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CHIMERA INVESTMENT CORPORATION REPORTS 3RD QUARTER 2022 EARNINGS

NEW YORK, November 03, 2022--(BUSINESS WIRE)--Chimera Investment Corporation (NYSE:CIM) today announced its financial results for the third quarter ended September 30, 2022.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20221103005405/en/

Financial Highlights:

  • 3RD QUARTER GAAP NET LOSS OF $0.88 PER DILUTED COMMON SHARE

  • 3RD QUARTER EARNINGS AVAILABLE FOR DISTRIBUTION(1) OF $0.27 PER DILUTED COMMON SHARE.

  • GAAP BOOK VALUE OF $7.44 PER COMMON SHARE

Business Highlights:

Third Quarter

  • Extended an existing $489 million non-mark-to-market facility by 29 months to February 2025

  • Entered into $885 million pay fixed interest rate swaps

  • Committed to purchase $687 million Residential Loans

  • Purchased and closed on $66 million Business Purpose Loans

  • Sponsored $370 million CIM 2022-R3 Securitization, which reduced our recourse leverage

Post Quarter

  • Cash balance increased to about $350 million as of October 31, 2022

  • Entered an additional $1.1 billion of pay fixed interest rate swaps

  • Entered $250 million 2-year, non-mark-to-market financing facility bringing our non and limited mark-to- market financing to nearly 50%

  • Expect to close the purchase of $476 million Residential Loans into a long-term non-mark-to market structure which we expect will generate double digit returns

  • Sponsored $145 million CIM 2022-NR1 Securitization, which further reduced our recourse leverage

"In the third quarter, elevated market volatility led to higher rates and wider spreads putting further pressure on our book value. However, these market conditions have brought new opportunities on both sides of the balance sheet," said Mohit Marria, CEO and Chief Investment Officer. "This quarter we committed to purchasing approximately $750 million mortgage loans, completed a $370 million securitization, and entered into $885 million of new interest rate swaps as a liability hedge against further increases in interest rates." Mr. Marria further stated, "Since quarter end, we have increased our cash position, entered into an additional $1.1 billion of hedges, closed a new non-mark-to-market financing facility, expect to close a purchase of jumbo prime loans into another long-term non-mark-to-market structure, and lastly, completed a $145 million securitization. We believe we are well positioned to take advantage of new market opportunities and that our patience and investment discipline will benefit our shareholders over the long-term."

(1) Earnings available for distribution per adjusted diluted common share is a non-GAAP measure. See additional discussion on page 6.

Other Information

Chimera Investment Corporation is a publicly traded real estate investment trust, or REIT, that is primarily engaged in the business of investing directly or indirectly through its subsidiaries, on a leveraged basis, in a diversified portfolio of mortgage assets, including residential mortgage loans, Non-Agency RMBS, Agency CMBS, Agency RMBS, and other real estate related securities.

CHIMERA INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands, except share and per share data)

(Unaudited)

September 30, 2022

December 31, 2021

Cash and cash equivalents

$

86,234

$

385,741

Non-Agency RMBS, at fair value (net of allowance for credit losses of $3 million and $213 thousand, respectively)

1,191,298

1,810,208

Agency RMBS, at fair value

38,470

60,487

Agency CMBS, at fair value

427,984

761,208

Loans held for investment, at fair value

11,707,299

12,261,926

Receivable for investments sold

14,118

Accrued interest receivable

69,330

69,513

Other assets

130,198

58,320

Derivatives, at fair value

4,389

Total assets (1)

$

13,669,320

$

15,407,403

Liabilities:

Secured financing agreements ($3.8 billion and $4.4 billion pledged as collateral, respectively)

$

2,820,931

$

3,261,613

Securitized debt, collateralized by Non-Agency RMBS ($281 million and $365 million pledged as collateral, respectively)

79,967

87,999

Securitized debt at fair value, collateralized by Loans held for investment ($10.6 billion and $11.0 billion pledged as collateral, respectively)

7,354,311

7,726,043

Payable for investments purchased

644,120

477,415

Accrued interest payable

25,773

20,416

Dividends payable

63,860

86,152

Accounts payable and other liabilities

26,654

11,574

Total liabilities (1)

$

11,015,616

$

11,671,212

Stockholders' Equity:

Preferred Stock, par value of $0.01 per share, 100,000,000 shares authorized:

8.00% Series A cumulative redeemable: 5,800,000 shares issued and outstanding, respectively ($145,000 liquidation preference)

$

58

$

58

8.00% Series B cumulative redeemable: 13,000,000 shares issued and outstanding, respectively ($325,000 liquidation preference)

130

130

7.75% Series C cumulative redeemable: 10,400,000 shares issued and outstanding, respectively ($260,000 liquidation preference)

104

104

8.00% Series D cumulative redeemable: 8,000,000 shares issued and outstanding, respectively ($200,000 liquidation preference)

80

80

Common stock: par value $0.01 per share; 500,000,000 shares authorized, 231,751,256 and 236,951,266 shares issued and outstanding, respectively

2,318

2,370

Additional paid-in-capital

4,314,942

4,359,045

Accumulated other comprehensive income

244,204

405,054

Cumulative earnings

3,941,742

4,552,008

Cumulative distributions to stockholders

(5,849,874

)

(5,582,658

)

Total stockholders' equity

$

2,653,704

$

3,736,191

Total liabilities and stockholders' equity

$

13,669,320

$

15,407,403

(1) The Company's consolidated statements of financial condition include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations and liabilities of the VIE for which creditors do not have recourse to the primary beneficiary (Chimera Investment Corporation). As of September 30, 2022, and December 31, 2021, total assets of consolidated VIEs were $10,790,005 and $10,666,591, respectively, and total liabilities of consolidated VIEs were $7,005,717 and $7,223,655, respectively.

Net Income (Loss)

(dollars in thousands, except share and per share data)

(unaudited)

For the Quarters Ended

For the Nine Months Ended

September 30, 2022

June 30, 2022

September 30, 2022

September 30, 2021

Net interest income:

Interest income (1)

$

188,303

$

195,357

$

585,835

$

716,384

Interest expense (2)

83,464

78,467

226,403

260,029

Net interest income

104,839

116,890

359,432

456,355

Increase (decrease) in provision for credit losses

(1,534

)

4,497

3,203

(58

)

Other investment gains (losses):

Net unrealized gains (losses) on derivatives

10,307

(1,618

)

8,689

Periodic interest cost of swaps, net

(122

)

(122

)

Net gains (losses) on derivatives

10,185

(1,618

)

8,567

Net unrealized gains (losses) on financial instruments at fair value

(239,513

)

(239,246

)

(848,925

)

545,643

Net realized gains (losses) on sales of investments

(37,031

)

(37,031

)

45,313

Gains (losses) on extinguishment of debt

(2,897

)

(2,897

)

(284,535

)

Other investment gains (losses)

(462

)

980

517

Total other gains (losses)

(266,821

)

(242,781

)

(879,769

)

306,421

Other expenses:

Compensation and benefits

10,000

8,859

30,211

35,363

General and administrative expenses

4,836

5,944

16,493

16,672

Servicing and asset manager fees

8,516

9,315

27,122

27,659

Transaction expenses

2,341

6,727

12,872

25,614

Total other expenses

25,693

30,845

86,698

105,308

Income (loss) before income taxes

(186,141

)

(161,233

)

(610,238

)

657,526

Income taxes

4

94

28

5,146

Net income (loss)

$

(186,145

)

$

(161,327

)

$

(610,266

)

$

652,380

Dividends on preferred stock

18,438

18,438

55,283

55,313

Net income (loss) available to common shareholders

$

(204,583

)

$

(179,765

)

$

(665,549

)

$

597,067

Net income (loss) per share available to common shareholders:

Basic

$

(0.88

)

$

(0.76

)

$

(2.84

)

$

2.57

Diluted

$

(0.88

)

$

(0.76

)

$

(2.84

)

$

2.42

Weighted average number of common shares outstanding:

Basic

231,750,422

235,310,440

234,671,912

232,717,010

Diluted

231,750,422

235,310,440

234,671,912

247,358,823

Dividends declared per share of common stock

$

0.23

$

0.33

$

0.89

$

0.96

(1) Includes interest income of consolidated VIEs of $139,598 and $140,209 for the quarters ended September 30, 2022 and June 30, 2022, respectively, and $410,873 and $446,198 for the nine months ended September 30, 2022 and 2021, respectively. See Note 9 to consolidated financial statements for further discussion.

(2) Includes interest expense of consolidated VIEs of $50,030 and $50,193 for the quarters ended September 30, 2022 and June 30, 2022, respectively, and $142,714 and $159,666 for the nine months ended September 30, 2022 and 2021, respectively. See Note 9 to consolidated financial statements for further discussion.

CHIMERA INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands, except share and per share data)

(Unaudited)

For the Quarters Ended

For the Nine Months Ended

September 30, 2022

June 30, 2022

September 30, 2022

September 30, 2021

Comprehensive income (loss):

Net income (loss)

$

(186,145

)

$

(161,327

)

$

(610,266

)

$

652,380

Other comprehensive income:

Unrealized gains (losses) on available-for-sale securities, net

(61,526

)

(58,369

)

(160,850

)

$

(82,065

)

Reclassification adjustment for net realized losses (gains) included in net income

$

(37,116

)

Other comprehensive income (loss)

(61,526

)

(58,369

)

(160,850

)

$

(119,181

)

Comprehensive income (loss) before preferred stock dividends

$

(247,671

)

$

(219,696

)

$

(771,116

)

$

533,199

Dividends on preferred stock

$

18,438

$

18,438

$

55,283

$

55,313

Comprehensive income (loss) available to common stock shareholders

$

(266,109

)

$

(238,134

)

$

(826,399

)

$

477,886

Earnings available for distribution

Earnings available for distribution is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains or losses on financial instruments carried at fair value with changes in fair value recorded in earnings, realized gains or losses on the sales of investments, gains or losses on the extinguishment of debt, interest expense on long term debt, changes in the provision for credit losses, other gains or losses on equity investments, and transaction expenses incurred. In addition, stock compensation expense charges incurred on awards to retirement eligible employees is reflected as an expense over a vesting period (36 months) rather than reported as an immediate expense.

As defined, Earnings available for distribution is the Economic net interest income, as defined previously, reduced by compensation and benefits expenses (adjusted for awards to retirement eligible employees), general and administrative expenses, servicing and asset manager fees, income tax benefits or expenses incurred during the period, as well as the preferred dividend charges. We view Earnings available for distribution as a consistent measure of our investment portfolio's ability to generate income for distribution to common stockholders. Earnings available for distribution is one of the metrics, but not the exclusive metric, that our Board of Directors uses to determine the amount, if any, of dividends on our common stock. Other metrics that our Board of Directors may consider when determining the amount, if any, of dividends on our common stock include (among others) REIT taxable income, dividend yield, book value, reinvestment opportunities and other cash needs. In addition, Earnings available for distribution is different than REIT taxable income and the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain adjustments) to our stockholders in order to maintain qualification as a REIT is not based on Earnings available for distribution. Therefore, Earnings available for distribution should not be considered as an indication of our REIT taxable income, a guaranty of our ability to pay dividends, or as a proxy for the amount of dividends we may pay, because Earnings available for distribution excludes certain items that impact our cash needs. We believe Earnings available for distribution as described above helps us and investors evaluate our financial performance period over period without the impact of certain transactions. Therefore, Earnings available for distribution should not be viewed in isolation and is not a substitute for net income or net income per basic share computed in accordance with GAAP. In addition, our methodology for calculating Earnings available for distribution may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and accordingly, our Earnings available for distribution may not be comparable to the Earnings available for distribution reported by other REITs.

The following table provides GAAP measures of net income and net income per diluted share available to common stockholders for the periods presented and details with respect to reconciling the line items to Earnings available for distribution and related per average diluted common share amounts. Earnings available for distribution is presented on an adjusted dilutive shares basis. Certain prior period amounts have been reclassified to conform to the current period's presentation.

For the Quarters Ended

September 30, 2022

June 30, 2022

March 31, 2022

December 31, 2021

September 30, 2021

(dollars in thousands, except per share data)

GAAP Net income (loss) available to common stockholders

$

(204,583

)

$

(179,765

)

$

(281,202

)

$

(718

)

$

313,030

Adjustments:

Net unrealized (gains) losses on financial instruments at fair value

239,513

239,246

370,167

108,286

(239,524

)

Net realized (gains) losses on sales of investments

37,031

(Gains) losses on extinguishment of debt

2,897

(980

)

25,622

Interest expense on long term debt

238

Increase (decrease) in provision for credit losses

(1,534

)

4,497

240

92

(386

)

Net unrealized (gains) losses on derivatives

(10,307

)

1,618

Transaction expenses

2,341

6,727

3,804

4,241

3,432

Stock Compensation expense for retirement eligible awards

(310

)

(309

)

723

(363

)

(365

)

Other investment (gains) losses

462

(980

)

Earnings available for distribution

$

62,613

$

73,931

$

93,732

$

110,558

$

102,047

GAAP net income (loss) per diluted common share

$

(0.88

)

$

(0.76

)

$

(1.19

)

$

$

1.30

Earnings available for distribution per adjusted diluted common share

$

0.27

$

0.31

$

0.39

$

0.46

$

0.42

The following tables provide a summary of the Company’s MBS portfolio at September 30, 2022 and December 31, 2021.

September 30, 2022

Principal or
Notional Value
at Period-End
(dollars in
thousands)

Weighted
Average
Amortized
Cost Basis

Weighted
Average Fair
Value

Weighted
Average
Coupon

Weighted Average
Yield at Period-
End (1)

Non-Agency RMBS

Senior

$

1,171,759

$

46.17

67.11

5.0

%

16.8

%

Subordinated

506,901

67.54

60.90

4.6

%

6.9

%

Interest-only

3,363,236

...