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CREXUS INVESTMENT CORP
Symbol U : CXS
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CreXus Investment Corp. Reports Results for the 4th Quarter and Year Ended 2012

2013-02-19 17:45 ET - News Release


NEW YORK -- (Business Wire)

CreXus Investment Corp. (NYSE: CXS), today reported GAAP net income for the quarter ended December 31, 2012 of $17.9 million or $0.23 per average share, as compared to $41.8 million or $0.55 per average share for the quarter ended December 31, 2011, and $22.6 million or $0.30 per average share for the quarter ended September 30, 2012.

GAAP net income for the year ended December 31, 2012 was $71.0 million or $0.93 per average share as compared to GAAP net income of $108.4 million or $1.73 per average share for the year ended December 31, 2011.

Common dividends declared for the quarters ended December 31, 2012, December 31, 2011, and September 30, 2012, were $0.32, $0.35 and $0.32 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, provision for loan losses, and non-deductible general and administrative expenses. The annualized dividend yield on the Company’s common stock for the quarter ended December 31, 2012, based on the December 31, 2012 closing price of $12.25, was 10.45%.

On a GAAP basis the Company provided a return on average equity of 7.86%, 18.12%, and 9.83%, for the quarters ended December 31, 2012, December 31, 2011, and September 30, 2012, respectively. On a GAAP basis, the Company provided a return on average equity of 7.76%, and 12.03% for the years ended December 31, 2012, and 2011, respectively.

The weighted average yield on commercial real estate loans and preferred equity was 10.56%, 29.86% and 10.29% at December 31, 2012, December 31, 2011 and September 30, 2012, respectively.

The following table summarizes segmented investment portfolio information for the Company:

 

December 31,

 

December 31,

 

September 30,

2012

 

2011

 

2012

Commercial Real Estate Debt and Preferred Equity Portfolio (dollars in thousands)
Commercial real estate loans $ 729,822 $ 752,801 $ 731,815
Preferred equity 39,769 - 39,769
Fixed-rate investments as percentage of portfolio 71 % 38 % 65 %
Adjustable-rate investments as percentage of portfolio 29 % 62 % 35 %
Fixed-rate investments
Commercial mortgage loans as percentage of fixed-rate assets 93 % 100 % 92 %
Preferred equity as percentage of fixed-rate assets 7 % - 8 %
Adjustable-rate investments
Commercial mortgage loans as percentage of adjustable-rate assets 100 % 100 % 100 %

Weighted average yield on commercial real estate loans and preferred equity

10.56 % 29.86 % 10.29 %
Real Estate Properties Portfolio including Real Estate Held for Sale
Real estate investment at period-end (1) 70,354 33,196 78,703
Annualized yield on real estate investment portfolio at period end (2) 9.55 % 7.67 % 9.44 %
Mortgages payable on real estate 19,150 16,600 19,150
Net equity in investments in real estate 51,204 16,596 59,553
Annualized yield on net equity in investments in real estate (2) 11.28 %

7.96

% 11.28 %
Weighted average cost of funds on real estate investment financing (3) 3.49 % 3.50 % 3.49 %

(1)

 

Includes $33.5 million and $41.5 million in real estate held for sale at December 31, 2012 and September 30, 2012, respectively.

Also includes related net intangible assets in excess of liabilities associated with purchase price allocation.

(2)

Based on average assets for the calendar year 2012. Impairment charge and gain on sale related to real estate held for sale were not annualized for purposes of determining the yield.

(3)

Interest expense includes net payments related to the interest rate swap and excludes changes in the market value of the interest rate swap.

 

The following table summarizes characteristics for each asset class:

  December 31, 2012     December 31, 2011   September 30, 2012  

Commercial

 

Preferred

 

Real

 

Commercial

 

Real

 

Commercial

 

Preferred

 

Real

Loans

 

Equity

 

Estate

   

Loans

 

Estate

 

Loans

 

Equity

 

Estate

 
Weighted average amortized cost basis $ 99.0 $ 100.0 - $ 90.0 - $ 98.9 $ 100.0 -
Weighted average coupon 9.87 % 11.00 % - 5.94 % - 9.63 % 11.00 % -
Fixed-rate percentage of asset class 70 % 100 % - 38 % - 64 % 100 % -
Adjustable-rate percentage of asset class 30 % - - 62 % - 36 % - -
Weighted average yield on assets at period-end 10.52 % 11.35 % 9.55 % 29.86 % 7.67 % 10.24 % 11.35 % 9.44 %
Weighted average cost of funds at period-end - - 3.49 %

(1)

- 3.50 % - - 3.49 %

(1)

 
(1) Interest expense includes net payments related to the interest rate swap and excludes changes in the market value of the interest rate swap.
 

At December 31, 2012 and September 30, 2012, the Company’s commercial real estate loan portfolio included one loan on non-accrual status. At December 31, 2011 the Company had two loans relating to one group of underlying properties that were 30 days or more delinquent. During the quarters ended December 31, 2012, December 31, 2011 and September 30, 2012, the Company did not record an additional provision for loan losses.

The accretion of discount on the Company’s loan and preferred equity portfolio, which is recorded as a component of interest income, for the quarters ended December 31, 2012, December 31, 2011 and September 30, 2012, was $499 thousand, $28.8 million and $8.0 million, respectively. The total net discount remaining at December 31, 2012 was $7.4 million as compared to $83.8 million at December 31, 2011, which includes an estimated $45.2 million of unaccretable discount. The accretable net discount at September 30, 2012 was $7.9 million.

The Company’s discontinued operations generated net income of $2.4 million for the quarter ended December 31, 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 December 31, 2012 is recorded net of a combined tax credit of approximately $1.6 million, composed of a tax credit of $987 thousand and a deferred tax asset of $571 thousand.

Annualized general and administrative expenses, including the management fee, as a percentage of average total equity were 2.14%, 2.09% and 2.07% for the quarters ended December 31, 2012, December 31, 2011, September 30, 2012, respectively. At December 31, 2012, the Company had a common stock book value per share of $11.85 as compared to $12.10 and $11.93 at December 31, 2011 and September 30, 2012, respectively.

CreXus acquires, manages and finances, directly or through its subsidiaries, commercial mortgage loans and other commercial real estate debt, 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.

The Company will hold the fourth quarter 2012 earnings conference call on Wednesday, February 20, 2013, at 9:00 a.m. ET. The number to call is 1-888-317-6016 for domestic calls and 1-412-317-6016 for international calls. There is no pass code, please reference CreXus Investment Corp fourth 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 10002481. The replay will be available at 11:00 a.m. EDT through February 22, 2013 at 1:00 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 ability to consummate the transaction contemplated by the agreement and plan of merger with Annaly Capital Management Inc. and its subsidiary CXS Acquisition Corporation; our projected financial and operating results; our ability to obtain and maintain financing arrangements and the terms of such arrangements; 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)
 
 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

2012

2012

2012

2012

2011

Assets: (unaudited) (unaudited) (unaudited) (unaudited) (1)
Cash and cash equivalents $ 123,543 $ 105,575 $ 189,128 $ 257,490 $ 202,814

Commercial real estate loans net of allowance for loan losses ($0, $0, $0, $0 and $369, respectively)

Senior 100,343 146,437 123,845 200,878 374,348
Subordinate 38,954 38,837 38,720 38,527 71,517
Mezzanine 590,525 546,541 513,913 390,682 306,936

Preferred equity, net allowance for loan losses ($0, $0, $0, $0, and $0, respectively)

39,769 39,769 - - -
Real estate held for sale 33,511 41,514 44,071 52,800 -
Investment in real estate, net 33,655 33,926 34,196 34,466 33,196
Intangible assets, net 5,095 5,201 5,306 5,412 -
Rents receivable 268 221 154 87 32
Accrued interest receivable 4,957 5,116 4,140 3,509 2,608
Principal receivable from servicer - - 11,429 - -
Other assets   3,379     5,275     2,527     3,540     1,420  
Total assets $ 973,999   $ 968,412   $ 967,429   $ 987,391   $ 992,871  
 
Liabilities:
Mortgages payable $ 19,150 $ 19,150 $ 19,150 $ 19,150 $ 16,600
Participation sold (non-recourse) 13,759 - - 14,898 14,755
Accrued interest payable - - - 48 6
Accounts payable and other liabilities 3,363 4,864 5,809 4,537 4,048
Dividends payable 24,522 24,523 20,692 20,688 26,817
Intangible liabilities, net 1,907 1,938 1,969 2,014 -
Investment management fees payable to affiliate   3,425     3,450     3,426     3,470     3,488  
Total liabilities   66,126     53,925     51,046     64,805     65,714  
 
Stockholders' Equity:

Common stock, par value $0.01 per share, 1,000,000,000 authorized, 76,630,528, 76,630,528, 76,630,528, 76,620,112, and, 76,620,112 shares issued and outstanding, respectively

766 766 766 766 766
Additional paid-in-capital 890,862 890,862 890,862 890,757 890,757
Retained earnings   16,245     22,859     24,755     31,063     35,634  
Total stockholders' equity   907,873     914,487     916,383     922,586     927,157  
Total liabilities and stockholders' equity $ 973,999   $ 968,412   $ 967,429   $ 987,391   $ 992,871  
 
(1) Derived from the audited consolidated statements of financial condition at December 31, 2011.
 

CREXUS INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands, except share and per share data)
(Unaudited)
   
For the Quarter ended

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

2012

2012

2012

2012

2011

 
Net interest income:
Interest income $ 20,397 $ 26,967 $ 17,805 $ 23,392 $ 41,726
Interest expense (281 ) (187 ) (310 ) (360 ) (75 )
Servicing fee   (152 )   (149 )   (114 )   (115 )   (142 )
Net interest income   19,964     26,631     17,381     22,917     41,509  
 
Other income:
Realized loss on sale of loan - - (525 ) - -
Realized gains on sales of investments - - - - 4,556
Miscellaneous fee income (1 ) - - 349 353
Rental income   821     809     811     712     238  
Total other income   820     809     286     1,061     5,147  
 
Other expenses:
Provision for loan losses - - - 2,803 -
Management fees to affiliate 3,432 3,446 3,426 3,471 3,560
General and administrative expenses 1,443 1,327 1,180 2,710 1,269
Amortization Expense 106 105 106 123 -
Depreciation expense   270     271     270     275     54  
Total other expenses   5,251     5,149     4,982     9,382     4,883  
 
Net income before income tax 15,533 22,291 12,685 14,596 41,773
Income tax   -     6     32     1     (1 )
Net income from continuing operations   15,533     22,285     12,653     14,595     41,774  
 

Net income (loss) from discontinued operations (net of tax (credit) expense of $(1,558), $425, $1,564, $295 and $0, respectively)

2,373 2,903 (46 ) 1,522 -
Gain on sale from discontinued operations - - 1,774 - -
Impairment charges   -     (2,560 )   -     -     -  
Total income from discontinued operations   2,373     343     1,728     1,522     -  
 
Net Income $ 17,906   $ 22,628   $ 14,381   $ 16,117   $ 41,774  
 
Net income per share-basic and diluted, continuing operations $ 0.20 $ 0.29 $ 0.17 $ 0.19 $ 0.55
Total income per share-basic and diluted, discontinued operations   0.03     0.01     0.02     0.02     -  
Net income per share-basic and diluted $ 0.23   $ 0.30   $ 0.19   $ 0.21   $ 0.55  
Dividend declared per share of common stock $ 0.32   $ 0.32   $ 0.27   $ 0.27   $ 0.35  
Weighted average number of shares outstanding-basic and diluted   76,630,528     76,630,528     76,624,462     76,620,112     76,620,112  
Comprehensive income:
Net income $ 17,906   $ 22,628   $ 14,381   $ 16,117   $ 41,774  
Other comprehensive income (loss):
Unrealized gains on securities available-for-sale - - - - 159
Reclassification adjustment for realized gains included in net income   -     -     -     -     (4,556 )
Total other comprehensive (loss) income   -     -     -     -     (4,397 )
Comprehensive income $ 17,906   $ 22,628   $ 14,381   $ 16,117   $ 37,377  
 

CREXUS INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands, except share and per share data)
 
  For the Years Ended

December 31,

 

2012

December 31,

(unaudited)

2011

 
Net interest income:
Interest income $ 88,561 $ 106,483
Interest expense (1,138 ) (2,370 )
Servicing fees   (530 )   (572 )
Net interest income   86,893     103,541  
 
Other income:
Realized loss on sale of loan (525 ) -
Realized gains on sales of investments - 18,481
Miscellaneous fee income 348 486
Rental income   3,153     238  
Total other income   2,976     19,205  
 
Other expenses:
Provision for loan losses, net 2,803 127
Management fees to affiliate 13,775 10,958
General and administrative expenses 6,660 3,211
Amortization expense 440 -
Depreciation expense   1,086     54  
Total other expenses   24,764     14,350  
 
Net income before income tax 65,105 108,396
Income tax   39     -  
Net income from continuing operations   65,066     108,396  
 
Net income from discontinued operations

(net of tax expense of $726 and $0, respectively)

6,752 -
Gain on sale from discontinued operations 1,774 -
Impairment changes   (2,560 )   -  
Total income from discontinued operations   5,966     -  
 
Net Income $ 71,032   $ 108,396  
 
Net income per share-basic and diluted, continuing operations $ 0.85 $ 1.73
Total income per share-basic and diluted, discontinued operations   0.08     -  
Net income per share-basic and diluted $ 0.93   $ 1.73  
Dividend declared per share of common stock $ 1.18   $ 1.13  
Weighted average number of shares outstanding-basic and diluted   76,626,430     62,609,153  
Comprehensive income:
Net income $ 71,032   $ 108,396  
Other comprehensive income:
Unrealized gains on securities available-for-sale - -
Reclassification adjustment for realized gains included in net income   -     (10,475 )
Total other comprehensive income (loss)   -     (10,475 )
Comprehensive income $ 71,032   $ 97,921  

Contacts:

CreXus Investment Corp.
Investor Relations
1-877-291-3453
www.crexusinvestment.com

Source: CreXus Investment Corp.

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