cim-20220331

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: March 31, 2022

☐ 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 Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	CIM PRB	New York Stock Exchange
7.75% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	CIM PRC	New York Stock Exchange
8.00% Series D Fixed-to-Floating Rate Cumulative 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 April 30, 2022
Common Stock, $0.01 par value			237,047,539

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 March 31, 2022 (Unaudited) and December 31, 2021 (Derived from the audited consolidated financial statements as of December 31, 2021)			2

Consolidated Statements of Operations (Unaudited) for the quarters ended March 31, 2022 and 2021			3

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the quarters ended March 31, 2022 and 2021			4

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the quarters ended March 31, 2022 and 2021			5

Consolidated Statements of Cash Flows (Unaudited) for the quarters ended March 31, 2022 and 2021			6

Notes to Consolidated Financial Statements (Unaudited)			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			39

Item 3. Quantitative and Qualitative Disclosures about Market Risk			62

Item 4. Controls and Procedures			67



Part II. OTHER INFORMATION



Item 1. Legal Proceedings			68

Item 1A. Risk Factors			68

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			68

Item 6. Exhibits			68

SIGNATURES			71

Part I - Financial Information

Item 1. Consolidated Financial Statements


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except share and per share data)
(Unaudited)
	March 31, 2022		December 31, 2021

Cash and cash equivalents	$	165,728	$	385,741
Non-Agency RMBS, at fair value (net of allowance for credit losses of $453 thousand and $213 thousand, respectively)	1,458,887		1,810,208
Agency RMBS, at fair value	74,104		60,487
Agency CMBS, at fair value	503,231		761,208
Loans held for investment, at fair value	12,905,280		12,261,926

Accrued interest receivable	72,418		69,513
Other assets	61,531		58,320

Total assets (1)	$	15,241,179	$	15,407,403
Liabilities:
Secured financing agreements ($4.5 billion and $4.4 billion pledged as collateral, respectively)	$	3,424,405	$	3,261,613
Securitized debt, collateralized by Non-Agency RMBS ($337 million and $365 million pledged as collateral, respectively)	84,188		87,999
Securitized debt at fair value, collateralized by Loans held for investment ($11.4 billion and $11.0 billion pledged as collateral, respectively)	8,010,170		7,726,043

Payable for investments purchased	259,796		477,415
Accrued interest payable	21,422		20,416
Dividends payable	86,560		86,152
Accounts payable and other liabilities	17,910		11,574

Total liabilities (1)	$	11,904,451	$	11,671,212

Commitments and Contingencies (See Note 15)

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, 237,044,792 and 236,951,266 shares issued and outstanding, respectively	2,370		2,370
Additional paid-in-capital	4,360,340		4,359,045
Accumulated other comprehensive income	364,099		405,054
Cumulative earnings	4,289,214		4,552,008
Cumulative distributions to stockholders	(5,679,667)		(5,582,658)
Total stockholders' equity	$	3,336,728	$	3,736,191
Total liabilities and stockholders' equity	$	15,241,179	$	15,407,403

(1) The Company's consolidated statements of financial condition include assets of consolidated variable interest entities, or 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 March 31, 2022, and December 31, 2021, total assets of consolidated VIEs were $11,025,170 and $10,666,591, respectively, and total liabilities of consolidated VIEs were $7,564,121 and $7,223,655, 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
	March 31, 2022		March 31, 2021
Net interest income:
Interest income (1)	$	202,175	$	243,127
Interest expense (2)	64,473		108,066
Net interest income	137,702		135,061

Increase/(decrease) in provision for credit losses	240		(126)








Other investment gains (losses):




Net unrealized gains (losses) on financial instruments at fair value	(370,167)		270,012
Net realized gains (losses) on sales of investments	—		37,796

Gains (losses) on extinguishment of debt	—		(237,137)
Total other gains (losses)	(370,167)		70,671





Other expenses:




Compensation and benefits	11,353		13,439
General and administrative expenses	5,711		5,198
Servicing and asset manager fees	9,291		9,281
Transaction expenses	3,804		16,437
Total other expenses	30,159		44,355
Income (loss) before income taxes	(262,864)		161,503
Income tax expense (benefit)	(70)		3,912
Net income (loss)	$	(262,794)	$	157,591

Dividends on preferred stock	18,408		18,438

Net income (loss) available to common shareholders	$	(281,202)	$	139,153

Net income (loss) per share available to common shareholders:
Basic	$	(1.19)	$	0.60
Diluted	$	(1.19)	$	0.54

Weighted average number of common shares outstanding:
Basic	237,012,702		230,567,231
Diluted	237,012,702		261,435,081

(1) Includes interest income of consolidated VIEs of $131,066 and $158,100 for the quarters ended March 31, 2022 and 2021, respectively. See Note 9 to consolidated financial statements for further discussion.

(2) Includes interest expense of consolidated VIEs of $42,491 and $65,205 for the quarters ended March 31, 2022 and 2021, 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
	March 31, 2022		March 31, 2021
Comprehensive income (loss):
Net income (loss)	$	(262,794)	$	157,591
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net	(40,955)		(38,652)


Reclassification adjustment for net realized losses (gains) included in net income	—		(25,793)

Other comprehensive income (loss)	(40,955)		(64,445)
Comprehensive income (loss) before preferred stock dividends	$	(303,749)	$	93,146
Dividends on preferred stock	$	18,408	$	18,438
Comprehensive income (loss) available to common stock shareholders	$	(322,157)	$	74,708

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 March 31, 2022

	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, 2021	$	58	$	130	$	104	$	80	$	2,370	$	4,359,045	$	405,054	$	4,552,008	$	(5,582,658)	$	3,736,191
Net income (loss)	—		—		—		—		—		—		—		(262,794)		—		(262,794)
Other comprehensive income (loss)	—		—		—		—		—		—		(40,955)		—		—		(40,955)
Repurchase of common stock	—		—		—		—		—		—		—		—		—		—



Stock based compensation	—		—		—		—		—		1,295		—		—		—		1,295
Common dividends declared	—		—		—		—		—		—		—		—		(78,601)		(78,601)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,408)		(18,408)

Balance, March 31, 2022	$	58	$	130	$	104	$	80	$	2,370	$	4,360,340	$	364,099	$	4,289,214	$	(5,679,667)	$	3,336,728

For the Quarter Ended March 31, 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)	—		—		—		—		—		—		—		157,591		—		157,591
Other comprehensive income (loss)	—		—		—		—		—		—		(64,445)		—		—		(64,445)
Repurchase of common stock	—		—		—		—		(2)		(1,826)		—		—		—		(1,828)
Settlement of warrants	—		—		—		—		—		(219,840)		—		—		—		(219,840)


Stock based compensation	—		—		—		—		2		4,056		—		—		—		4,058
Common dividends declared	—		—		—		—		—		—		—		—		(69,986)		(69,986)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, March 31, 2021	$	58	$	130	$	104	$	80	$	2,306	$	4,320,419	$	493,651	$	4,039,485	$	(5,289,735)	$	3,566,498

See accompanying notes to consolidated financial statements.


CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
	For the Quarters Ended
	March 31, 2022		March 31, 2021
Cash Flows From Operating Activities:
Net income (loss)	$	(262,794)	$	157,591
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Accretion) amortization of investment discounts/premiums, net	25,897		13,260
Accretion (amortization) of deferred financing costs, debt issuance costs, and securitized debt discounts/premiums, net	(2,676)		9,673





Net unrealized losses (gains) on financial instruments at fair value	370,167		(270,012)
Net realized losses (gains) on sales of investments	—		(37,796)

Net increase (decrease) in provision for credit losses	240		(126)

(Gain) loss on extinguishment of debt	—		237,137

Equity-based compensation expense	1,295		4,058
Changes in operating assets:
Decrease (increase) in accrued interest receivable, net	(2,904)		3,593
Decrease (increase) in other assets	(1,160)		12,042
Changes in operating liabilities:
Increase (decrease) in accounts payable and other liabilities	6,335		8,877

Increase (decrease) in accrued interest payable, net	1,518		(16,096)
Net cash provided by (used in) operating activities	$	135,918	$	122,201
Cash Flows From Investing Activities:
Agency MBS portfolio:
Purchases	$	(44,627)	$	(28,856)
Sales	—		201,037
Principal payments	230,321		147,859
Non-Agency RMBS portfolio:
Purchases	(23,000)		—
Sales	—		32,459
Principal payments	76,472		63,311
Loans held for investment:
Purchases	(1,019,118)		(1,069,554)
Sales	—		903,358
Principal payments	592,603		564,559


Net cash provided by (used in) investing activities	$	(187,349)	$	814,173
Cash Flows From Financing Activities:
Proceeds from secured financing agreements	$	8,972,972	$	14,021,592
Payments on secured financing agreements	(8,810,180)		(14,615,709)

Net proceeds from preferred stock offerings	—		—
Payments on repurchase of common stock	—		(1,828)
Proceeds from securitized debt borrowings, collateralized by Loans held for investment	262,118		3,400,687
Payments on securitized debt borrowings, collateralized by Loans held for investment	(495,172)		(3,379,096)
Payments on securitized debt borrowings, collateralized by Non-Agency RMBS	(1,719)		(5,499)




Settlement of warrants	—		(219,840)
Common dividends paid	(78,194)		(69,844)
Preferred dividends paid	(18,407)		(18,438)
Net cash provided by (used in) financing activities	$	(168,582)	$	(887,975)
Net increase (decrease) in cash and cash equivalents	(220,013)		48,399


Cash and cash equivalents at beginning of period	385,741		269,090
Cash and cash equivalents at end of period	$	165,728	$	317,489

Supplemental disclosure of cash flow information:
Interest received	$	225,168	$	259,981
Interest paid	$	66,143	$	114,490


Non-cash investing activities:

Payable for investments purchased	$	259,796	$	76,534

Net change in unrealized gain (loss) on available-for sale securities	$	(40,955)	$	(64,445)


Transfer of investments due to consolidation
Loans held for investment, at fair value	$	1,047,838	$	—

Securitized debt at fair value, collateralized by loans held for investment	$	774,510	$	—
Non-Agency RMBS, at fair value	$	(218,276)	$	—






Non-cash financing activities:
Dividends declared, not yet paid	$	86,560	$	77,355

See accompanying notes to consolidated financial statements.

CHIMERA INVESTMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Chimera Investment Corporation, or the Company, was organized in Maryland on June 1, 2007. The Company commenced operations on November 21, 2007 when it completed its initial public offering. The Company elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder, or the Code.

The Company is an internally managed REIT that is primarily engaged, through its subsidiaries, in the business of investing in a diversified portfolio of mortgage assets, including residential mortgage loans, Agency RMBS, Non-Agency RMBS, Agency CMBS, and other real estate-related assets. The following defines certain of the commonly used terms in this Quarterly Report on Form 10-Q: Agency refers to a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government, such as Ginnie Mae; MBS refers to mortgage-backed securities secured by pools of residential or commercial mortgage loans; Agency RMBS and Agency CMBS refer to MBS that are secured by pools of residential and commercial mortgage loans, respectively, and are issued or guaranteed by an Agency; Agency MBS refers to MBS that are issued or guaranteed by an Agency and includes Agency RMBS and Agency CMBS collectively; Non-Agency RMBS refers to residential MBS that are not guaranteed by any agency of the U.S. Government or any Agency. IO refers to Interest-only securities.

The Company conducts its operations through various subsidiaries including subsidiaries it treats as taxable REIT subsidiaries, or TRSs. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate related business. The Company currently has twelve wholly-owned direct subsidiaries: Chimera RMBS Whole Pool LLC and Chimera RMBS LLC formed in June 2009; CIM Trading Company LLC, or CIM Trading, formed in July 2010; Chimera Funding TRS LLC, or CIM Funding TRS, a TRS formed in October 2013; Chimera CMBS Whole Pool LLC and Chimera RMBS Securities LLC formed in March 2015; Chimera RR Holding LLC formed in April 2016; Anacostia LLC, a TRS formed in June 2018; NYH Funding LLC, a TRS formed in May 2019; Kali 2020 Holdings LLC formed in May 2020; Varuna Capital Partners LLC formed in September 2020; and Aarna Holdings LLC formed in November 2020.

The Company holds a non-consolidated interest in Kah Capital Management, which is accounted for as an equity method investment in other assets on the Statement of Financial Condition. The Company paid $250 thousand and $346 thousand, during the quarters ended March 31, 2022 and 2021, respectively, in fees to Kah Capital Management for investment services provided, which are reported within Other Expenses on the Statement of Operations.

2. Summary of the Significant Accounting Policies

(a) Basis of Presentation and Consolidation

The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. In the opinion of the Company, all normal and recurring adjustments considered necessary for a fair presentation of its financial position, results of operations and cash flows have been included. Investment transactions are recorded on the trade date.

The consolidated financial statements include the Company’s accounts, the accounts of its wholly-owned subsidiaries, and variable interest entities, or VIEs, in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

The Company uses securitization trusts considered to be VIEs in its securitization transactions. VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest, or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly impact the VIEs’ economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. For VIEs that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIEs’ economic performance may be determined by an entity’s involvement with the design and structure of the VIE.

The trusts are structured as entities that receive principal and interest on the underlying collateral and distribute those payments to the security holders. The assets held by the securitization entities are restricted in that they can only be used to fulfill the obligations of the securitization entity. The Company’s risks associated with its involvement with these VIEs are limited to its risks and rights as a holder of the security it has retained as well as certain risks associated with being the sponsor and depositor of and the seller, directly or indirectly to, the securitizations entities.

Determining the primary beneficiary of a VIE requires judgment. The Company determined that for the securitizations it consolidates, its ownership provides the Company with the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE. In addition, the Company has the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, or power, such as rights to replace the servicer without cause, or the Company was determined to have power in connection with its involvement with the structure and design of the VIE.

The Company’s interest in the assets held by these securitization vehicles, which are consolidated on the Company’s Consolidated Statements of Financial Condition, is restricted by the structural provisions of these trusts, and a recovery of the Company’s investment in the vehicles will be limited by each entity’s distribution provisions. Generally, the securities retained by the Company are the most subordinate in the capital structure, which means those securities receive distributions after the senior securities have been paid. The liabilities of the securitization vehicles, which are also consolidated on the Company’s Consolidated Statements of Financial Condition, are non-recourse to the Company, and can only be satisfied using proceeds from each securitization vehicle’s respective asset pool.

The assets of securitization entities are comprised of residential mortgage-backed securities, or RMBS, or residential mortgage loans. See Notes 3, 4 and 9 for further discussion of the characteristics of the securities and loans in the Company’s portfolio.

(b) Statements of Financial Condition Presentation

The Company’s Consolidated Statements of Financial Condition include both the Company’s direct assets and liabilities and the assets and liabilities of consolidated securitization vehicles. Retained beneficial interests of the consolidated securitization vehicles are eliminated on consolidation. Assets of each consolidated VIE can only be used to satisfy the obligations of that VIE, and the liabilities of consolidated VIEs are non-recourse to the Company. The Company is not obligated to provide, nor does it intend to provide, any financial support to these consolidated securitization vehicles. The notes to the consolidated financial statements describe the Company’s assets and liabilities including the assets and liabilities of consolidated securitization vehicles. See Note 9 for additional information related to the Company’s investments in consolidated securitization vehicles.

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company’s estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions could be materially different than anticipated in those estimates, which could have a material adverse impact on the Company’s results of operations and its financial condition.

The Company has made significant estimates including in accounting for income recognition on Agency MBS, Non-Agency RMBS, IO MBS (Note 3) and residential mortgage loans (Note 4), valuation of Agency MBS and Non-Agency RMBS (Notes 3 and 5), residential mortgage loans (Notes 4 and 5) and securitized debt (Notes 5 and 7). Actual results could differ materially from those estimates.

d) Significant Accounting Policies

There have been no significant changes to the Company's accounting policies included in Note 2 to the consolidated financial statements of the Company’s Form 10-K for the year ended December 31, 2021, other than the significant accounting policies discussed below.

Fair Value Disclosure

A complete discussion of the methodology utilized by the Company to estimate the fair value of its financial instruments is included in Note 5 to these consolidated financial statements.

Income Taxes

The Company does not have any material unrecognized tax positions that would affect its financial statements or require disclosure. No accruals for penalties and interest were necessary as of March 31, 2022, or December 31, 2021.

(e) Recent Accounting Pronouncements

Reference Rate Reform (Topic 848)

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2020-4, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter Bank Offering Rate (or LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The amendments in this update are effective for contracts held by the Company subject to reference rate reform that fall within the scope of this update beginning immediately through December 31, 2022 at which time the transition is expected to be complete. The Company has not yet had any contracts modified to adopt reference rate reform. When a contract within the scope of this update is updated for reference rate reform, the Company will evaluate the impact in accordance with this update.

Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)

In August 2020, the FASB issued ASU No. 2020-6, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The FASB issued this update to simplify the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted earnings per share, or EPS, calculation for instruments that may be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure requirements to increase transparency. The Company adopted the guidance on January 1, 2022. The Company does not have convertible instruments and contracts in its own equity, therefore, the adoption of this guidance did not have any material impact on the Company's consolidated financial statements.

3. Mortgage-Backed Securities

The Company classifies its Non-Agency RMBS as senior, subordinated, or Interest-only. The Company also invests in Agency MBS which it classifies as Agency RMBS to include residential and residential interest-only MBS and Agency CMBS to include commercial and commercial interest-only MBS. Senior interests in Non-Agency RMBS are generally entitled to the first principal repayments in their pro-rata ownership interests at the acquisition date. The tables below present amortized cost, allowance for credit losses, fair value and unrealized gain/losses of the Company's MBS investments as of March 31, 2022 and December 31, 2021.


March 31, 2022
(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount		Amortized Cost		Allowance for credit losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	1,250,785	$	4,613	$	(664,447)	$	590,951	$	(283)	$	929,028	$	339,274	$	(914)	$	338,360
Subordinated	512,981		4,781		(169,024)		348,738		(170)		394,387		51,853		(6,034)		45,819
Interest-only	3,644,165		181,159		—		181,159		—		135,472		20,791		(66,478)		(45,687)
Agency RMBS

Interest-only	1,501,720		122,163		—		122,163		—		74,104		6		(48,065)		(48,059)
Agency CMBS
Project loans	329,515		6,830		(205)		336,140		—		356,200		20,060		—		20,060
Interest-only	2,779,083		154,135		—		154,135		—		147,031		2,299		(9,403)		(7,104)
Total	$	10,018,249	$	473,681	$	(833,676)	$	1,733,286	$	(453)	$	2,036,222	$	434,283	$	(130,894)	$	303,389



December 31, 2021
(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount		Amortized Cost		Allowance for credit losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	1,283,788	$	5,906	$	(673,207)	$	616,487	$	(212)	$	985,682	$	369,913	$	(506)	$	369,407
Subordinated	845,432		5,179		(274,843)		575,768		(1)		652,025		99,240		(22,982)		76,258
Interest-only	3,904,665		191,230		—		191,230		—		172,501		36,512		(55,241)		(18,729)
Agency RMBS

Interest-only	992,978		102,934		—		102,934		—		60,487		—		(42,447)		(42,447)
Agency CMBS
Project loans	560,565		10,812		(879)		570,498		—		614,419