0001206774-20-001592 DEF 14A 8 20200625 20200508 20200508 20200508 CHIMERA INVESTMENT CORP 0001409493 6798 260630461 MD 1231 DEF 14A 34 001-33796 20860723 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 212-626-2300 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 DEF 14A 1 cim3687441-def14a.htm DEFINITIVE PROXY STATEMENT Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to §240.14a-12 Chimera Investment Corporation (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: -------------------------------------------------------------------------------- Table of Contents [[Image Removed]] ANNUAL MEETING AND PROXY STATEMENT Annual Meeting To Be Held June 25, 2020 To the Stockholders of Chimera Investment Corporation: It is my pleasure to invite you to attend the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) of Chimera Investment Corporation, a Maryland corporation (“Chimera” or “the Company”), that will be held on June 25, 2020, at 10:00 a.m. Eastern Time. At the beginning of this year, as we looked back at a successful 2019 and looked forward to a bright future for 2020, we did not imagine that we would face a global COVID-19 pandemic, and the resulting unprecedented and volatile market conditions that followed. We, and the Country, will continue to face uncertainty and challenges ahead, but we are committed to remain good stewards of our company and of the health and safety of our people. I have no doubt that we will get through this difficult time and will be stronger for having done so together. This year’s Annual Meeting will once again be a virtual meeting to be held over the Internet. We believe that the use of the Internet to host the Annual Meeting enables expanded stockholder participation. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/CIM2020 and entering your 16-digit control number. The accompanying notice of the Annual Meeting and Proxy Statement tell you more about the agenda and procedures for the meeting. They also describe, among other things, how the Company’s Board of Directors operates and provide information about our director candidates, executive officer and director compensation and corporate governance matters. I look forward to sharing more information with you about Chimera at the Annual Meeting. Your vote is very important. Whether or not you plan to virtually attend the Annual Meeting, I urge you to authorize your proxy as soon as possible. You may authorize your proxy on the Internet, by telephone, or by mail. Your vote will ensure your representation at the Annual Meeting regardless of whether you attend via webcast on June 25, 2020. Sincerely, [[Image Removed]] Matthew Lambiase Chief Executive Officer and President May 8, 2020 -------------------------------------------------------------------------------- Table of Contents NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF CHIMERA INVESTMENT CORPORATION Time: 10:00 a.m. Eastern Time Date: Thursday, June 25, 2020 Place: Virtual meeting via webcast at www.virtualshareholdermeeting.com/CIM2020 Purpose: This year’s Annual Meeting will be held for the following purposes: ?To elect (i) three Class I Directors, each to serve until our annual meeting of stockholders in 2023 and until his successor is duly elected and qualified and (ii) one Class III Director, to serve until our annual meeting of stockholders in 2022 and until his successor is duly elected and qualified; ?To consider and vote upon a non-binding advisory resolution on our executive compensation; ?To consider and vote upon the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020; and ?To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. ?We utilize the “notice and access” model rather than mailing full sets of proxy materials to stockholders, as we think, among other things, the Company Other Important Information: benefits from the reduced costs associated with this method of delivery. Thus, on or about May 8, 2020, we expect to commence mailing of a Notice of Internet Availability of Proxy Materials, which contains information regarding electronic access to our proxy materials and voting information. However, we will mail hard copies of the proxy materials to any stockholder who requests them. Our Proxy Statement and 2019 Annual Report are available at www.proxyvote.com. ?Registered holders of our common stock at the close of business on April 22, 2020 may attend and vote at the Annual Meeting and any adjournments or postponements thereof. ?Your shares cannot be voted unless they are represented by proxy or in person by the record holder attending the Annual Meeting via webcast. Whether or not you plan to attend the Annual Meeting via webcast, please vote your shares by proxy to ensure they are represented at the Annual Meeting. By order of the Board of Directors, [[Image Removed]] Phillip J. Kardis II Chief Legal Officer and Corporate Secretary Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held June 25, 2020. Our Proxy Statement and 2019 Annual Report to Stockholders are available at www.proxyvote.com. -------------------------------------------------------------------------------- Table of Contents TABLE OF CONTENTS INFORMATION ABOUT THE MEETING 1 WHERE YOU CAN FIND MORE INFORMATION 4 PROPOSAL I ELECTION OF DIRECTORS 5 CORPORATE GOVERNANCE, DIRECTOR INDEPENDENCE, BOARD MEETINGS AND COMMITTEES 8 MANAGEMENT 14 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CHIMERA 15 EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS 16 EQUITY COMPENSATION PLAN INFORMATION 39 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 39 COMPENSATION OF DIRECTORS 39 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 41 REPORT OF THE AUDIT COMMITTEE 42 PROPOSAL 2 CONSIDER AND VOTE UPON A NON-BINDING ADVISORY VOTE APPROVING EXECUTIVE COMPENSATION 43 PROPOSAL 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 44 ADDITIONAL MATTERS 45 i -------------------------------------------------------------------------------- Table of Contents [[Image Removed]] 520 MADISON AVE, 32ND FLOOR NEW YORK, NEW YORK 10022 2020 ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT INFORMATION ABOUT THE MEETING General Information These materials are intended to solicit proxies on behalf of the Board of Directors of Chimera Investment Corporation, a Maryland corporation (which we refer to as “Chimera,” the “Company,” “we,” or “us”), for the 2020 Annual Meeting of Stockholders (“Annual Meeting”), including any adjournment or postponement thereof. This year, the Annual Meeting will once again be a virtual meeting of stockholders. This means you will be able to attend the Annual Meeting, vote and submit questions during the Annual Meeting via a live webcast by visiting www.virtualshareholdermeeting.com/CIM2020. The meeting will convene at 10:00 a.m. Eastern Time on June 25, 2020. Items to be Voted on at the Annual Meeting (1) Election of (a) three Class I Directors, Paul A. Donlin, Mark Abrams and Gerard Creagh, each to serve until our annual meeting of stockholders in 2023 and until his successor is duly elected and qualified, and (b) one Class III Director, Brian P. Reilly, to serve until our annual meeting of stockholders in 2022 and until his successor is duly elected and qualified; (2) Consider and vote upon a non-binding advisory resolution on our executive compensation; and (3) Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020. (4) Other than these three items, we know of no other business to be considered at the Annual Meeting. If any other business is properly presented at the Annual Meeting, your signed proxy card authorizes your proxy to vote on those matters in his or her discretion. Board of Directors Recommendation Our Board of Directors recommends that you vote: (1) “FOR” the election of each of the nominees as Directors; (2) “FOR” the approval of the non-binding advisory resolution on executive compensation; and (3) “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020. 1 -------------------------------------------------------------------------------- Table of Contents Stockholders Entitled to Vote at the Meeting If you were a stockholder of record at the close of business on the record date for the meeting, April 22, 2020 (the “Record Date”), you are entitled to vote at the meeting. There were 188,752,612 shares of common stock outstanding on the Record Date. You will have one vote on each matter properly brought before the meeting for each share of common stock you own. How to Vote Your Shares Your vote is important. Your shares can be voted at the Annual Meeting only if (i) you are present in person by attending the virtual Annual Meeting via webcast and you vote your shares electronically at such meeting, as described in this Proxy Statement, or (ii) you are represented by proxy. Even if you plan to attend the Annual Meeting via webcast, we urge you to authorize your proxy in advance (i) electronically by going to the www.proxyvote.com website and following the instructions described on the Notice of Internet Availability of Proxy Materials (“Notice of Access card”), previously mailed to you or on your proxy card, (ii) by calling the toll-free number (for residents of the United States and Canada) listed on your Notice of Access card or your proxy card or (iii) by mail. Please have your proxy card in hand when going online or calling. If you authorize your proxy electronically through the website or by telephone, you do not need to return your proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card, and then date, sign and return it in the postage-paid envelope provided so it is received no later than June 24, 2020. If you hold your shares beneficially in street name, i.e., through a nominee (such as a bank or broker), you may be able to authorize your proxy by telephone or the Internet as well as by mail. You should follow the instructions you receive from your broker or other nominee to vote these shares. Your broker or nominee will not vote your shares on the election of directors or the advisory resolution on executive compensation unless you provide instructions to your broker or nominee on how to vote your shares. How to Revoke Your Proxy You may revoke your proxy at any time before it is voted at the Annual Meeting by: ? authorizing your proxy again on the Internet or by telephone (only the latest Internet or telephone proxy will be counted), as described above; ? properly executing and delivering a later-dated proxy card by mail; ? voting electronically at the Annual Meeting via webcast; or ? sending a written notice of revocation to the inspector of election in care of the Corporate Secretary of the Company at 520 Madison Avenue, 32nd Floor, New York, NY 10022 so it is received no later than June 24, 2020. Voting at the Annual Meeting The method by which you vote and authorize your proxy will in no way limit your right to vote at the Annual Meeting if you later decide to vote electronically during the Annual Meeting via webcast. If you hold your shares in street name, you must obtain a proxy executed in your favor from your nominee (such as your bank or broker) to be able to vote at the Annual Meeting. Quorum for the Annual Meeting A quorum will be present at the Annual Meeting if a majority of the votes entitled to be cast are present, in person by attending the Annual Meeting via webcast or by proxy. Because there were 188,752,612 outstanding shares of common stock as of the Record Date, each share entitled to one vote per share, stockholders representing at least 94,376,307 votes need to be present in person or by proxy at the Annual Meeting for a quorum to exist. If a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be postponed or adjourned to solicit additional proxies. 2 -------------------------------------------------------------------------------- Table of Contents Votes Required to Approve Each Item The voting requirements are as follows: Discretionary Voting Proposal Vote Required Allowed (1) Election of directors Majority of total votes No cast for and against such nominee (2) Approval of the advisory Majority of votes cast No vote on our executive compensation (3) Ratification of the Majority of votes case Yes appointment of Ernst & Young LLP “Majority of votes cast” means a majority of the votes cast at the Annual Meeting on the proposal. Effect of Abstentions and Broker “Non-Votes” An abstention is the voluntary act of not voting by a stockholder who is present at a meeting and entitled to vote, including by directing a proxy to abstain. Abstentions will be treated as shares that are present for purposes of determining the presence of a quorum. Discretionary voting occurs when a bank, broker, or other holder of record does not receive voting instructions from the beneficial owner and votes those shares in its discretion on any proposal as to which the rules of the New York Stock Exchange (“NYSE”) permit such bank, broker, or other holder of record to vote. When banks, brokers, and other holders of record are not permitted under the NYSE rules to vote the beneficial owner’s shares on a proposal, and there is at least one other proposal on which discretionary voting is allowed, the affected shares are referred to as broker “non-votes.” Broker “non-votes” will be treated as present for purposes of determining the presence of a quorum at the Annual Meeting. Abstentions and broker non-votes, if any, will have no effect on the election of the directors (Proposal No. 1), the advisory vote on our executive compensation (Proposal No. 2), or the ratification of the appointment of Ernst & Young LLP (Proposal No. 3). Annual Meeting Admission You may attend the virtual Annual Meeting if you are a stockholder of record, a proxy of a stockholder of record, or a beneficial owner of our common stock with evidence of ownership. If you attend the virtual Annual Meeting, you will be able to vote your shares and submit questions. Internet Availability of Proxy Materials We utilize a “notice and access” model rather than mailing full sets of proxy materials to stockholders, as we think among other things the Company benefits from the reduced costs associated with this method of delivery. Thus, pursuant to rules of the Securities and Exchange Commission (“SEC”), we are making our proxy materials available to our stockholders electronically over the Internet rather than mailing the proxy materials. Accordingly, we are sending a Notice of Access card to our stockholders. All stockholders can access the proxy materials, including this Proxy Statement and our 2019 Annual Report to Stockholders, on the website referred to in the Notice of Access card or to request a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice of Access card (as well as the proxy card). In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Solicitation of Proxies for the Annual Meeting We are soliciting the proxy accompanying this Proxy Statement. We are bearing all costs associated with the solicitation of proxies for the Annual Meeting. This solicitation is being made primarily through the Internet and by mail, but may also be made by our directors, executive officers, employees and representatives by telephone, facsimile transmission, electronic transmission or in person. No compensation will be given to our directors, executive officers or employees for this solicitation. Arrangements also will be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of shares held of record by these persons, and we will reimburse them for their reasonable out-of-pocket expenses. We will bear the total cost of soliciting proxies. 3 -------------------------------------------------------------------------------- Table of Contents We have retained Innisfree M&A Incorporated (“Innisfree”), a proxy solicitation firm, to assist us in the solicitation of proxies for the Annual Meeting. We will pay Innisfree a fee of $12,500 for its services. In addition, we may pay Innisfree additional fees depending on the extent of additional services requested by us and will reimburse Innisfree for expenses Innisfree incurs in connection with its engagement by us. Stockholders have the option to authorize their proxy over the Internet or by telephone. Please be aware that if you authorize your proxy over the Internet or by telephone, you may incur costs such as telephone and access charges for which you will be responsible. Householding We have adopted a procedure approved by the SEC called householding. Under this procedure, registered stockholders who have the same address and last name and who receive either (i) a Notice of Access card or (ii) paper copies of the proxy materials through the mail will receive only one copy of our proxy materials, or a single envelope containing the notices for all stockholders at that address. Stockholders who participate in householding will continue to receive separate proxy cards or Notice of Access card that will include each stockholder’s unique control number to vote the shares held in each account. If a stockholder of record residing at such an address wishes to receive separate proxy materials, he or she may request it orally or in writing by contacting us at Chimera Investment Corporation, 520 Madison Avenue, 32nd Floor, New York, New York 10022, Attention: Investor Relations, by emailing us at investor@chimerareit.com, or by calling us at (888) 895-6557, and we will promptly deliver to the stockholder the requested proxy materials. If a stockholder of record residing at such an address wishes to receive a separate annual report or proxy statement in the future, he or she may contact us in the same manner. If you are an eligible stockholder of record receiving multiple copies of our proxy materials, you can request householding by contacting us in the same manner. If you own your shares through a bank, broker or other nominee, you can contact the nominee. Postponement or Adjournment of the Annual Meeting We may postpone the Annual Meeting by making a public announcement of such postponement prior to the Annual Meeting. Our bylaws permit the chairman of the meeting to recess or adjourn the meeting, without notice other than an announcement at the Annual Meeting. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. These SEC filings are available to the public from commercial document retrieval services and at the Internet site maintained by the SEC at http://www.sec.gov. Our website is www.chimerareit.com. We make available on this website under “Investors – Filings & Reports – SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. 4 -------------------------------------------------------------------------------- Table of Contents PROPOSAL I ELECTION OF DIRECTORS We have three classes of Directors. Our Class I Directors, Paul Donlin, Mark Abrams, and Gerard Creagh, will be elected at the Annual Meeting and will serve until our annual meeting of stockholders in 2023. Our Class II Directors serve until our annual meeting of stockholders in 2021. Our Class III Directors, including Brian P. Reilly to be elected at the Annual Meeting, serve until our annual meeting of stockholders in 2022. Set forth below are the names and certain biographical information on each of our nominees for our Class I Directors and Class III Director to be elected as the Annual Meeting, as well as each of our Class II Directors and other Class III Directors. Name Class Age* Independent Director Since Paul Donlin I 58 Yes November 2007 Mark Abrams I 71 Yes November 2007 Gerard Creagh I 62 Yes April 2010 Brian P. Reily III 60 Yes July 2019 Teresa B. Bazemore II 60 Yes November 2017 Dennis M. Mahoney II 78 Yes April 2010 Debra W. Still II 67 Yes March 2018 John P. Reilly III 71 Yes April 2010 Matthew Lambiase III 54 No August 2007 ____________________ *as of June 25, 2020 At the Annual Meeting, the stockholders will vote to elect three Class I Directors, whose terms will expire at our annual meeting of stockholders in 2023, and one Class III Director, whose term will expire at our annual meeting of stockholders in 2022, and in each case until the election and qualification of their successors or to their earlier death, resignation or removal. Nominees for Re-election as Class I Directors The following information is furnished regarding the nominees for re-election as Class I directors by the holders of Common Stock. Paul Donlin was appointed as one of our Class I Directors and our Nonexecutive Chairman of the Board of Directors on November 15, 2007. Mr. Donlin left Citigroup in 2007, after a career that spanned 21 years. For the previous 10 years at Citigroup, Mr. Donlin was in the securitization business, with his most recent position being the Head of Global Securitization in the Global Securitized Markets Business within Fixed Income. Earlier in his career at Citigroup, Mr. Donlin managed the Structured Finance and Advisory Unit of Citigroup’s Private Bank. Mr. Donlin has an M.B.A. from Harvard University and a Bachelor’s Degree from Georgetown University. The Board believes that Mr. Donlin’s qualifications include, among other things, his significant experience in the residential mortgage-backed securities market from his years of management and oversight of securitization activities and his expertise in financial matters. Mark Abrams was appointed as one of our Class I Directors on November 15, 2007. Mr. Abrams served as Chief Investment Officer of the Presidential Life Insurance Company from November 2003 until January 2013 and as Executive Vice President from 2005 until January 2013. He was Senior Vice President of the Presidential Life Insurance Company from 2001 to 2003, and before that, Mr. Abrams served as Vice President of the Presidential Life Insurance Company since October 1994. Mr. Abrams has a Bachelor’s Degree from Hobart College. The Board believes that Mr. Abrams’s qualifications include, among other things, his experience as a chief investment officer and his prior executive management experience with other companies. 5 -------------------------------------------------------------------------------- Table of Contents Gerard Creagh was appointed as one of our Class I Directors effective as of April 1, 2010. Since May 2011, Mr. Creagh has served as a Managing Partner at CVC Advisers LLC, a financial consulting firm. From September 2005 through April 2010, Mr. Creagh served as the President and a member of the Board of Directors of Duff & Phelps Corporation. From September 2005 to September 2007, Mr. Creagh served as President of Duff & Phelps Acquisitions, LLC. Prior to its merger with Duff & Phelps in September 2005, Mr. Creagh served as executive managing director of Standard & Poor’s Corporate Value Consulting practice. Mr. Creagh joined Standard & Poor’s from PricewaterhouseCoopers, where he held the position of North American Valuation Services practice leader. Mr. Creagh previously served as the U.S. leader for the Valuation Practice of Coopers & Lybrand. Mr. Creagh has a Bachelor’s Degree and Master’s Degree in mechanical engineering from Manhattan College and has an M.B.A. in finance from New York University’s Leonard N. Stern School of Business. The Board believes that Mr. Creagh’s qualifications include, among other things, his experience in the oversight of risk management policies and procedures, his significant background as a lead corporate executive and his prior board experience with other companies. Nominee for Re-election as Class III Director The following information is furnished regarding the nominee for re-election as a Class III director by the holders of Common Stock. Brian P. Reilly was appointed as one of our Class III Directors on July 31, 2019. Mr. Reilly has over 34 years of experience across multiple roles in the financial services industry. He currently serves as Senior Vice President and Chief Auditor of The Travelers Companies, Inc., where he oversees the global audit team evaluating financial controls, operational efficiency, regulatory compliance and system and data integrity. He has been the Chief Auditor of The Travelers since 2002. Prior to joining The Travelers, Mr. Reilly was a partner with Arthur Andersen LLP. In addition, Mr. Reilly currently serves as a board member of the Connecticut Society of Certified Public Accountants, an organization of accounting professionals. Mr. Reilly has a Bachelor’s Degree in accounting from the University of Connecticut and is a Certified Public Accountant. The Board believes that Mr. Reilly’s qualifications include, among other things, his experience as an auditor and certified public accountant, and his significant experience in the oversight and evaluation of financial controls, operational efficiency, regulatory compliance and system and data integrity. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (i) PAUL DONLIN, MARK ABRAMS, GERARD CREAGH, AND BRIAN P. REILLY AS DIRECTORS EACH TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS IN 2023, AND (ii) BRIAN P. REILLY AS DIRECTOR TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS IN 2022, IN EACH CASE, AS AND UNTIL HIS SUCCESSOR IS DULY ELECTED AND QUALIFIED. Continuing Class II Directors The following information is furnished regarding our Class II directors who will continue to serve on the Board until our 2021 Annual Meeting and until their respective successor are duly elected and qualified. Teresa Bryce Bazemore was appointed as one of our Class II Directors on November 1, 2017. Ms. Bazemore served as the President of Radian Guaranty from July 2008 to her retirement in April 2017 where she oversaw the strategic planning, business development and operations of the mortgage insurance business line. Prior to her position as the President, from October 2006 to July 2008, she served as Executive Vice President, General Counsel and Corporate Secretary and added the role of Chief Risk Officer of Radian Group in February 2007. Prior to joining the Radian Group, from June 2000 to May 2006, she was the Vice President, General Counsel, and Secretary for Nexstar Financial Corporation. Prior to Nexstar, from March 1997 to May 2000, she was the General Counsel of the mortgage banking line of business at Bank of America. Ms. Bazemore has been a member of the T. Rowe Price Funds board of directors since January 1, 2018. In addition, she was a member of the board of directors of the Federal Home Loan Bank of Pittsburgh and served on the board’s Affordable Housing Products & Services Committee and the Audit Committee from August 2017 until March 2019. Ms. Bazemore earned a BA from the University of Virginia and a JD from Columbia University. 6 -------------------------------------------------------------------------------- Table of Contents The Board believes that Ms. Bazemore’s qualifications include, among other things, her extensive experience as a senior executive in the mortgage banking field as well as well as her experience serving as a director of a U.S. government-sponsored bank and on the T. Rowe Price Fund Board of Directors. Dennis M. Mahoney was appointed as one of our Class II Directors effective as of April 1, 2010. Before retiring in 2007, Mr. Mahoney was Senior Vice President of Columbia Bank and was responsible for the development and expansion of alternative investment products. Prior to joining Columbia Bank in 1994, Mr. Mahoney was Executive Vice President and Chief Operating Officer of First Atlantic Savings. Mr. Mahoney joined First Atlantic Savings in 1988 from Carteret Savings Bank where he was Executive Vice President and Treasurer. Mr. Mahoney received a Bachelor’s Degree in Economics and Business Administration from Roanoke College. The Board believes that Mr. Mahoney’s qualifications include, among other things, his significant knowledge of the banking and investment industry and his experience as an executive in the financial services industry. Debra W. Still was appointed as one of our Class II Directors on March 6, 2018. Ms. Still has served as President and Chief Executive Officer of Pulte Financial Services since 2010, which includes the mortgage lending, title and insurance operations of PulteGroup, Inc. (NYSE: PHM), one of the nation’s largest homebuilders. In addition to Pulte Financial Services, Ms. Still is also President of, and a member of the board of managers of, Pulte Mortgage, LLC, a nationwide lender headquartered in Englewood, Colorado. Ms. Still began her career with Pulte Mortgage, LLC in 1983 where she served in various executive capacities, including Chief Operating Officer, prior to being named President in 2004. Ms. Still is a graduate of Ithaca College, Ithaca, N.Y., with a Bachelor of Science degree and has completed graduate work in Finance at George Washington University, Washington, D.C. The Board believes that Ms. Still’s qualifications include, among other things, her significant experience as a senior executive in real estate finance overseeing mortgage lending operations. Continuing Class III Directors The following information is furnished regarding our Class III directors who will continue to serve on the Board until our 2022 Annual Meeting and until their respective successor are duly elected and qualified. Matthew Lambiase has served as our President and Chief Executive Officer and one of our directors since August 2007. Prior to becoming our Chief Executive Officer and President, Mr. Lambiase was a Managing Director and Head of Business Development for Annaly Capital Management, Inc. (“Annaly”). Before that, Mr. Lambiase was a Director in Fixed Income Sales at Nomura Securities International, Inc. Over his 11-year employment at Nomura, Mr. Lambiase was responsible for the distribution of commercial and residential mortgage-backed securities to a wide variety of institutional investors. Mr. Lambiase also held positions at Bear, Stearns & Company as Vice President in Institutional Fixed Income Sales and as a mortgage analyst in the Financial Analytics and Structured Transaction Group. Mr. Lambiase has a Bachelor’s Degree in Economics from the University of Dayton. The Board believes that Mr. Lambiase’s qualifications, including his significant industry knowledge and experience and his current position as our Chief Executive Officer and President, provide him with knowledge of our long-term strategy and operations. 7 -------------------------------------------------------------------------------- Table of Contents John P. Reilly was appointed as one of our Class III Directors effective as of April 1, 2010. Mr. Reilly co-founded and, until June 2014, was President and Chief Executive Officer, of Keltic Financial Services, LLC (“Keltic”), a finance company providing asset based loans to medium size companies. Upon the acquisition of Keltic by Ares Management, L.P. (“Ares”) in June 2014, Mr. Reilly became a Partner in the Direct Lending Group of Ares until July 2016 when he retired from Ares. Prior to founding Keltic Financial Services, LLC in 1999, Mr. Reilly spent 22 years at Citicorp in various senior executive positions in the Leverage Lending, Capital Markets, Corporate Finance and Private Banking Businesses. Since 2001, Mr. Reilly has served as a director of Scan Source, Inc. Mr. Reilly has an M.B.A. from Fairleigh Dickinson University, Teaneck, New Jersey, and a Bachelor’s Degree from King’s College, Wilkes-Barre, Pennsylvania. The Board believes that Mr. Reilly’s qualifications include, among other things, his knowledge of the finance industry and the various senior positions he has held at companies within that space, and his prior experience as a director of another public company. CORPORATE GOVERNANCE, DIRECTOR INDEPENDENCE, BOARD MEETINGS AND COMMITTEES Corporate Governance We believe that we have implemented appropriate corporate governance policies and observe good corporate governance procedures and practices. We have adopted a number of written policies, including Corporate Governance Guidelines, a Code of Business Conduct and Ethics, and charters for our audit committee, risk committee, compensation committee and nominating and corporate governance committee. Board Oversight of Risk The Board of Directors is responsible for overseeing our risk management practices, and committees of the Board of Directors assist it in fulfilling this responsibility. The Board of Directors has established a risk committee, which is comprised solely of independent directors, to assist the Board of Directors in the oversight of our risk governance structure; our risk management and risk assessment guidelines and policies regarding market, credit and liquidity and funding, operational, regulatory, tax and legal risk; and our risk tolerance, including risk tolerance levels and capital targets and limits. As required by its charter, the risk committee routinely discusses with management our significant risk exposures and the actions management has taken to limit, monitor or control such exposures, including guidelines and policies with respect to our assessment of risk and risk management. At least annually, the risk committee reviews with management our risk management program, which identifies and quantifies a broad spectrum of enterprise-wide risks and related action plans, and has quarterly risk assessment updates with management. In 2019, our Board of Directors participated in this review and discussion, and it expects to continue this practice as part of its role in the oversight of our risk management practices. At their discretion, members of the Board of Directors may also directly contact management to review and discuss any risk-related or other concerns that may arise between regular meetings. Additionally, the Chairman of the risk committee liaises with the Chairman of the audit committee to assist the audit committee in its review of our policies with respect to risk assessment and risk management. We have entered employment agreements with each of our named executive officers, pursuant to which we pay compensation to each of the named executive officers in the form of both cash and stock-based compensation. Pursuant to our existing equity incentive plan, we grant equity awards to the named executive officers and, in addition, as determined by the Board of Directors we may grant equity awards to our non- executive employees. Our Board of Directors, including our compensation committee, considers that such grants align the interests of the officers and employees with our interests and do not create risks that are reasonably likely to have a material adverse effect on us. As part of its risk assessment and management activities going forward, our compensation committee undertakes an annual review of our compensation policies and practices as they relate to risk, the results of which will be shared with our Board of Directors. For a discussion of the governance of our executive compensation, see “Compensation Discussion and Analysis – Governance of Our Executive Compensation Program.” 8 -------------------------------------------------------------------------------- Table of Contents Board Leadership Structure We have separated the roles of principal executive officer and chairman of the board. Our principal executive officer is Matthew Lambiase, who is our Chief Executive Officer, President and a director. Our chairman of the Board of Directors is Paul Donlin, who is an independent director. The Board of Directors believes this current allocation of responsibilities between these two positions provides for dynamic board leadership while maintaining strong independence and is therefore an effective and appropriate leadership structure. Independence of Our Directors NYSE rules require that at least a majority of our directors be independent of our company and management. The rules also require that our Board of Directors affirmatively determine that there are no material relationships between a director and us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us), and that a director otherwise meets the NYSE’s bright line independence standards, before such director can be deemed independent. We have adopted independence standards consistent with NYSE rules. Our Board of Directors has reviewed both direct and indirect transactions and relationships that each of our directors had or maintained with us and our management. Our Board of Directors, based upon the fact that none of our independent directors have any relationships with us other than as directors and holders of our common stock, affirmatively determined that seven of our directors are independent directors under NYSE rules. Our independent directors are Mark Abrams, Teresa Bryce Bazemore, Gerard Creagh, Paul Donlin, Dennis M. Mahoney, John P. Reilly, Debra W. Still, and Brian P. Reilly. Matthew Lambiase is not considered independent because he is an employee of the Company. Additional Governance Features Stock Ownership Guidelines We believe that each director should have a substantial personal investment in our company. We have adopted stock ownership requirements whereby each non-employee director is prohibited from selling or otherwise transferring vested equity awards during his or her term as a director until the aggregate value of all stock holdings in our Company exceeds 5x the cash portion of such director’s annual base retainer fee. In addition, each of our named executive officers is subject to a stock ownership and retention requirement. Shares of our stock received from equity awards, after taxes, must be held by the executive until a stated level of ownership is achieved, measured as a multiple of salary—5x for our CEO and 3x for the other named executive officers. Once this required minimum ownership level has been achieved, the named executive officer must continue to maintain that minimum ownership level until six months after termination of employment. Our Board of Directors believes that these stock ownership and retention requirements further align the interests of the members of our Board of Directors and our named executive officers with the long-term interests of our stockholders by requiring a meaningful portion of compensation to be held as shares of our common stock. Anti-Hedging Policy We have a policy prohibiting all directors, employees and officers from engaging in any hedging transactions with respect to shares of our common stock, including, without limitation, options, short sales, puts, calls, derivative actions such as forwards, futures or swaps. The policy applies to all shares owned by the individual, whether acquired through our equity award programs, open market acquisitions, or otherwise. 9 -------------------------------------------------------------------------------- Table of Contents Code of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics, which sets forth the basic principles and guidelines for resolving various legal and ethical questions that may arise in the workplace and in the conduct of our business. This code is applicable to all our employees, named executive officers and directors. This Code of Business Conduct and Ethics was adopted within the meaning of Item 406(b) of Regulation S- K, and applies to our principal executive officer, principal financial and accounting officer and controller or persons performing similar functions. This Code of Business Conduct and Ethics is publicly available on our website at www.chimerareit.com. If we make any substantive amendments to this Code of Business Conduct and Ethics or grant any waiver, including any implicit waiver, we intend to disclose these events on our website. Corporate Governance Guidelines We have adopted Corporate Governance Guidelines, which, in conjunction with the charters and key practices of our board committees, provide the framework for the governance of the Company. Where You Can Find These Documents Our Code of Business Conduct and Ethics and our Corporate Governance Guidelines are available on our website (www.chimerareit.com). We will provide copies of these documents free of charge to any stockholder who sends a written request to Investor Relations, Chimera Investment Corporation, 520 Madison Avenue, 32nd Floor, New York, New York 10022. Board Meetings and Committees Our Board of Directors meets regularly throughout the year. During 2019, there were eleven meetings of the Board of Directors. Our corporate governance guidelines require that any director serving as a chief executive should not serve on more than two boards of public companies in addition to our Board of Directors. Moreover, other directors should not serve on more than 4 other boards of public companies in addition to our Board of Directors. Our corporate governance guidelines further require that the board have at least two regularly scheduled meetings each year for our independent directors. These meetings, which are designed to promote unfettered discussions among our independent directors, are presided over by Paul Donlin. During 2019, our independent directors had three meetings. In 2019, all directors attended at least 75% of the aggregate meetings of our Board of Directors and the committees of which they were members. Our Board of Directors has the following four standing committees: a compensation committee, an audit committee, a nominating and corporate governance committee, and a risk committee. The table below provides current membership and meeting information for 2019 for each of these committees. Nominating and Corporate Compensation Audit Governance Risk Name Committee Committee Committee Committee Mark Abrams X X* Teresa B. Bazemore X X Gerard Creagh X* X Paul Donlin X* X Dennis M. Mahoney X* X John P. Reilly X X Debra W. Still X X Brian P. Reilly** X X Total Meetings in 2019 2 6 5 9 10 -------------------------------------------------------------------------------- Table of Contents ____________________ * Committee Chair ** Mr. Brian P. Reilly was elected to the Board, and the Audit and Risk Committees, on July 31, 2019. The functions performed by these standing committees are summarized below, and are set forth in more detail in their charters. The complete text of the charters for each standing committee can be found on our website at www.chimerareit.com under “Investors – Corporate Governance – Charter Documents.” Compensation Committee Our Board of Directors has established a compensation committee, which is composed of three of our independent directors, Mr. Creagh, Mr. John P. Reilly and Ms. Bazemore. Mr. Creagh chairs the compensation committee, whose principal functions are to: ? evaluate the performance of and determine the compensation for our executive officers; ? oversee the type, design, implementation, administration, interpretation and amendment of our compensation plans, policies and programs; ? recommend to the Board of Directors the compensation for our independent directors; ? administer the issuance of any securities under our equity incentive plan to our executives; and ? produce annual reports on compensation for inclusion in our proxy statement and prepare any report relating to compensation required by the SEC. For a discussion of the governance of our executive compensation, see “Compensation Discussion and Analysis – Governance of Our Executive Compensation Program.” Our Board of Directors has determined that all directors serving on the compensation committee are independent members of the compensation committee under the current NYSE independence requirements and SEC rules. For additional information on the compensation committee, please see “Compensation Committee Report” below. Audit Committee Our Board of Directors has established an audit committee, which is composed of five of our independent directors, Messrs. Abrams, and Creagh, Mahoney, Brian P. Reilly and Ms. Bazemore. Mr. Mahoney chairs the audit committee. Our Board of Directors has determined that each of Mr. Mahoney, Mr. Brian P. Reilly, and Mr. Abrams is an audit committee financial expert, as that term is defined by the SEC. Each of the members of the audit committee is “financially literate” under the rules of the NYSE. The committee assists the board in overseeing: ? the integrity of our financial statements; ? our compliance with legal and regulatory requirements; ? the independent registered public accounting firm’s qualifications and independence; ? the performance of our system of disclosure controls and procedure, internal audit function and independent registered public accounting firm; and ? our overall risk profile and risk management policies. The audit committee is also responsible for engaging our independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of the audit engagement, approving professional services provided by the independent registered public accounting firm, reviewing the independence of the independent registered public accounting firm, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls. 11 -------------------------------------------------------------------------------- Table of Contents Our Board of Directors has determined that all directors serving on the audit committee are independent members of the audit committee under the current NYSE independence requirements and SEC rules. The activities of the audit committee are described in greater detail below under the caption “Report of the Audit Committee.” Nominating and Corporate Governance Committee Our Board of Directors has established a nominating and corporate governance committee, which is composed of four of our independent directors, Mr. Donlin, Mr. John P. Reilly and Ms. Still. Mr. Donlin chairs the nominating and corporate governance committee, which is responsible for seeking, considering and recommending to the Board of Directors qualified candidates for election as directors and recommending a slate of nominees for election as directors at the annual meeting of stockholders. It also periodically prepares and submits to the board for adoption the nominating and corporate governance committee’s selection criteria for director nominees. It reviews and makes recommendations on matters involving general operation of the board and our corporate governance, and it annually recommends to the Board of Directors nominees for each committee of the Board of Directors. In addition, the nominating and corporate governance committee annually facilitates the assessment of the Board of Directors’, and each individual director’s, performance, and then reports thereon to the full board. Our Board of Directors has determined that all directors serving on the nominating and corporate governance committee are independent members of the nominating and corporate governance committee under the current NYSE independence requirements and SEC rules. Our nominating and corporate governance committee currently considers the following factors in making its nominee recommendations to the Board of Directors: background, skills, expertise, diversity, accessibility and availability to serve effectively on the Board of Directors. In addition, the Company endeavors to have a diverse Board of Directors representing a range of experiences in areas that are relevant to the Company’s business and the needs of the Board of Directors from time-to-time, and, as part of the search process, our nominating and corporate governance committee will consider highly qualified candidates, including women and minorities, and take into consideration other aspects of maintaining a diverse board. Our nominating and corporate governance committee also conducts inquiries into the background and qualifications of potential candidates. The nominating and corporate governance committee will consider nominees recommended by our stockholders. These recommendations should be submitted in writing to our Secretary in accordance with the procedures described herein under “—Communications with the Board of Directors” and “Additional Matters—Stockholder Proposals.” Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating nominees for director. Our nominating and corporate governance committee regularly assesses the appropriate size of the Board of Directors, and whether any vacancies on the Board of Directors are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, our nominating and corporate governance committee considers various potential candidates for director. Candidates may come to the attention of our nominating and corporate governance committee through current members of our Board of Directors, professional search firms, stockholders or other persons. These candidates are evaluated at regular or special meetings of our nominating and corporate governance committee and may be considered at any point during the year. As described above, our nominating and corporate governance committee considers properly submitted stockholder recommendations for candidates for the Board of Directors. Following verification of the stockholder status of persons recommending candidates, recommendations are aggregated and considered by our nominating and corporate governance committee at a regularly scheduled or special meeting. If any materials are provided by a stockholder in connection with the recommendation of a director candidate, such materials are forwarded to our nominating and corporate governance committee. Our nominating and corporate governance committee also reviews materials provided by professional search firms or other parties in connection with a nominee who is not recommended by a stockholder. In evaluating such nominations, our nominating and corporate governance committee seeks to achieve a balance of knowledge, experience and capability on the Board of Directors. 12 -------------------------------------------------------------------------------- Table of Contents Risk Committee Our Board of Directors has established a risk committee, which is composed of five of our independent directors, Messrs. Abrams, Donlin, and Mahoney, Brian P. Reilly and Ms. Still. Mr. Abrams chairs the risk committee. The risk committee assists the Board in the oversight of our risk governance structure; our risk management and risk assessment guidelines and policies regarding market, credit and liquidity and funding risk; our risk tolerance, including risk tolerance levels and capital targets and limits; and our capital, liquidity and funding, operational, regulatory, tax and legal risk. Communications with the Board of Directors Interested persons may communicate their complaints or concerns by sending written communications to the Board of Directors, committees of the Board of Directors, the non-management directors and individual directors by mailing those communications to: Chimera Investment Corporation Applicable Addressee* 520 Madison Avenue, 32nd Floor New York, NY 10022 Phone: (888) 895-6557 Email: investor@chimerareit.com Attention: Investor Relations *Audit Committee of the Board of Directors *Compensation Committee of the Board of Directors *Nominating and Corporate Governance Committee of the Board of Directors *Risk Committee of the Board of Directors *Non-Management Directors *Name of Individual Director These communications are sent by us directly to the specified addressee. We require each member of the Board of Directors to attend our annual meeting of stockholders except for absences due to causes beyond the reasonable control of the director. All directors then serving on our Board of Directors attended our 2019 Annual Meeting. 13 -------------------------------------------------------------------------------- Table of Contents MANAGEMENT The following sets forth certain information with respect to our executive officers: Name Age* Title Matthew Lambiase 54 Chief Executive Officer, President and Director Robert Colligan 49 Chief Financial Officer Choudhary Yarlagadda 58 Chief Operating Officer Mohit Marria 42 Chief Investment Officer Phillip J. Kardis II 58 Chief Legal Officer and Secretary ____________________ * as of June 25, 2020 Biographical information on Mr. Lambiase is provided above under “Proposal 1—Election of Directors.” Certain biographical information for Mr. Colligan, Mr. Yarlagadda, Mr. Marria and Mr. Kardis is set forth below. Robert Colligan is our Chief Financial Officer. Prior to becoming our Chief Financial Officer in May 2013, Mr. Colligan was the Controller at Starwood Capital Group for the previous five years. Prior to Starwood Capital Group, from 2002 to 2008, Mr. Colligan was a Managing Director at Bear Stearns and, from 1999 to 2002, a Vice President at Merrill Lynch in financial reporting, strategy and investor relations roles. Mr. Colligan also served as a Managing Director of Annaly from May 2013 until August 2015. Mr. Colligan began his career at PricewaterhouseCoopers where, from 1993 to 1999, he had roles in both audit and national tax. He has a Bachelor’s Degree in Accounting from Villanova University, a Master’s Degree in Taxation from George Washington University and is a Certified Public Accountant. Choudhary Yarlagadda is our Chief Operating Officer. Prior to becoming Chief Operating Officer in August 2015, Mr. Yarlagadda was a Managing Director and Head of Structured Products for Annaly since January 2008. Prior to joining Annaly, Mr. Yarlagadda was a Director in Structured Credit Products at Credit Suisse and before that a Vice President in the Fixed Income Mortgage Group at Nomura Securities International, Inc. Mr. Yarlagadda has an MS from the Florida Institute of Technology and BS from the National Institute of Technology (India). Mohit Marria is our Chief Investment Officer. Prior to becoming Chief Investment Officer in December 2013, Mr. Marria was an Executive Vice President of Annaly. While at Annaly, Mr. Marria had responsibility for the development and implementation of Chimera’s trading strategies in residential mortgage-backed securities, residential mortgage loans and its derivatives portfolio. He has been a member of the investment team since Chimera’s inception. Mr. Marria joined Annaly from American International Group (AIG). Prior to working at AIG, Mr. Marria worked at Metropolitan Life Insurance Company. Mr. Marria earned a Bachelor’s Degree in Finance and an M.B.A., each from the Rutgers University. Phillip J. Kardis II is our Chief Legal Officer and Secretary. Prior to becoming Chief Legal Officer in September 2015, Mr. Kardis was a partner with the law firm of K&L Gates LLP where he represented mortgage REITs and other companies and funds that acquire, originate, service and finance residential mortgage loans, mortgage servicing rights and mortgage backed securities, including the Company. Prior to joining K&L Gates LLP in 2004, Mr. Kardis practiced corporate and securities law at several law firms. In addition, Mr. Kardis has held positions at the U.S. Department of Commerce, Rockwell International, the U.S. Senate Committee on the Budget and Analytic Services, Inc. Mr. Kardis has two BA degrees from George Washington University, an MA from George Washington University, an MA from George Mason University, and a JD from the Georgetown University Law Center. 14 -------------------------------------------------------------------------------- Table of Contents SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CHIMERA The following table sets forth certain information relating to the beneficial ownership of our common stock by (i) each of our named executive officers and directors, (ii) all our executive officers and directors as a group, and (iii) all persons that we believe beneficially own more than 5% of our outstanding common stock. Knowledge of the beneficial ownership of our common stock is drawn from statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Except as otherwise indicated, the information is as of April 22, 2020 and, to our knowledge, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned by the stockholder. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. Except as otherwise indicated, the business address of the stockholders listed below is the address of our principal executive office, 520 Madison Avenue, 32nd Floor, New York, New York 10022. Amount and Nature of Percent of Name of Beneficial Owner Beneficial Ownership(1) Class Matthew Lambiase 261,537 * Robert Colligan 151,982 * Choudhary Yarlagadda(2) 435,711 * Mohit Marria 133,140 * Phillip J. Kardis II 95,705 * Mark Abrams 63,136 * Teresa B. Bazemore 15,970 * Gerard Creagh 157,104 * Paul Donlin(3) 539,611 * Dennis M. Mahoney 63,485 * John P. Reilly 85,683 * Debra W. Still 13,169 * Brian P. Reilly 23,035 * All Directors and Officers As a Group (13 persons) 2,039,267 * Vanguard Group Inc.(4) 17,925,721 9.6% BlackRock, Inc.(5) 12,020,352 6.4% ____________________ * Less than 1 percent. (1) For officers, does not included deferred stock units (DSUs) that have vested and credited to their accounts pursuant to deferrals made under the terms of our Stock Award Deferral Program. These DSUs do not have voting rights and the officers do not have the right to receive such DSUs within 60 days of April 22, 2020. As of April 22, 2020, the following officers have the following aggregate amounts of vested DSUs credited to their respective accounts: Name DSUs Matthew Lambiase 552,555 Choudhary Yarlagadda 368,296 Mohit Marria 229,216 Robert Colligan 20,233 (2) Includes 366,287 shares of common stock held by members of Mr. Yarlagadda’s immediate family. (3) Includes 4,000 shares of common stock held by Mr. Donlin in a Family Trust and 320,609 shares of common stock held by Donlin Financial LLC. 15 -------------------------------------------------------------------------------- Table of Contents (4) The address for the stockholder is 100 Vanguard Blvd., Malvern, PA 19355. The shares shown as beneficially owned by The Vanguard Group, Inc. reflect shares owned on its own behalf and on behalf of the following entities: Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. The Vanguard Group, Inc. reported having sole voting power over 98,357 shares, shared voting power over 30,533 shares, sole dispositive power over 17,925 shares and shared dispositive power over 101,627 shares. Based solely on information contained in a Schedule 13G/A filed by The Vanguard Group Inc. on February 12, 2020. (5) The address for this stockholder is 55 East 52nd Street, New York, NY 10022. The shares shown as beneficially owned by BlackRock, Inc. reflect shares owned on its own behalf and on behalf of the following subsidiaries: BlackRock Life Limited; BlackRock International Limited; BlackRock Advisors, LLC; BlackRock (Netherlands) B.V.; BlackRock Institutional Trust Company, National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc.; BlackRock Japan Co., Ltd.; BlackRock Asset Management Schweiz AG; BlackRock Investment Management, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock (Luxembourg) S.A.; BlackRock Investment Management (Australia) Limited; BlackRock Advisors (UK) Limited; BlackRock Fund Advisors; reported beneficially owning 12,020,352 shares of common stock with sole voting power over 11,246,999 shares, shared voting power over zero shares, sole dispositive power over 12,020,352 shares and shared dispositive power over zero shares. Based solely on information contained in a Schedule 13G/A filed by BlackRock Inc. on February 20, 2020. EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS Compensation Discussion and Analysis Our Compensation Discussion and Analysis describes the key features of our executive compensation program and the compensation committee’s approach in deciding 2019 compensation for our named executive officers. Our named executive officers for 2019 are the following: Name Title (as of last day of 2019) Matthew Lambiase 54 Chief Executive Officer, President and Director Robert Colligan 49 Chief Financial Officer Choudhary Yarlagadda 58 Chief Operating Officer Mohit Marria 42 Chief Investment Officer Phillip J. Kardis II 58 Chief Legal Officer and Secretary We have divided this discussion into four parts: 1. Overview 2. Key Design Features and 2019 Actions 3. Governance 4. Other Features and Policies Overview Employment Agreements On December 17, 2018, we entered new three-year employment agreements with each named executive officer effective January 1, 2019. Similar to the initial employment agreements, the new employment agreements specify the mix of salary and incentive compensation opportunities comprising each named executive officer’s total direct compensation opportunity. As with the initial employment agreements, the mix includes a significant focus on variable incentive compensation opportunities intended to directly link the amount of total direct compensation received to Company performance over one- and three-year periods but with an adjusted balance in the mix of awards and updates to the performance measures and maximum award opportunities as noted below. The new employment agreements (including for Mr. Kardis) provide that the incentive compensation opportunity: ? is variable, potentially ranging from 0% to 200% or 250% of the target depending on the performance goal and actual performance result, 16 -------------------------------------------------------------------------------- Table of Contents ? is determined based on a balanced combination of (i) our return on average equity (“ROAE”) measured against an index of comparator companies, (ii) our total economic return (changes in book value per share plus dividends per share) performance as compared against an index of comparator companies over a three-year performance period (“relative TER”), and (iii) a fixed restricted stock unit grant, and ? to the extent earned, is delivered in a balanced mix of cash and equity awards that include additional vesting requirements, to further encourage executive retention and alignment of interests with the long-term interests of our stockholders. 2019 Performance Highlights We view 2019 as a successful year for the Company. We have continued our focus on residential mortgage credit, including acquiring and securitizing seasoned residential mortgage loans. Consequently, we delivered solid results in a challenging interest rate and economic environment. ? GAAP net income for 2019 was $341 million. ? Distributed quarterly common stock dividend of $0.50 per common share per quarter in 2019. ? Stock price to GAAP book value per share ratio as of December 31, 2019 was 1.27 to 1. ? Securitized $3.6 billion of mortgage loans, which included a mix of seasoned re-performing residential loans, jumbo prime residential loans, and investor property loans. ? Company Return on Average Equity for 2019 was 17.7%. ? Total Shareholder Return (change in stock price plus dividends) for the three-year period ended December 31, 2019 was 61%. 2019 Compensation Highlights Compensation decisions by the compensation committee for 2019 demonstrate the direct link between the compensation opportunities for our named executive officers and performance for our stockholders, consistent with the design contemplated by the employment agreements: ? Our ROAE for 2019 was 17.7%, which placed us 5th across the 35 companies in the iShares Mortgage Real Estate ETF. This performance equaled the 85.7th percentile against the peer group, resulting in the ROAE cash bonus being awarded at 214.7% of the target bonus. ? The named executive officer received a fixed grant of restricted stock units (RSUs) vesting over three years. ? The named executive officers received a grant of performance share units (PSUs) in early 2019 that become earned based on our relative TER performance for 2019-2021. ? For the 2017 PSUs earned based on 2017-2019 relative Total Stockholder Return under the original employment agreements, our Total Shareholder Return for the three-year period ended December 31, 2019 was 61% which was the 96.7thpercentile of the companies constituting the NAREIT FTSE Mortgage Home Finance index. This performance resulted in shares issued pursuant to the 2017 PSU award at 150% of the target award amount. 17 -------------------------------------------------------------------------------- Table of Contents Compensation Policies The compensation committee has established the following compensation policies that we believe are in the best, long-term interests of our stockholders: What We Do and How We Do It Provide a majority of compensation [[Image Removed]] For CEO, 67% of target total direct in performance-based compensation compensation is performance-based Pay for performance based on Use multiple, balanced measures, measurable goals for both annual [[Image Removed]] focused on ROAE and relative TER and long-term awards Balanced mix of cash and 60% of incentive opportunity tied stock-based awards tied to annual to annual ROAE, 20% tied to a fixed and long-term performance [[Image Removed]] RSU grant and 20% tied to 3-year relative TER; mix of cash (ROAE portion) and stock (relative TER and fixed RSU grant) Stock ownership and retention 5x salary for CEO and 3x salary for policy all other named executive officers; [[Image Removed]] 100% of shares must be retained until minimum ownership level is met; applies until 6 months after termination of employment Receive advice from independent Compensation consultant (Frederic compensation consultant [[Image Removed]] W. Cook & Co.) provides no other services to the Company What We Don’t Do and The Reasons Why No supplemental executive Consistent with focus on retirement plans for named [[Image Removed]] performance-oriented environment executive officers No change in control excise tax Consistent with focus on gross up performance-oriented environment [[Image Removed]] and commitment to best practices aligned to long-term stockholder interests No excessive perquisites or Consistent with focus on severance benefits performance-oriented environment [[Image Removed]] and commitment to best practices aligned to long-term stockholder interests No single trigger vesting of equity Per employment agreements, vesting compensation upon a change in [[Image Removed]] following a change in control control requires involuntary termination of employment (double-trigger) No hedging transactions permitted Policy prohibits hedging transactions, including the [[Image Removed]] purchase of financial instruments designed to hedge/offset any decrease in the market value of our stock 18 -------------------------------------------------------------------------------- Table of Contents Key Design Features and 2019 Actions Overview of Elements of Compensation Our named executive officers, pursuant to their employment agreements, receive compensation primarily in the form of salary plus an incentive award opportunity determined each year ranging from 0% to 200% or 250% of the target depending on the performance goal and actual performance result. Each executive’s base salary is fixed for the term of the employment agreement and represents a smaller portion of the total annual compensation allowing us to effectively manage our fixed expenses. The compensation committee periodically reviews base salary levels in light of market practices and changes in responsibilities. For 2019, the base salary amounts were as follows: 2019 Base Salary Name Amount Matthew Lambiase $850,000 Robert Colligan $500,000 Choudhary Yarlagadda $800,000 Mohit Marria $750,000 Phillip J. Kardis II $750,000 The new employment agreements provide a total target incentive award amount and the weighting among the three components as was the case for the original employment agreements. The compensation committee believes the allocation of incentive compensation opportunities reflected in the employment agreements represents an appropriately balanced approach to providing incentive compensation opportunities. The following chart summarizes the 2019 target incentive award and the three components for each executive: 19 -------------------------------------------------------------------------------- Table of Contents Overview of Compensation Elements Compensation Description Objectives Element Base Salary ?Fixed cash compensation for the ?Per employment agreement term of each executive’s ?Provides fixed level of cash employment agreement. compensation ?Reward executives for efficiently generating earnings ?Creates a direct connection between business success and financial reward Annual ?60% of the total incentive ?Reward executives for Incentive compensation opportunity for the efficiently generating earnings year, payable in cash ?Creates a direct connection ?Ranges from 0% to 250% of target, between business success and based on Relative ROAE performance financial reward Long-Term ?20% of total incentive ?PSUs provide multi-year focus Incentives compensation opportunity in the on driving stockholder returns form of a fixed RSU award, which ?Both awards align named vests ratably over 3 years executive officers with ?20% of total incentive stockholder interests and opportunity in the form of a PSU encourage retention award ?Ranges from 0% to 200% of target, based on relative TER performance Post-Employment ?Employment agreements include ?Per negotiated employment Benefits severance payments and benefits in agreements case of involuntary termination ?Market-competitive practice to (without cause or with good limit executive risk of reason) involuntary termination without ?Severance amounts are not cause, and encourages stable excessive (generally, 1.5-2.25x management team salary and cash bonus, even in ?Change in control provisions connection with a termination ensure that management will be following a change in control) able to fairly assess potential ?No single-trigger vesting of transactions equity awards upon a change in ?Competitive with peer control (if awards are assumed) companies ?No 280G or other tax gross-ups ?Assists with recruitment and agreements retention Other Benefits ?401(k), health care and life insurance programs, same as other non-executive employees ?No executive perquisites 2019 Incentive Compensation Decisions General. The compensation design reflected in the employment agreements for 2019 weights the compensation opportunities heavily towards variable, performance-based awards in a mix of cash and stock, and balanced by annual and multi-year performance goals. The compensation committee believes that the incentive compensation design reflected in the employment agreements is appropriately tied to our business strategy and will encourage our management team to pursue strategies intended to deliver efficient earnings against our capital base and strong stockholder returns. The 2019 design for our named executive officers includes an incentive award opportunity broken into three key components: ? a relative ROAE bonus, based on performance for the four quarters beginning with the third-quarter 2018 through the third-quarter 2019, payable in cash ranging from 0% to 250% of target, ? a fixed long term incentive (“LTI”) bonus granted in early 2019 as an award of RSUs vesting ratably over three years, and 20 -------------------------------------------------------------------------------- Table of Contents ? a relative TER bonus granted in early 2019 as a PSU award that becomes earned based on TER results over a 3-year performance period (January 2019 through December 2021) and ranging from 0% to 200% of target. ROAE and TER are key financial measures for us because, as a mortgage REIT, we are focused on generating earnings efficiently against our capital base and returning those earnings to our stockholders, primarily in the form of dividends. Providing RSUs and PSUs as part of the mix should encourage retention and align the interests of the named executive officers with the long-term interests of our stockholders. The employment agreements provide a total target incentive award amount and the weighting among the three components. The compensation committee believes the allocation of incentive compensation opportunities reflected in the employment agreements represents an appropriately balanced approach to providing incentive compensation opportunities. The following chart summarizes the 2019 target incentive award and the three components for our named executive officers: 2019 Incentive Compensation Targets per Employment Agreements Fixed LTI Bonus ROAE Bonus (RSU award) TER Bonus (PSU Total target Name (cash) (60%) (20%) award) (20%) Incentive award Matthew Lambiase $ 2,640,000 $880,000 $880,000 $4,400,000 Robert Colligan $ 990,000 $330,000 $330,000 $1,650,000 Choudhary Yarlagadda $ 1,782,000 $594,000 $594,000 $2,970,000 Mohit Marria $ 1,500,000 $500,000 $500,000 $2,500,000 Phillip Kardis $ 1,485,000 $495,000 $495,000 $2,475,000 * The total target incentive award is subject to review and potential adjustment by the compensation committee. ROAE Bonus. The amount of the ROAE bonus for 2019 was determined based on ROAE results against the ROAE performance of the members of our peer group for the “Annual Cash Bonus Measurement Period” (Q3 2018 to Q3 2019). The ROAE bonus earned for a year is payable in cash by no later than January 31 of the following year. Under the employment agreements, ROAE means the Company’s net income for the year divided by its average equity for the year.1 ____________________ 1 For this purpose, the Company’s net income is determined in accordance with GAAP, but excluding non-cash, non-operating expense items such as depreciation expense, amortization of goodwill and other non-cash, non-operating expense items as determined by the compensation committee in its sole discretion for the applicable performance period. If, for any portion of any performance period, (i) the Company does not use hedge accounting or (ii) its derivative hedging instruments or any portion thereof are otherwise deemed ineffective, which in either case, results in changes in the value of such hedging instruments being recorded in the Company’s GAAP income statement, then any gains or losses from such hedging instruments will also be excluded. The Company’s average equity under the employment agreements means the stockholders’ equity of the Company as determined in accordance with GAAP, but excluding accumulated other comprehensive income or loss (which, among other things, reflects unrealized gains or losses in the Company’s residential mortgage-backed securities portfolio), stockholders’ equity attributable to preferred stock and other items as determined by the compensation committee in its sole discretion for the applicable performance period. For purposes of calculating ROAE, Company Average Equity will be determined based on the average of the Company’s stockholders’ equity calculated as described in the preceding sentence as of the last day of each quarter during the applicable performance period. Notwithstanding the foregoing, stockholders’ equity attributable to an issuance of common stock of the Company during the performance period shall be excluded from the calculation of “Company Average Equity” for a period of six months from such issuance. 21 -------------------------------------------------------------------------------- Table of Contents The following chart summarizes the ROAE performance goals and results for 2019: Percentage of Target Relative ROAE Cash Payable