cim-20210630

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______________ TO _________________

COMMISSION FILE NUMBER: 1-33796

CHIMERA INVESTMENT CORPORATION

(Exact name of Registrant as specified in its Charter)


Maryland						26-0630461
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

520 Madison Avenue 32nd Floor

(Address of principal executive offices)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share	CIM	New York Stock Exchange
8.00% Series A Cumulative Redeemable Preferred Stock	CIM PRA	New York Stock Exchange
8.00% Series B Cumulative Fixed-to-Floating Rate Redeemable Preferred Stock	CIM PRB	New York Stock Exchange
7.75% Series C Cumulative Fixed-to-Floating Rate Redeemable Preferred Stock	CIM PRC	New York Stock Exchange
8.00% Series D Cumulative Fixed-to-Floating Rate Redeemable Preferred Stock	CIM PRD	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:


Class			Outstanding at July 31, 2021
Common Stock, $0.01 par value			235,955,784

CHIMERA INVESTMENT CORPORATION


Part I. FINANCIAL INFORMATION



Item 1. Consolidated Financial Statements:

Consolidated Statements of Financial Condition as of June 30, 2021 (Unaudited) and December 31, 2020 (Derived from the audited consolidated financial statements as of December 31, 2020)			2

Consolidated Statements of Operations (Unaudited) for the quarters and six months ended June 30, 2021 and 2020			3

Consolidated Statements of Comprehensive Income (Unaudited) for the quarters and six months ended June 30, 2021 and 2020			4

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the quarters and six months ended June 30, 2021 and 2020			5

Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2021 and 2020			7

Notes to Consolidated Financial Statements (Unaudited)			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			43

Item 3. Quantitative and Qualitative Disclosures about Market Risk			65

Item 4. Controls and Procedures			70



Part II. OTHER INFORMATION



Item 1. Legal Proceedings			71

Item 1A. Risk Factors			71

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			71

Item 6. Exhibits			72

SIGNATURES			74

Item 1. Consolidated Financial Statements


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except share and per share data)
(Unaudited)
	June 30, 2021		December 31, 2020

Cash and cash equivalents	$	346,951	$	269,090
Non-Agency RMBS, at fair value (net of allowance for credit losses of $508 thousand and $180 thousand, respectively)	1,919,668		2,150,714
Agency RMBS, at fair value	76,820		90,738
Agency CMBS, at fair value	1,236,507		1,740,368
Loans held for investment, at fair value	12,150,868		13,112,129

Accrued interest receivable	75,314		81,158
Other assets	53,931		78,822

Total assets (1)	$	15,860,059	$	17,523,019
Liabilities:
Secured financing agreements ($4.8 billion and $6.7 billion pledged as collateral, respectively)	$	3,554,428	$	4,636,847
Securitized debt, collateralized by Non-Agency RMBS ($453 million and $505 million pledged as collateral, respectively)	99,559		113,433
Securitized debt at fair value, collateralized by Loans held for investment ($11.5 billion and $12.4 billion pledged as collateral, respectively)	8,371,511		8,711,677
Long term debt	20,550		51,623
Payable for investments purchased	58,467		106,169
Accrued interest payable	23,128		40,950
Dividends payable	87,050		77,213
Accounts payable and other liabilities	17,935		5,721

Total liabilities (1)	$	12,232,628	$	13,743,633

Commitments and Contingencies (See Note 16)

Stockholders' Equity:
Preferred Stock, par value of $0.01 per share, 100,000,000 shares authorized:
8.00% Series A cumulative redeemable: 5,800,000 shares issued and outstanding, respectively ($145,000 liquidation preference)	$	58	$	58
8.00% Series B cumulative redeemable: 13,000,000 shares issued and outstanding, respectively ($325,000 liquidation preference)	130		130
7.75% Series C cumulative redeemable: 10,400,000 shares issued and outstanding, respectively ($260,000 liquidation preference)	104		104
8.00% Series D cumulative redeemable: 8,000,000 shares issued and outstanding, respectively ($200,000 liquidation preference)	80		80
Common stock: par value $0.01 per share; 500,000,000 shares authorized, 235,557,640 and 230,556,760 shares issued and outstanding, respectively	2,356		2,306
Additional paid-in-capital	4,352,986		4,538,029
Accumulated other comprehensive income	456,113		558,096
Cumulative earnings	4,202,806		3,881,894
Cumulative distributions to stockholders	(5,387,202)		(5,201,311)
Total stockholders' equity	$	3,627,431	$	3,779,386
Total liabilities and stockholders' equity	$	15,860,059	$	17,523,019

(1) The Company's consolidated statements of financial condition include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations and liabilities of the VIE for which creditors do not have recourse to the primary beneficiary (Chimera Investment Corporation). As of June 30, 2021, and December 31, 2020, total assets of consolidated VIEs were $11,090,458 and $12,165,017, respectively, and total liabilities of consolidated VIEs were $7,786,837 and $8,063,110, respectively. See Note 9 for further discussion.

See accompanying notes to consolidated financial statements.


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
(Unaudited)
	For the Quarters Ended				For the Six Months Ended
	June 30, 2021		June 30, 2020			June 30, 2021		June 30, 2020
Net interest income:
Interest income (1)	$	252,677	$	245,922		$	495,805	$	546,189
Interest expense (2)	80,610		129,256			188,677		271,339
Net interest income	172,067		116,666			307,128		274,850

Increase/(decrease) in provision for credit losses	453		(4,497)			327		1,817








Other investment gains (losses):
Net unrealized gains (losses) on derivatives	—		—			—		201,000
Realized gains (losses) on terminations of interest rate swaps	—		—			—		(463,966)
Net realized gains (losses) on derivatives	—		—			—		(41,086)
Net gains (losses) on derivatives	—		—			—		(304,052)
Net unrealized gains (losses) on financial instruments at fair value	36,108		(171,921)			306,120		(432,809)
Net realized gains (losses) on sales of investments	7,517		26,380			45,313		102,234

Gains (losses) on extinguishment of debt	(21,777)		459			(258,914)		459
Total other gains (losses)	21,848		(145,082)			92,519		(634,168)





Other expenses:




Compensation and benefits	9,230		10,255			22,669		23,190
General and administrative expenses	6,173		5,963			11,371		11,100
Servicing and asset manager fees	9,081		10,072			18,362		20,601
Transaction expenses	5,745		4,710			22,182		9,616
Total other expenses	30,229		31,000			74,584		64,507
Income (loss) before income taxes	163,233		(54,919)			324,736		(425,642)
Income tax expense (benefit)	(88)		36			3,824		68
Net income (loss)	$	163,321	$	(54,955)		$	320,912	$	(425,710)

Dividends on preferred stock	18,438		18,438			36,875		36,875

Net income (loss) available to common shareholders	$	144,883	$	(73,393)		$	284,037	$	(462,585)

Net income (loss) per share available to common shareholders:
Basic	$	0.63	$	(0.37)		$	1.23	$	(2.39)
Diluted	$	0.60	$	(0.37)		$	1.14	$	(2.39)

Weighted average number of common shares outstanding:
Basic	231,638,042		199,282,790			231,105,595		193,150,696
Diluted	241,739,536		199,282,790			251,723,940		193,150,696

(1) Includes interest income of consolidated VIEs of $149,115 and $169,127 for the quarters ended June 30, 2021 and 2020, respectively, and $307,214 and $343,809 for the six months ended June 30, 2021 and 2020, respectively. See Note 9 to consolidated financial statements for further discussion.

(2) Includes interest expense of consolidated VIEs of $50,935 and $70,816 for the quarters ended June 30, 2021 and 2020, respectively, and $116,141 and $135,445 for the six months ended June 30, 2021 and 2020, respectively. See Note 9 to consolidated financial statements for further discussion.

See accompanying notes to consolidated financial statements.




CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except share and per share data)
(Unaudited)

	For the Quarters Ended				For the Six Months Ended
	June 30, 2021		June 30, 2020			June 30, 2021		June 30, 2020
Comprehensive income (loss):
Net income (loss)	$	163,321	$	(54,955)		$	320,912	$	(425,710)
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net	(26,215)		61,399			(64,867)		(137,805)


Reclassification adjustment for net realized losses (gains) included in net income	(11,323)		(26,380)			(37,116)		(33,021)

Other comprehensive income (loss)	(37,538)		35,019			(101,983)		(170,826)
Comprehensive income (loss) before preferred stock dividends	$	125,783	$	(19,936)		$	218,929	$	(596,536)
Dividends on preferred stock	$	18,438	$	18,438		$	36,875	$	36,875
Comprehensive income (loss) available to common stock shareholders	$	107,345	$	(38,374)		$	182,054	$	(633,411)

See accompanying notes to consolidated financial statements.


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
(Unaudited)



























For the Quarter Ended June 30, 2021

	Series A Preferred Stock Par Value		Series B Preferred Stock Par Value		Series C Preferred Stock Par Value		Series D Preferred Stock Par Value		Common Stock Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
Balance, March 31, 2021	$	58	$	130	$	104	$	80	$	2,306	$	4,320,419	$	493,651	$	4,039,485	$	(5,289,735)	$	3,566,498
Net income (loss)	—		—		—		—		—		—		—		163,321		—		163,321
Other comprehensive income (loss)	—		—		—		—		—		—		(37,538)		—		—		(37,538)

Settlement of convertible debt	—		—		—		—		49		31,764		—		—		—		31,813
Settlement of warrants	—		—		—		—		—		(1,105)		—		—		—		(1,105)

Stock based compensation	—		—		—		—		1		1,908		—		—		—		1,909
Common dividends declared	—		—		—		—		—		—		—		—		(79,029)		(79,029)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, June 30, 2021	$	58	$	130	$	104	$	80	$	2,356	$	4,352,986	$	456,113	$	4,202,806	$	(5,387,202)	$	3,627,431

For the Quarter Ended June 30, 2020

	Series A Preferred Stock Par Value		Series B Preferred Stock Par Value		Series C Preferred Stock Par Value		Series D Preferred Stock Par Value		Common Stock Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
Balance, March 31, 2020	$	58	$	130	$	104	$	80	$	1,860	$	4,255,054	$	502,491	$	3,422,285	$	(4,938,208)	$	3,243,854
Net income (loss)	—		—		—		—		—		—		—		(54,955)		—		(54,955)

Other comprehensive income (loss)	—		—		—		—		—		—		35,019		—		—		35,019
Settlement of convertible debt	—		—		—		—		460		292,349		—		—		—		292,809
Purchase of capped call	—		—		—		—		—		(33,750)		—		—		—		(33,750)
Stock based compensation	—		—		—		—		—		1,390		—		—		—		1,390
Common dividends declared	—		—		—		—		—		—		—		—		(70,050)		(70,050)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, June 30, 2020	$	58	$	130	$	104	$	80	$	2,320	$	4,515,043	$	537,510	$	3,367,330	$	(5,026,696)	$	3,395,879

For the Six Months Ended June 30, 2021

	Series A Preferred Stock Par Value		Series B Preferred Stock Par Value		Series C Preferred Stock Par Value		Series D Preferred Stock Par Value		Common Stock Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
Balance, December 31, 2020	$	58	$	130	$	104	$	80	$	2,306	$	4,538,029	$	558,096	$	3,881,894	$	(5,201,311)	$	3,779,386
Net income (loss)	—		—		—		—		—		—		—		320,912		—		320,912
Other comprehensive income (loss)	—		—		—		—		—		—		(101,983)		—		—		(101,983)
Repurchase of common stock	—		—		—		—		(2)		(1,826)		—		—		—		(1,828)
Settlement of warrants	—		—		—		—		—		(220,945)		—		—		—		(220,945)
Settlement of convertible debt	—		—		—		—		49		31,764		—		—		—		31,813

Stock based compensation	—		—		—		—		3		5,964		—		—		—		5,967
Common dividends declared	—		—		—		—		—		—		—		—		(149,016)		(149,016)
Preferred dividends declared	—		—		—		—		—		—		—		—		(36,875)		(36,875)

Balance, June 30, 2021	$	58	$	130	$	104	$	80	$	2,356	$	4,352,986	$	456,113	$	4,202,806	$	(5,387,202)	$	3,627,431


For the Six Months Ended June 30, 2020

	Series A Preferred Stock Par Value		Series B Preferred Stock Par Value		Series C Preferred Stock Par Value		Series D Preferred Stock Par Value		Common Stock Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
Balance, December 31, 2019	$	58	$	130	$	104	$	80	$	1,873	$	4,275,963	$	708,336	$	3,793,040	$	(4,826,291)	$	3,953,293
Net income (loss)	—		—		—		—		—		—		—		(425,710)		—		(425,710)
Other comprehensive income (loss)	—		—		—		—		—		—		(170,826)		—		—		(170,826)
Repurchase of common stock	—		—		—		—		(14)		(22,052)		—		—		—		(22,066)
Settlement of convertible debt	—		—		—		—		460		292,349		—		—		—		292,809
Purchase of capped call	—		—		—		—		—		(33,750)		—		—		—		(33,750)
Stock based compensation	—		—		—		—		1		2,533		—		—		—		2,534
Common dividends declared	—		—		—		—		—		—		—		—		(163,530)		(163,530)
Preferred dividends declared	—		—		—		—		—		—		—		—		(36,875)		(36,875)
Balance, June 30, 2020	$	58	$	130	$	104	$	80	$	2,320	$	4,515,043	$	537,510	$	3,367,330	$	(5,026,696)	$	3,395,879

See accompanying notes to consolidated financial statements.


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
	For the Six Months Ended
	June 30, 2021		June 30, 2020
Cash Flows From Operating Activities:
Net income (loss)	$	320,912	$	(425,710)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Accretion) amortization of investment discounts/premiums, net	38,546		60,974
Accretion (amortization) of deferred financing costs, debt issuance costs, and securitized debt discounts/premiums, net	11,179		(35,148)

Net unrealized losses (gains) on derivatives	—		(201,000)


Margin (paid) received on derivatives	—		325,594
Net unrealized losses (gains) on financial instruments at fair value