NEW YORK–(BUSINESS WIRE)–Chimera Investment Corporation (NYSE:CIM) today announced its financial results for the fourth quarter and full year ended December 31, 2022.
Financial Highlights:
4TH QUARTER GAAP NET INCOME OF $0.34 PER DILUTED COMMON SHARE
4TH QUARTER EARNINGS AVAILABLE FOR DISTRIBUTION(1) OF $0.11 PER DILUTED COMMON SHARE.
FULL YEAR GAAP NET LOSS OF $587 MILLION, OR $2.51 PER DILUTED COMMON SHARE
FULL YEAR EARNINGS AVAILABLE FOR DISTRIBUTION(1) OF $256 MILLION, OR $1.08 PER DILUTED COMMON SHARE.
GAAP BOOK VALUE OF $7.49 PER COMMON SHARE
4TH QUARTER BOOK VALUE RETURN OF 3.8%, CHANGE IN BOOK VALUE PLUS DIVIDEND FOR THE QUARTER
Business Highlights:
Fourth Quarter
Settled $463 million of fixed rate prime jumbo loans into a financing structure in which we borrowed $383 million for five years at an effective fixed rate with non-mark-to-market feature
Sponsored $145 million CIM 2022-NR1 Securitization which reduced our mark-to-market mortgage loan warehouse exposure by approximately $100 million
Post Quarter
Committed to purchase approximately $900 million of residential mortgage loans, which is expected to be accretive to future earnings
Collapsed CIM Trust 2020-R4, CIM Trust 2020-NR1, CIM Trust 2018-R5, and CIM Trust 2018-R6 and issued CIM Trust 2023-R1 and CIM Trust 2023-NR1 reducing recourse borrowing amount by approximately $139 million and releasing approximately $90 million in equity
As of January 31, we had approximately $365 million in cash
“Since the end of last year, we have been able to take positive actions with respect to our financing, hedging, and asset acquisitions and allocation which we believe position us to navigate potentially volatile markets in 2023, said Phillip Kardis, Chief Executive Officer.”
(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)
December 31, 2022
December 31, 2021
Cash and cash equivalents
$
264,600
$
385,741
Non-Agency RMBS, at fair value (net of allowance for credit losses of $7 million and $213 thousand, respectively)
1,147,481
1,810,208
Agency RMBS, at fair value
15,148
60,487
Agency CMBS, at fair value
415,796
761,208
Loans held for investment, at fair value
11,359,236
12,261,926
Accrued interest receivable
61,768
69,513
Other assets
133,866
58,320
Derivatives, at fair value
4,096
—
Total assets (1)
$
13,401,991
$
15,407,403
Liabilities:
Secured financing agreements ($4.7 billion and $4.4 billion pledged as collateral, respectively, and includes $374 million and $0 million at fair value, respectively)
$
3,434,765
$
3,261,613
Securitized debt, collateralized by Non-Agency RMBS ($276 million and $365 million pledged as collateral, respectively)
78,542
87,999
Securitized debt at fair value, collateralized by Loans held for investment ($10.0 billion and $11.0 billion pledged as collateral, respectively)
7,100,742
7,726,043
Payable for investments purchased
9,282
477,415
Accrued interest payable
30,696
20,416
Dividends payable
64,545
86,152
Accounts payable and other liabilities
16,616
11,574
Total liabilities (1)
$
10,735,188
$
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, 231,824,192 and 236,951,266 shares issued and outstanding, respectively
2,318
2,370
Additional paid-in-capital
4,318,388
4,359,045
Accumulated other comprehensive income
229,345
405,054
Cumulative earnings
4,038,942
4,552,008
Cumulative distributions to stockholders
(5,922,562
)
(5,582,658
)
Total stockholders’ equity
$
2,666,803
$
3,736,191
Total liabilities and stockholders’ equity
$
13,401,991
$
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 December 31, 2022, and December 31, 2021, total assets of consolidated VIEs were $10,199,266 and $10,666,591, respectively, and total liabilities of consolidated VIEs were $6,772,125 and $7,223,655, respectively.
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
(Unaudited)
For the Year Ended
December 31, 2022
December 31, 2021
December 31, 2020
Net interest income:
Interest income (1)
$
773,121
$
937,546
$
1,030,250
Interest expense (2)
333,293
326,628
516,181
Net interest income
439,828
610,918
514,069
Increase/(decrease) in provision for credit losses
7,037
33
180
Other investment gains (losses):
Net unrealized gains (losses) on derivatives
(1,482
)
—
201,000
Realized gains (losses) on terminations of interest rate swaps
(561
)
—
(463,966
)
Periodic interest cost of swaps, net
(1,752
)
—
(41,086
)
Net gains (losses) on derivatives
(3,795
)
—
(304,052
)
Net unrealized gains (losses) on financial instruments at fair value
(736,899
)
437,357
(110,664
)
Net realized gains (losses) on sales of investments
(76,473
)
45,313
166,946
Gains (losses) on extinguishment of debt
(2,897
)
(283,556
)
(54,418
)
Other investment gains (losses)
(1,866
)
—
—
Total other gains (losses)
(821,930
)
199,114
(302,188
)
Other expenses:
Compensation and benefits
49,378
46,823
44,811
General and administrative expenses
22,651
22,246
22,914
Servicing and asset manager fees
36,005
36,555
39,896
Transaction expenses
16,146
29,856
15,068
Total other expenses
124,180
135,480
122,689
Income (loss) before income taxes
(513,319
)
674,519
89,012
Income tax expense (benefit)
(253
)
4,405
158
Net income (loss)
$
(513,066
)
$
670,114
$
88,854
Dividends on preferred stock
73,765
73,764
73,750
Net income (loss) available to common shareholders
$
(586,831
)
$
596,350
$
15,104
Net income (loss) per share available to common shareholders:
Basic
$
(2.51
)
$
2.55
$
0.07
Diluted
$
(2.51
)
$
2.44
$
0.07
Weighted average number of common shares outstanding:
Basic
233,938,745
233,770,474
212,995,533
Diluted
233,938,745
245,496,926
226,438,341
(1) Includes interest income of consolidated VIEs of $551,253, $586,580, and $683,456 for the years ended December 31, 2022, 2021, and 2020, respectively.
(2) Includes interest expense of consolidated VIEs of $197,823, $203,135, and $285,142 for the years ended December 31, 2022, 2021, and 2020, respectively.
CHIMERA INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except share and per share data)
(Unaudited)
For the Year Ended
December 31, 2022
December 31, 2021
December 31, 2020
Comprehensive income (loss):
Net income (loss)
$
(513,066
)
$
670,114
$
88,854
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net
(175,709
)
(115,926
)
(94,136
)
Reclassification adjustment for net realized losses (gains) included in net income
—
(37,116
)
(56,104
)
Other comprehensive income (loss)
(175,709
)
$
(153,042
)
$
(150,240
)
Comprehensive income (loss) before preferred stock dividends
$
(688,775
)
$
517,072
$
(61,386
)
Dividends on preferred stock
$
73,765
$
73,764
$
73,750
Comprehensive income (loss) available to common stock shareholders
$
(762,540
)
$
443,308
$
(135,136
)
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.
Earnings available for distribution is the Economic net interest income, 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. Economic net interest income is a non-GAAP financial measure that equals GAAP net interest income adjusted for interest expense on long term debt, net periodic interest cost of interest rate swaps and excludes interest earned on cash. See a reconciliation of Economic net interest income to the most relevant GAAP measure below.
We view Earnings available for distribution as one 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, cash generated from the portfolio, 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. 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
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
(dollars in thousands, except per share data)
GAAP Net income (loss) available to common stockholders
$
78,716
$
(204,583
)
$
(179,765
)
$
(281,202
)
$
(718
)
Adjustments:
Net unrealized (gains) losses on financial instruments at fair value
(112,026
)
239,513
239,246
370,167
108,286
Net realized (gains) losses on sales of investments
39,443
37,031
—
—
—
(Gains) losses on extinguishment of debt
—
—
2,897
—
(980
)
Increase (decrease) in provision for credit losses
3,834
(1,534
)
4,497
240
92
Net unrealized (gains) losses on derivatives
10,171
(10,307
)
1,618
—
—
Realized (gains) losses on terminations of interest rate swaps
561
—
—
—
—
Transaction expenses
3,274
2,341
6,727
3,804
4,241
Stock Compensation expense for retirement eligible awards
(309
)
(310
)
(309
)
723
(363
)
Other investment (gains) losses
2,383
462
(980
)
—
—
Earnings available for distribution
$
26,047
$
62,613
$
73,931
$
93,732
$
110,558
GAAP net income (loss) per diluted common share
$
0.34
$
(0.88
)
$
(0.76
)
$
(1.19
)
$
—
Earnings available for distribution per adjusted diluted common share
$
0.11
$
0.27
$
0.31
$
0.39
$
0.46
The following tables provide a summary of the Company’s MBS portfolio at December 31, 2022 and December 31, 2021.
December 31, 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
$
1,153,458
$
46.09
66.05
5.3
%
16.4
%
Subordinated
439,591
68.60
65.27
4.2
%
6.8
%
Interest-only
3,286,545
4.95
3.01
0.6
%
5.3
%
Agency RMBS
Interest-only
409,940
4.58
3.70
0.9
%
5.0
%
Agency CMBS
Project loans
302,685
101.85
95.62
4.3
%
4.1
%
Interest-only
2,669,396
5.23
4.73
0.7
%
3.4
%
(1) Bond Equivalent Yield at period end.
December 31, 2021
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
$
1,283,788
$
48.02
$
76.78
4.5
%
18.0
%
Subordinated
845,432
68.10
77.12
3.8
%
7.1
%
Interest-only
3,904,665
4.90
4.42
1.7
%
13.2
%
Agency RMBS
Interest-only
992,978
10.37
6.09
1.3
%
0.3
%
Agency CMBS
Project loans
560,565
101.77
109.61
4.3
%
4.1
%
Interest-only
2,578,640
5.70
5.69
0.7
%
4.6
%
(1) Bond Equivalent Yield at period end.
At December 31, 2022 and December 31, 2021, the secured financing agreements collateralized by MBS and Loans held for investment had the following remaining maturities and borrowing rates.
December 31, 2022
December 31, 2021
(dollars in thousands)
Principal (1)
Weighted
Average
Borrowing
Rates
Range of
Borrowing Rates
Principal (1)
Weighted
Average
Borrowing
Rates
Range of
Borrowing Rates
1 to 29 days
493,918
4.66%
3.63% – 6.16%
1,018,670
0.73%
0.11% – 1.95%
30 to 59 days
762,768
6.14%
4.60% – 7.34%
379,031
1.66%
1.55% – 1.70%
60 to 89 days
225,497
6.04%
4.70% – 7.12%
342,790
1.86%
0.90% – 2.35%
90 to 119 days
43,180
6.54%
5.50% – 6.70%
67,840
1.66%
1.66% – 1.66%
120 to 180 days
401,638
5.88%
5.57% – 6.92%
157,944
1.38%
0.95% – 1.45%
180 days to 1 year
402,283
6.06%
5.63% – 6.64%
895,210
3.70%
1.95% – 4.38%
1 to 2 years
251,286
13.98%
13.98% – 13.98%
143,239
3.05%
3.05% – 3.05%
2 to 3 years
480,022
8.07%
8.07% – 8.07%
—
NA
NA
Greater than 3 years
382,839
5.14%
5.10% – 6.07%
256,889
5.56%
5.56% – 5.56%
Total
$ 3,443,431
6.61%
$ 3,261,613
2.30%
(1) The outstanding balance for secured financing agreements in the table above is net of $1 million and $3 million of deferred financing cost as of December 31, 2022 and 2021, respectively.
The following table summarizes certain characteristics of our portfolio at December 31, 2022 and December 31, 2021.
December 31, 2022
December 31, 2021
GAAP Leverage at period-end
4.0:1
3.0:1
GAAP Leverage at period-end (recourse)
1.3:1
0.9:1
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Portfolio Composition
Amortized Cost
Fair Value
Non-Agency RMBS
7.5 %
10.1 %
8.9 %
12.1 %
Senior
4.0 %
4.5 %
5.9 %
6.5 %
Subordinated
2.3 %
4.2 %
2.2 %
4.4 %
Interest-only
1.2 %
1.4 %
0.8 %
1.2 %
Agency RMBS
0.1 %
0.8 %
0.1 %
0.4 %
Pass-through
— %
— %
— %
— %
Interest-only
0.1 %
0.8 %
0.1 %
0.4 %
Agency CMBS
3.3 %
5.3 %
3.2 %
5.2 %
Project loans
2.3 %
4.2 %
2.2 %
4.2 %
Interest-only
1.0 %
1.1 %
1.0 %
1.0 %
Loans held for investment
89.1 %
83.8 %
87.8 %
82.3 %
Fixed-rate percentage of portfolio
96.5 %
95.4 %
95.6 %
94.4 %
Adjustable-rate percentage of portfolio
3.5 %
4.6 %
4.4 %
5.6 %
Economic Net Interest Income
Our Economic net interest income is a non-GAAP financial measure that equals GAAP net interest income adjusted for interest expense on long term debt, net periodic interest cost of interest rate swaps and excludes interest earned on cash. 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 Net gains (losses) on derivatives in our Consolidated Statements of Operations. Interest rate swaps are used to manage the increase in interest paid on secured financing 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 all components of interest expense and net interest income of our investment portfolio. However, Economic net interest income should not be viewed in isolation and is not a substitute for net interest income computed in accordance with GAAP. Where indicated, interest expense, adjusting for interest payments on long term debt and any interest earned on cash, is referred to as Economic interest expense. Where indicated, net interest income reflecting interest payments on long term debt, net periodic interest cost of interest rate swaps and any interest earned on cash, is referred to as Economic net interest income.
The following table reconciles the Economic net interest income to GAAP net interest income and Economic interest expense to GAAP interest expense for the periods presented.
GAAP
Interest
Income
GAAP
Interest
Expense
Periodic
Interest Cost
of Interest
Rate Swaps
Interest
Expense
on Long
Term Debt
Economic
Interest
Expense
GAAP Net
Interest
Income
Net
Realized
Gains
(Losses) on
Interest Rate
Swaps
Other (1)
Economic
Net
Interest
Income
For the Year Ended December 31, 2022
$
773,121
$
333,293
$
1,752
$
—
$
335,045
$
439,828
$
(1,752
)
$
(2,505
)
$
435,571
For the Year Ended December 31, 2021
$
937,546
$
326,628
$
—
$
(2,274
)
$
324,354
$
610,918
$
—
$
2,208
$
613,126
For the Year Ended December 31, 2020
$
1,030,250
$
516,181
$
6,385
$
(7,082
)
$
515,484
$
514,069
$
(6,385
)
$
5,755
$
513,439
For the Quarter Ended December 31, 2022
$
187,286
$
106,891
$
1,629
$
—
$
108,520
$
80,395
$
(1,629
)
$
(1,867
)
$
76,899
For the Quarter Ended September 30, 2022
$
188,303
$
83,464
$
122
$
—
$
83,586
$
104,839
$
(122
)
$
(540
)
$
104,177
For the Quarter Ended June 30, 2022
$
195,357
$
78,467
$
—
$
—
$
78,467
$
116,890
$
—
$
(81
)
$
116,809
For the Quarter Ended March 31, 2022
$
202,175
$
64,473
$
—
$
—
$
64,473
$
137,702
$
—
$
(18
)
$
137,684
(1) Primarily interest expense on Long term debt, periodic net interest cost on swaps and 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
December 31, 2022
September 30, 2022
December 31, 2021
(dollars in thousands)
(dollars in thousands)
(dollars in thousands)
Average
Balance
Interest
Average
Yield/Cost
Average
Balance
Interest
Average
Yield/Cost
Average
Balance
Interest
Average
Yield/Cost
Assets:
Interest-earning assets (1):
Agency RMBS
$
31,542
$
346
4.4
%
$
110,260
$
274
1.0
%
$
104,684
$
71
0.3
%
Agency CMBS
441,421
4,291
3.9
%
445,191
4,784
4.3
%
851,886
27,711
13.0
%
Non-Agency RMBS
1,013,693
29,304
11.6
%
1,061,412
33,565
12.6
%
1,406,876
51,644
14.7
%
Loans held for investment
12,075,239
151,478
5.0
%
12,022,445
149,140
5.0
%
11,498,173
141,724
4.9
%
Total
$
13,561,895
$
185,419
5.5
%
$
13,639,308
$
187,763
5.5
%
$
13,861,619
$
221,150
6.4
%
Liabilities and stockholders’ equity:
Interest-bearing liabilities (2):
Secured financing agreements collateralized by:
Agency RMBS
$
4,547
$
46
4.0
%
$
6,560
$
45
2.7
%
$
23,824
$
40
0.7
%
Agency CMBS
358,914
3,464
3.9
%
350,883
2,009
2.3
%
731,577
346
0.2
%
Non-Agency RMBS
788,795
13,275
6.7
%
853,768
7,368
3.5
%
839,898
5,837
2.8
%
Loans held for investment
1,971,144
33,776
6.9
%
1,845,075
21,181
4.6
%
1,872,915
13,281
2.8
%
Securitized debt
8,056,913
57,959
2.9
%
8,176,766
52,983
2.6
%
8,009,117
47,094
2.4
%
Total
$
11,180,313
$
108,520
3.9
%
$
11,233,052
$
83,586
3.0
%
$
11,477,331
$
66,598
2.3
%
Economic net interest income/net interest rate spread
$
76,899
1.6
%
$
104,177
2.5
%
$
154,552
4.1
%
Net interest-earning assets/net interest margin
$
2,381,582
2.3
%
$
2,406,256
3.1
%
$
2,384,288
4.5
%
Ratio of interest-earning assets to interest bearing liabilities
1.21
1.21
1.21
(1) Interest-earning assets at amortized cost
(2) Interest includes periodic net interest cost on swaps
The table below shows our Net Income and Economic net interest income as a percentage of average stockholders’ equity and Earnings available for distribution as a percentage of average common stockholders’ equity. Return on average equity is defined as our GAAP net income (loss) as a percentage of average equity. Average equity is defined as the average of our beginning and ending stockholders’ equity balance for the period reported. Economic Net Interest Income and Earnings available for distribution are non-GAAP measures as defined in previous sections.
Return on Average
Equity
Economic Net
Interest
Income/Average
Equity *
Earnings available
for
distribution/Average
Common Equity
(Ratios have been annualized)
For the Year Ended December 31, 2022
(16.69) %
14.17 %
11.96 %
For the Year Ended December 31, 2021
18.05 %
16.52 %
15.42 %
For the Year Ended December 31, 2020
2.46 %
14.21 %
12.43 %
For the Quarter Ended December 31, 2022
14.61 %
11.56 %
6.02 %
For the Quarter Ended September 30, 2022
(26.47) %
14.81 %
13.30 %
For the Quarter Ended June 30, 2022
(20.45) %
14.81 %
13.29 %
For the Quarter Ended March 31, 2022
(29.72) %
15.57 %
14.38 %
Contacts
Investor Relations
888-895-6557
www.chimerareit.com