Chimera Investment Corporation Reports 3rd Quarter Core EPS of $0.16
NEW YORK--(BUSINESS WIRE)--
Chimera Investment Corporation (NYSE: CIM) today reported Core Earnings for the quarter ending September 30, 2008 of $6.3 million or $0.16 per share as compared to Core Earnings of $6.9 million or $0.18 per share for the quarter ended June 30, 2008. "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 terminations of interest rate swaps 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 a GAAP net loss of $107.6 million or $2.76 per share and GAAP net income of $33.9 million or $0.87 per share for the quarters ended September 30, 2008 and June 30, 2008, respectively.
At September 30, 2008, the Company had completed sales of assets with a carrying value of $432.6 million in AAA-rated non-Agency residential mortgage-backed securities (RMBS) and terminated $983.4 million in interest rate swaps, which resulted in net realized losses of approximately $113.1 million and $10.5 million, respectively. The Company had no sales of investments during the quarter ended June 30, 2008.
For the quarters ended September 30, 2008 and June 30, 2008, the Company recorded unrealized gains on interest rate swaps of $10.1 million and $25.6 million, respectively.
The Company declared common dividends $0.16 per share for each of the quarters ended September 30, 2008 and June 30, 2008. The annualized dividend yield on the Company's common stock for the third quarter, based on the September 30, 2008 closing price of $6.21, was 10.31%. On a Core Earnings basis, the Company provided an annualized return on average equity of 7.97% and 6.88% for the quarters ending September 30, 2008 and June 30, 2008, respectively. On a GAAP basis, the Company provided an annualized return on average equity of (136.88%) and 33.60% for the quarters ending September 30, 2008 and June 30, 2008, respectively.
Matthew J. Lambiase, Chief Executive Officer and President of Chimera, commented on the quarter's results. "Financial markets remain volatile after one of the most traumatic quarters in history. Policymakers have been busily attending to the situation, managing not only the stresses on the financial infrastructure but also the risks to economic growth. There are some signs of stabilization, but we are likely to see continued volatility as well as opportunity. We were also busy during the quarter, taking several steps to strengthen the company's financial position so that we can begin to take advantage of the many investment opportunities arising from the market dislocation. We believe that our recent capital raise will assist in that effort."
For the quarter ending September 30, 2008, the annualized yield on average earning assets was 5.35% and the annualized cost of funds on the average borrowed funds was 4.64% for an interest rate spread of 0.71%. This is a 6 basis point increase over the 0.65% annualized interest rate spread for the quarter ended June 30, 2008. The weighted average yield on assets was 5.63% and the weighted average cost of funds was 7.10% at September 30, 2008. At June 30, 2008, the weighted average yield on assets was 6.18% and the weighted average cost of funds was 5.35%. Leverage at September 30, 2008 was 4.6:1 and at June 30, 2008, it was 3.6:1.
Residential mortgage-backed securities comprised approximately 60% of the Company's investment portfolio at September 30, 2008. The balance of the portfolio was comprised of loans collateralizing secured debt.
The following table summarizes portfolio information for the Company:
For the Quarter For the
Ended Quarter
September 30, Ended June
2008 30, 2008
-----------------------------
Leverage at period-end 4.6:1 3.6:1
Residential mortgage-backed securities
as a % of portfolio 60.4% 61.8%
Residential mortgage loans as a % of
portfolio - 7.7%
Loans collateralizing secured debt as a
% of portfolio 39.6% 30.5%
Fixed-rate investments as % of portfolio 18.4% 20.0%
Adjustable-rate investments as % of
portfolio 81.6% 80.0%
Fixed-rate investments
Residential mortgage-backed
securities as a % of fixed-rate
assets 4.4% 16.0%
Residential mortgage loans as a % of
fixed-rate assets - 15.2%
Loans collateralizing secured debt as
a % of fixed-rate assets 95.6% 68.8%
Adjustable-rate investments
Residential mortgage-backed
securities as a % of adjustable-rate
assets 73.0% 73.2%
Residential mortgage loans as a % of
adjustable-rate assets - 5.8%
Loans collateralizing secured debt as
a % of adjustable-rate assets 27.0% 21.0%
Annualized yield on average earning
assets during the period 5.35% 6.18%
Annualized cost of funds on average
repurchase agreements balance during
the period 4.64% 5.53%
Annualized interest rate spread during
the period 0.71% 0.65%
Weighted average yield on assets at
period-end 5.63% 6.18%
Weighted average cost of funds at
period-end 7.10% 5.35%
The Company's portfolio is comprised entirely of high credit quality mortgage-backed securities and securitized whole residential mortgage loans. At September 30, 2008 and June 30, 2008, the Company's mortgage-backed securities portfolio was composed primarily of AAA-rated securities and its securitized mortgage loan portfolio had no loans 60 days delinquent. During the quarter ending September 30, 2008 the Company recorded a reduction of $563 thousand in its loan loss provision in general and administrative expenses as compared to a $15 thousand reduction in loan loss provision recorded for the quarter ended June 30, 2008. This reduction is a result of the Company securitizing all of its loans held for investment during the quarter into RMBS thus eliminating the provision for loan losses on that investment class. The Company discontinues accrual of income on loans that become 60 days delinquent until such time as the loan again becomes performing. At September 30, 2008 there were no non-performing loans.
The Constant Prepayment Rate was 9% and 12% during the quarters ending September 30, 2008 and June 30, 2008, respectively. The weighted average cost basis was 100.1 and 100.9 as of September 30, 2008 and June 30, 2008, respectively. The net amortization of premiums was $908 thousand for the quarter ended September 30, 2008 and the accretion of discounts on investments was $318 thousand for the quarter ended June 30, 2008. The total net premium remaining un-amortized at September 30, 2008 was $1.5 million. The total net discount remaining un-accreted at June 30, 2008 was $1.6 million.
General and administrative expenses, including the base management fee, as a percentage of average interest earning assets were 0.44% and 0.71% for the quarters ending September 30, 2008 and June 30, 2008, respectively. At September 30, 2008 and June 30, 2008, the Company had a common stock book value per share of $6.18 and $9.94, respectively.
On October 24, 2008, the Company announced the sale of 110,000,000 shares of common stock at $2.25 per share for estimated gross proceeds of approximately $247.5 million. Immediately following the sale of these shares, Annaly Capital Management, Inc. purchased 11,681,415 shares at the same price per share as the public offering, for net proceeds of approximately $26.3 million, In addition, on October 28, 2008 the underwriters exercised the option to purchase up to an additional 16,500,000 shares of common stock to cover over-allotments for net proceeds of approximately $35.8 million.
Chimera is a specialty finance company that invests in residential mortgage loans, residential mortgage-backed securities, 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 177,170,098 shares of common stock outstanding.
The Company will hold the third quarter 2008 earnings conference call on Friday, November 7, 2008 at 10:00 a.m. EST. The number to call is 866-713-8564 for domestic calls and 617-597-5312 for international calls and the pass code is 69563405. The replay number is 888-286-8010 for domestic calls and 617-801-6888 for international calls and the pass code is 81501641. 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 e-mail distribution list, please visit www.chimerareit.com, click on E-Mail alerts, enter your e-mail address where indicated and click the Subscribe 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 absence of an operating history, our use of leverage, changes in the yield curve, the availability of mortgage loans, mortgage-backed securities and other real estate assets for purchase, changes in the market value of our assets, our ability to obtain financing and the terms of financing, general volatility of the securities markets in which we invest, interest rate mismatches between our assets 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 mortgage-backed securities, rates of default or decreased recovery rates on our investments, prepayments of mortgage assets and 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, changes in governmental regulations, tax law and rates and similar matters, market trends in our industry, interest rates, the debt securities markets or the general economy, 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 for the fiscal year ending December 31, 2007 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 STATEMENT OF FINANCIAL CONDITION
(dollars in thousands, except per share data)
September June 30, March 31, December
30, 2008 2008 2008 31, 2007
(unaudited) (unaudited) (unaudited) (1)
------------ ------------ ------------ ----------
ASSETS
Cash and cash
equivalents $ 6,167 $ 49,889 $ 91,370 $ 6,026
Restricted cash - 29,507 102,834 1,350
Mortgage-Backed
Securities, at fair
value 759,378 1,116,586 1,229,780 1,124,290
Loans held for
investment, net of
allowance for loan
losses of $0, $546
thousand, $1.3
million, and $81
thousand,
respectively - 150,083 361,594 162,371
Securitized loans
held for investment,
net of allowance for
loan losses of $680
thousand and $698
thousand,
respectively 598,014 613,580 - -
Receivable for
investments sold - - 113,581 -
Reverse repurchase
agreements - - - 265,000
Accrued interest
receivable 8,212 9,863 9,993 6,036
Other assets 456 1,648 892 563
------------ ------------ ------------ ----------
Total assets $1,372,227 $1,971,156 $1,910,044 $1,565,636
============ ============ ============ ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Repurchase
agreements $ 619,657 $ 909,089 $1,439,534 $ 270,584
Collateralized debt
obligation 500,688 504,397 -
Payable for
investments
purchased - 146,824 - 748,920
Accrued interest
payable 2,579 3,518 3,207 415
Dividends payable 6,048 6,044 9,814 943
Accounts payable
and other
liabilities 2,313 3,540 2,528 1,729
Interest rate
swaps, at fair
value - 10,065 35,649 4,156
------------ ------------ ------------ ----------
Total liabilities 1,131,285 1,583,477 1,490,732 1,026,747
------------ ------------ ------------ ----------
Stockholders' Equity:
Common stock: par
value $.01 per
share; 500,000,000
authorized,
38,992,893,
38,999,850,
37,744,918, and
37,705,563
outstanding,
respectively 378 378 377 377
Additional paid-in
capital 533,220 533,026 532,818 532,208
Accumulated other
comprehensive
(loss) income (138,307) (104,981) (45,285) 10,153
Accumulated deficit (154,349) (40,744) (68,598) (3,849)
------------ ------------ ------------ ----------
Total stockholders'
equity 240,942 387,679 419,312 538,889
------------ ------------ ------------ ----------
Total liabilities and
stockholders' equity $1,372,227 $1,971,156 $1,910,044 $1,565,636
============ ============ ============ ==========
(1) Derived from the audited financial statements at December 31,
2007.
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(dollars in thousands, except per share data)
For the
Quarter For the For the
Ended Quarter Quarter
September Ended June Ended March
30, 2008 30, 2008 31, 2008
(unaudited) (unaudited) (unaudited)
------------ ------------ ------------
Interest income $ 23,458 $ 29,951 $ 28,194
Interest expense 15,543 20,025 14,022
------------ ------------ ------------
Net interest income 7,915 9,926 14,172
------------ ------------ ------------
Unrealized gains (losses) on
interest rate swaps 10,065 25,584 (31,493)
Realized gains (losses) on
sales of investments (113,130) 1,644 (32,819)
Realized gains (losses) on
terminations of
interest rate swaps (10,460) 123 -
------------ ------------ ------------
Net Investment Income
(Expense) (105,610) 37,277 (50,140)
------------ ------------ ------------
Expenses
Management fee 1,681 2,228 2,227
General and administrative
expenses 253 1,152 2,565
------------ ------------ ------------
Total expenses 1,934 3,380 4,792
------------ ------------ ------------
Income (loss) before income
taxes (107,544) 33,897 (54,932)
------------ ------------ ------------
Income taxes 12 - 3
------------ ------------ ------------
Net income (loss) $ (107,556) $ 33,897 $ (54,935)
============ ============ ============
Net income (loss) per share -
basic and diluted $ (2.76) $ 0.87 $ (1.46)
============ ============ ============
Weighted average number of
shares outstanding - basic
and diluted 38,992,893 38,999,850 37,744,486
============ ============ ============
Net income (loss) $ (107,556) $ 33,897 $ (54,935)
------------ ------------ ------------
Other comprehensive (loss)
income:
Unrealized (loss) gain on
available-for-sale
securities (146,456) (58,051) (88,257)
Reclassification adjustment
for realized
(gains) losses included in
income 113,130 (1,644) 32,819
------------ ------------ ------------
Other comprehensive (loss)
income (33,326) (59,695) (55,438)
------------ ------------ ------------
Comprehensive (loss) income $ (140,882) $ (25,798) $ (110,373)
============ ============ ============
For the
Period
November 21,
2007 (date
For the Nine operations
Months Ended commenced)
September through
30, 2008 December 31,
(unaudited) 2007 (1)
------------- -------------
Interest income $ 81,603 $ 3,492
Interest expense 49,590 415
------------- -------------
Net interest income 32,013 3,077
------------- -------------
Unrealized gains (losses) on interest rate
swaps 4,156 (4,156)
Realized gains (losses) on sales of
investments (144,304) -
Realized gains (losses) on terminations of
interest rate swaps (10,337) -
------------- -------------
Net Investment Income (Expense) (118,472) (1,079)
------------- -------------
Expenses
Management fee 6,136 1,217
General and administrative expenses 3,972 605
------------- -------------
Total expenses 10,108 1,822
------------- -------------
Income (loss) before income taxes (128,580) (2,901)
------------- -------------
Income taxes 15 5
------------- -------------
Net income (loss) $ (128,595) $ (2,906)
============= =============
Net income (loss) per share - basic and
diluted $ (3.30) $ (.08)
============= =============
Weighted average number of shares
outstanding - basic and diluted 38,994,357 37,401,737
============= =============
Net income (loss) $ (128,595) $ (2,906)
------------- -------------
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-
sale securities (282,611) 10,153
Reclassification adjustment for realized
(gains) losses included in income 144,304 -
------------- -------------
Other comprehensive (loss) income (138,307) 10,153
------------- -------------
Comprehensive (loss) income $ (266,902) $ 7,247
============= =============
(1) Derived from the audited financial statements for the period
November 21, 2007 (date operations commenced) through December 31,
2007.
Source: Chimera Investment Corporation
Released November 6, 2008