CreXus Investment Corp. Reports Results for the 3rd Quarter 2012
CreXus Investment Corp. Reports Results for the 3rdQuarter 2012
NEW YORK--(BUSINESS WIRE)-- CreXus Investment Corp. (NYS: CXS) , today reported GAAP net income for the quarter ended September 30, 2012 of $22.6 million or $0.30 per average share, as compared to $39.9 million or $0.52 per average share for the quarter ended September 30, 2011 and $14.4 million or $0.19 per average share for the quarter ended June 30, 2012.
Common dividends declared for the quarters ended September 30, 2012, September 30, 2011, and June 30, 2012, were $0.32, $0.30 and $0.27 per common share, respectively. The Company distributes dividends based on its current estimate of taxable earnings per common share, not GAAP earnings. Taxable and GAAP earnings will typically differ due to items such as differences in premium amortization and discount accretion, non-taxable unrealized and realized gains and losses, credit loss recognition, and non-deductible general and administrative expenses. The annualized dividend yield on the Company's common stock for the quarter ended September 30, 2012, based on the September 30, 2012 closing price of $10.81, was 11.84%.
On a GAAP basis the Company provided a return on average equity of 9.83%, 17.61% and 6.24%, for the quarters ended September 30, 2012, September 30, 2011, and June 30, 2012, respectively.
Kevin Riordan, Chief Executive Officer and President of CreXus, commented on the quarter's results. "With $125 million of capital committed this quarter, we continue the process of increasing our portfolio yield and maturity while maintaining a consistent risk profile, and building a book of business that is designed to perform for the long-term. The weight of Fed involvement in the fixed income markets is being felt in our markets and credit spreads are tightening, but we believe this will result in an increase in new loan originations and securities issuance. Our pipeline and platform remain active, and we will continue to capitalize on opportunities as they arise."
The weighted average yield on commercial real estate debt and preferred equity was 10.29%, 16.80% and 11.27% at September 30, 2012, September 30, 2011 and June 30, 2012, respectively. The yield on the Company's real estate portfolio, which includes real estate held for sale, as of the quarters ended September 30, 2012, and June 30, 2012 was 9.44% and 9.50%, respectively. The Company held no real estate properties at September 30, 2011.
The following table summarizes segmented investment portfolio information for the Company:
|Quarter ended |
June 30, 2012
|Commercial Real Estate Debt and Preferred Equity Portfolio||(dollars in thousands)|
|Debt investment portfolio at period-end||$ 731,815||$ 873,644||$ 676,478|
|Preferred equity portfolio at period-end||39,769||21,282||-|
|Fixed-rate investments as percentage of portfolio||65%||50%||65%|
|Adjustable-rate investments as percentage of portfolio||35%||50%||35%|
|Agency mortgage-backed securities as percentage of fixed-rate assets||-||38%||-|
|Commercial mortgage loans as percentage of fixed-rate assets||92%||58%||100%|
|Commercial preferred equity as percentage of fixed-rate assets||8%||4%||-|
|Commercial mortgage loans as percentage of adjustable-rate assets||100%||100%||100%|
|Weighted average yield on commercial real estate debt and preferred equity at period-end||10.29%||16.80%||11.27%|
|Real Estate Properties Portfolio including Real Estate Held for Sale|
|Real estate investment at period-end (1)||78,703||-||81,604|
|Annualized yield on real estate investment portfolio at period end (2)||9.44%||-|
|Mortgages payable on real estate||19,150||-||19,150|
|Net equity in investments in real estate||59,553||-||62,454|
|Annualized yield on net equity in investments in real estate (2)||11.28%||-|
|Weighted average cost of funds on real estate investment financing (3)||3.49%||-||3.49%|
Includes $41.5 million and $44.1 million in real estate held for sale at September 30, 2012 and June 30, 2012, respectively.
Also includes related net intangible assets in excess of liabilities associated with purchase price allocation.
Impairment charge and gain on sale related to discontinued operations were not annualized for purposes of determining the yield on equity.
Interest expense includes net payments related to the interest rate swap and excludes change in market value.
The following table summarizes select characteristics for each of the Company's asset classes:
|Quarter ended||Quarter ended||Quarter ended|
|September 30, 2012||September 30, 2011||June 30, 2012|
|Weighted average amortized cost basis||$ 98.9||$ 100.0||-||85.6||93.8||104.7||$ 97.0||-|
|Weighted average coupon||9.63%||11.00%||-||5.40%||10.09%||4.77%||9.50%||-|
|Fixed-rate percentage of asset class||64%||100%||-||37%||100%||100%||65%||-|
|Adjustable-rate percentage of asset class||36%||100%||-||63%||-||-||35%||-|
|Weighted average yield on assets at period-end||10.24%||11.35%||9.44%||19.97%||17.28%||3.39%||11.27%|
|Weighted average cost of funds at period-end||-||-||3.49%|
Interest expense includes net payments related to the interest rate swap and excludes change in market value.
At September 30, 2012, the Company's commercial mortgage loan portfolio included one loan on non-accrual status. At September 30, 2011 the Company had two loans relating to one group of underlying properties that were 30 days or more delinquent. At June 30, 2012, the Company's commercial mortgage loan portfolio had no delinquent loans. At September 30, 2012, the Company had no allowance for loan losses. At September 30, 2012 the Company classified two loans as Watch List. The Company had two loans classified as Workout at September 30, 2011 and one loan classified as Watch List at June 30, 2012.
The accretion of discount on the Company's loan and preferred equity portfolio, which is a component of interest income, for the quarters ended September 30, 2012, September 30, 2011 and June 30, 2012, was $8.0 million, $30.2 million and $2.6 million, respectively. The total net discount remaining at September 30, 2012 was $7.9 million.
The Company's discontinued operations were composed of net income of $2.9 million and a $2.6 million impairment charge for the quarter ended September 30, 2012, which relates to the net operating results of collateral acquired during the quarter ended March 30, 2012 via a deed in lieu of foreclosure that are recorded as real estate held for sale in the Consolidated Statements of Financial Condition. Net income from discontinued operations for the quarter ended September 30, 2012 is recorded net of a tax provision of approximately $425 thousand.
Annualized general and administrative expenses, including the management fee, as a percentage of average total equity was 2.07%, 1.86% and 2.00% for the quarters ended September 30, 2012, September 30, 2011, and June 30, 2012, respectively. At September 30, 2012, the Company had a common stock book value per share of $11.93, as compared to $11.96 and $11.96 at September 30, 2011 and June 30, 2012, respectively.
CreXus acquires, manages and finances, directly or through its subsidiaries, commercial mortgage loans and other commercial real estate debt, commercial real property, commercial mortgage-backed securities and other commercial and residential real estate-related assets. 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, a wholly owned subsidiary of Annaly Capital Management, Inc.
The Company prepares a supplement to provide additional quarterly information for the benefit of its shareholders. The supplement can be found at the Company's website in the Investor Relations section under "Quarterly Supplemental Information".
The Company will hold the third quarter 2012 earnings conference call on Tuesday, November 6, 2012, at 11:00 a.m. ET. The number to call is 1-866-524-3160 for domestic calls, 1-412-317-6760 for international calls and 1-866-605-3852 for Canadian calls. There is no pass code; please reference CreXus Investment Corp. third quarter earnings. The replay number is 1-877-344-7529 for domestic calls and 1-412-317-0088 for international calls and the conference number is 10019912. The replay will be available at 1:00 p.m. ET through November 8, 2012 at 12:00 p.m. ET. There will be a web cast of the call on www.crexusinvestment.com. If you would like to be added to the e-mail distribution list, please visit www.crexusinvestment.com, click on Investor Relations, then E-Mail Alerts, enter your e-mail address where indicated 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 strategy; our projected financial and operating results; our ability to obtain and maintain financing arrangements and the terms of such arrangements; financing and advance rates for our targeted assets; our continuing or future relationships with third parties; our ability to realize our expectations of advantages of acquiring assets; general volatility of the markets in which we acquire assets; the implementation, timing and impact of, and changes to, various government programs; our expected assets; changes in the value of our assets; 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 assets; rates of default or decreased recovery rates on our assets; 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; changes in governmental regulations, tax law and rates, accounting guidance, and similar matters; availability of 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 integrate and manage newly acquired assets into our portfolio; 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 most recent 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.
|CREXUS INVESTMENT CORP.|
|CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION|
|(dollars in thousands, except share and per share data)|
|September 30, 2012||June 30, 2012||March 31, 2012||December 31, 2011||September 30, 2011|
|Cash and cash equivalents||$||105,575||$||189,128||$||257,490||$||202,814||$||47,233|
|Agency mortgage-backed securities, at fair value||-||-||-||-||200,335|
Commercial mortgages net of allowance for loan losses
($0, $0, $0, $369 and $331, respectively)
Preferred equity, net allowance for loan losses
($0, $0, $0, $0, and $38, respectively)
|Real estate held for sale||41,514||44,071||52,800||-||-|
|Investment in real estate, net||33,926||34,196||34,466||33,196||-|
|Intangible assets, net||5,201||5,306||5,412||-||-|
|Accrued interest receivable||5,116||4,140||3,509||2,608||3,861|
|Principal receivable from servicer||-||11,429||-||-||-|
|Participation sold (non-recourse)||-||-||14,898||14,755||-|
|Accrued interest payable||-||-||48||6||-|
|Accounts payable and other liabilities||4,864||5,809||4,537||4,048||4,038|
|Intangible liabilities, net||1,938||1,969||2,014||-||-|
|Investment management fees payable to affiliate||3,450||3,426||3,470||3,488||3,373|
|Common stock, par value $0.01 per share, 1,000,000,000|
authorized, 76,630,528, 76,630,528, 76,620,112, 76,620,112,
and, 76,620,112 shares issued and outstanding, respectively
|Accumulated other comprehensive income||-||-||-||-||4,397|
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