CIM Chimera Investment Corporation New

• GAAP EARNINGS OF $0.84 PER COMMON SHARE
• CORE EARNINGS(1) OF $0.51 PER COMMON SHARE
• GAAP BOOK VALUE OF $16.20 PER COMMON SHARE
• SPONSORED FOUR RESIDENTIAL MORTGAGE LOAN SECURITIZATIONS TOTALING $4.1 BILLION, INCURRED $11 MILLION IN SECURITIZATION DEAL EXPENSES

“Chimera had a very active start to 2017. We sponsored four residential mortgage securitizations totaling $4.1 billion and issued $325 million of Series B preferred stock,” said Matthew Lambiase, Chimera’s CEO and President. “The activity in the first quarter positioned us to grow our balance sheet, create value through four new securitizations and make accretive investments for our common shareholders.”

“The timing of our new capital deployment and securitization deal expenses reduced core earnings for the first quarter. We expect to see the full benefit of these new investments in the second quarter 2017.” said Rob Colligan, Chimera’s CFO.

(1) Core earnings is a non-GAAP measure. See additional discussion on page 5. Note: All per common share amounts presented on a diluted basis.  

Other Information

Chimera Investment Corporation is a publicly traded real estate investment trust, or REIT, that is primarily engaged in real estate finance. We were incorporated in Maryland on June 01, 2007 and commenced operations on November 21, 2007. We invest, either directly or indirectly through our subsidiaries, in RMBS, residential mortgage loans, Agency CMBS, commercial mortgage loans, real estate-related securities and various other asset classes. We have elected and believe that we are organized and have operated in a manner that enables us to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code.

Please visit www.chimerareit.com and click on Investor Relations for additional information about us.

  CHIMERA INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except share and per share data)   March 31, 2017   December 31, 2016 Assets:       Cash and cash equivalents $ 82,556   $ 177,714 Non-Agency RMBS, at fair value 3,228,391 3,330,063 Agency MBS, at fair value 4,101,851 4,167,754 Securitized loans held for investment, at fair value 12,713,273 8,753,653 Accrued interest receivable 99,669 79,697 Other assets 190,021 166,350 Derivatives, at fair value, net 10,889     9,677   Total assets (1) $ 20,426,650     $ 16,684,908   Liabilities: Repurchase agreements ($7.3 billion and $7.0 billion, MBS pledged as collateral, respectively) $ 5,851,204 $ 5,600,903 Securitized debt, collateralized by Non-Agency RMBS ($1.8 billion pledged as collateral, respectively) 303,389 334,124 Securitized debt at fair value, collateralized by loans held for investment ($12.7 billion and $8.8 billion pledged as collateral, respectively) 10,111,293 6,941,097 Payable for investments purchased 473,269 520,532 Accrued interest payable 67,596 48,670 Dividends payable 97,008 97,005 Accounts payable and other liabilities 9,176 16,694 Derivatives, at fair value 1,627     2,350   Total liabilities (1) $ 16,914,562     $ 13,561,375     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 and 0 shares issued and outstanding, respectively ($325,000 liquidation preference) 130 $ — Common stock: par value $0.01 per share; 300,000,000 shares authorized, 187,779,489 and 187,739,634 shares issued and outstanding, respectively 1,878 1,877 Additional paid-in-capital 3,824,197 3,508,779 Accumulated other comprehensive income 727,711 718,106 Cumulative earnings 2,605,991 2,443,184 Cumulative distributions to stockholders (3,647,877 )   (3,548,471 ) Total stockholders' equity $ 3,512,088     $ 3,123,533   Total liabilities and stockholders' equity $ 20,426,650     $ 16,684,908  

(1)

 

The Company's consolidated statements of financial condition include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations and liabilities of the VIE for which creditors do not have recourse to the primary beneficiary (Chimera Investment Corporation). As of March 31, 2017 and December 31, 2016, total assets of consolidated VIEs were $14,693,307 and $10,761,954, respectively, and total liabilities of consolidated VIEs were $10,451,235 and $7,300,163, respectively.

    CHIMERA INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except share and per share data)   For the Quarters Ended March 31, 2017   March 31, 2016 Net Interest Income:   Interest income (1) $ 251,344 $ 201,194 Interest expense (2) 110,231     62,981   Net interest income 141,113     138,213   Other-than-temporary impairments: Total other-than-temporary impairment losses (2,713 ) (4,423 ) Portion of loss recognized in other comprehensive income (15,988 )   (6,255 ) Net other-than-temporary credit impairment losses (18,701 )   (10,678 ) Other investment gains (losses): Net unrealized gains (losses) on derivatives 4,896 (101,110 ) Realized gains (losses) on terminations of interest rate swaps — (458 ) Net realized gains (losses) on derivatives (9,358 )   (34,969 ) Net gains (losses) on derivatives (4,462 )   (136,537 ) Net unrealized gains (losses) on financial instruments at fair value 72,243 16,871 Net realized gains (losses) on sales of investments 5,167 (2,674 ) Gains (losses) on Extinguishment of Debt —     (1,766 ) Total other gains (losses) 72,948     (124,106 )   Other income: Other income —     95,000   Total other income —     95,000     Other expenses: Compensation and benefits 7,556 5,222 General and administrative expenses 4,040 4,503 Servicing Fees of consolidated VIEs 9,588 5,577 Deal Expenses 11,353     —   Total other expenses 32,537     15,302   Income (loss) before income taxes 162,823 83,127 Income taxes 16     29   Net income (loss) $ 162,807     $ 83,098     Dividend on preferred stock 5,283 —         Net income (loss) available to common shareholders $ 157,524     $ 83,098     Net income (loss) per share available to common shareholders:       Basic $ 0.84     $ 0.44   Diluted $ 0.84     $ 0.44     Weighted average number of common shares outstanding:       Basic 187,761,748     187,723,472   Diluted 188,195,061     187,840,182     Dividends declared per share of common stock $ 0.50 $ 0.98

(1)

 

Includes interest income of consolidated VIEs of $192,989 and $131,980 for the quarters ended March 31, 2017 and 2016 respectively.

(2)

Includes interest expense of consolidated VIEs of $82,684 and $39,250 for the quarters ended March 31, 2017 and 2016 respectively.

    CHIMERA INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except share and per share data) (Unaudited)   For the Quarters Ended March 31, 2017   March 31, 2016 Comprehensive income (loss): Net income (loss) $ 162,807 $ 83,098 Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net (3,910 ) 59,408 Reclassification adjustment for net losses included in net income for other-than-temporary credit impairment losses 18,701 10,678 Reclassification adjustment for net realized losses (gains) included in net income (5,186 )   (1,612 ) Other comprehensive income (loss) 9,605     68,474   Comprehensive income (loss) before preferred stock dividends $ 172,412     $ 151,572   Dividends on preferred stock $ 5,283     $ —   Comprehensive income (loss) available to common stock shareholders $ 167,129     $ 151,572    

Core earnings

Core earnings is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains on the aggregate portfolio, impairment losses, realized gains on sales of investments, realized gains or losses on futures, realized gains or losses on swap terminations, gain on deconsolidation, extinguishment of debt and certain other non-recurring gains or losses. As defined, core earnings include interest income and expense as well as realized losses on interest rate swaps used to hedge interest rate risk. Management believes that the presentation of core earnings is useful to investors because it can provide a useful measure of comparability to our other REIT peers, but has important limitations. We believe core earnings as described above helps evaluate our financial performance without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, core earnings should not be viewed in isolation and is not a substitute for net income or net income per basic share computed in accordance with GAAP.

The following table provides GAAP measures of net income and net income per basic share available to common stockholders for the periods presented and details with respect to reconciling the line items to core earnings and related per average basic common share amounts:

For the Quarters Ended March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016 (dollars in thousands, except per share data) GAAP Net income available to common stockholders $ 157,524     $ 219,454     $ 172,817     $ 74,127     $ 83,098   Adjustments: Net other-than-temporary credit impairment losses 18,701 14,780 11,574 20,955 10,678 Net unrealized (gains) losses on derivatives (4,896 ) (101,475 ) (27,628 ) (22,100 ) 101,110 Net unrealized (gains) losses on financial instruments at fair value (72,243 ) 20,664 (32,999 ) (30,347 ) (16,871 ) Net realized (gains) losses on sales of investments (5,167 ) (11,121 ) (3,079 ) (6,631 ) 2,674 (Gains) losses on extinguishment of debt — (1,334 ) 45 — 1,766 Realized (gains) losses on terminations of interest rate swaps — — — 60,158 458 Net realized (gains) losses on Futures (1) 2,084 (19,628 ) 7,823 (635 ) 21,609 Other income —     —     —     —     (95,000 ) Core Earnings $ 96,003     $ 121,340     $ 128,553     $ 95,527     $ 109,522                     GAAP net income per basic common share $ 0.84     $ 1.17     $ 0.92     $ 0.39     $ 0.44   Core earnings per basic common share(2) $ 0.51     $ 0.65     $ 0.68     $ 0.51     $ 0.58      

(1)

 

Included in net realized gains (losses) on derivatives in the Consolidated Statements of Operations.

(2)

We note that core and taxable earnings will typically differ, and may materially differ, due to differences on realized gains and losses on investments and related hedges, credit loss recognition, timing differences in premium amortization, accretion of discounts, equity compensation and other items.

 

The following tables provide a summary of the Company’s MBS portfolio at March 31, 2017 and December 31, 2016.

        March 31, 2017    

Principal orNotional Valueat Period-End(dollars inthousands)

 

WeightedAverageAmortizedCost Basis

 

WeightedAverage FairValue

 

WeightedAverageCoupon

 

WeightedAverage Yieldat Period-End (1)

Non-Agency RMBS         Senior $ 3,060,690 $ 55.51 $ 79.68 4.4 % 15.8 % Senior, interest-only 5,434,402 5.29 4.41 1.4 % 10.9 % Subordinated 662,469 70.25 81.28 3.8 % 9.1 % Subordinated, interest-only 263,126 5.18 4.48 1.0 % 12.8 % Agency MBS Residential pass-through 2,480,534 105.82 104.33 3.9 % 3.0 % Commercial pass-through 1,393,290 102.51 99.24 3.6 % 2.9 % Interest-only 3,248,168 4.29 4.04 0.8 % 3.6 %                           December 31, 2016    

Principal orNotional Valueat Period-End(dollars inthousands)

 

WeightedAverageAmortizedCost Basis

 

WeightedAverage FairValue

 

WeightedAverageCoupon

 

WeightedAverage Yieldat Period-End (1)

Non-Agency RMBS Senior $ 3,190,947 $ 55.76 $ 78.69 4.3 % 15.5 % Senior, interest-only 5,648,339 5.18 4.49 1.5 % 11.7 % Subordinated 673,259 70.83 82.21 3.8 % 9.2 % Subordinated, interest-only 266,927 5.20 4.50 1.1 % 13.5 % Agency MBS Residential pass-through 2,594,570 105.78 104.29 3.9 % 3.0 % Commercial pass-through 1,331,543 102.64 98.91 3.6 % 2.9 % Interest-only 3,356,491 4.53 4.31 0.8 % 3.5 %                       (1) Bond Equivalent Yield at period end.  

At March 31, 2017 and December 31, 2016, the repurchase agreements collateralized by MBS had the following remaining maturities.

  March 31, 2017   December 31, 2016 (dollars in thousands) Overnight $ — $ — 1 to 29 days 3,743,094 2,947,604 30 to 59 days 1,107,093 958,956 60 to 89 days 320,551 407,625 90 to 119 days 40,223 559,533 Greater than or equal to 120 days   640,243     727,185 Total   $ 5,851,204     $ 5,600,903  

The following table summarizes certain characteristics of our portfolio at March 31, 2017 and December 31, 2016.

    March 31, 2017   December 31, 2016 Interest earning assets at period-end (1) $ 20,043,515 $ 16,251,470 Interest bearing liabilities at period-end $ 16,265,886 $ 12,876,124 GAAP Leverage at period-end 4.6:1 4.1:1 GAAP Leverage at period-end (recourse) 1.7:1 1.8:1 Portfolio Composition, at amortized cost Non-Agency RMBS 7.1 % 9.0 % Senior 3.1 % 3.9 % Senior, interest only 1.5 % 1.9 % Subordinated 2.4 % 3.1 % Subordinated, interest only 0.1 % 0.1 % RMBS transferred to consolidated VIEs 5.8 % 7.6 % Agency MBS 22.0 % 27.7 % Residential 13.8 % 17.8 % Commercial 7.5 % 8.9 % Interest-only 0.7 % 1.0 % Securitized loans held for investment 65.1 % 55.7 % Fixed-rate percentage of portfolio 91.0 % 88.4 % Adjustable-rate percentage of portfolio 9.0 % 11.6 % Annualized yield on average interest earning assets for the periods ended 6.5 % 6.4 %

Annualized cost of funds on average borrowed funds for the periods ended (2)

3.5

%   3.0 % (1) Excludes cash and cash equivalents. (2) Includes the effect of realized losses on interest rate swaps.  

Economic Net Interest Income

Our “Economic net interest income” is a non-GAAP financial measure, that equals interest income, less interest expense and realized losses on our interest rate swaps. Realized losses on our interest rate swaps are the periodic net settlement payments made or received. For the purpose of computing economic net interest income and ratios relating to cost of funds measures throughout this section, interest expense includes net payments on our interest rate swaps, which is presented as a part of Realized gains (losses) on derivatives in our Consolidated Statements of Operations and Comprehensive Income. Interest rate swaps are used to manage the increase in interest paid on repurchase agreements in a rising rate environment. Presenting the net contractual interest payments on interest rate swaps with the interest paid on interest-bearing liabilities reflects our total contractual interest payments. We believe this presentation is useful to investors because it depicts the economic value of our investment strategy by showing actual interest expense and net interest income. Where indicated, interest expense, including interest payments on interest rate swaps, is referred to as economic interest expense. Where indicated, net interest income reflecting interest payments on interest rate swaps, is referred to as economic net interest income.

The following table reconciles the GAAP and non-GAAP measurements reflected in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

   

GAAPInterestIncome

 

GAAPInterestExpense

 

NetRealizedLosses onInterestRate Swaps

 

EconomicInterestExpense

 

GAAP NetInterestIncome

 

NetRealizedLosses onInterestRate Swaps

  Other (1)  

EconomicNetInterestIncome

For the Quarter Ended March 31, 2017   $ 251,344     $ 110,231     $ 4,106     $ 114,337     $ 141,113     $ (4,106 )   $ (519 )   $ 136,488 For the Quarter Ended December 31, 2016   $ 260,823     $ 106,737     $ 4,151     $ 110,888     $ 154,086     $ (4,151 )   $ 40     $ 149,975 For the Quarter Ended September 30, 2016   $ 250,953     $ 94,911     $ 4,595     $ 99,506     $ 156,042     $ (4,595 )   $ (105 )   $ 151,342 For the Quarter Ended June 30, 2016   $ 221,096     $ 83,227     $ 8,141     $ 91,368     $ 137,869     $ (8,141 )   $ (367 )   $ 129,361 For the Quarter Ended March 31, 2016   $ 201,194     $ 62,981     $ 11,220     $ 74,201     $ 138,213     $ (11,220 )   $ (448 )   $ 126,545 (1) Primarily interest income on cash and cash equivalents.  

The table below shows our average earning assets held, interest earned on assets, yield on average interest earning assets, average debt balance, economic interest expense, economic average cost of funds, economic net interest income, and net interest rate spread for the periods presented.

  For the Quarter Ended March 31, 2017     March 31, 2016 (dollars in thousands) (dollars in thousands)     AverageBalance   Interest   AverageYield/Cost AverageBalance   Interest   AverageYield/Cost Assets:                       Interest-earning assets (1):         Agency MBS $ 3,730,939 $ 27,632 3.0 % $ 6,003,520 $ 37,659 2.5 % Non-Agency RMBS 1,372,359 30,205 8.8 % 1,461,811 31,106 8.5 % Non-Agency RMBS transferred to consolidated VIEs 1,141,388 60,134 21.1 % 1,418,442 64,232 18.1 % Residential mortgage loans held for investment   9,091,646     132,854     5.8 % 4,686,855     67,749     5.8 % Total   $ 15,336,332     $ 250,825     6.5 % $ 13,570,628     $ 200,746     5.9 %                         Liabilities and stockholders' equity:                       Interest-bearing liabilities: Repurchase agreements collateralized by: Agency MBS (2) $ 3,120,531 $ 11,473 1.5 % $ 5,419,402 $ 21,279 1.6 % Non-Agency RMBS 745,920 5,532 3.0 % 828,757 4,941 2.4 % RMBS from bond securitizations 605,366 4,669 3.1 % 708,286 5,043 2.8 % RMBS from loan securitizations 1,328,324 9,978 3.0 % 540,479 3,687 2.7 % Securitized debt, collateralized by Non-Agency RMBS 318,756 5,012 6.3 % 510,761 3,996 3.1 % Securitized debt, collateralized by loans   7,121,397     77,673     4.4 % 3,671,167     35,255     3.8 % Total   $ 13,240,294     $ 114,337     3.5 % $ 11,678,852     $ 74,201     2.5 %                         Economic net interest income/net interest rate spread       $ 136,488     3.0 %     $ 126,545     3.4 %                         Net interest-earning assets/net interest margin   $ 2,096,038         3.6 % $ 1,891,776         3.6 %                             Ratio of interest-earning assets to interest bearing liabilities   1.16               1.16             (1) Interest-earning assets at amortized cost (2) Interest includes cash paid on swaps  

The table below shows our Net Income, Economic Net Interest Income and Core Earnings, each as a percentage of average equity. Return on average equity is defined as our GAAP net income (loss) as a percentage of average equity. Average equity is defined as the average of Company’s beginning and ending equity balance for the period reported. Economic Net Interest Income is a non-GAAP financial measure, that equals interest income, less interest expense and realized losses on our interest rate swaps. Core Earnings is a non-GAAP measures as defined in previous section.

Return onAverage Equity

   

Economic NetInterestIncome/AverageEquity *

   

CoreEarnings/AverageEquity

  (Ratios have been annualized) For the Quarter Ended March 31, 2017 19.63 %     16.46 %     11.57 % For the Quarter Ended December 31, 2016 28.82 %     19.48 %     15.76 % For the Quarter Ended September 30, 2016 23.04 %     20.18 %     17.14 % For the Quarter Ended June 30, 2016 10.09 %     17.61 %     13.00 % For the Quarter Ended March 31, 2016 11.34 %     17.28 %     14.95 % * Includes effect of realized losses on interest rate swaps.  

The following table presents changes to Accretable Discount (net of premiums) as it pertains to our Non-Agency RMBS portfolio, excluding premiums on IOs, during the previous five quarters.

  For the Quarters Ended Accretable Discount (Net of Premiums) March 31, 2017   December 31, 2016 September 30, 2016   June 30, 2016   March 31, 2016     (dollars in thousands) Balance, beginning of period $ 683,648 $ 733,060 $ 769,764 $ 778,847 $ 824,154 Accretion of discount (43,715 ) (44,427 ) (44,455 ) (42,297 ) (45,481 ) Purchases (3,642 ) (33,987 ) 8,959 (1,001 ) (11,102 ) Sales and deconsolidation (7,303 ) (2,138 ) (14,386 ) (20,590 ) — Transfers from/(to) credit reserve, net   19,671     31,140   13,178     54,805     11,276   Balance, end of period   $ 648,659     $ 683,648   $ 733,060     $ 769,764     $ 778,847    

Disclaimer

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2016, and any subsequent Quarterly Reports on Form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: the state of credit markets and general economic conditions; changes in interest rates and the market value of our assets; the rates of default or decreased recovery on the mortgages underlying our target assets; the occurrence, extent and timing of credit losses within our portfolio; the credit risk in our underlying assets; declines in home prices; our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target assets; our ability to borrow to finance our assets and the associated costs; changes in the competitive landscape within our industry; our ability to manage various operational risks and costs associated with our business; interruptions in or impairments to our communications and information technology systems; our ability to acquire residential mortgage loans and successfully securitize the residential mortgage loans we acquire; our ability to oversee our third party sub-servicers; the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the foreclosure process; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; the impact of new or modified government mortgage refinance or principal reduction programs; our ability to maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status under the Investment Company Act of 1940.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Chimera does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Chimera’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Chimera or matters attributable to Chimera or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

Readers are advised that the financial information in this press release is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by the company’s independent auditors.

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Chimera Investment CorporationInvestor Relations212-413-1880www.chimerareit.com