0001206774-21-001004 PRE 14A 8 20210610 20210406 20210406 CHIMERA INVESTMENT CORP 0001409493 6798 260630461 MD 1231 PRE 14A 34 001-33796 21809485 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 212-626-2300 520 MADISON AVENUE 32ND FLOOR NEW YORK NY 10022 PRE 14A 1 cim3847781-pre14a.htm PRELIMINARY 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: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] 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 10, 2021 To the Stockholders of Chimera Investment Corporation: It is my pleasure to invite you to attend the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of Chimera Investment Corporation, a Maryland corporation (“Chimera” or “the Company”), that will be held on June 10, 2021, at 10:00 a.m. Eastern Time. Last year presented the Company with a number of challenges. As the year got underway, we did not imagine that we would face the global COVID-19 pandemic, and the resulting unprecedented and volatile market conditions that followed. We faced significant margin calls in March and April and were able to meet each and preserve the valuable assets we acquired and created over the years. We saw a significant bounce back in our book value per share and in our economic return during the second half of the year. We, and the Country, will continue to face uncertainty and challenges ahead, but we are committed to remaining 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 and is also appropriate given the challenges created by the COVID-19 pandemic. 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/CIM2021 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. On a personal note, in November, we announced the retirement of Matt Lambiase. Matt was our CEO and a Director since our founding in 2007. Under his leadership, Chimera grew to a $3.8 billion mortgage REIT and paid more than $5.2 billion dividends to stockholders. We want to thank him, and we all wish Matt the best of success in his future. 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 10, 2021. Sincerely, [[Image Removed]] Mohit Marria Chief Executive Officer and Chief Investment Officer April , 2021 Table of Contents NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF CHIMERA INVESTMENT CORPORATION Time: 10:00 a.m. Eastern Time Date: Thursday, June 10, 2021 Place: Virtual meeting via webcast at www.virtualshareholdermeeting.com/CIM2021 Purpose: This year’s Annual Meeting will be held for the following purposes: • To elect two Class II Directors, each to serve until our annual meeting of stockholders in 2024 and until his or her successor is duly elected and qualifies; • To consider and vote upon a proposal to approve an amendment to the Company’s charter to declassify the Board of Directors; • To consider and vote upon a non-binding advisory resolution to approve 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 2021; and • To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. Other • We utilize the “notice and access” model rather than mailing Important full sets of proxy materials to stockholders, as we think, among Information: other things, the Company benefits from the reduced costs associated with this method of delivery. Thus, on or about April 27, 2021, 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 2020 Annual Report are available at www.proxyvote.com. • Record holders of our common stock at the close of business on April 16, 2021 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 10, 2021. Our Proxy Statement and 2020 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 5 PROPOSAL 1 ELECTION OF DIRECTORS 6 CORPORATE GOVERNANCE, DIRECTOR INDEPENDENCE, BOARD MEETINGS AND 8 COMMITTEES MANAGEMENT 16 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF 16 CHIMERA EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS 18 EQUITY COMPENSATION PLAN INFORMATION 40 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 40 COMPENSATION OF DIRECTORS 40 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 42 REPORT OF THE AUDIT COMMITTEE 43 PROPOSAL 2 CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE AN AMENDMENT TO 43 THE COMPANY’S CHARTER TO DECLASSIFY THE BOARD PROPOSAL 3 CONSIDER AND VOTE UPON A NON-BINDING ADVISORY VOTE APPROVING 45 EXECUTIVE COMPENSATION PROPOSAL 4 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC 46 ACCOUNTING FIRM ADDITIONAL MATTERS 47 i Table of Contents [[Image Removed]] 520 MADISON AVE, 32ND FLOOR NEW YORK, NEW YORK 10022 2021 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 2021 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/CIM2021. The meeting will convene at 10:00 a.m. Eastern Time on June 10, 2021. Items to be Voted on at the Annual Meeting (1) Election of two Class II Directors, Debra W. Still and Mohit Marria, each to serve until our annual meeting of stockholders in 2024 and until his or her successor is duly elected and qualifies; (2) Consider and vote upon a proposal to approve an amendment to the Company’s charter to declassify the Board of Directors; (3) Consider and vote upon a non-binding advisory resolution to approve our executive compensation; (4) Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021; and (5) Other than these four 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 an amendment to the Company’s charter to declassify the Board of Directors; (3) “FOR” the approval of the non-binding advisory resolution on executive compensation; and 1 Table of Contents (4) “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021. 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 16, 2021 (the “Record Date”), you are entitled to vote at the meeting. There were ____ 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 9, 2021. 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 9, 2021. 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 _____ outstanding shares of common stock as of the Record Date, and each share is entitled to one vote per share, stockholders representing at least _____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 cast No for and against such nominee (2) Approval of an amendment Majority of votes entitled No to the Company’s charter to to be cast on the matter declassify the Board of Directors (2) Approval of the advisory Majority of votes cast No vote on our executive compensation (3) Ratification of the Majority of votes cast 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. Proposals No. 1, 2 and 3 are considered “non-routine” matters that brokers may not vote on without instruction from beneficial owners. As a result, a broker non-vote will be treated as present for purposes of determining the presence of a quorum at the Annual Meeting but will not be voted on these proposals. Abstentions and broker non-votes, if any, will have no effect on the election of the directors (Proposal No. 1), or the advisory vote on our executive compensation (Proposal No. 3).Abstentions will have no effect on the ratification of the appointment of Ernst & Young LLP (Proposal No. 4) and we do not anticipate any broker non-votes on such proposal as it is a routine matter. Abstentions and broker non-votes, if any, will be the same as a vote against the proposal to approve an amendment to the Company’s charter to declassify the Board of Directors (Proposal No. 2). 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. 3 Table of Contents 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 2020 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. 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. 4 Table of Contents 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 “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. 5 Table of Contents PROPOSAL 1 ELECTION OF DIRECTORS We have three classes of Directors. Our Class II Directors, Debra W. Still and Mohit Marria, will be elected at the Annual Meeting and will serve until our annual meeting of stockholders in 2024. Our Class I Directors serve until our annual meeting of stockholders in 2023. Our Class III Directors 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 II Directors to be elected as the Annual Meeting, as well as each of our Class I Directors and other Class III Directors. Name Class Age* Independent Director Since Debra W. Still II 68 Yes March 2018 Mohit Marria II 43 No November 2020 Dennis Mahoney** II 79 Yes April 2010 Paul Donlin*** I 59 Yes November 2007 Mark Abrams I 72 Yes November 2007 Gerard Creagh I 63 Yes April 2010 Brian P. Reilly III 61 Yes July 2019 John P. Reilly III 72 Yes April 2010 Choudhary Yarlagadda III 59 No November 2020 *as of June 10, 2021 ** Dennis Mahoney, whose term expires at the Annual Meeting, has informed us that that he will not stand for re-election as a director at the Annual Meeting. *** Paul Donlin, whose term expires at the annual meeting of stockholders in 2023, has informed us that he will retire immediately after the Annual Meeting. As a result of the retirement of Mr. Donlin and Mr. Mahoney, effective as of the conclusion of the Annual Meeting, the Board reduced the number of directors serving on the Board from nine to seven and, in connection therewith, reduced the number of Class I directors from three to two, and reduced the number of Class II directors from three to two. At the Annual Meeting, the stockholders will vote to elect two Class II Directors, whose terms will expire at our annual meeting of stockholders in 2024, and in each case until the election and qualification of their successors or to the earlier of their death, resignation or removal. Nominees for Re-election as Class II Directors The following information is furnished regarding the nominees for re-election as Class II directors by the holders of Common Stock. 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. 6 Table of Contents Mohit Marria was appointed as one of our Class II Directors on November 16, 2020. Mr. Marria is our Chief Executive Officer and Chief Investment Officer. Prior to becoming Chief Investment Officer in December 2013, Mr. Marria was an Executive Vice President of Annaly Capital Management Inc., a publicly-traded mortgage REIT. 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, New Brunswick, New Jersey. The Board believes that Mr. Marria’s experiences and qualifications, including his leadership, knowledge, skills and business contacts which were critical for the Company’s transition of business strategy and operations in response to the COVID-19 pandemic, make him a valuable member of the Board. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR DEBRA W. STILL AND MOHIT MARRIA AS DIRECTORS EACH TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS IN 2024, IN EACH CASE, UNTIL HIS OR HER SUCCESSOR IS DULY ELECTED AND QUALIFIES. Continuing Class I Directors The following information is furnished regarding our Class I directors who will continue to serve on the Board until our 2023 Annual Meeting and until their respective successor are duly elected and qualified. 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. Gerard Creagh was appointed as one of our Class I Directors effective as of April 1, 2010. Mr. Creagh was appointed as Chairman of the Board in December 2020. 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. 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. 7 Table of Contents 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. 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. Choudhary Yarlagadda was appointed as one of our Class III Directors on November 16, 2020. Mr. Yarlagadda is our President and Chief Operating Officer. Prior to becoming our 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, Melbourne, Florida and BS from the National Institute of Technology, India. The Board believes that Mr. Yarlagadda’s experience and qualifications, including his critical role in developing the Company’s new financing strategy and restructuring of the Company’s operations and capital structure in response to the COVID-19 pandemic, make him a valuable member of the Board. 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. 8 Table of Contents 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 2020, 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 Chair of the risk committee liaises with the Chair 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.” Board Leadership Structure We have separated the roles of principal executive officer and Chairman of the Board. Our principal executive officer is Mohit Marria, who is our Chief Executive Officer, Chief Investment Officer and a director. Our Chairman of the Board of Directors is Gerard Creagh, 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, 9 Table of Contents Gerard Creagh, Paul Donlin, Dennis M. Mahoney, John P. Reilly, Debra W. Still, and Brian P. Reilly. Teresa Bazemore was an independent director until her resignation on February 28, 2021. Mohit Marria and Choudhary Yarlagadda are not considered independent because they are employees of the Company. Board of Directors and Committee Self-Assessment The Board of Directors recognizes that a thoughtful and comprehensive Board evaluation process is an integral component of a robust corporate governance framework and an effective Board. Generally, our nominating and corporate governance committee facilitates the annual assessment of the Board of Directors, and each individual director, and then reports to the full Board. Similarly, each committee reviews the results of its assessment to determine whether any changes need to be made to the committee or its procedures. In addition to the formal evaluation processes conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round. The nominating and corporate governance committee reviews the self-assessment process from time-to-time. For 2021, the nominating and corporate governance committee recommended a process involving an independent third-party to complete a comprehensive analysis of the Board of Director’s overall effectiveness. Accordingly, we have engaged a third-party to facilitate the 2021 Board of Directors and committee self-assessment process, which involves the following steps: Interviews: Review Feedback: Discussion of Improvements: Results: Individual, Review and Board of confidential analysis of Third-party to Directors interviews with feedback by discuss feedback considers and each director third-party with chair of implements nominating and improvements corporate based on the governance findings and à à committee and à recommendations the Chairman of from the the Board of assessment Directors and process deliver findings to the entire Board and each of its committees We anticipate that ü General Board practices, information, and resources improvements, as the Board of Directors deems ü Board dynamics and culture necessary, will be made during 2021 and thereafter ü Board leadership based on the information gained through this ü Board composition, skills, tenure and refreshment self-assessment process, which is intended to provide ü Committee leadership and composition the Board of Directors with insight into the following ü Relationship with management key areas: ü Succession planning ü Board priorities, strategy and purpose ü Risk oversight 10 Table of Contents 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/Pledging 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. The policy also prohibits Company’s executive officers and directors from holding Company securities in a margin account or pledging Company securities as collateral for a loan. 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. 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. 11 Table of Contents Board Meetings and Committees Our Board of Directors meets regularly throughout the year. During 2020, there were fifty-three 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 the Chairman of the Board. During 2020, our independent directors had five meetings. In 2020, 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, each of which is comprised solely of independent directors: 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 2020 for each of these committees. Nominating and Corporate Compensation Audit Governance Risk Name Committee Committee Committee Committee Mark Abrams 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 2020 5 6 4 4 *Committee Chair **Ms. Still became Chair of the nominating and corporate governance committee on March 31, 2021. Ms. Bazemore was an Independent Director until her resignation on February 28, 2021. Prior to her resignation, Ms. Bazemore served on the audit committee and the compensation committee. 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 “Corporate Governance – Governance Documents – Committee Charters.” Compensation Committee Our Board of Directors has established a compensation committee, which is currently composed of three of our independent directors, Messrs. Creagh and John P. Reilly and Ms. Still. 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 12 Table of Contents • 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 currently composed of three of our independent directors, Messrs. Abrams, Mahoney and Brian P. Reilly. Mr. Brian P. Reilly chairs the audit committee. Our Board of Directors has determined that each of Messrs. Brian P. Reilly, Abrams and Mahoney 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. 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, Messrs. Donlin, Creagh, and John P. Reilly and Ms. Still. Ms. Still 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. 13 Table of Contents 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. Risk Committee Our Board of Directors has established a risk committee, which is composed of four of our independent directors, Messrs. Abrams, Donlin, Mahoney, and Brian P. Reilly. 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: 14 Table of Contents 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 2020 Annual Meeting. 15 Table of Contents MANAGEMENT The following sets forth certain information with respect to our executive officers: Name Age* Title Mohit Marria 43 Chief Executive Officer and Chief Investment Officer Choudhary Yarlagadda 59 President and Chief Operating Officer Robert Colligan 50 Chief Financial Officer Phillip J. Kardis II 59 Chief Legal Officer and Secretary * as of June 10, 2021 Biographical information for Mr. Marria and Mr. Yarlagadda is provided above under “Proposal 1—Election of Directors.” Certain biographical information for Mr. Colligan 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, Villanova, Pennsylvania, a Master’s Degree in Taxation from George Washington University, Washington, D.C. and is a Certified Public Accountant. 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 Bachelor’s Degrees from George Washington University, Washington, D.C., a Master’s Degree from George Washington University, a Master’s Degree from George Mason University, Fairfax, Virginia, and a JD from the Georgetown University Law Center, Washington, D.C. 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 March 31, 2021 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. 16 Table of Contents Amount and Nature of Percent of Name of Beneficial Owner Beneficial Ownership(1) Class Mohit Marria 128,273 * Choudhary Yarlagadda(2) 809,469 * Robert Colligan 200,080 * Phillip J. Kardis II 119,276 * Mark Abrams 80,805 * Gerard Creagh 199,463 * Paul Donlin(3) 582,288 * Dennis M. Mahoney 85,798 * John P. Reilly 109,164 * Debra W. Still 30,220 * Brian P. Reilly 63,699 * All Directors and Officers As a Group (11 persons) 2,408,535 * Vanguard Group Inc.(4) 20,626,421 8.82% BlackRock, Inc.(5) 19,243,890 8.2% * 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 March 31, 2021. As of March 31, 2021, the following officers have the following aggregate amounts of vested DSUs credited to their respective accounts: Name DSUs Choudhary Yarlagadda 658,749 Mohit Marria 445,399 Phillip J. Kardis II 9,308 (2) Includes 366,296 shares of common stock held by members of Mr. Yarlagadda’s immediate family. (3) Includes 320,609 shares of common stock held by Mr. Donlin in a Family Trust and 4,000 shares of common stock held by Donlin Financial LLC. (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 zero shares, shared voting power over 219,206 shares, sole dispositive power over 20,221,690 shares and shared dispositive power over 404,731 shares. Based solely on information contained in a Schedule 13G/A filed by The Vanguard Group Inc. on February 8, 2021. (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 19,243,890 shares of common stock with sole voting power over 18,833,364 shares, shared voting power over zero shares, sole dispositive power over 19,243,890 shares and shared dispositive power over zero shares. Based solely on information contained in a Schedule 13G/A filed by BlackRock Inc. on January 28, 2021. 17 Table of Contents 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 2020 compensation for our named executive officers. Our named executive officers for 2020 are the following: Name Age* Title (as of last day of 2020) Matthew Lambiase 54 Chief Executive Officer, President and Director Robert Colligan 49 Chief Financial Officer Choudhary Yarlagadda 58 Chief Operating Officer Mohit Marria 43 Chief Investment Officer Phillip J. Kardis II 59 Chief Legal Officer and Secretary *as of April 27, 2021 On December 31, 2020, Mr. Lambiase, who has been our CEO and President and a director since our founding, retired and stepped down from our Board. On January 1, 2021, Mr. Marria became our Chief Executive Officer and remains our Chief Investment Officer and Mr. Yarlagadda was named President and remains our Chief Operating Officer. We have divided the discussion of the key features of our executive compensation program into four parts: 1. Overview 2. Key Design Features and 2020 Actions 3. Governance 4. Other Features and Policies Overview Employment Agreements On December 17, 2018, we entered three-year employment agreements with each named executive officer effective January 1, 2019. The 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 employment agreements 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, • 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 18 Table of Contents • 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. 2020 Performance Highlights The COVID-19 pandemic caused unprecedented market dislocations during the end of the first quarter and throughout the second quarter of 2020. Like many other mortgage REITs, the Company was subjected to significant margin calls which it was able to meet without selling its high-yielding non-Agency MBS portfolio. Throughout the year, we worked diligently on the liability side of our balance sheet to enhance liquidity and strengthen our cash position. In addition, the Company was able to continue to conduct its business, closing a number of securitizations and paying a higher dividend per share than many of its peers. As a result of these efforts, we were able to accomplish the following: • Distributed quarterly common stock dividends totaling $1.40 per common share in 2020. • Securitized $4.2 billion of mortgage loans, in 11 separate transactions, which included a mix of seasoned re-performing residential loans, jumbo prime residential loans, and investor property loans. • Company ROAE for 2020 was 30.7%. • Since the onset of the pandemic, we took aggressive actions to reduce our financing risk by lengthening and strengthening our secured credit facilities. At year-end, we had $3.2 billion credit-related secured financing, which is 37% less than we were financing at year-end 2019. The average maturity of our credit-related financing is 15 months, and $2 billion of such financing, or roughly two-thirds, is either non-mark-to-market or limited-mark-to-market. • Our strategy of maintaining our high yielding assets during the COVID-19 liquidity disruption paid dividends the second half of 2020. Our book value improved nearly 4% in the fourth quarter and over 16% since the middle of the year. The improved book value, combined with the Company’s dividend policy, generated a 6% economic return for the fourth quarter and a 22% economic return since June 30th of 2020. 2020 Compensation Highlights Compensation decisions by the compensation committee for 2020 demonstrate the 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 2020 was 30.7%, which placed us 4th across the 35 companies in the iShares Mortgage Real Estate ETF. This performance equaled the 90th percentile against the peer group, resulting in the ROAE cash bonus being awarded at 224.3% of the target bonus. • The named executive officers 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 2020 that become earned based on our relative TER performance for 2020-2022. • For the 2018 PSUs earned based on 2018-2020 relative Total Shareholder Return under the original employment agreements, our Total Shareholder Return for the three-year period ended December 31, 2020 was the 48th percentile of the companies constituting the NAREIT FTSE Mortgage Home Finance index. This performance resulted in shares issued pursuant to the 2018 PSU award at 96.8% of the target award amount. 19 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 For CEO, 67% of target total compensation in [[Image Removed]] direct compensation is performance-based performance-based compensation Pay for performance based on Use multiple, balanced measures, measurable goals for both [[Image Removed]] focused on ROAE and relative TER annual and long-term awards Balanced mix of cash and 60% of incentive opportunity tied stock-based awards tied to to annual ROAE, 20% tied to a annual and long-term [[Image Removed]] fixed RSU grant and 20% tied to performance 3-year relative TER; mix of cash (ROAE portion) and stock (relative TER and fixed RSU grant) Stock ownership and 5x salary for CEO and 3x salary retention policy for all other named executive officers; 100% of shares must be [[Image Removed]] retained until minimum ownership level is met; applies until 6 months after termination of employment Receive advice from Compensation consultant (Frederic independent compensation [[Image Removed]] W. Cook & Co.) provides no other consultant 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 Consistent with focus on tax 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 Per employment agreements, vesting equity compensation upon a [[Image Removed]] following a change in control change in control requires involuntary termination of employment (double-trigger) No hedging transactions Policy prohibits hedging permitted transactions, including the [[Image Removed]] purchase of financial instruments designed to hedge/offset any decrease in the market value of our stock 20 Table of Contents Key Design Features and 2020 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, helping 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 2020, the base salary amounts were as follows: 2020 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 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 2020 target incentive award and the three components for each executive: Overview of Compensation Elements Compensation Description Objectives Element Base Salary • Fixed cash compensation for • Per employment agreement the term of each executive’s • Provides fixed level of employment agreement. cash compensation • Reward executives for efficiently generating earnings • Creates a direct connection between business success and financial reward Annual Incentive • 60% of the total incentive • Reward executives for compensation opportunity for the efficiently generating earnings year, payable in cash • Creates a direct connection • Ranges from 0% to 250% of between business success and target, based on relative ROAE financial reward performance Long-Term • 20% of total incentive • PSUs provide multi-year Incentives compensation opportunity in the focus on driving stockholder form of a fixed RSU award, which returns vests ratably over 3 years • Both awards align named • 20% of total incentive executive officers with opportunity in the form of a PSU stockholder interests and award encourage retention • Ranges from 0% to 200% of target, based on relative TER performance 21 Table of Contents Post-Employment • Employment agreements include • Per negotiated employment Benefits severance payments and benefits in agreements case of involuntary termination • Market-competitive practice (without cause or with good to 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 connection with a termination provisions ensure that following a change in control) management will be able to • No single-trigger vesting of fairly assess potential equity awards upon a change in transactions control (if awards are assumed) • Competitive with peer • No 280G or other tax gross-ups companies agreements • Assists with recruitment and retention Other Benefits • 401(k), health care and life insurance programs, same as other non-executive employees • No executive perquisites 2020 Incentive Compensation Decisions General. The compensation design reflected in the employment agreements weights the compensation opportunities heavily towards variable, performance-based awards in a mix of cash and stock and is 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 2020 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 2019 through the third-quarter 2020, payable in cash ranging from 0% to 250% of target, • a fixed long-term incentive (“LTI”) bonus granted in early 2020 as an award of RSUs vesting ratably over three years, and • a relative TER bonus granted in early 2020 as a PSU award that becomes earned based on TER results over a 3-year performance period (January 2020 through December 2022) 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 2020 target incentive award and the three components for our named executive officers: 22 Table of Contents 2020 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 2020 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 2019 to Q3 2020). 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 The following chart summarizes the ROAE performance goals and results for 2020: Relative ROAE Percentage of Target Cash Payable