CreXus Investment Corp. Reports Results for the 4th Quarter and Year Ended 2012

  CreXus Investment Corp. Reports Results for the 4th Quarter and Year Ended
  2012

Business Wire

NEW YORK -- February 19, 2013

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    (dollars in thousands)
Preferred Equity Portfolio
Commercial real estate loans       $  729,822     $  752,801     $  731,815
Preferred equity                      39,769         -              39,769
Fixed-rate investments as             71      %      38      %      65       %
percentage of portfolio
Adjustable-rate investments as        29      %      62      %      35       %
percentage of portfolio
Fixed-rate investments
Commercial mortgage loans as          93      %      100     %      92       %
percentage of fixed-rate assets
Preferred equity as percentage        7       %      -              8        %
of fixed-rate assets
Adjustable-rate investments
Commercial mortgage loans as
percentage of adjustable-rate         100     %      100     %      100      %
assets
Weighted average yield on
commercial real estate loans and      10.56   %      29.86   %      10.29    %
preferred equity
Real Estate Properties Portfolio
including Real Estate Held for
Sale
Real estate investment at             70,354         33,196         78,703
period-end ^(1)
Annualized yield on real estate
investment portfolio at period        9.55    %      7.67    %      9.44     %
end ^(2)
Mortgages payable on real estate      19,150         16,600         19,150
Net equity in investments in          51,204         16,596         59,553
real estate
Annualized yield on net equity
in investments in real estate         11.28   %      7.96    %      11.28    %
^(2)
Weighted average cost of funds
on real estate investment             3.49    %      3.50    %      3.49     %
financing ^(3)

(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.
      Based on average assets for the calendar year 2012. Impairment charge
(2)   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           $  99.0      $ 100.0     -             $  90.0      -        $  98.9      $ 100.0     -
amortized cost
basis
Weighted             9.87  %     11.00 %   -                5.94  %   -           9.63  %     11.00 %   -
average coupon
Fixed-rate
percentage of        70    %     100   %   -                38    %   -           64    %     100   %   -
asset class
Adjustable-rate
percentage of        30    %     -         -                62    %   -           36    %     -         -
asset class
Weighted
average yield        10.52 %     11.35 %   9.55 %           29.86 %   7.67 %      10.24 %     11.35 %   9.44 %
on assets at
period-end
Weighted
average cost of      -           -         3.49 % ^(1)      -         3.50 %      -           -         3.49 % ^(1)
funds at
period-end
 
(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      September     June 30,      March 31,     December
                  31,           30,                                       31,
                  2012          2012          2012          2012          2011
Assets:           (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)
Cash and cash     $ 123,543     $ 105,575     $ 189,128     $ 257,490     $ 202,814
equivalents
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         39,769        39,769        -             -             -
($0, $0, $0,
$0, and $0,
respectively)
Real estate         33,511        41,514        44,071        52,800        -
held for sale
Investment in
real estate,        33,655        33,926        34,196        34,466        33,196
net
Intangible          5,095         5,201         5,306         5,412         -
assets, net
Rents               268           221           154           87            32
receivable
Accrued
interest            4,957         5,116         4,140         3,509         2,608
receivable
Principal
receivable from     -             -             11,429        -             -
servicer
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         $ 19,150      $ 19,150      $ 19,150      $ 19,150      $ 16,600
payable
Participation
sold                13,759        -             -             14,898        14,755
(non-recourse)
Accrued
interest            -             -             -             48            6
payable
Accounts
payable and         3,363         4,864         5,809         4,537         4,048
other
liabilities
Dividends           24,522        24,523        20,692        20,688        26,817
payable
Intangible
liabilities,        1,907         1,938         1,969         2,014         -
net
Investment
management fees     3,425         3,450         3,426         3,470         3,488    
payable to
affiliate
Total               66,126        53,925        51,046        64,805        65,714   
liabilities
                                                                           
Stockholders'
Equity:
Common stock,
par value $0.01
per share,
1,000,000,000
authorized,
76,630,528,
76,630,528,         766           766           766           766           766
76,630,528,
76,620,112,
and, 76,620,112
shares issued
and
outstanding,
respectively
Additional          890,862       890,862       890,862       890,757       890,757
paid-in-capital
Retained            16,245        22,859        24,755        31,063        35,634   
earnings
Total
stockholders'       907,873       914,487       916,383       922,586       927,157  
equity
Total
liabilities and   $ 973,999     $ 968,412     $ 967,429     $ 987,391     $ 992,871  
stockholders'
equity
 
(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           19,964           26,631           17,381           22,917           41,509      
income
                                                                                          
Other income:
Realized loss on       -                -                (525       )     -                -
sale of loan
Realized gains on
sales of               -                -                -                -                4,556
investments
Miscellaneous fee      (1         )     -                -                349              353
income
Rental income          821              809              811              712              238         
Total other income     820              809              286              1,061            5,147       
                                                                                          
Other expenses:
Provision for loan     -                -                -                2,803            -
losses
Management fees to     3,432            3,446            3,426            3,471            3,560
affiliate
General and
administrative         1,443            1,327            1,180            2,710            1,269
expenses
Amortization           106              105              106              123              -
Expense
Depreciation           270              271              270              275              54          
expense
Total other            5,251            5,149            4,982            9,382            4,883       
expenses
                                                                                          
Net income before      15,533           22,291           12,685           14,596           41,773
income tax
Income tax             -                6                32               1                (1         )
Net income from
continuing             15,533           22,285           12,653           14,595           41,774      
operations
                                                                                          
Net income (loss)
from discontinued
operations (net of
tax (credit)           2,373            2,903            (46        )     1,522            -
expense of
$(1,558), $425,
$1,564, $295 and
$0, respectively)
Gain on sale from
discontinued           -                -                1,774            -                -
operations
Impairment charges     -                (2,560     )     -                -                -           
Total income from
discontinued           2,373            343              1,728            1,522            -           
operations
                                                                                          
Net Income           $ 17,906         $ 22,628         $ 14,381         $ 16,117         $ 41,774      
                                                                                          
Net income per
share-basic and
diluted,             $ 0.20           $ 0.29           $ 0.17           $ 0.19           $ 0.55
continuing
operations
Total income per
share-basic and
diluted,               0.03             0.01             0.02             0.02             -           
discontinued
operations
Net income per
share-basic and      $ 0.23           $ 0.30           $ 0.19           $ 0.21           $ 0.55        
diluted
Dividend declared
per share of         $ 0.32           $ 0.32           $ 0.27           $ 0.27           $ 0.35        
common stock
Weighted average
number of shares       76,630,528       76,630,528       76,624,462       76,620,112       76,620,112  
outstanding-basic
and diluted
Comprehensive
income:
Net income           $ 17,906         $ 22,628         $ 14,381         $ 16,117         $ 41,774      
Other
comprehensive
income (loss):
Unrealized gains
on securities          -                -                -                -                159
available-for-sale
Reclassification
adjustment for
realized gains         -                -                -                -                (4,556     )
included in net
income
Total other
comprehensive          -                -                -                -                (4,397     )
(loss) income
Comprehensive        $ 17,906         $ 22,628         $ 14,381         $ 16,117         $ 37,377      
income
 

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
                                                 6,752            -
(net of tax expense of $726 and $0,
respectively)
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,        $ 0.85           $ 1.73
continuing operations
Total income per share-basic and diluted,        0.08             -           
discontinued operations
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                76,626,430       62,609,153  
outstanding-basic and diluted
Comprehensive income:
Net income                                     $ 71,032         $ 108,396     
Other comprehensive income:
Unrealized gains on securities                   -                -
available-for-sale
Reclassification adjustment for realized         -                (10,475    )
gains included in net income
Total other comprehensive income (loss)          -                (10,475    )
Comprehensive income                           $ 71,032         $ 97,921      

Contact:

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