ 51,644
Net income (loss)
per share-basic and $ 0.16 $ 0.19 $ 0.14 $ 0.24 $ 0.10
diluted
Weighted average
number of shares 765,475,340 670,371,022 670,324,435 670,324,854 503,110,132
outstanding-basic
and diluted
Comprehensive income
(loss):
Net income (loss) $ 124,579 $ 125,610 $ 95,469 $ 158,002 $ 51,644
Other comprehensive
income (loss):
Unrealized gains
(losses) on (151,524 ) 241,581 (31,753 ) 238,969 39,501
available-for-sale
securities, net
Reclassification
adjustment for net
losses included in
net income for 6,893 2,544 1,316 2,185 6,495
other-than-temporary
credit impairment
losses
Reclassification
adjustment for
realized losses 326 607 (15,996 ) (74,447 ) (9,321 )
(gains) included in
net income
Other comprehensive (144,305 ) 244,732 (46,433 ) 166,707 36,675
income (loss):
Comprehensive income $ (19,726 ) $ 370,342 $ 49,036 $ 324,709 $ 88,319
(loss)
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except share and per share data)
(unaudited)
For the six months ended
June 30, 2010 June 30, 2009
Net Interest Income:
Interest income $ 262,506 $ 93,084
Interest expense 14,572 17,355
Interest income, non-retained 100,690 -
Interest expense, non-retained 55,251 -
Net interest income 293,373 75,729
Other-than-temporary impairments:
Total other-than-temporary impairment losses (47,433 ) (8,575 )
Non-credit portion of loss recognized in other 37,996 2,080
comprehensive income (loss)
Net other-than-temporary credit impairment (9,437 ) (6,495 )
losses
Other gains (losses):
Unrealized gains (losses) on interest rate (11,237 ) -
swaps
Realized gain (loss) on sales of investments, 342 12,948
net
Realized losses on principal write-downs of (1,275 ) -
non-Agency RMBS
Total other gains (losses) (12,170 ) 12,948
Net investment income (loss) 271,766 82,182
Other expenses:
Management fee 17,377 8,539
Provision for loan losses 1,630 1,363
General and administrative expenses 2,569 1,766
Total other expenses 21,576 11,668
Income (loss) before income taxes 250,190 70,514
Income taxes 1 1
Net income (loss) $ 250,189 $ 70,513
Net income (loss) per share-basic and diluted $ 0.35 $ 0.21
Weighted average number of shares 718,185,900 341,053,858
outstanding-basic and diluted
Comprehensive income (loss):
Net income (loss) $ 250,189 $ 70,513
Other comprehensive income (loss):
Unrealized gains (losses) on 90,057 53,092
available-for-sale securities, net
Reclassification adjustment for net losses
included in net income for 9,437 6,495
other-than-temporary credit impairment losses
Reclassification adjustment for realized 933 (12,948 )
losses (gains) included in net income
Other comprehensive income (loss): 100,427 46,639
Comprehensive income (loss) $ 350,616 $ 117,152
Source: Chimera Investment Corporation
Released August 2, 2010