Business Wire | Feb 10, 2021 07:00AM EST

Chimera Investment Corporation Reports 4th Quarter 2020 Earnings

Feb. 10, 2021

NEW YORK--(BUSINESS WIRE)--Feb. 10, 2021--Chimera Investment Corporation (NYSE:CIM) today announced its financial results for the fourth quarter ended December 31, 2020. The Company's GAAP net income for the fourth quarter was $129 million, or $0.49 per common share and net income was $15 million, or $0.07 for the full year ended December 31, 2020. Core earnings(1) for the fourth quarter and full year ended December 31, 2020 was $72 million, or $0.29 per common share and $334 million, or $1.46 per common share respectively.

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"Chimera's strategy of keeping its legacy assets generated a rebound in book value and economic returns of 22% since the middle of 2020. In addition, Chimera continues to use the securitization market for term financing its credit investments completing four separate transactions this quarter," said Mohit Marria, Chimera's CEO and Chief Investment Officer. "For the full year 2020, Chimera sponsored eleven securitizations totaling $4.2 billion and retained $655 million investment for our portfolio."

(1) Core earnings per adjusted diluted common share is a non-GAAP measure. Seeadditional discussion on page 5.

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 our 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, December 31, 2020 2019

Cash and cash equivalents $ 269,090 $ 109,878

Non-Agency RMBS, at fair value (net ofallowance for credit losses of $180 thousand 2,150,714 2,614,408 and $0 thousand, respectively)

Agency RMBS, at fair value 90,738 6,490,293

Agency CMBS, at fair value 1,740,368 2,850,717

Loans held for investment, at fair value 13,112,129 14,292,815

Receivable for investments sold - 446,225

Accrued interest receivable 81,158 116,423

Other assets 78,822 194,301

Derivatives, at fair value, net - 3,611

Total assets ^(1) $ 17,523,019 $ 27,118,671

Liabilities:

Secured financing agreements ($6.7 billion and$15.4 billion pledged as collateral, $ 4,636,847 $ 13,427,545 respectively)

Securitized debt, collateralized by Non-AgencyRMBS ($505 million and $598 million pledged as 113,433 133,557 collateral, respectively)

Securitized debt at fair value, collateralizedby loans held for investment ($12.4 billion and 8,711,677 8,179,608 $12.1 billion pledged as collateral,respectively)

Long term debt 51,623 -

Payable for investments purchased 106,169 1,256,337

Accrued interest payable 40,950 63,600

Dividends payable 77,213 98,568

Accounts payable and other liabilities 5,721 6,163

Total liabilities ^(1) $ 13,743,633 $ 23,165,378

Stockholders' Equity:

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

8.00% Series A cumulative redeemable: 5,800,000shares issued and outstanding, respectively $ 58 $ 58 ($145,000 liquidation preference)

8.00% Series B cumulative redeemable:13,000,000 shares issued and outstanding, 130 130 respectively ($325,000 liquidation preference)

7.75% Series C cumulative redeemable:10,400,000 shares issued and outstanding, 104 104 respectively ($260,000 liquidation preference)

8.00% Series D cumulative redeemable: 8,000,000shares issued and outstanding, respectively 80 80 ($200,000 liquidation preference)

Common stock: par value $0.01 per share;500,000,000 shares authorized, 230,556,760 and 2,306 1,873 187,226,081 shares issued and outstanding,respectively

Additional paid-in-capital 4,538,029 4,275,963

Accumulated other comprehensive income 558,096 708,336

Cumulative earnings 3,881,894 3,793,040

Cumulative distributions to stockholders (5,201,311) (4,826,291)

Total stockholders' equity $ 3,779,386 $ 3,953,293

Total liabilities and stockholders' equity $ 17,523,019 $ 27,118,671

(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 December 31, 2020, and December 31, 2019, total assets of consolidated VIEs were $12,165,017 and $12,544,744, respectively, and total liabilities of consolidated VIEs were $8,063,110 and $8,064,235, respectively.

(1) The Company's consolidated statements of financial condition include assetsof consolidated variable interest entities ("VIEs") that can only be used tosettle obligations and liabilities of the VIE for which creditors do not haverecourse to the primary beneficiary (Chimera Investment Corporation). As ofDecember 31, 2020, and December 31, 2019, total assets of consolidated VIEswere $12,165,017 and $12,544,744, respectively, and total liabilities ofconsolidated VIEs were $8,063,110 and $8,064,235, respectively.

CHIMERA INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

For the Year Ended

December 31, 2020

December 31, 2019

December 31, 2018

Net interest income:

Interest income (1)

$

1,030,250

$

1,361,110

$

1,273,316

Interest expense (2)

516,181

758,814

679,108

Net interest income

514,069

602,296

594,208

Increase/(decrease) in provision for credit losses

180

-

$

-

Net other-than-temporary credit impairment losses

-

(4,853)

(21,791)

Other investment gains (losses):

Net unrealized gains (losses) on derivatives

201,000

(106,209)

(141,162)

Realized gains (losses) on terminations of interest rate swaps

(463,966)

(359,726)

-

Net realized gains (losses) on derivatives

(41,086)

(34,423)

18,369

Net gains (losses) on derivatives

(304,052)

(500,358)

(122,793)

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

(110,664)

409,634

46,632

Net realized gains (losses) on sales of investments

166,946

20,360

(2,743)

Gains (losses) on extinguishment of debt

(54,418)

9,318

26,376

Total other gains (losses)

(302,188)

(61,046)

(52,528)

Other expenses:

Compensation and benefits

44,811

48,880

35,114

General and administrative expenses

25,346

26,555

22,664

Servicing fees

37,464

36,290

40,773

Transaction expenses

15,068

10,928

9,610

Total other expenses

122,689

122,653

108,161

Income (loss) before income taxes

89,012

413,744

411,728

Income taxes

158

193

91

Net income (loss)

$

88,854

$

413,551

$

411,637

Dividends on preferred stock

73,750

72,704

43,197

Net income (loss) available to common shareholders

$

15,104

$

340,847

$

368,440

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

Basic

$

0.07

$

1.82

$

1.97

Diluted

$

0.07

$

1.81

$

1.96

Weighted average number of common shares outstanding:

Basic

212,995,533

187,156,990

187,146,170

Diluted

226,438,341

188,406,444

187,748,862

CHIMERA INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

For the Year Ended

December 31, December 31, December 31, 2020 2019 2018

Net interest income:

Interest income ^(1) $ 1,030,250 $ 1,361,110 $ 1,273,316

Interest expense ^(2) 516,181 758,814 679,108

Net interest income 514,069 602,296 594,208



Increase/(decrease) in provision 180 - $ - for credit losses



Net other-than-temporary credit - (4,853) (21,791) impairment losses



Other investment gains (losses):

Net unrealized gains (losses) on 201,000 (106,209) (141,162) derivatives

Realized gains (losses) onterminations of interest rate (463,966) (359,726) - swaps

Net realized gains (losses) on (41,086) (34,423) 18,369 derivatives

Net gains (losses) on derivatives (304,052) (500,358) (122,793)

Net unrealized gains (losses) onfinancial instruments at fair (110,664) 409,634 46,632 value

Net realized gains (losses) on 166,946 20,360 (2,743) sales of investments

Gains (losses) on extinguishment (54,418) 9,318 26,376 of debt

Total other gains (losses) (302,188) (61,046) (52,528)



Other expenses:

Compensation and benefits 44,811 48,880 35,114

General and administrative 25,346 26,555 22,664 expenses

Servicing fees 37,464 36,290 40,773

Transaction expenses 15,068 10,928 9,610

Total other expenses 122,689 122,653 108,161

Income (loss) before income taxes 89,012 413,744 411,728

Income taxes 158 193 91

Net income (loss) $ 88,854 $ 413,551 $ 411,637



Dividends on preferred stock 73,750 72,704 43,197



Net income (loss) available to $ 15,104 $ 340,847 $ 368,440 common shareholders



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

Basic $ 0.07 $ 1.82 $ 1.97

Diluted $ 0.07 $ 1.81 $ 1.96



Weighted average number of common shares outstanding:

Basic 212,995,533 187,156,990 187,146,170

Diluted 226,438,341 188,406,444 187,748,862

(1) Includes interest income of consolidated VIEs of $683,456, $780,746 and $904,830 for the years ended December 31, 2020, 2019 and 2018, respectively.

(2) Includes interest expense of consolidated VIEs of $285,142, $337,387 and $395,255 for the years ended December 31, 2020, 2019 and 2018, respectively.

(1) Includes interest income of consolidated VIEs of $683,456, $780,746 and$904,830 for the years ended December 31, 2020, 2019 and 2018, respectively.

(2) Includes interest expense of consolidated VIEs of $285,142, $337,387 and$395,255 for the years ended December 31, 2020, 2019 and 2018, 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, 2020

December 31, 2019

December 31, 2018

Comprehensive income (loss):

Net income (loss)

$

88,854

$

413,551

$

411,637

Other comprehensive income:

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

(94,136)

70,855

(185,570)

Reclassification adjustment for net losses included in net income for other-than-temporary credit impairment losses

-

4,853

21,791

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

(56,104)

5,796

(6,291)

Other comprehensive income (loss)

(150,240)

81,504

(170,070)

Comprehensive income (loss) before preferred stock dividends

$

(61,386)

$

495,055

$

241,567

Dividends on preferred stock

$

73,750

$

72,704

$

43,197

Comprehensive income (loss) available to common stock shareholders

$

(135,136)

$

422,351

$

198,370

Core earnings

Core earnings is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains on the aggregate portfolio, provision for credit losses, interest expense on long term debt, 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 expenses incurred in relation to securitizations. 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, core earnings include interest income and expense, as well as periodic cash settlements on interest rate swaps used to hedge interest rate risk and other expenses. Core earnings is inclusive of preferred dividend charges, compensation and benefits (adjusted for awards to retirement eligible employees), general and administrative expenses, servicing fees, as well as income tax expenses incurred during the period. Management believes that the presentation of core earnings provides investors with a useful measure but has important limitations. We believe core earnings as described above helps us evaluate our financial performance period over period 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. In addition, our methodology for calculating core earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and accordingly, our reported core earnings may not be comparable to the core earnings 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 core earnings and related per average diluted common share amounts. The Core earnings is presented on an adjusted dilutive shares basis. The adjusted dilutive shares used for core earnings is a non-GAAP measure which includes the GAAP dilutive shares of 265 million, adjusted for the dilutive effect of approximately 20 million shares on warrants issued in second quarter of 2020. We exclude the dilutive effect of the warrants as the warrant holders do not participate in dividends. Certain prior period amounts have been reclassified to conform to the current period's presentation.

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, December December 2020 31, 2019 31, 2018

Comprehensive income (loss):

Net income (loss) $ 88,854 $ 413,551 $ 411,637

Other comprehensive income:

Unrealized gains (losses) on (94,136) 70,855 (185,570) available-for-sale securities, net

Reclassification adjustment for netlosses included in net income for - 4,853 21,791 other-than-temporary credit impairmentlosses

Reclassification adjustment for netrealized losses (gains) included in (56,104) 5,796 (6,291) net income

Other comprehensive income (loss) (150,240) 81,504 (170,070)

Comprehensive income (loss) before $ (61,386) $ 495,055 $ 241,567 preferred stock dividends

Dividends on preferred stock $ 73,750 $ 72,704 $ 43,197

Comprehensive income (loss) available $ (135,136) $ 422,351 $ 198,370 to common stock shareholders

Core earnings

Core earnings is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains on the aggregate portfolio, provision for credit losses, interest expense on long term debt, 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 expenses incurred in relation to securitizations. 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, core earnings include interest income and expense, as well as periodic cash settlements on interest rate swaps used to hedge interest rate risk and other expenses. Core earnings is inclusive of preferred dividend charges, compensation and benefits (adjusted for awards to retirement eligible employees), general and administrative expenses, servicing fees, as well as income tax expenses incurred during the period. Management believes that the presentation of core earnings provides investors with a useful measure but has important limitations. We believe core earnings as described above helps us evaluate our financial performance period over period 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. In addition, our methodology for calculating core earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and accordingly, our reported core earnings may not be comparable to the core earnings 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 core earnings and related per average diluted common share amounts. The Core earnings is presented on an adjusted dilutive shares basis. The adjusted dilutive shares used for core earnings is a non-GAAP measure which includes the GAAP dilutive shares of 265 million, adjusted for the dilutive effect of approximately 20 million shares on warrants issued in second quarter of 2020. We exclude the dilutive effect of the warrants as the warrant holders do not participate in dividends. Certain prior period amounts have been reclassified to conform to the current period's presentation.

For the Quarters Ended

December September June 30, March 31, December 31, 30, 2020 2020 31, 2020 2020 2019

(dollars in thousands, except per share data)

GAAP Netincomeavailable to $ 128,797 $ 348,891 $ (73,393) $ (389,193) $ 111,881 commonstockholders

Adjustments:

Interestexpense on 1,197 1,495 4,391 - - long term debt

Increase(decrease) in 13 (1,650) (4,497) 6,314 - provision forcredit losses

Net unrealized(gains) losses - - - (201,000) (83,656) on derivatives

Net unrealized(gains) losseson financial (61,379) (260,766) 171,921 260,887 112,751 instruments atfair value

Net realized(gains) losses 329 (65,041) (26,380) (75,854) (17,687) on sales ofinvestments

(Gains) losseson (919) 55,794 (459) - (9,926) extinguishmentof debt

Realized(gains) losseson - - - 463,966 8,353 terminationsof interestrate swaps

Net realized(gains) losses - - - 34,700 (8,229) on Futures^(1)

Transaction 3,827 1,624 4,710 4,906 6,639 expenses

StockCompensationexpense for (225) (275) (273) 1,189 (45) retirementeligibleawards

Core Earnings $ 71,640 $ 80,072 $ 76,020 $ 105,915 $ 120,081



GAAP netincome per $ 0.49 $ 1.32 $ (0.37) $ (2.08) $ 0.59 diluted commonshare

Core earningsper adjusted $ 0.29 $ 0.33 $ 0.32 $ 0.56 $ 0.64 diluted commonshare ^(2)

(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 December 31, 2020 and December 31, 2019.

Included in net realized gains (losses) on derivatives in the Consolidated(1) Statements of Operations.

We note that core and taxable earnings will typically differ, and may materially differ, due to differences on realized gains and losses on(2) 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 December 31, 2020 and December 31, 2019.

December 31, 2020

Principal or Weighted Weighted Notional Value Average Average Weighted Weighted at Period-End Amortized Fair Average Average Yield at (dollars in Cost Value Coupon Period-End ^(1) thousands) Basis

Non-Agency RMBS

Senior $ 1,560,135 $ 50.65 81.90 4.5 % 16.9 %

Subordinated 905,674 62.46 67.43 3.8 % 6.3 %

Interest-only 5,628,240 4.43 4.66 1.5 % 16.2 %

Agency RMBS

Interest-only 1,262,963 9.41 7.18 1.7 % 1.6 %

Agency CMBS

Project loans 1,527,621 101.81 112.23 4.1 % 3.8 %

Interest-only 1,326,665 1.78 1.95 0.6 % 8.4 %

(1) Bond Equivalent Yield at period end.

(1) Bond Equivalent Yield at period end.

December 31, 2019

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

Weighted Average AmortizedCost Basis

Weighted Average Fair Value

Weighted AverageCoupon

Weighted Average Yield at Period-End (1)

Non-Agency RMBS

Senior

$

2,024,564

$

52.98

$

84.01

5.0

%

20.8

%

Subordinated

876,592

63.15

71.25

3.7

%

6.9

%

Interest-only

7,458,653

4.04

3.87

1.1

%

8.4

%

Agency RMBS

Pass-through

6,080,547

102.15

104.64

4.0

%

3.4

%

Interest-only

1,539,941

9.06

8.29

1.6

%

4.0

%

Agency CMBS

Project loans

2,621,938

101.82

106.86

3.7

%

3.6

%

Interest-only

1,817,246

2.81

2.70

0.7

%

4.7

%

December 31, 2019

Principal or Weighted Weighted Notional Value Average Average Weighted Weighted at Period-End Amortized Fair Average Average Yield at (dollars in Cost Value Coupon Period-End ^(1) thousands) Basis

Non-Agency RMBS

Senior $ 2,024,564 $ 52.98 $ 84.01 5.0 % 20.8 %

Subordinated 876,592 63.15 71.25 3.7 % 6.9 %

Interest-only 7,458,653 4.04 3.87 1.1 % 8.4 %

Agency RMBS

Pass-through 6,080,547 102.15 104.64 4.0 % 3.4 %

Interest-only 1,539,941 9.06 8.29 1.6 % 4.0 %

Agency CMBS

Project loans 2,621,938 101.82 106.86 3.7 % 3.6 %

Interest-only 1,817,246 2.81 2.70 0.7 % 4.7 %

(1) Bond Equivalent Yield at period end.

At December 31, 2020 and December 31, 2019, the secured financing agreements collateralized by MBS and Loans held for investment had the following remaining maturities and borrowing rates.

(1) Bond Equivalent Yield at periodend.

At December 31, 2020 and December 31, 2019, the secured financing agreements collateralized by MBS and Loans held for investment had the following remaining maturities and borrowing rates.

December 31, 2020 December 31, 2019

(dollars in thousands)

Weighted Range of Weighted Range of Principal Average Borrowing Principal Average Borrowing (1) Borrowing Rates Borrowing Rates Rates Rates

Overnight $ - NA NA $ - NA NA

1 to 29 1,521,134 0.38% 0.20% - 9,709,387 2.26% 1.90% -days 2.72% 3.62%

30 to 59 481,257 4.35% 2.42% - 800,648 2.96% 2.15% -days 6.61% 3.52%

60 to 89 352,684 2.78% 1.34% - 608,520 3.00% 2.59% -days 6.30% 3.35%

90 to 119 301,994 7.97% 7.97% - - NA NAdays 7.97%

120 to 595,900 5.29% 2.40% - 809,077 3.38% 3.06% -180 days 6.26% 3.46%

180 days 345,204 3.60% 3.25% - 580,886 3.42% 3.26% -to 1 year 4.50% 3.51%

1 to 2 - NA NA 427,981 3.28% 3.19% -years 3.30%

2 to 3 642,696 4.91% 1.65% - - NA NAyears 7.00%

Greater 5.56% - 3.19% -than 3 395,978 5.56% 5.56% 491,046 3.20% 3.20%years

Total $ 4,636,847 3.41% $ 13,427,545 2.52%

The following table summarizes certain characteristics of our portfolio at December 31, 2020 and December 31, 2019.

December 31, 2020 December 31, 2019

Interest earning assets at period-end ^ $ 17,093,949 $ 26,248,233 (1)

Interest bearing liabilities at $ 13,513,580 $ 21,740,710 period-end

GAAP Leverage at period-end 3.6:1 5.5:1

GAAP Leverage at period-end (recourse) 1.2:1 3.4:1

Portfolio Composition, at amortized cost

Non-Agency RMBS 10.2 % 7.9 %

Senior 5.0 % 4.5 %

Subordinated 3.6 % 2.2 %

Interest-only 1.6 % 1.2 %

Agency RMBS 0.7 % 25.7 %

Pass-through - % 25.1 %

Interest-only 0.7 % 0.6 %

Agency CMBS 10.0 % 11.0 %

Project loans 9.9 % 10.8 %

Interest-only 0.1 % 0.2 %

Loans held for investment 79.1 % 55.4 %

Fixed-rate percentage of portfolio 94.9 % 95.9 %

Adjustable-rate percentage of portfolio 5.1 % 4.1 %

(1) Excludes cash and cash equivalents.

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.

(1) Excludes cash and cash equivalents.

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.

Net Net Realized Interest Realized Economic GAAP GAAP (Gains) Expense Economic GAAP Net Gains Net Interest Interest Losses on on Long Interest Interest (Losses) Other^ (1) Interest Income Expense Interest Term Expense Income on Interest Income Rate Debt Rate Swaps Swaps

For theYearEnded $ 1,030,250 $ 516,181 $ 6,385 $ (7,082) $ 515,484 $ 514,069 $ (6,385) $ 5,755 $ 513,439 December31, 2020

For theYearEnded $ 1,361,110 $ 758,814 $ (3,012) $ - $ 755,802 $ 602,296 $ 3,012 $ (7,938) $ 597,370 December31, 2019

For theYearEnded $ 1,273,316 $ 679,108 $ 1,488 $ - $ 680,596 $ 594,208 $ (1,488) $ 760 $ 593,480 December31, 2018



For theQuarterEnded $ 236,156 $ 120,285 $ - $ (1,197) $ 119,088 $ 115,871 $ - $ 1,177 $ 117,048 December31, 2020

For theQuarterEnded $ 247,905 $ 124,557 $ - $ (1,495) $ 123,062 $ 123,348 $ - $ 1,487 $ 124,835 September30, 2020

For theQuarterEnded $ 245,922 $ 129,256 $ - $ (4,391) $ 124,865 $ 116,666 $ - $ 4,358 $ 121,024 June 30,2020

For theQuarterEnded $ 300,266 $ 142,083 $ 6,385 $ - $ 148,468 $ 158,183 $ (6,385) $ (1,266) $ 150,532 March 31,2020

(1) Primarily interest expense on Long term debt 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.

(1) Primarily interest expense on Long term debt and interest income on cashand 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, 2020 December 31, 2019

(dollars in thousands) (dollars in thousands)

Average Average Average Average Balance Interest Yield/ Balance Interest Yield/ Cost Cost

Assets:

Interest-earning assets ^(1):

Agency RMBS $ 121,440 $ 479 1.6 % $ 7,417,646 $ 63,108 3.4 %

Agency CMBS 1,455,855 15,400 4.2 % 2,298,601 24,856 4.3 %

Non-Agency RMBS 1,650,268 56,259 13.6 % 1,976,632 81,429 16.5 %

Loans held for 12,770,508 163,998 5.1 % 12,851,351 169,605 5.3 %investment

Total $ 15,998,071 $ 236,136 5.9 % $ 24,544,230 $ 338,998 5.5 %



Liabilities andstockholders' equity:

Interest-bearing liabilities:

Securedfinancingagreements collateralizedby:

Agency RMBS $ 71,689 $ 173 1.0 % $ 7,015,513 $ 37,949 2.2 %

Agency CMBS 1,323,972 738 0.2 % 2,272,069 14,819 2.6 %

Non-Agency RMBS 1,069,348 13,797 5.2 % 1,404,981 11,466 3.3 %

Loans held for 2,200,314 26,627 4.8 % 3,786,840 33,781 3.6 %investment

Securitized debt 8,630,854 77,753 3.6 % 7,758,406 76,597 3.9 %

Total $ 13,296,177 $ 119,088 3.6 % $ 22,237,809 $ 174,612 3.1 %



Economic netinterest income/ $ 117,048 2.3 % $ 164,386 2.4 %net interestrate spread



Netinterest-earning $ 2,701,894 2.9 % $ 2,306,421 2.7 %assets/netinterest margin



Ratio ofinterest-earningassets to 1.20 1.10 interest bearingliabilities

(1)Interest-earning assets at amortized cost

(2)Interest includes net cash paid/received on swaps

The table below shows our Net Income and Economic Net Interest Income as a percentage of average stockholders' equity and Core Earnings 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 Core Earnings are non-GAAP measures as defined in previous sections

(1) Interest-earning assets at amortized cost

(2) Interest includes net cash paid/received on swaps

The table below shows our Net Income and Economic Net Interest Income as a percentage of average stockholders' equity and Core Earnings 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 Core Earnings are non-GAAP measures as defined in previous sections

Economic Net Core Return on Interest Earnings/ Average Income/Average Average Equity Equity * Common Equity

(Ratios have been annualized)

For the Year Ended December 31, 2020 2.46 % 14.21 % 12.43 %

For the Year Ended December 31, 2019 10.56 % 15.26 % 13.93 %

For the Year Ended December 31, 2018 11.08 % 15.98 % 14.31 %



For the Quarter Ended December 31, 2020 15.76 % 12.53 % 10.21 %

For the Quarter Ended September 30, 2020 41.43 % 14.08 % 12.24 %

For the Quarter Ended June 30, 2020 (6.62) % 14.58 % 12.72 %

For the Quarter Ended March 31, 2020 (41.21) % 16.73 % 15.88 %

* Includes effect of realized losses on interest rate swaps and excludes long term debt expense.

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.

* Includes effect of realized losses on interest rate swaps and excludes longterm debt expense.

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

(dollars in thousands)

Accretable December September June 30, March 31, DecemberDiscount (Net 31, 2020 30, 2020 2020 2020 31, 2019of Premiums)

Balance,beginning of $ 422,981 $ 410,447 $ 438,232 $ 494,255 $ 494,780 period

Accretion of (21,281) (20,045) (22,508) (24,784) (44,342) discount

Purchases 758 2,096 - (4,336) (12,541)

Sales and 98 - (23,425) 438 (786) deconsolidation

Transfers from/(to) credit 7,134 30,483 18,148 (27,341) 57,144 reserve, net

Balance, end of $ 409,690 $ 422,981 $ 410,447 $ 438,232 $ 494,255 period

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 most recent Annual Report on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, under the caption "Risk Factors." Factors that could cause actual results to differ include, but are not limited to: our business and investment strategy; our ability to accurately forecast the payment of future dividends on our common and preferred stock, and the amount of such dividends; our ability to determine accurately the fair market value of our assets; availability of investment opportunities in real estate-related and other securities, including our valuation of potential opportunities that may arise as a result of current and future market dislocations; effect of the novel coronavirus (or COVID-19) pandemic on real estate market, financial markets and our Company, including the impact on the value, availability, financing and liquidity of mortgage assets; how COVID-19 may affect us, our operations and our personnel; our expected investments; changes in the value of our investments, including negative changes resulting in margin calls related to the financing of our assets; changes in interest rates and mortgage prepayment rates; prepayments of the mortgage and other loans underlying our mortgage-backed securities, or RMBS, or other asset-backed securities, or ABS; rates of default, delinquencies or decreased recovery rates on our investments; general volatility of the securities markets in which we invest; our ability to maintain existing financing arrangements and our ability to obtain future financing arrangements; our ability to effect our strategy to securitize residential mortgage loans; interest rate mismatches between our investments and our borrowings used to finance such purchases; effects of interest rate caps on our adjustable-rate investments; the degree to which our hedging strategies may or may not protect us from interest rate volatility; the impact of and changes to various government programs, including in response to COVID-19; impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters; market trends in our industry, interest rates, the debt securities markets or the general economy; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; availability of qualified personnel; our ability to maintain our classification as a real estate investment trust, or, REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or 1940 Act; our expectations regarding materiality or significance; and the effectiveness of our disclosure controls and procedures.

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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CONTACT: Investor Relations 888-895-6557 www.chimerareit.com