cim-20220630

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: June 30, 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 July 31, 2022
Common Stock, $0.01 par value			231,751,256

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 June 30, 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 and six months ended June 30, 2022 and 2021			3

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the quarters and six months ended June 30, 2022 and 2021			4

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the quarters and six months ended June 30, 2022 and 2021			5

Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2022 and 2021			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			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 3. Defaults Upon Senior Securities			72

Item 4. Mine Safety Disclosures			72

Item 5. Other Information			72

Item 6. Exhibits			73

SIGNATURES			75

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)
	June 30, 2022		December 31, 2021

Cash and cash equivalents	$	158,455	$	385,741
Non-Agency RMBS, at fair value (net of allowance for credit losses of $5 million and $213 thousand, respectively)	1,321,775		1,810,208
Agency RMBS, at fair value	73,454		60,487
Agency CMBS, at fair value	455,637		761,208
Loans held for investment, at fair value	11,894,421		12,261,926

Accrued interest receivable	70,201		69,513
Other assets	58,811		58,320

Total assets (1)	$	14,032,754	$	15,407,403
Liabilities:
Secured financing agreements ($4.0 billion and $4.4 billion pledged as collateral, respectively)	$	3,148,832	$	3,261,613
Securitized debt, collateralized by Non-Agency RMBS ($309 million and $365 million pledged as collateral, respectively)	81,732		87,999
Securitized debt at fair value, collateralized by Loans held for investment ($11.1 billion and $11.0 billion pledged as collateral, respectively)	7,682,291		7,726,043

Payable for investments purchased	11,555		477,415
Accrued interest payable	22,733		20,416
Dividends payable	85,675		86,152
Accounts payable and other liabilities	26,937		11,574

Total liabilities (1)	$	11,059,755	$	11,671,212

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, 231,748,414 and 236,951,266 shares issued and outstanding, respectively	2,317		2,370
Additional paid-in-capital	4,312,604		4,359,045
Accumulated other comprehensive income	305,730		405,054
Cumulative earnings	4,127,887		4,552,008
Cumulative distributions to stockholders	(5,775,911)		(5,582,658)
Total stockholders' equity	$	2,972,999	$	3,736,191
Total liabilities and stockholders' equity	$	14,032,754	$	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 June 30, 2022, and December 31, 2021, total assets of consolidated VIEs were $10,783,461 and $10,666,591, respectively, and total liabilities of consolidated VIEs were $7,293,599 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				For the Six Months Ended
	June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Net interest income:
Interest income (1)	$	195,357	$	252,677		$	397,532	$	495,805
Interest expense (2)	78,467		80,610			142,939		188,677
Net interest income	116,890		172,067			254,593		307,128

Increase/(decrease) in provision for credit losses	4,497		453			4,737		327








Other investment gains (losses):
Net unrealized gains (losses) on derivatives	(1,618)		—			(1,618)		—



Net unrealized gains (losses) on financial instruments at fair value	(239,246)		36,108			(609,412)		306,120
Net realized gains (losses) on sales of investments	—		7,517			—		45,313

Gains (losses) on extinguishment of debt	(2,897)		(21,777)			(2,897)		(258,914)
Other investment gains	980		—			980		—
Total other gains (losses)	(242,781)		21,848			(612,947)		92,519





Other expenses:




Compensation and benefits	8,859		9,230			20,211		22,669
General and administrative expenses	5,944		6,173			11,657		11,371
Servicing and asset manager fees	9,315		9,081			18,607		18,362
Transaction expenses	6,727		5,745			10,531		22,182
Total other expenses	30,845		30,229			61,006		74,584
Income (loss) before income taxes	(161,233)		163,233			(424,097)		324,736
Income tax expense (benefit)	94		(88)			24		3,824
Net income (loss)	$	(161,327)	$	163,321		$	(424,121)	$	320,912

Dividends on preferred stock	18,438		18,438			36,845		36,875

Net income (loss) available to common shareholders	$	(179,765)	$	144,883		$	(460,966)	$	284,037

Net income (loss) per share available to common shareholders:
Basic	$	(0.76)	$	0.63		$	(1.95)	$	1.23
Diluted	$	(0.76)	$	0.60		$	(1.95)	$	1.14

Weighted average number of common shares outstanding:
Basic	235,310,440		231,638,042			236,156,868		231,105,595
Diluted	235,310,440		241,739,536			236,156,868		251,723,940

(1) Includes interest income of consolidated VIEs of $140,209 and $149,115 for the quarters ended June 30, 2022 and 2021, respectively, and $271,275 and $307,214 for the six months ended June 30, 2022 and 2021, respectively. See Note 9 to consolidated financial statements for further discussion.

(2) Includes interest expense of consolidated VIEs of $50,193 and $50,935 for the quarters ended June 30, 2022 and 2021, respectively, and $92,684 and $116,141 for the six months ended June 30, 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				For the Six Months Ended
	June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021
Comprehensive income (loss):
Net income (loss)	$	(161,327)	$	163,321		$	(424,121)	$	320,912
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net	(58,369)		(26,215)			(99,324)		$	(64,867)


Reclassification adjustment for net realized losses (gains) included in net income	—		(11,323)			—		$	(37,116)

Other comprehensive income (loss)	(58,369)		(37,538)			(99,324)		$	(101,983)
Comprehensive income (loss) before preferred stock dividends	$	(219,696)	$	125,783		$	(523,445)	$	218,929
Dividends on preferred stock	$	18,438	$	18,438		$	36,845	$	36,875
Comprehensive income (loss) available to common stock shareholders	$	(238,134)	$	107,345		$	(560,290)	$	182,054

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, 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, March 31, 2022	$	58	$	130	$	104	$	80	$	2,370	$	4,360,340	$	364,099	$	4,289,214	$	(5,679,667)	$	3,336,728
Net income (loss)	—		—		—		—		—		—		—		(161,327)		—		(161,327)
Other comprehensive income (loss)	—		—		—		—		—		—		(58,369)		—		—		(58,369)
Repurchase of common stock	—		—		—		—		(54)		(48,832)		—		—		—		(48,886)



Stock based compensation	—		—		—		—		1		1,096		—		—		—		1,097
Common dividends declared	—		—		—		—		—		—		—		—		(77,806)		(77,806)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, June 30, 2022	$	58	$	130	$	104	$	80	$	2,317	$	4,312,604	$	305,730	$	4,127,887	$	(5,775,911)	$	2,972,999

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 Six Months Ended June 30, 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)	—		—		—		—		—		—		—		(424,121)		—		(424,121)

Other comprehensive income (loss)	—		—		—		—		—		—		(99,324)		—		—		(99,324)
Repurchase of common stock	—		—		—		—		(54)		(48,832)		—		—		—		(48,886)

Stock based compensation	—		—		—				1		2,391		—		—		—		2,392
Common dividends declared	—		—		—		—		—		—		—		—		(156,408)		(156,408)
Preferred dividends declared	—		—		—		—		—		—		—		—		(36,845)		(36,845)

Balance, June 30, 2022	$	58	$	130	$	104	$	80	$	2,317	$	4,312,604	$	305,730	$	4,127,887	$	(5,775,911)	$	2,972,999


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

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, 2022		June 30, 2021
Cash Flows From Operating Activities:
Net income (loss)	$	(424,121)	$	320,912
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Accretion) amortization of investment discounts/premiums, net	53,789		38,546
Accretion (amortization) of deferred financing costs, debt issuance costs, and securitized debt discounts/premiums, net	(2,257)		11,179

Net unrealized losses (gains) on derivatives	1,618		—

Proceeds (payments) for derivative settlements	(6,200)		—
Margin (paid) received on derivatives	5,990		—
Net unrealized losses (gains) on financial instruments at fair value	609,412		(306,120)
Net realized losses (gains) on sales of investments	—		(45,313)
Other investment (gains) losses	(980)		—
Net increase (decrease) in provision for credit losses	4,737		327

(Gain) loss on extinguishment of debt	2,897		258,914

Equity-based compensation expense	2,392		5,967
Changes in operating assets:
Decrease (increase) in accrued interest receivable, net	(687)		5,843
Decrease (increase) in other assets	(403)		(25,599)
Changes in operating liabilities:
Increase (decrease) in accounts payable and other liabilities	10,579		12,656

Increase (decrease) in accrued interest payable, net	1,890		(17,823)
Net cash provided by (used in) operating activities	$