Chimera Investment ( NYSE: CIM ) stock sank 8.9% in late Thursday morning trading after the mortgage REIT's Q3 net interest income fell short of Wall Street expectations, and as higher rates widened spreads, pressuring book value.
Q3 earnings available for distribution of $0.27 per share, meeting the consensus estimate, dropped from $0.31 in Q2 and from $0.42 in Q3 2021.
Q3 economic net interest income of $104.2M, trailing the $110.6M consensus, slid from $116.8M in the prior quarter and from $149.4M in the year-ago quarter.
GAAP book value was $7.44 per common share at Sept. 30, 2022, vs. $8.82 at June 30. CEO and Chief Investment Officer Mohit Marria said during the Q3 conference call that he "suspects" that book value has declined 2%-3% since quarter end as rates have moved up "about 30 basis points parallel across the curve. Spreads are marginally wider."
Earnings available for distribution/average common equity was 13.30%, vs. 13.29% in the previous quarter and 14.54% in the year-ago quarter.
"In the third quarter, elevated market volatility led to higher rates and wider spreads putting further pressure on our book value," Marria said. "However, these market conditions have brought new opportunities on both side of the balance sheet."
During the quarter, Chimera ( CIM ) committed to purchasing $750M mortgage loans, completed a $370M securitization and entered into $885M of new interest rate swaps as a liability hedge against further increases in interest rates.
Since the quarter end, the company entered into an additional $1.1B of hedges; closed on a new non-mark-to-market financial facility; expects to close the purchase of $476M residential loans into a long-term non-mark-to-market structure that's expected to generate double-digit returns; and completed a $145M securitization.
Its cash balance increased to ~$350M as of Oct. 31, 2022.
Earlier, Chimera Investment ( CIM ) non-GAAP EPS of -$0.88 misses by $0.56, net interest income of $104.84M misses by $5.72M
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Chimera Investment stock dives after Q3 NII miss, more pressure on book value