cim-20220930

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, 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 October 31, 2022
Common Stock, $0.01 par value			231,754,346

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, 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 nine months ended September 30, 2022 and 2021			3

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

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

Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 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)
	September 30, 2022		December 31, 2021

Cash and cash equivalents	$	86,234	$	385,741
Non-Agency RMBS, at fair value (net of allowance for credit losses of $3 million and $213 thousand, respectively)	1,191,298		1,810,208
Agency RMBS, at fair value	38,470		60,487
Agency CMBS, at fair value	427,984		761,208
Loans held for investment, at fair value	11,707,299		12,261,926
Receivable for investments sold	14,118		—
Accrued interest receivable	69,330		69,513
Other assets	130,198		58,320
Derivatives, at fair value	4,389		—
Total assets (1)	$	13,669,320	$	15,407,403
Liabilities:
Secured financing agreements ($3.8 billion and $4.4 billion pledged as collateral, respectively)	$	2,820,931	$	3,261,613
Securitized debt, collateralized by Non-Agency RMBS ($281 million and $365 million pledged as collateral, respectively)	79,967		87,999
Securitized debt at fair value, collateralized by Loans held for investment ($10.6 billion and $11.0 billion pledged as collateral, respectively)	7,354,311		7,726,043

Payable for investments purchased	644,120		477,415
Accrued interest payable	25,773		20,416
Dividends payable	63,860		86,152
Accounts payable and other liabilities	26,654		11,574

Total liabilities (1)	$	11,015,616	$	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, 231,751,256 and 236,951,266 shares issued and outstanding, respectively	2,318		2,370
Additional paid-in-capital	4,314,942		4,359,045
Accumulated other comprehensive income	244,204		405,054
Cumulative earnings	3,941,742		4,552,008
Cumulative distributions to stockholders	(5,849,874)		(5,582,658)
Total stockholders' equity	$	2,653,704	$	3,736,191
Total liabilities and stockholders' equity	$	13,669,320	$	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 September 30, 2022, and December 31, 2021, total assets of consolidated VIEs were $10,790,005 and $10,666,591, respectively, and total liabilities of consolidated VIEs were $7,005,717 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 Nine Months Ended
	September 30, 2022		September 30, 2021			September 30, 2022		September 30, 2021
Net interest income:
Interest income (1)	$	188,303	$	220,579		$	585,835	$	716,384
Interest expense (2)	83,464		71,353			226,403		260,029
Net interest income	104,839		149,226			359,432		456,355

Increase/(decrease) in provision for credit losses	(1,534)		(386)			3,203		(58)








Other investment gains (losses):
Net unrealized gains (losses) on derivatives	10,307		—			8,689		—

Periodic interest cost of swaps, net	(122)		—			(122)		—
Net gains (losses) on derivatives	10,185		—			8,567		—
Net unrealized gains (losses) on financial instruments at fair value	(239,513)		239,524			(848,925)		545,643
Net realized gains (losses) on sales of investments	(37,031)		—			(37,031)		45,313

Gains (losses) on extinguishment of debt	—		(25,622)			(2,897)		(284,535)
Other investment gains (losses)	(462)		—			517		—
Total other gains (losses)	(266,821)		213,902			(879,769)		306,421





Other expenses:




Compensation and benefits	10,000		12,694			30,211		35,363
General and administrative expenses	4,836		5,300			16,493		16,672
Servicing and asset manager fees	8,516		9,297			27,122		27,659
Transaction expenses	2,341		3,432			12,872		25,614
Total other expenses	25,693		30,723			86,698		105,308
Income (loss) before income taxes	(186,141)		332,791			(610,238)		657,526
Income tax expense (benefit)	4		1,323			28		5,146
Net income (loss)	$	(186,145)	$	331,468		$	(610,266)	$	652,380

Dividends on preferred stock	18,438		18,438			55,283		55,313

Net income (loss) available to common shareholders	$	(204,583)	$	313,030		$	(665,549)	$	597,067

Net income (loss) per share available to common shareholders:
Basic	$	(0.88)	$	1.33		$	(2.84)	$	2.57
Diluted	$	(0.88)	$	1.30		$	(2.84)	$	2.42

Weighted average number of common shares outstanding:
Basic	231,750,422		235,887,296			234,671,912		232,717,010
Diluted	231,750,422		240,362,602			234,671,912		247,358,823

(1) Includes interest income of consolidated VIEs of $139,598 and $138,984 for the quarters ended September 30, 2022 and 2021, respectively, and $410,873 and $446,198 for the nine months ended September 30, 2022 and 2021, respectively. See Note 9 to consolidated financial statements for further discussion.

(2) Includes interest expense of consolidated VIEs of $50,030 and $43,525 for the quarters ended September 30, 2022 and 2021, respectively, and $142,714 and $159,666 for the nine months ended September 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 Nine Months Ended
	September 30, 2022		September 30, 2021			September 30, 2022		September 30, 2021
Comprehensive income (loss):
Net income (loss)	$	(186,145)	$	331,468		$	(610,266)	$	652,380
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net	(61,526)		(17,198)			(160,850)		$	(82,065)


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

Other comprehensive income (loss)	(61,526)		(17,198)			(160,850)		$	(119,181)
Comprehensive income (loss) before preferred stock dividends	$	(247,671)	$	314,270		$	(771,116)	$	533,199
Dividends on preferred stock	$	18,438	$	18,438		$	55,283	$	55,313
Comprehensive income (loss) available to common stock shareholders	$	(266,109)	$	295,832		$	(826,399)	$	477,886

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, 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, June 30, 2022	$	58	$	130	$	104	$	80	$	2,317	$	4,312,604	$	305,730	$	4,127,887	$	(5,775,911)	$	2,972,999
Net income (loss)	—		—		—		—		—		—		—		(186,145)		—		(186,145)
Other comprehensive income (loss)	—		—		—		—		—		—		(61,526)		—		—		(61,526)




Stock based compensation	—		—		—		—		1		2,338		—		—		—		2,339
Common dividends declared	—		—		—		—		—		—		—		—		(55,525)		(55,525)
Preferred dividends declared	—		—		—		—		—		—		—		—		(18,438)		(18,438)

Balance, September 30, 2022	$	58	$	130	$	104	$	80	$	2,318	$	4,314,942	$	244,204	$	3,941,742	$	(5,849,874)	$	2,653,704

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 Nine Months Ended September 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)	—		—		—		—		—		—		—		(610,266)		—		(610,266)

Other comprehensive income (loss)	—		—		—		—		—		—		(160,850)		—		—		(160,850)
Repurchase of common stock	—		—		—		—		(54)		(48,832)		—		—		—		(48,886)

Stock based compensation	—		—		—				2		4,729		—		—		—		4,731
Common dividends declared	—		—		—		—		—		—		—		—		(211,933)		(211,933)
Preferred dividends declared	—		—		—		—		—		—		—		—		(55,283)		(55,283)

Balance, September 30, 2022	$	58	$	130	$	104	$	80	$	2,318	$	4,314,942	$	244,204	$	3,941,742	$	(5,849,874)	$	2,653,704



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

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, 2022		September 30, 2021
Cash Flows From Operating Activities:
Net income (loss)	$	(610,266)	$	652,380
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Accretion) amortization of investment discounts/premiums, net	68,632		61,158
Accretion (amortization) of deferred financing costs, debt issuance costs, and securitized debt discounts/premiums, net	(2,799)		9,268

Net unrealized losses (gains) on derivatives	(8,689)		—

Proceeds (payments) for derivative settlements	(6,200)		—
Margin (paid) received on derivatives	(2,301)		—
Net unrealized losses (gains) on financial instruments at fair value	848,925		(545,643)
Net realized losses (gains) on sales of investments	37,031		(45,313)
Other investment (gains) losses	(517)		—
Net increase (decrease) in provision for credit losses	3,203		(58)

(Gain) loss on extinguishment of debt	2,897		284,535

Equity-based compensation expense	4,731		4,993
Changes in operating assets: