0001628280-20-011703 8-K 25 20200805 2.02 9.01 20200805 20200805 CHIMERA INVESTMENT CORP 0001409493 6798 260630461 MD 1231 8-K 34 001-33796 201075580 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 212-626-2300 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 8-K 1 chimera8-kq2x20pressre.htm 8-K Document false0001409493 0001409493 2020-08-05 2020-08-05 0001409493 us-gaap:PreferredClassBMember 2020-08-05 2020-08-05 0001409493 us-gaap:SeriesCPreferredStockMember 2020-08-05 2020-08-05 0001409493 us-gaap:PreferredClassAMember 2020-08-05 2020-08-05 0001409493 us-gaap:SeriesDPreferredStockMember 2020-08-05 2020-08-05 0001409493 us-gaap:CommonStockMember 2020-08-05 2020-08-05 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ____________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 5, 2020 CHIMERA INVESTMENT CORPORATION (Exact name of registrant as specified in its charter) Maryland 1-33796 26-0630461 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 520 Madison Avenue, 32nd Fl New York New York 10022 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (212) 626-2300 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 CIM PRA New York Stock Exchange Preferred Stock 8.00% Series B Cumulative Fixed-to-Floating Rate Redeemable CIM PRB New York Stock Exchange Preferred Stock 7.75% Series C Cumulative Fixed-to-Floating Rate Redeemable CIM PRC New York Stock Exchange Preferred Stock 8.00% Series D Cumulative Fixed-to-Floating Rate Redeemable CIM PRD New York Stock Exchange Preferred Stock Registrant's Web site address: www.chimerareit.com (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ? Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ? Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) -------------------------------------------------------------------------------- ? Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ? Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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. ? -------------------------------------------------------------------------------- Item 2.02. Results of Operations and Financial Condition On August 5, 2020, the registrant issued a press release announcing its financial results for the quarter ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report. On August 5, 2020, the registrant posted supplemental financial information on the News & Events - Press Releases section of its website (www.chimerareit.com). A copy of the supplemental financial information is furnished as Exhibit 99.2 to this report and incorporated herein by reference. Item 9.01 Financial Statements and Exhibits (d) Exhibits 99.1 Press Release, dated August 5, 2020, issued by Chimera Investment Corporation 99.2 Supplemental Financial Information for the quarter ended June 30, 2020 -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Chimera Investment Corporation By: /s/ Rob Colligan Name: Rob Colligan Title: Chief Financial Officer Date: August 5, 2020 EX-99.1 2 pressrelease-q22020.htm EXHIBIT 99.1 Exhibit [[Image Removed: chimeralogoa18.jpg]] PRESS RELEASE NYSE: CIM CHIMERA INVESTMENT CORPORATION 520 Madison Avenue New York, New York 10022 _________________________________________________________________________________________________ Investor Relations 888-895-6557 www.chimerareit.com FOR IMMEDIATE RELEASE CHIMERA INVESTMENT CORPORATION REPORTS 2ND QUARTER 2020 EARNINGS • GAAP NET LOSS OF $(0.37) PER COMMON SHARE • CORE EARNINGS(1) OF $0.32 PER COMMON SHARE • GAAP BOOK VALUE OF $10.63 PER COMMON SHARE • FINANCED NEARLY $2 BILLION OF NON-AGENCY SECURITIES ON NON-MARK-TO-MARKET FACILITIES • REMOVED THE MARK-TO-MARKET WAREHOUSE FINANCING RISK OF OUR NON-SECURITIZED RESIDENTIAL LOAN PORTFOLIO THROUGH THREE SECURITIZATIONS AND A NEW NON-MARK-TO-MARKET FACILITY NEW YORK - (BUSINESS WIRE) - Chimera Investment Corporation (NYSE:CIM) today announced its financial results for the second quarter ended June 30, 2020. The Company’s GAAP net loss for the second quarter was $(73) million, or $(0.37) per common share. Core earnings(1) for the second quarter was $76 million, or $0.32 per common share. We entered into three non-mark-to-market facilities to finance approximately $2 billion of our non-agency portfolio, including our risk retention securities. We also entered into a limited mark-to-market facility to finance roughly $611 million of non-agency securities. As a result of these actions approximately 54% of our non-agency borrowings are not subject to full mark-to-market risk. In addition, we have increased the weighted average day to maturity of our non-agency financing from 223 days in the first quarter to 698 days in the second quarter. As of the end of the second quarter, more than 42% of our non-agency financings have terms longer than 1 year. Additionally, we removed the mark-to-market warehouse financing risk of our non-securitized residential loan portfolio by completing two loan securitizations during the second quarter totaling approximately $715 million, one loan securitization in July for approximately $338 million, and one non-mark-to market loan facility which financed the remaining $393 million of residential loans. "During the second quarter we prioritized our focus on liquidity and non-mark-to-market and longer-term financing arrangements," said Matthew Lambiase, President and Chief Executive Officer. "This strategy has allowed us to retain high-yielding assets, provide time for asset price recovery, while remaining positioned for opportunistic investments." 1 -------------------------------------------------------------------------------- (1) Core earnings is a non-GAAP measure. See additional discussion on page 6. 2 -------------------------------------------------------------------------------- Other Information Chimera Investment Corporation is a publicly traded real estate investment trust, or REIT, that is primarily engaged in the business of investing directly or indirectly through our subsidiaries, on a leveraged basis, in a diversified portfolio of mortgage assets, including residential mortgage loans, Non-Agency RMBS, Agency CMBS, Agency RMBS, and other real estate related securities. CHIMERA INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except share and per share data) (Unaudited) June 30, 2020 December 31, 2019 Cash and cash equivalents $ 302,553 $ 109,878 Non-Agency RMBS, at fair value (net of allowance for credit losses of $2 million and $0 million, 2,184,170 2,614,408 respectively) Agency RMBS, at fair value 107,263 6,490,293 Agency CMBS, at fair value 2,612,344 2,850,717 Loans held for investment, at fair value 13,036,833 14,292,815 Receivable for investments sold — 446,225 Accrued interest receivable 89,387 116,423 Other assets 115,601 194,301 Derivatives, at fair value, net — 3,611 Total assets (1) $ 18,448,151 $ 27,118,671 Liabilities: Secured financing agreements ($7.8 billion and $15.4 $ 5,944,201 $ 13,427,545 billion pledged as collateral, respectively) Securitized debt, collateralized by Non-Agency RMBS ($524 million and $598 million pledged as collateral, 124,414 133,557 respectively) Securitized debt at fair value, collateralized by loans held for investment ($12.2 billion and $12.1 8,530,111 8,179,608 billion pledged as collateral, respectively) Long Term Debt 71,600 — Payable for investments purchased 246,770 1,256,337 Accrued interest payable 41,336 63,600 Dividends payable 75,554 98,568 Accounts payable and other liabilities 18,286 6,163 Total liabilities (1) $ 15,052,272 $ 23,165,378 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 $ 58 $ 58 liquidation preference) 8.00% Series B cumulative redeemable: 13,000,000 shares issued and outstanding, respectively ($325,000 130 130 liquidation preference) 7.75% Series C cumulative redeemable: 10,400,000 shares issued and outstanding, respectively ($260,000 104 104 liquidation preference) 8.00% Series D cumulative redeemable: 8,000,000 shares issued and outstanding, respectively ($200,000 80 80 liquidation preference) Common stock: par value $0.01 per share; 500,000,000 shares authorized, 232,003,526 and 187,226,081 shares 2,320 1,873 issued and outstanding, respectively Additional paid-in-capital 4,515,043 4,275,963 Accumulated other comprehensive income 537,510 708,336 Cumulative earnings 3,367,330 3,793,040 Cumulative distributions to stockholders (5,026,696 ) (4,826,291 ) Total stockholders' equity $ 3,395,879 $ 3,953,293 Total liabilities and stockholders' equity $ 18,448,151 $ 27,118,671 (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, 2020, and December 31, 2019, total assets of consolidated VIEs were $12,578,835 and $12,544,744, respectively, and total liabilities of consolidated VIEs were $8,431,077 and $8,064,235, respectively. 3 -------------------------------------------------------------------------------- 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, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Net interest income: Interest income (1) $ 245,922 $ 339,914 $ 546,189 $ 690,303 Interest expense (2) 129,256 198,110 271,339 401,060 Net interest income 116,666 141,804 274,850 289,243 Increase/(decrease) in provision for credit losses (4,497 ) — 1,817 — Net other-than-temporary credit impairment losses — — — (4,853 ) Other investment gains (losses): Net unrealized gains (losses) on derivatives — (132,171 ) 201,000 (221,486 ) Realized gains (losses) on terminations of interest rate swaps — (95,211 ) (463,966 ) (203,257 ) Net realized gains (losses) on derivatives — (9,697 ) (41,086 ) (16,974 ) Net gains (losses) on derivatives — (237,079 ) (304,052 ) (441,717 ) Net unrealized gains (losses) on financial instruments at fair value (171,921 ) 190,748 (432,809 ) 391,561 Net realized gains (losses) on sales of investments 26,380 (7,526 ) 102,234 1,077 Gains (losses) on extinguishment of debt 459 (608 ) 459 (608 ) Total other gains (losses) (145,082 ) (54,465 ) (634,168 ) (49,687 ) Other expenses: Compensation and benefits 10,255 12,114 23,190 26,484 General and administrative expenses 6,562 6,217 12,239 12,019 Servicing fees 9,473 9,280 19,462 18,243 Transaction expenses 4,710 813 9,616 895 Total other expenses 31,000 28,424 64,507 57,641 Income (loss) before income taxes (54,919 ) 58,915 (425,642 ) 177,062 Income taxes 36 155 68 155 Net income (loss) $ (54,955 ) $ 58,760 $ (425,710 ) $ 176,907 Dividends on preferred stock 18,438 18,438 36,875 35,829 Net income (loss) available to common shareholders $ (73,393 ) $ 40,322 $ (462,585 ) $ 141,078 Net income (loss) per share available to common shareholders: Basic $ (0.37 ) $ 0.22 $ (2.39 ) $ 0.75 Diluted $ (0.37 ) $ 0.21 $ (2.39 ) $ 0.75 Weighted average number of common shares outstanding: Basic 199,282,790 187,153,007 193,150,696 187,132,842 Diluted 199,282,790 188,271,483 193,150,696 188,254,266 (1) Includes interest income of consolidated VIEs of $169,127 and $200,703 for the quarters ended June 30, 2020 and 2019, respectively and $343,809 and $407,814 for the six months ended June 30, 2020 and 2019, respectively. (2) Includes interest expense of consolidated VIEs of $70,816 and $87,529 for the quarters ended June 30, 2020 and 2019, respectively and $135,445 and $178,556 for the six months ended June 30, 2020 and 2019, respectively. 4 -------------------------------------------------------------------------------- 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, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Comprehensive income (loss): Net income (loss) $ (54,955 ) $ 58,760 $ (425,710 ) $ 176,907 Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net (1) 61,399 58,833 (137,805 ) 85,218 Reclassification adjustment for net losses included in net income for other-than-temporary credit impairment losses — — — 4,853 Reclassification adjustment for net realized losses (gains) included in net income (26,380 ) 7,269 (33,021 ) 22,187 Other comprehensive income (loss) 35,019 66,102 (170,826 ) 112,258 Comprehensive income (loss) before preferred stock dividends $ (19,936 ) $ 124,862 $ (596,536 ) $ 289,165 Dividends on preferred stock $ 18,438 $ 18,438 $ 36,875 $ 35,829 Comprehensive income (loss) available to common stock shareholders $ (38,374 ) $ 106,424 $ (633,411 ) $ 253,336 (1) Quarter ended and six months ended June 30, 2020 amounts includes $8 million and $15 million, respectively, of unrealized losses on AFS securities for which the Company has recognized an allowance for credit losses. 5 -------------------------------------------------------------------------------- Core earnings Core earnings is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains on the aggregate portfolio, provision for credit losses, interest expense on long term debt, impairment losses, realized gains on sales of investments, realized gains or losses on futures, realized gains or losses on swap terminations, gain on deconsolidation, extinguishment of debt and expenses incurred in relation to securitizations. In addition, stock compensation expense charges incurred on awards to retirement eligible employees is reflected as an expense over a vesting period (36 months) rather than reported as an immediate expense. As defined, core earnings include interest income and expense, as well as periodic cash settlements on interest rate swaps used to hedge interest rate risk and other expenses. Core earnings is inclusive of preferred dividend charges, compensation and benefits (adjusted for awards to retirement eligible employees), general and administrative expenses, servicing fees, as well as income tax expenses incurred during the period. Management believes that the presentation of core earnings provides investors with a useful measure but has important limitations. We believe core earnings as described above helps us evaluate our financial performance period over period without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, core earnings should not be viewed in isolation and is not a substitute for net income or net income per basic share computed in accordance with GAAP. In addition, our methodology for calculating core earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and accordingly, our reported core earnings may not be comparable to the core earnings reported by other REITs. The following table provides GAAP measures of net income and net income per diluted share available to common stockholders for the periods presented and details with respect to reconciling the line items to core earnings and related per average diluted common share amounts. The Core earnings is presented on an adjusted dilutive shares basis. The adjusted dilutive shares used for core earnings is a non-GAAP measure which includes the GAAP dilutive shares of 199 million, adjusted for potentially dilutive shares of 43 million less the dilutive effect of approximately 5 million shares on warrants issued in second quarter of 2020. We exclude the dilutive effect of the warrants as the warrant holders do not participate in dividends. Certain prior period amounts have been reclassified to conform to the current period's presentation. For the Quarters Ended June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 (dollars in thousands, except per share data) GAAP Net income available to common stockholders $ (73,393 ) $ (389,193 ) $ 111,881 $ 87,888 $ 40,322 Adjustments: Interest expense on long term debt 4,391 — — — — Increase (decrease) in provision for credit losses (4,497 ) 6,314 — — — Net unrealized (gains) losses on derivatives — (201,000 ) (83,656 ) (31,620 ) 132,171 Net unrealized (gains) losses on financial instruments at fair value 171,921 260,887 112,751 (130,825 ) (190,748 ) Net realized (gains) losses on sales of investments (26,380 ) (75,854 ) (17,687 ) (1,596 ) 7,526 (Gains) losses on extinguishment of debt (459 ) — (9,926 ) — 608 Realized (gains) losses on terminations of interest rate swaps — 463,966 8,353 148,114 95,211 Net realized (gains) losses on Futures (1) — 34,700 (8,229 ) 19,138 13,544 Transaction expenses 4,710 4,906 6,639 3,415 812 Stock Compensation expense for retirement eligible awards (273 ) 1,189 (45 ) (145 ) (144 ) Core Earnings $ 76,020 $ 105,915 $ 120,081 $ 94,369 $ 99,302 GAAP net income per diluted common share $ (0.37 ) $ (2.08 ) $ 0.59 $ 0.47 $ 0.21 Core earnings per adjusted diluted common share (2) $ 0.32 $ 0.56 $ 0.64 $ 0.50 $ 0.53 (1) Included in net realized gains (losses) on derivatives in the Consolidated Statements of Operations. (2) We note that core and taxable earnings will typically differ, and may materially differ, due to differences on realized gains and losses on investments and related hedges, credit loss recognition, timing differences in premium amortization, accretion of discounts, equity compensation and other items. 6 -------------------------------------------------------------------------------- The following tables provide a summary of the Company’s MBS portfolio at June 30, 2020 and December 31, 2019. June 30, 2020 Principal or Weighted Notional Value Weighted Average Weighted Weighted Average Average Yield at Period-End Amortized Average Coupon at Period-End (dollars in Cost Basis Fair Value (1) thousands) Non-Agency RMBS Senior $ 1,697,252 $ 51.81 79.06 4.6 % 16.8 % Subordinated 893,311 62.91 58.51 3.6 % 6.4 % Interest-only 6,380,154 4.31 5.01 1.5 % 15.5 % Agency RMBS Interest-only 1,425,919 9.16 7.52 1.4 % 2.1 % Agency CMBS Project loans 2,297,301 101.71 111.97 3.8 % 3.7 % Interest-only 1,690,539 2.40 2.37 0.7 % 5.0 % December 31, 2019 Principal or Weighted Notional Value at Weighted Average Weighted Average Weighted Average Average Yield Period-End Amortized Fair Value Coupon at Period-End (dollars in Cost Basis (1) thousands) Non-Agency RMBS Senior $ 2,024,564 $ 52.98 $ 84.01 5.0 % 20.8 % Subordinated 876,592 63.15 71.25 3.7 % 6.9 % Interest-only 7,458,653 4.04 3.87 1.1 % 8.4 % Agency RMBS Pass-through 6,080,547 102.15 104.64 4.0 % 3.4 % Interest-only 1,539,941 9.06 8.29 1.6 % 4.0 % Agency CMBS Project loans 2,621,938 101.82 106.86 3.7 % 3.6 % Interest-only 1,817,246 2.81 2.70 0.7 % 4.7 % 7 -------------------------------------------------------------------------------- At June 30, 2020 and December 31, 2019, the repurchase agreements collateralized by MBS and Loans held for investment had the following remaining maturities. June 30, 2020 December 31, 2019 (dollars in thousands) Weighted Weighted Average Range of Average Range of Borrowing Borrowing Borrowing Borrowing Principal Rates Rates Principal Rates Rates Overnight $ — NA NA $ — NA NA 1 to 29 days 0.21% - 2,311,122 0.48% 2.74% 9,709,387 2.26% 1.90% - 3.62% 30 to 59 days 1.97% - 296,041 2.55% 2.67% 800,648 2.96% 2.15% - 3.52% 60 to 89 days (1) 2.15% - 2.59% - 65,390 2.37% 2.43% 608,520 3.00% 3.35% 90 to 119 days — NA NA — NA NA 120 to 180 days 1.66% - 191,904 1.96% 2.93% 809,077 3.38% 3.06% - 3.46% 180 days to 1 year 1.68% - 1,497,192 5.34% 8.74% 580,886 3.42% 3.26% - 3.51% 1 to 2 years 1.68% - 187,187 2.92% 4.50 % 427,981 3.28% 3.19% - 3.30% 2 to 3 years 7.00% - 400,000 7.00% 7.00% — NA NA Greater than 3 years 1.58% - 794,581 3.91% 5.56 % 491,046 3.20% 3.19% - 3.20% Total $ 5,743,417 2.93% $ 13,427,545 2.52% (1) June 30, 2020 balance excludes $201 million principal related to a secured borrowing which will terminate during third quarter of 2020. The fair value of the collateral on this secured borrowing was $330 million and the interest rate was 18.7%. The following table summarizes certain characteristics of our portfolio at June 30, 2020 and December 31, 2019. June 30, 2020 December 31, 2019 Interest earning assets at period-end (1) $ 17,940,610 $ 26,248,233 Interest bearing liabilities at period-end $ 14,670,326 $ 21,740,710 GAAP Leverage at period-end 4.3:1 5.5:1 GAAP Leverage at period-end (recourse) 1.8:1 3.4:1 Portfolio Composition, at amortized cost Non-Agency RMBS 10.0 % 7.9 % Senior 5.1 % 4.5 % Subordinated 3.3 % 2.2 % Interest-only 1.6 % 1.2 % Agency RMBS 0.8 % 25.7 % Pass-through — % 25.1 % Interest-only 0.8 % 0.6 % Agency CMBS 13.8 % 11.0 % Project loans 13.6 % 10.8 % Interest-only 0.2 % 0.2 % Loans held for investment 75.4 % 55.4 % Fixed-rate percentage of portfolio 94.9 % 95.9 % Adjustable-rate percentage of portfolio 5.1 % 4.1 % (1) Excludes cash and cash equivalents. 8 -------------------------------------------------------------------------------- Economic Net Interest Income Our “Economic net interest income” is a non-GAAP financial measure, that equals interest income, less interest expense and realized losses on our interest rate swaps. Realized losses on our interest rate swaps are the periodic net settlement payments made or received. For the purpose of computing economic net interest income and ratios relating to cost of funds measures throughout this section, interest expense includes net payments on our interest rate swaps, which is presented as a part of Realized gains (losses) on derivatives in our Consolidated Statements of Operations and Comprehensive Income. Interest rate swaps are used to manage the increase in interest paid on repurchase agreements in a rising rate environment. Presenting the net contractual interest payments on interest rate swaps with the interest paid on interest-bearing liabilities reflects our total contractual interest payments. We believe this presentation is useful to investors because it depicts the economic value of our investment strategy by showing actual interest expense and net interest income. Where indicated, interest expense, including interest payments on interest rate swaps, is referred to as economic interest expense. Where indicated, net interest income reflecting interest payments on interest rate swaps, is referred to as economic net interest income. The following table reconciles the GAAP and non-GAAP measurements reflected in the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Net Realized (Gains) Net Realized Economic GAAP GAAP Losses on Economic GAAP Net Gains (Losses) on Net Interest Interest Interest Rate Interest Expense Interest Interest Interest Rate Interest Income Expense Swaps on Long Term Debt Expense Income Swaps Other (1) Income For the Quarter Ended June 30, 2020 $ 245,922 $ 129,256 $ — $ (4,391 ) $ 124,865 $ 116,666 $ — $ 4,358 $ 121,024 For the Quarter Ended March 31, 2020 $ 300,266 $ 142,083 $ 6,385 $ — $ 148,468 $ 158,183 $ (6,385 ) $ (1,266 ) $ 150,532 For the Quarter Ended December 31, 2019 $ 340,662 $ 169,203 $ 5,409 $ — $ 174,612 $ 171,459 $ (5,409 ) $ (1,664 ) $ 164,386 For the Quarter Ended September 30, 2019 $ 330,144 $ 188,551 $ 963 $ — $ 189,514 $ 141,593 $ (963 ) $ (2,465 ) $ 138,165 For the Quarter Ended June 30, 2019 $ 339,914 $ 198,110 $ (3,923 ) $ — $ 194,187 $ 141,804 $ 3,923 $ (2,237 ) $ 143,490 (1) Primarily interest expense/(income) on Long term debt, cash and cash equivalents. 9 -------------------------------------------------------------------------------- The table below shows our average earning assets held, interest earned on assets, yield on average interest earning assets, average debt balance, economic interest expense, economic average cost of funds, economic net interest income, and net interest rate spread for the periods presented. For the Quarter Ended June 30, 2020 June 30, 2019 (dollars in thousands) (dollars in thousands) Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost Assets: Interest-earning assets (1): Agency RMBS $ 132,915 $ 682 2.1 % $ 8,866,523 $ 73,652 3.3 % Agency CMBS 2,223,629 20,161 3.6 % 2,138,240 19,573 3.7 % Non-Agency RMBS 1,758,255 57,515 13.1 % 1,918,451 74,618 15.6 % Loans held for investment 13,202,723 167,531 5.1 % 11,906,654 169,834 5.7 % Total $ 17,317,522 $ 245,889 5.7 % $ 24,829,868 $ 337,677 5.4 % Liabilities and stockholders' equity: Interest-bearing liabilities: Secured financing agreements collateralized by: Agency RMBS $ 77,114 $ 228 1.2 % $ 8,566,949 $ 55,147 2.6 % Agency CMBS 2,188,202 2,346 0.4 % 1,896,296 11,601 2.4 % Non-Agency RMBS 1,292,934 22,408 6.9 % 1,284,996 13,155 4.1 % Loans held for investment 2,978,013 27,338 3.7 % 2,892,756 26,755 3.7 % Securitized debt 8,459,641 72,545 3.4 % 7,943,504 87,529 4.4 % Total $ 14,995,904 $ 124,865 3.3 % $ 22,584,501 $ 194,187 3.4 % Economic net interest income/net interest rate spread $ 121,024 2.4 % $ 143,490 2.0 % Net interest-earning assets/net interest margin $ 2,321,618 2.8 % $ 2,245,367 2.3 % Ratio of interest-earning assets to interest bearing liabilities 1.15 1.10 (1) Interest-earning assets at amortized cost (2) Interest includes net cash paid/received on swaps The table below shows our Net Income and Economic Net Interest Income as a percentage of average stockholders' equity and Core Earnings as a percentage of average common stockholders' equity. Return on average equity is defined as our GAAP net income (loss) as a percentage of average equity. Average equity is defined as the average of our beginning and ending stockholders' equity balance for the period reported. Economic Net Interest Income and Core Earnings are non-GAAP measures as defined in previous sections. Economic Net Interest Income/Average Equity Core Earnings/Average Return on Average Equity * Common Equity (Ratios have been annualized) For the Quarter Ended June 30, 2020 (6.62 )% 14.58 % 12.72 % For the Quarter Ended March 31, 2020 (41.21 )% 16.73 % 15.88 % For the Quarter Ended December 31, 2019 13.12 % 16.55 % 15.78 % For the Quarter Ended September 30, 2019 10.68 % 13.88 % 12.37 % For the Quarter Ended June 30, 2019 5.93 % 14.49 % 13.10 % * Includes effect of realized losses on interest rate swaps and excludes long term debt expense. 10 -------------------------------------------------------------------------------- The following table presents changes to Accretable Discount (net of premiums) as it pertains to our Non-Agency RMBS portfolio, excluding premiums on IOs, during the previous five quarters. For the Quarters Ended Accretable Discount (Net of Premiums) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 (dollars in thousands) Balance, beginning of period $ 438,232 $ 494,255 $ 494,780 $ 514,095 $ 485,040 Accretion of discount (22,508 ) (24,784 ) (44,342 ) (33,256 ) (35,964 ) Purchases — (4,336 ) (12,541 ) (13,772 ) 48,736 Sales and deconsolidation (23,425 ) 438 (786 ) 1,536 409 Transfers from/(to) credit reserve, net 18,148 (27,341 ) 57,144 26,177 15,874 Balance, end of period $ 410,447 $ 438,232 $ 494,255 $ 494,780 $ 514,095 Disclaimer This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our most recent Annual Report on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: our business and investment strategy; our ability to accurately forecast the payment of future dividends on our common and preferred stock, and the amount of such dividends; our ability to determine accurately the fair market value of our assets; availability of investment opportunities in real estate-related and other securities, including our valuation of potential opportunities that may arise as a result of current and future market dislocations; effect of the novel coronavirus (or COVID-19) pandemic on real estate market, financial markets and our Company, including the impact on the value, availability, financing and liquidity of mortgage assets; how COVID-19 may affect us, our operations and our personnel; our expected investments; changes in the value of our investments, including negative changes resulting in margin calls related to the financing of our assets; changes in interest rates and mortgage prepayment rates; prepayments of the mortgage and other loans underlying our mortgage-backed securities, or RMBS, or other asset-backed securities, or ABS; rates of default, delinquencies or decreased recovery rates on our investments; general volatility of the securities markets in which we invest; our ability to maintain existing financing arrangements and our ability to obtain future financing arrangements; our ability to effect our strategy to securitize residential mortgage loans; interest rate mismatches between our investments and our borrowings used to finance such purchases; effects of interest rate caps on our adjustable-rate investments; the degree to which our hedging strategies may or may not protect us from interest rate volatility; the impact of and changes to various government programs, including in response to COVID-19; impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters; market trends in our industry, interest rates, the debt securities markets or the general economy; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; availability of qualified personnel; our ability to maintain our classification as a real estate investment trust, or, REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or 1940 Act; our expectations regarding materiality or significance; and the effectiveness of our disclosure controls and procedures. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Chimera does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Chimera’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Chimera or matters attributable to Chimera or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. 11 -------------------------------------------------------------------------------- Readers are advised that the financial information in this press release is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by the Company’s independent auditors. 12 EX-99.2 3 supplementq22020r10495d.htm EXHIBIT 99.2 [[Image Removed]] FINANCIAL SUPPLEMENT 2nd Quarter 2020 -------------------------------------------------------------------------------- [[Image Removed]] DISCLAIMER This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “goal” “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our most recent Annual Report on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q and Current Report on Form 8-K, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to:our business and investment strategy; our ability to accurately forecast the payment of future dividends on our common and preferred stock, and the amount of such dividends; our ability to determine accurately the fair market value of our assets; availability of investment opportunities in real estate-related and other securities, including our valuation of potential opportunities that may arise as a result of current and future market dislocations; effect of the novel coronavirus (or COVID-19) pandemic on real estate market, financial markets and our Company, including the impact on the value, availability, financing and liquidity of mortgage assets; how COVID-19 may affect us, our operations and our personnel; our expected investments; changes in the value of our investments, including negative changes resulting in margin calls related to the financing of our assets; changes in interest rates and mortgage prepayment rates; prepayments of the mortgage and other loans underlying our mortgage-backed securities, or RMBS, or other asset-backed securities, or ABS; rates of default, delinquencies or decreased recovery rates on our investments; general volatility of the securities markets in which we invest; our ability to maintain existing financing arrangements and our ability to obtain future financing arrangements; our ability to effect our strategy to securitize residential mortgage loans; interest rate mismatches between our investments and our borrowings used to finance such purchases; effects of interest rate caps on our adjustable-rate investments; the degree to which our hedging strategies may or may not protect us from interest rate volatility; the impact of and changes to various government programs, including in response to COVID-19; impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters; market trends in our industry, interest rates, the debt securities markets or the general economy; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; availability of qualified personnel; our ability to maintain our classification as a real estate investment trust, or, REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or 1940 Act; our expectations regarding materiality or significance; and the effectiveness of our disclosure controls and procedures. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Chimera does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Chimera’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Chimera or matters attributable to Chimera or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. This presentation may include industry and market data obtained through research, surveys, and studies conducted by third parties and industry publications. We have not independently verified any such market and industry data from third-party sources. This presentation is provided for discussion purposes only and may not be relied upon as legal or investment advice, nor is it intended to be inclusive of all the risks and uncertainties that should be considered. This presentation does not constitute an offer to purchase or sell any securities, nor shall it be construed to be indicative of the terms of an offer that the parties or their respective affiliates would accept. Readers are advised that the financial information in this presentation is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by the company’s independent auditors. Information is unaudited, estimated and subject to change. -------------------------------------------------------------------------------- [[Image Removed]] PORTFOLIO COMPOSITION 90% of Chimera's equity capital is allocated to mortgage credit (2) Net Investment Analysis Residential Mortgage 17 Credit Portfolio (1) RESIDENTIAL 16 Total Assets: 15.2 billion MORTGAGE AGENCY TOTAL CREDIT PORTFOLIO PORTFOLIO 15 PORTFOLIO 14 13 Non-Recourse GROSS ASSET 6.0% 3.5% 5.7% YIELD: 12 (Securitization) 11 $8.7 FINANCING (3) 10 COSTS 3.8% 0.5% 3.3% s n 9 o i l l i NET INTEREST B 8 SPREAD: 2.2% 3.0% 2.4% 7 6 Recourse (Repo) NET INTEREST 2.7% 3.1% 2.8% MARGIN: 5 $3.6 Agency Portfolio 4 Total Assets: 2.7 billion(1) All data as of June 30, 2020 3 (1) Financing excludes unsettled trades. (2) Reflects second quarter 2020 average assets, yields, and spreads. 2 Equity Recourse (Repo) (3) Includes the interest incurred on interest rate swaps. $3.0 $2.1 1 Equity 0 $0.3 Information is unaudited, estimated and subject to change. 2 -------------------------------------------------------------------------------- [[Image Removed]] GAAP ASSET ALLOCATION Chimera added to the loan portfolio during the quarter June 30, 2020 March 31, 2020 12% 12% 1% 1% 15% 15% 73% 72% Non-Agency MBS Agency RMBS Non-Agency MBS Agency RMBS Agency CMBS Loan Portfolio Agency CMBS Loan Portfolio Total Portfolio: $17.9 billion Total Portfolio: $18.4 billion Based on fair value. Information is unaudited, estimated and subject to change. 3 -------------------------------------------------------------------------------- [[Image Removed]] GAAP FINANCING SOURCES Chimera operates at 4.3:1 total leverage and 1.8:1 recourse leverage(1) June 30, 2020 March 31, 2020 26% 32% 1% 53% 59% 1% 14% 15% Non-Agency Secured Financing, RMBS Non-Agency Secured Financing, RMBS Agency Secured Financing, RMBS Agency Secured Financing, RMBS Agency Secured Financing, CMBS Agency Secured Financing, CMBS Non-Recourse Debt, Securitized RMBS and Loans (2) Non-Recourse Debt, Securitized RMBS and Loans (2) Total Portfolio: $14.6 billion Total Portfolio: $15.1 billion (1) Leverage ratios as of June 30, 2020 (2) Consists of tranches of RMBS and loan securitizations sold to third parties. Information is unaudited, estimated and subject to change. 4 -------------------------------------------------------------------------------- [[Image Removed]] NON-AGENCY FINANCING Chimera’s focus in the 2nd quarter was extending maturities and securing non-mark-to-market financing Maturity Facility Type 9% 1% 42% 46% 43% 48% 11% 0 - 3 Months 3 - 6 Months Non Mark-to-Market Limited Mark-to-Market 6 - 12 Months Greater Than 12 Months Mark-to-Market Data based on secured financing agreements outstanding as of June 30, 2020 Information is unaudited, estimated and subject to change. 5 -------------------------------------------------------------------------------- [[Image Removed]] CONSOLIDATED LOAN SECURITIZATIONS TOTAL ORIGINAL TOTAL OF TOTAL OF TOTAL REMAINING REMAINING FACE OF REMAINING FACE OF VINTAGE DEAL FACE TRANCHES SOLD TRANCHES FACE TRANCHES SOLD TRANCHES RETAINED RETAINED 2020 CIM 2020-R4 $276,316 $207,237 $69,079 $276,316 $207,237 $69,079 2020 CIM 2020-R3 438,228 328,670 109,558 434,872 325,208 109,664 2020 CIM 2020-R2 492,347 351,926 140,421 480,261 404,917 75,344 2020 CIM 2020-R1 390,761 317,608 73,153 381,399 308,529 72,870 2019 CIM 2019-R5 315,039 252,224 62,815 291,593 228,902 62,691 2019 CIM 2019-R4 320,802 200,000 120,802 300,840 236,678 64,162 2019 CIM 2019-R3(1) 342,633 291,237 51,396 309,727 258,315 51,412 2019 CIM 2019-R2 464,327 358,172 106,155 437,607 332,170 105,437 2019 CIM 2019-R1 371,762 297,409 74,353 343,110 269,130 73,980 2018 CIM 2018-NR1 257,548 — 257,548 164,843 — 164,843 2018 CIM 2018-R6 478,251 334,775 143,476 378,069 236,310 141,759 2018 CIM 2018-R5 380,194 266,136 114,058 289,165 177,077 112,088 2018 CIM 2018-R4 387,222 271,056 116,166 310,395 195,501 114,894 2018 CIM 2018-R3 181,073 146,669 34,404 128,290 94,707 33,583 2018 CIM 2018-R2 380,292 266,204 114,088 276,845 163,171 113,674 2018 CIM 2018-R1 169,032 140,297 28,735 129,786 101,110 28,676 2017 CMLTI 2017-RP2 421,329 341,276 80,053 316,307 281,205 35,102 2017 CIM 2017-8 1,148,050 688,829 459,221 828,022 380,865 447,157 2017 CIM 2017-7 512,446 341,062 171,384 372,316 213,586 158,730 2017 CIM 2017-6 782,725 626,179 156,546 539,532 387,044 152,488 2017 CIM 2017-5 377,034 75,407 301,627 272,860 201,019 71,841 2017 CIM 2017-4 830,510 710,003 120,507 429,982 326,353 103,629 2017 CIM 2017-3 2,434,640 2,113,267 321,373 1,433,208 1,134,004 299,204 2017 CIM 2017-1 526,267 368,387 157,880 325,332 175,177 150,155 2016 CIM 2016-FRE1 185,811 115,165 70,646 113,800 50,910 62,890 2016 CIM 2016-3 1,746,084 1,478,933 267,151 926,584 693,326 233,258 2016 CIM 2016-2 1,762,177 1,492,563 269,614 934,236 696,676 237,560 2016 CIM 2016-1 1,499,341 1,266,898 232,443 788,471 589,361 199,110 2012 CSMC 2012-CIM3 329,886 305,804 24,082 76,148 62,471 13,677 2008 PHHMC 2008-CIM1 619,710 549,142 70,568 21,859 16,040 5,819 TOTAL $18,821,837 $14,502,535 $4,319,302 $12,311,775 $8,746,999 $3,564,776 All data as of June 30, 2020 $ in thousands (1) Accounted for as a secured borrowing Information is unaudited, estimated and subject to change. 6 -------------------------------------------------------------------------------- [[Image Removed]] chimerareit.com --------------------------------------------------------------------------------