cim-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: September 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.)

630 Fifth Ave, Ste 2400

New York, New York

(Address of principal executive offices)

10111

(Zip Code)

(888) 895-6557

(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:

Yes þ No ☐

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).

Yes þ No ☐

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).

Yes ☐ No þ

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 October 31, 2021
Common Stock, $0.01 par value			236,884,709

CHIMERA INVESTMENT CORPORATION

FORM 10-Q

TABLE OF CONTENTS


Part I. FINANCIAL INFORMATION



Item 1. Consolidated Financial Statements:

Consolidated Statements of Financial Condition as of September 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 nine months ended September 30, 2021 and 2020			3

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the quarters and nine months ended September 30, 2021 and 2020			4

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

Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 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			44

Item 3. Quantitative and Qualitative Disclosures about Market Risk			66

Item 4. Controls and Procedures			71



Part II. OTHER INFORMATION



Item 1. Legal Proceedings			72

Item 1A. Risk Factors			72

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			72

Item 6. Exhibits			73

SIGNATURES			75

Part I

Item 1. Consolidated Financial Statements


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

Cash and cash equivalents	$	328,455	$	269,090
Non-Agency RMBS, at fair value (net of allowance for credit losses of $122 thousand and $180 thousand, respectively)	1,890,030		2,150,714
Agency RMBS, at fair value	65,889		90,738
Agency CMBS, at fair value	1,062,131		1,740,368
Loans held for investment, at fair value	12,533,864		13,112,129

Accrued interest receivable	74,011		81,158
Other assets	49,844		78,822

Total assets (1)	$	16,004,224	$	17,523,019
Liabilities:
Secured financing agreements ($5.0 billion and $6.7 billion pledged as collateral, respectively)	$	3,788,336	$	4,636,847
Securitized debt, collateralized by Non-Agency RMBS ($424 million and $505 million pledged as collateral, respectively)	92,204		113,433
Securitized debt at fair value, collateralized by Loans held for investment ($11.3 billion and $12.4 billion pledged as collateral, respectively)	7,947,644		8,711,677
Long term debt	—		51,623
Payable for investments purchased	192,552		106,169
Accrued interest payable	20,388		40,950
Dividends payable	85,255		77,213
Accounts payable and other liabilities	29,297		5,721

Total liabilities (1)	$	12,155,676	$	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, 236,883,020 and 230,556,760 shares issued and outstanding, respectively	2,369		2,306
Additional paid-in-capital	4,357,526		4,538,029
Accumulated other comprehensive income	438,915		558,096
Cumulative earnings	4,534,274		3,881,894
Cumulative distributions to stockholders	(5,484,908)		(5,201,311)
Total stockholders' equity	$	3,848,548	$	3,779,386
Total liabilities and stockholders' equity	$	16,004,224	$	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 September 30, 2021, and December 31, 2020, total assets of consolidated VIEs were $10,865,801 and $12,165,017, respectively, and total liabilities of consolidated VIEs were $7,400,498 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 Nine Months Ended
	September 30, 2021		September 30, 2020			September 30, 2021		September 30, 2020
Net interest income:
Interest income (1)	$	220,579	$	247,905		$	716,384	$	794,094
Interest expense (2)	71,353		124,557			260,029		395,897
Net interest income	149,226		123,348			456,355		398,197

Increase/(decrease) in provision for credit losses	(386)		(1,650)			(58)		167








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	239,524		260,766			545,643		(172,042)
Net realized gains (losses) on sales of investments	—		65,041			45,313		167,275

Gains (losses) on extinguishment of debt	(25,622)		(55,794)			(284,535)		(55,338)
Total other gains (losses)	213,902		270,013			306,421		(364,157)





Other expenses:




Compensation and benefits	12,694		10,287			35,363		33,476
General and administrative expenses	5,300		6,236			16,672		17,335
Servicing and asset manager fees	9,297		9,473			27,659		30,074
Transaction expenses	3,432		1,624			25,614		11,239
Total other expenses	30,723		27,620			105,308		92,124
Income (loss) before income taxes	332,791		367,391			657,526		(58,251)
Income tax expense (benefit)	1,323		62			5,146		130
Net income (loss)	$	331,468	$	367,329		$	652,380	$	(58,381)

Dividends on preferred stock	18,438		18,438			55,313		55,313

Net income (loss) available to common shareholders	$	313,030	$	348,891		$	597,067	$	(113,694)

Net income (loss) per share available to common shareholders:
Basic	$	1.33	$	1.50		$	2.57	$	(0.55)
Diluted	$	1.30	$	1.32		$	2.42	$	(0.55)

Weighted average number of common shares outstanding:
Basic	235,887,296		232,127,224			232,717,010		206,237,705
Diluted	240,362,602		265,346,359			247,358,823		206,237,705

(1) Includes interest income of consolidated VIEs of $138,984 and $171,442 for the quarters ended September 30, 2021 and 2020, respectively, and $446,198 and $515,250 for the nine months ended September 30, 2021 and 2020, respectively. See Note 9 to consolidated financial statements for further discussion.

(2) Includes interest expense of consolidated VIEs of $43,525 and $74,753 for the quarters ended September 30, 2021 and 2020, respectively, and $159,666 and $210,198 for the nine months ended September 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 Nine Months Ended
	September 30, 2021		September 30, 2020			September 30, 2021		September 30, 2020
Comprehensive income (loss):
Net income (loss)	$	331,468	$	367,329		$	652,380	$	(58,381)
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net	(17,198)		40,470			(82,065)		(97,334)


Reclassification adjustment for net realized losses (gains) included in net income	—		(22,999)			(37,116)		(56,021)

Other comprehensive income (loss)	(17,198)		17,471			(119,181)		(153,355)
Comprehensive income (loss) before preferred stock dividends	$	314,270	$	384,800		$	533,199	$	(211,736)
Dividends on preferred stock	$	18,438	$	18,438		$	55,313	$	55,313
Comprehensive income (loss) available to common stock shareholders	$	295,832	$	366,362		$	477,886	$	(267,049)

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 September 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, June 30, 2021	$	58	$	130	$	104	$	80	$	2,356	$	4,352,986	$	456,113	$	4,202,806	$	(5,387,202)	$	3,627,431
Net income (loss)	—		—		—		—		—		—		—		331,468		—		331,468
Other comprehensive income (loss)	—		—		—		—		—		—		(17,198)		—		—		(17,198)

Settlement of convertible debt	—		—		—		—		8		5,518		—		—		—		5,526


Stock based compensation	—		—		—		—		5		(978)		—		—		—		(973)
Common dividends declared	—		—		—		—		—		—		—		—		(79,268)		(79,268)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, September 30, 2021	$	58	$	130	$	104	$	80	$	2,369	$	4,357,526	$	438,915	$	4,534,274	$	(5,484,908)	$	3,848,548

For the Quarter Ended September 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, June 30, 2020	$	58	$	130	$	104	$	80	$	2,320	$	4,515,043	$	537,510	$	3,367,330	$	(5,026,696)	$	3,395,879
Net income (loss)	—		—		—		—		—		—		—		367,329		—		367,329

Other comprehensive income (loss)	—		—		—		—		—		—		17,471		—		—		17,471
Settlement of convertible debt	—		—		—		—		2		1,198		—		—		—		1,200

Stock based compensation	—		—		—		—		—		1,578		—		—		—		1,578
Common dividends declared	—		—		—		—		—		—		—		—		(68,477)		(68,477)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, September 30, 2020	$	58	$	130	$	104	$	80	$	2,322	$	4,517,819	$	554,981	$	3,734,659	$	(5,113,611)	$	3,696,542

For the Nine Months Ended September 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)	—		—		—		—		—		—		—		652,380		—		652,380
Other comprehensive income (loss)	—		—		—		—		—		—		(119,181)		—		—		(119,181)
Repurchase of common stock	—		—		—		—		(2)		(1,826)		—		—		—		(1,828)
Settlement of warrants	—		—		—		—		—		(220,945)		—		—		—		(220,945)
Settlement of convertible debt	—		—		—		—		58		37,282		—		—		—		37,340

Stock based compensation	—		—		—		—		7		4,986		—		—		—		4,993
Common dividends declared	—		—		—		—		—		—		—		—		(228,284)		(228,284)
Preferred dividends declared	—		—		—		—		—		—		—		—		(55,313)		(55,313)

Balance, September 30, 2021	$	58	$	130	$	104	$	80	$	2,369	$	4,357,526	$	438,915	$	4,534,274	$	(5,484,908)	$	3,848,548


For the Nine Months Ended September 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)	—		—		—		—		—		—		—		(58,381)		—		(58,381)
Other comprehensive income (loss)	—		—		—		—		—		—		(153,355)		—		—		(153,355)
Repurchase of common stock	—		—		—		—		(15)		(22,051)		—		—		—		(22,066)
Settlement of convertible debt	—		—		—		—		463		293,546		—		—		—		294,009
Purchase of capped call	—		—		—		—		—		(33,750)		—		—		—		(33,750)
Stock based compensation	—		—		—		—		1		4,111		—		—		—		4,112
Common dividends declared	—		—		—		—		—		—		—		—		(232,007)		(232,007)
Preferred dividends declared	—		—		—		—		—		—		—		—		(55,313)		(55,313)
Balance, September 30, 2020	$	58	$	130	$	104	$	80	$	2,322	$	4,517,819	$	554,981	$	3,734,659	$	(5,113,611)	$	3,696,542

See accompanying notes to consolidated financial statements.


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
	For the Nine Months Ended
	September 30, 2021		September 30, 2020
Cash Flows From Operating Activities:
Net income (loss)	$	652,380	$	(58,381)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Accretion) amortization of investment discounts/premiums, net	61,158		93,365
Accretion (amortization) of deferred financing costs, debt issuance costs, and securitized debt discounts/premiums, net	9,268		(41,102)

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	(545,643)