0001628280-20-015420 8-K 25 20201104 2.02 9.01 20201104 20201104 CHIMERA INVESTMENT CORP 0001409493 6798 260630461 MD 1231 8-K 34 001-33796 201285149 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 212-626-2300 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 8-K 1 cim-20201104.htm 8-K 0001409493false00014094932020-11-042020-11-040001409493us-gaap:CommonStockMember2020-11-042020-11-040001409493us-gaap:PreferredClassAMember2020-11-042020-11-040001409493us-gaap:PreferredClassBMember2020-11-042020-11-040001409493us-gaap:SeriesCPreferredStockMember2020-11-042020-11-040001409493us-gaap:SeriesDPreferredStockMember2020-11-042020-11-04 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): November 4, 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 Preferred CIM PRA New York Stock Exchange Stock 8.00% Series B Cumulative Fixed-to-Floating Rate CIM PRB New York Stock Exchange Redeemable Preferred Stock 7.75% Series C Cumulative Fixed-to-Floating Rate CIM PRC New York Stock Exchange Redeemable Preferred Stock 8.00% Series D Cumulative Fixed-to-Floating Rate CIM PRD New York Stock Exchange Redeemable 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 November 4, 2020, the registrant issued a press release announcing its financial results for the quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report. On November 4, 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 November 4, 2020, issued by Chimera Investment Corporation 99.2 Supplemental Financial Information for the quarter ended September 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: November 4, 2020 EX-99.1 2 pressrelease-q32020.htm EX-99.1 [[Image Removed: chimeralogoa181.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 3RD QUARTER 2020 EARNINGS •GAAP NET INCOME OF $1.32 PER COMMON SHARE •CORE EARNINGS(1) OF $0.33 PER COMMON SHARE •GAAP BOOK VALUE OF $11.91 PER COMMON SHARE NEW YORK - (BUSINESS WIRE) - Chimera Investment Corporation (NYSE:CIM) today announced its financial results for the third quarter ended September 30, 2020. The Company’s GAAP net income for the third quarter was $349 million, or $1.32 per common share. Core earnings(1) for the third quarter was $80 million, or $0.33 per common share. “Over the past six months we have concentrated the company’s efforts on strengthening the balance sheet and protecting our valuable credit assets” said Matthew Lambiase, President and Chief Executive Officer. “These actions contributed to this quarters strong performance and enabled us to complete three securitizations while purchasing $640 million loans for our portfolio.” (1) Core earnings per adjusted diluted common share is a non-GAAP measure. See additional discussion on page 5. 1 -------------------------------------------------------------------------------- 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) September 30, 2020 December 31, 2019 Cash and cash equivalents $ 325,717 $ 109,878 Non-Agency RMBS, at fair value (net of allowance for credit 2,218,289 2,614,408 losses of $167 thousand and $0 thousand, respectively) Agency RMBS, at fair value 99,988 6,490,293 Agency CMBS, at fair value 1,754,740 2,850,717 Loans held for investment, at fair value 13,533,252 14,292,815 Receivable for investments sold — 446,225 Accrued interest receivable 86,727 116,423 Other assets 75,155 194,301 Derivatives, at fair value, net — 3,611 Total assets (1) $ 18,093,868 $ 27,118,671 Liabilities: Secured financing agreements ($6.7 billion and $15.4 billion $ 4,700,037 $ 13,427,545 pledged as collateral, respectively) Securitized debt, collateralized by Non-Agency RMBS ($528 117,904 133,557 million and $598 million pledged as collateral, respectively) Securitized debt at fair value, collateralized by loans held for investment ($12.4 billion and $12.1 billion pledged as 8,757,449 8,179,608 collateral, respectively) Long term debt 70,641 — Payable for investments purchased 614,583 1,256,337 Accrued interest payable 36,451 63,600 Dividends payable 76,362 98,568 Accounts payable and other liabilities 23,899 6,163 Total liabilities (1) $ 14,397,326 $ 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 $ 58 $ 58 and outstanding, respectively ($145,000 liquidation preference) 8.00% Series B cumulative redeemable: 13,000,000 shares issued 130 130 and outstanding, respectively ($325,000 liquidation preference) 7.75% Series C cumulative redeemable: 10,400,000 shares issued 104 104 and outstanding, respectively ($260,000 liquidation preference) 8.00% Series D cumulative redeemable: 8,000,000 shares issued 80 80 and outstanding, respectively ($200,000 liquidation preference) Common stock: par value $0.01 per share; 500,000,000 shares authorized, 232,190,087 and 187,226,081 shares issued and 2,322 1,873 outstanding, respectively Additional paid-in-capital 4,517,819 4,275,963 Accumulated other comprehensive income 554,981 708,336 Cumulative earnings 3,734,659 3,793,040 Cumulative distributions to stockholders (5,113,611) (4,826,291) Total stockholders' equity $ 3,696,542 $ 3,953,293 Total liabilities and stockholders' equity $ 18,093,868 $ 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 September 30, 2020, and December 31, 2019, total assets of consolidated VIEs were $12,795,729 and $12,544,744, respectively, and total liabilities of consolidated VIEs were $8,660,123 and $8,064,235, respectively. 2 -------------------------------------------------------------------------------- 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, 2020 September 30, 2019 September 30, September 30, 2020 2019 Net interest income: Interest income (1) $ 247,905 $ 330,144 $ 794,094 $ 1,020,448 Interest expense (2) 124,557 188,551 395,897 589,611 Net interest income 123,348 141,593 398,197 430,837 Increase/(decrease) in provision for credit losses (1,650) — 167 — Net other-than-temporary credit impairment losses — — — (4,853) Other investment gains (losses): Net unrealized gains (losses) on derivatives — 31,620 201,000 (189,865) Realized gains (losses) on terminations of interest rate swaps — (148,114) (463,966) (351,372) Net realized gains (losses) on derivatives — (20,178) (41,086) (37,151) Net gains (losses) on derivatives — (136,672) (304,052) (578,388) Net unrealized gains (losses) on financial instruments at fair value 260,766 130,825 (172,042) 522,386 Net realized gains (losses) on sales of investments 65,041 1,596 167,275 2,673 Gains (losses) on extinguishment of debt (55,794) — (55,338) (608) Total other gains (losses) 270,013 (4,251) (364,157) (53,937) Other expenses: Compensation and benefits 10,287 12,191 33,476 38,675 General and administrative expenses 6,811 6,528 19,050 18,569 Servicing fees 8,898 8,881 28,359 27,125 Transaction expenses 1,624 3,415 11,239 4,289 Total other expenses 27,620 31,015 92,124 88,658 Income (loss) before income taxes 367,391 106,327 (58,251) 283,389 Income taxes 62 1 130 156 Net income (loss) $ 367,329 $ 106,326 $ (58,381) $ 283,233 Dividends on preferred stock 18,438 18,438 55,313 54,267 Net income (loss) available to common shareholders $ 348,891 $ 87,888 $ (113,694) $ 228,966 Net income (loss) per share available to common shareholders: Basic $ 1.50 $ 0.47 $ (0.55) $ 1.22 Diluted $ 1.32 $ 0.47 $ (0.55) $ 1.22 Weighted average number of common shares outstanding: Basic 232,127,224 187,158,167 206,237,705 187,141,377 Diluted 265,346,359 188,440,171 206,237,705 188,331,109 (1) Includes interest income of consolidated VIEs of $171,442 and $192,622 for the quarters ended September 30, 2020 and 2019, respectively and $515,250 and $600,436 for the nine months ended September 30, 2020 and 2019, respectively. (2) Includes interest expense of consolidated VIEs of $74,753 and $82,234 for the quarters ended September 30, 2020 and 2019, respectively and $210,198 and $260,790 for the nine months ended September 30, 2020 and 2019, respectively. 3 -------------------------------------------------------------------------------- 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, 2020 September September 30, September 30, 2019 2020 30, 2019 Comprehensive income (loss): Net income (loss) $ 367,329 $ 106,326 $ (58,381) $ 283,233 Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net (1) 40,470 29,980 (97,334) 115,198 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 (22,999) — (56,021) 22,187 Other comprehensive income (loss) 17,471 29,980 (153,355) 142,238 Comprehensive income (loss) before preferred stock dividends $ 384,800 $ 136,306 $ (211,736) $ 425,471 Dividends on preferred stock $ 18,438 $ 18,438 $ 55,313 $ 54,267 Comprehensive income (loss) available to common stock shareholders $ 366,362 $ 117,868 $ (267,049) $ 371,204 (1) Quarter ended and nine months ended September 30, 2020 amounts includes $150 thousand and $15 million, respectively, of unrealized losses on AFS securities for which the Company has recognized an allowance for credit losses. 4 -------------------------------------------------------------------------------- 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 265 million, adjusted for the dilutive effect of approximately 20 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 September 30, June 30, 2020 March 31, 2020 December 31, September 30, 2020 2019 2019 (dollars in thousands, except per share data) GAAP Net income available to common stockholders $ 348,891 $ (73,393) $ (389,193) $ 111,881 $ 87,888 Adjustments: Interest expense on long term debt 1,495 4,391 — — — Increase (decrease) in provision for credit losses (1,650) (4,497) 6,314 — — Net unrealized (gains) losses on derivatives — — (201,000) (83,656) (31,620) Net unrealized (gains) losses on financial instruments at fair value (260,766) 171,921 260,887 112,751 (130,825) Net realized (gains) losses on sales of investments (65,041) (26,380) (75,854) (17,687) (1,596) (Gains) losses on extinguishment of debt 55,794 (459) — (9,926) — Realized (gains) losses on terminations of interest rate swaps — — 463,966 8,353 148,114 Net realized (gains) losses on Futures (1) — — 34,700 (8,229) 19,138 Transaction expenses 1,624 4,710 4,906 6,639 3,415 Stock Compensation expense for retirement eligible awards (275) (273) 1,189 (45) (145) Core Earnings $ 80,072 $ 76,020 $ 105,915 $ 120,081 $ 94,369 GAAP net income per diluted common share $ 1.32 $ (0.37) $ (2.08) $ 0.59 $ 0.47 Core earnings per adjusted diluted common share (2) $ 0.33 $ 0.32 $ 0.56 $ 0.64 $ 0.50 (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. 5 -------------------------------------------------------------------------------- The following tables provide a summary of the Company’s MBS portfolio at September 30, 2020 and December 31, 2019. September 30, 2020 Principal or Weighted Notional Value Average Weighted Average Fair Weighted Average Weighted Average Yield at Period-End Amortized Value Coupon at Period-End (1) (dollars in Cost Basis thousands) Non-Agency RMBS Senior $ 1,629,183 $ 51.33 81.81 4.5 % 16.5 % Subordinated 915,631 63.57 64.58 3.6 % 6.3 % Interest-only 6,056,933 4.33 4.85 1.5 % 16.8 % Agency RMBS Interest-only 1,343,378 9.24 7.44 1.9 % 1.5 % Agency CMBS Project loans 1,538,077 101.82 112.24 4.1 % 3.9 % Interest-only 1,383,665 1.89 2.06 0.7 % 7.9 % (1) Bond Equivalent Yield at period end. December 31, 2019 Principal or Weighted Notional Value at Average Weighted Weighted Average Weighted Average Yield Period-End Amortized Average Fair Coupon at Period-End (1) (dollars in Cost Basis Value 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 % (1) Bond Equivalent Yield at period end. 6 -------------------------------------------------------------------------------- At September 30, 2020 and December 31, 2019, the secured financing agreements collateralized by MBS and Loans held for investment had the following remaining maturities and borrowing rates. September 30, 2020 December 31, 2019 (dollars in thousands) Weighted Average Weighted Average Principal Borrowing Rates Range of Borrowing Rates Principal Borrowing Rates Range of Borrowing Rates Overnight $ — NA NA $ — NA NA 1 to 29 days 1,610,030 0.58% 0.20% - 3.02% 9,709,387 2.26% 1.90% - 3.62% 30 to 59 days 212,333 2.35% 1.85% - 2.55% 800,648 2.96% 2.15% - 3.52% 60 to 89 days 14,626 1.83% 1.55% - 2.45% 608,520 3.00% 2.59% - 3.35% 90 to 119 days — NA NA — NA NA 120 to 180 days 606,072 4.23% 1.34% - 6.61% 809,077 3.38% 3.06% - 3.46% 180 days to 1 year 1,004,318 6.02% 3.25% - 7.99% 580,886 3.42% 3.26% - 3.51% 1 to 2 years 92,695 4.50% 4.50% - 4.50% 427,981 3.28% 3.19% - 3.30% 2 to 3 years 395,829 7.00% 7.00% - 7.00% — NA NA Greater than 3 years 764,134 3.84% 1.55% - 5.56% 491,046 3.20% 3.19% - 3.20% Total $ 4,700,037 3.44% $ 13,427,545 2.52% The following table summarizes certain characteristics of our portfolio at September 30, 2020 and December 31, 2019. September 30, 2020 December 31, 2019 Interest earning assets at period-end (1) $ 17,606,269 $ 26,248,233 Interest bearing liabilities at period-end $ 13,646,031 $ 21,740,710 GAAP Leverage at period-end 3.7:1 5.5:1 GAAP Leverage at period-end (recourse) 1.3:1 3.4:1 Portfolio Composition, at amortized cost Non-Agency RMBS 10.2 % 7.9 % Senior 5.1 % 4.5 % Subordinated 3.5 % 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 9.7 % 11.0 % Project loans 9.5 % 10.8 % Interest-only 0.2 % 0.2 % Loans held for investment 79.3 % 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. 7 -------------------------------------------------------------------------------- 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 Interest Economic GAAP Net Gains (Losses) Net Interest Interest Interest Rate Expense on Long Interest Interest on Interest Interest Income Expense Swaps Term Debt Expense Income Rate Swaps Other (1) Income For the Quarter Ended September 30, 2020 $ 247,905 $ 124,557 $ — $ (1,495) $ 123,062 $ 123,348 $ — $ 1,487 $ 124,835 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 (1) Primarily interest expense on Long term debt and interest income on cash and cash equivalents. 8 -------------------------------------------------------------------------------- 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 September 30, 2020 September 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 $ 127,273 $ 495 1.6 % $ 8,474,168 $ 68,984 3.3 % Agency CMBS 1,770,009 25,571 5.8 % 2,304,541 20,179 3.5 % Non-Agency RMBS 1,692,702 56,311 13.3 % 1,956,631 70,374 14.4 % Loans held for investment 12,943,898 165,520 5.1 % 12,017,663 168,142 5.6 % Total $ 16,533,882 $ 247,897 6.0 % $ 24,753,003 $ 327,679 5.3 % Liabilities and stockholders' equity: Interest-bearing liabilities: Secured financing agreements collateralized by: Agency RMBS $ 76,755 $ 208 1.1 % $ 7,948,235 $ 50,492 2.5 % Agency CMBS 1,680,566 1,141 0.3 % 2,160,190 14,097 2.6 % Non-Agency RMBS 1,171,542 17,495 6.0 % 1,376,214 12,916 3.8 % Loans held for investment 2,340,689 27,814 4.8 % 3,112,001 29,775 3.8 % Securitized debt 8,711,513 76,404 3.5 % 7,819,135 82,234 4.2 % Total $ 13,981,065 $ 123,062 3.5 % $ 22,415,775 $ 189,514 3.4 % Economic net interest income/net interest rate spread $ 124,835 2.5 % $ 138,165 1.9 % Net interest-earning assets/net interest margin $ 2,552,817 3.0 % $ 2,337,228 2.2 % Ratio of interest-earning assets to interest bearing liabilities 1.18 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. Return on Average Economic Net Interest Core Earnings/Average Common Equity Income/Average Equity * Equity (Ratios have been annualized) For the Quarter Ended September 30, 2020 41.43 % 14.08 % 12.24 % 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 % * Includes effect of realized losses on interest rate swaps and excludes long term debt expense. 9 -------------------------------------------------------------------------------- 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 (dollars in thousands) Accretable Discount (Net of Premiums) September 30, December 31, September 30, 2020 June 30, 2020 March 31, 2020 2019 2019 Balance, beginning of period $ 410,447 $ 438,232 $ 494,255 $ 494,780 $ 514,095 Accretion of discount (20,045) (22,508) (24,784) (44,342) (33,256) Purchases 2,096 — (4,336) (12,541) (13,772) Sales and deconsolidation — (23,425) 438 (786) 1,536 Transfers from/(to) credit reserve, net 30,483 18,148 (27,341) 57,144 26,177 Balance, end of period $ 422,981 $ 410,447 $ 438,232 $ 494,255 $ 494,780 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. 10 -------------------------------------------------------------------------------- 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. 11 EX-99.2 3 supplement-q32020r7.htm EX-99.2 [[Image Removed]] FINANCIAL SUPPLEMENT 3rd 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 92% of Chimera's equity capital is allocated to mortgage credit Net Investment Analysis(2) Residential Mortgage 17 Credit Portfolio Total Assets: 15.8 billion(1) RESIDENTIAL 16 MORTGAGE AGENCY TOTAL 15 CREDIT PORTFOLIO PORTFOLIO PORTFOLIO 14 13 Non-Recourse GROSS ASSET 12 (Securitization) YIELD: 6.1% 5.5% 6.0% 11 $8.9 10 FINANCING COSTS(3) 4.0% 0.3% 3.5% 9 8 Bi llions 7 NET INTEREST 2.1% 5.2% 2.5% SPREAD: 6 Recourse (Repo) 5 $3.3 NET INTEREST 4 MARGIN: 2.7% 5.2% 3.0% Agency Portfolio 3 Equity Total Assets: 1.9 billion(1) 2 All data as of September 30, 2020 $3.4 (1) Financing excludes unsettled trades. 1 $1.4 (2) Reflects third quarter 2020 average assets, yields, and spreads. 0 $0.3 (3) Includes the interest incurred on interest rate swaps. Equity Recourse Non-Recourse Information is unaudited, estimated and subject to change. 2 -------------------------------------------------------------------------------- [[Image Removed]] GAAP ASSET ALLOCATION Chimera added to the loan portfolio during the quarter September 30, 2020 December 31, 2019 13% 10% 1% 10% 25% 54% 77% 11% Non-Agency MBS Agency RMBS Non-Agency MBS Agency RMBS Agency CMBS Loan Portfolio Agency CMBS Loan Portfolio Total Portfolio: $17.6 billion Total Portfolio: $26.2 billion Based on fair value. Information is unaudited, estimated and subject to change. 3 -------------------------------------------------------------------------------- [[Image Removed]] GAAP FINANCING SOURCES 3.7:1 total leverage and 1.3:1 recourse leverage(1) in Q3 compared to 5.5:1 total leverage and 3.4:1 recourse leverage(1) in Q4 2019 September 30, 2020 December 31, 2019 24% 24% 38% 1% 10% 65% 29% 9% 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: $13.6 billion Total Portfolio: $21.7 billion (1) Leverage ratios as of September 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 continues to focus on longer term and non-mark- to-market financing for its non-agency portfolio Maturity Facility Type 9% 21% 44% 45% 44% 26% 11% 0 - 3 Months Non Mark-to-Market 3 - 6 Months Limited Mark-to-Market 6 - 12 Months Mark-to-Market Greater Than 12 Months Data based on secured financing agreements outstanding as of September 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-R5 $338,416 $257,027 $81,389 $321,538 $239,933 $81,605 2020 CIM 2020-R4 276,316 207,237 69,079 270,441 201,262 69,179 2020 CIM 2020-R3 438,228 328,670 109,558 420,509 310,781 109,728 2020 CIM 2020-R2 492,347 351,926 140,421 468,501 393,398 75,103 2020 CIM 2020-R1 390,761 317,608 73,153 376,233 303,480 72,753 2019 CIM 2019-R5 315,039 252,224 62,815 280,229 217,581 62,648 2019 CIM 2019-R4 320,802 200,000 120,802 292,907 228,746 64,161 2019 CIM 2019-R3(1) 342,633 291,237 51,396 299,091 247,671 51,420 2019 CIM 2019-R2 464,327 358,172 106,155 428,718 323,566 105,152 2019 CIM 2019-R1 371,762 297,409 74,353 334,376 260,399 73,977 2018 CIM 2018-NR1 257,548 — 257,548 158,226 — 158,226 2018 CIM 2018-R6 478,251 334,775 143,476 362,504 220,924 141,580 2018 CIM 2018-R5 380,194 266,136 114,058 276,987 164,923 112,064 2018 CIM 2018-R4 387,222 271,056 116,166 298,624 183,948 114,676 2018 CIM 2018-R3 181,073 146,669 34,404 123,943 90,452 33,491 2018 CIM 2018-R2 380,292 266,204 114,088 266,667 152,982 113,685 2018 CIM 2018-R1 169,032 140,297 28,735 125,523 96,840 28,683 2017 CMLTI 2017-RP2 421,329 341,276 80,053 307,018 270,494 36,524 2017 CIM 2017-8 1,148,050 688,829 459,221 805,523 645,740 159,783 2017 CIM 2017-7 512,446 341,062 171,384 359,868 202,003 157,865 2017 CIM 2017-6 782,725 626,179 156,546 518,595 367,356 151,239 2017 CIM 2017-5 377,034 75,407 301,627 264,002 192,626 71,376 2017 CIM 2017-4 830,510 710,003 120,507 408,226 305,140 103,086 2017 CIM 2017-3 2,434,640 2,113,267 321,373 1,367,878 1,067,685 300,193 2017 CIM 2017-1 526,267 368,387 157,880 312,765 216,337 96,428 2016 CIM 2016-FRE1 185,811 115,165 70,646 110,365 47,996 62,369 2016 CIM 2016-3 1,746,084 1,478,933 267,151 886,343 652,718 233,625 2016 CIM 2016-2 1,762,177 1,492,563 269,614 892,717 654,277 238,440 2016 CIM 2016-1 1,499,341 1,266,898 232,443 755,885 556,109 199,776 2012 CSMC 2012-CIM3 329,886 305,804 24,082 64,057 51,752 12,305 2008 PHHMC 2008-CIM1 619,710 549,142 70,568 21,014 15,364 5,650 TOTAL $19,160,253 $14,759,562 $4,400,691 $12,179,273 $8,882,483 $3,296,790 All data as of September 30, 2020 $ in thousands (1) Accounted for as a secured borrowing Information is unaudited, estimated and subject to change. 6 -------------------------------------------------------------------------------- [[Image Removed]] chimerareit.com --------------------------------------------------------------------------------