MARYLAND
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26-0630461
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(State or other jurisdiction of incorporation of organization)
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(I.R.S. Employer Identification Number)
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1211 Avenue of the Americas, Suite 2902
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New York, New York
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10036
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $.01 per share
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New York Stock Exchange
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F-1
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S-1
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EXHIBITS
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our business and investment strategy;
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our ability to maintain existing financing arrangements, obtain future financing arrangements and the terms of such arrangements, particularly in light of the restatement and other matters discussed in this Form 10-K;
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our ability to timely file our periodic reports with the Securities and Exchange Commission, or SEC;
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our expectations regarding materiality or significance;
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the effectiveness of our disclosure controls and procedures;
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material weaknesses in our internal controls over financial reporting;
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additional information that may arise from the preparation of our financial statements;
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inadequacy of or weakness in our internal controls over financial reporting of which we are not currently aware or which have not been detected;
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general volatility of the securities markets in which we invest;
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the impact of and changes to various government programs;
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our expected investments;
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changes in the value of our investments;
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interest rate mismatches between our investments and our borrowings used to finance such purchases;
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changes in interest rates and mortgage prepayment rates;
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effects of interest rate caps on our adjustable-rate investments;
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rates of default, delinquencies or decreased recovery rates on our investments;
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prepayments of the mortgage and other loans underlying our mortgage-backed securities, or RMBS, or other asset-backed securities, or ABS;
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the degree to which our hedging strategies may or may not protect us from interest rate volatility;
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the potential delisting of our common stock from the New York Stock Exchange, or NYSE:
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impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters;
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availability of investment opportunities in real estate-related and other securities;
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availability of qualified personnel;
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estimates relating to our ability to make distributions to our stockholders in the future;
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our understanding of our competition;
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market trends in our industry, interest rates, the debt securities markets or the general economy;
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our ability to maintain our classification as a real estate investment trust, or REIT, for federal income tax purposes; and
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our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or 1940 Act.
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Commercial Mortgage Loans
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First or second lien loans secured by multifamily properties, which are residential rental properties consisting of five or more dwelling units; and mixed residential or other commercial properties; retail properties; office properties; or industrial properties, which may or may not conform to the Agency Guidelines.
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Other Asset-Backed Securities
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CMBS.
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Debt and equity tranches of CDOs.
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Consumer and non-consumer ABS, including investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes.
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Hedging Instruments
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Swaps
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● | Swaptions | ||
● | Futures | ||
● | Index options | ||
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Mortgage options
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No investment shall be made that would cause us to fail to qualify as a REIT for federal income tax purposes;
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No investment shall be made that would cause us to be regulated as an investment company under the 1940 Act;
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With the exception of real estate and housing, no single industry shall represent greater than 20% of the securities or aggregate risk exposure in our portfolio; and
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Investments in non-rated or deeply subordinated ABS or other securities that are non-qualifying assets for purposes of the 75% REIT asset test will be limited to an amount not to exceed 50% of our stockholders’ equity.
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Repurchase Agreements
. We have financed certain of our assets through the use of repurchase agreements. We anticipate that repurchase agreements will be one of the sources we will use to achieve our desired amount of leverage for our residential real estate assets. We maintain formal relationships with multiple counterparties to obtain financing on favorable terms.
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Warehouse Facilities
. We have utilized and may in the future utilize credit facilities for capital needed to fund our assets. We intend to maintain formal relationships with multiple counterparties to maintain warehouse lines on favorable terms.
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Securitization
. We have acquired and may in the future acquire residential mortgage loans for our portfolio with the intention of securitizing them and retaining a portion of the securitized mortgage loans in our portfolio. To facilitate the securitization or financing of our loans, we generally create subordinate certificates, providing a specified amount of credit enhancement, which we intend to retain in our portfolio.
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Re-REMICs.
We have acquired and may in the future acquire Non-Agency RMBS for our portfolio with the intention of re-securitizing them and retaining a portion of the re-securitized Non-Agency RMBS in our portfolio, typically the subordinate certificates. To facilitate the re-securitization, we transfer Non-Agency RMBS to a special purpose entity that has been formed as a securitization vehicle that will issue multiple classes of securities secured by and payable from cash flows on the underlying Non-Agency RMBS.
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puts and calls on securities or indices of securities;
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Eurodollar futures contracts and options on such contracts;
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interest rate caps, swaps and swaptions;
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U.S. Treasury securities and options on U.S. Treasury securities; and
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other similar transactions.
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general market conditions;
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the market’s perception of our growth potential;
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our current and potential future earnings and cash distributions;
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the market price of the shares of our capital stock; and
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the market’s view of the quality of our assets.
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the issuer issues securities the payment of which depends primarily on the cash flow from “eligible assets” that by their terms convert into cash within a finite time period;
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the securities sold are fixed income securities rated investment grade by at least one rating agency (fixed income securities which are unrated or rated below investment grade may be sold to institutional accredited investors and any securities may be sold to “qualified institutional buyers” and to persons involved in the organization or operation of the issuer);
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the issuer acquires and disposes of eligible assets (1) only in accordance with the agreements pursuant to which the securities are issued, (2) so that the acquisition or disposition does not result in a downgrading of the issuer’s fixed income securities and (3) the eligible assets are not acquired or disposed of for the primary purpose of recognizing gains or decreasing losses resulting from market value changes; and
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unless the issuer is issuing only commercial paper, the issuer appoints an independent trustee, takes reasonable steps to transfer to the trustee an ownership or perfected security interest in the eligible assets, and meets rating agency requirements for commingling of cash flows.
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incur or guarantee additional debt;
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make certain investments or acquisitions;
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make distributions on or repurchase or redeem capital stock;
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engage in mergers or consolidations;
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finance mortgage loans with certain attributes;
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reduce liquidity below certain levels;
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grant liens;
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incur operating losses for more than a specified period;
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enter into transactions with affiliates; and
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hold mortgage loans for longer than established time periods.
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interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
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available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought;
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the duration of the hedge may not match the duration of the related liability;
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the amount of income that a REIT may earn from hedging transactions (other than through TRSs) to offset interest rate losses is limited by federal tax provisions governing REITs;
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the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and
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the party owing money in the hedging transaction may default on its obligation to pay.
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available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
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the duration of the hedge may not match the duration of the related liability;
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as explained in further detail in the risk factor immediately below, the party owing money in the hedging transaction may default on its obligation to pay;
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the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and
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the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value. Downward adjustments, or “mark-to-market losses,” would reduce our stockholders’ equity.
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acts of God, including earthquakes, hurricanes, floods and other natural disasters, that may result in uninsured losses;
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acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;
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adverse changes in national and local economic and market conditions;
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changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;
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costs of remediation and liabilities associated with environmental conditions such as indoor mold; and
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the potential for uninsured or under-insured property losses.
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the ability of the homeowner to rescind, or cancel, the loan;
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the inability of the holder of the loan to collect all of the principal and interest otherwise due on the loan;
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the right of the homeowner to collect a refund of amounts previously paid (which may include amounts financed by the loan), or to set off those amounts against his or her future loan obligations; and
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the liability of the servicer and the owner of the loan for actual damages, statutory damages and punitive damages, civil or criminal penalties, costs and attorneys’ fees.
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actual or anticipated variations in our quarterly operating results or business prospects;
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changes in our earnings estimates or publication of research reports about us or the real estate industry;
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an inability to meet or exceed securities analysts' estimates or expectations;
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increases in market interest rates;
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hedging or arbitrage trading activity in our shares of common stock;
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capital commitments;
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changes in market valuations of similar companies;
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changes in valuations of our assets;
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adverse market reaction to any increased indebtedness we incur in the future;
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additions or departures of management personnel;
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actions by institutional shareholders;
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speculation in the press or investment community;
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changes in our distribution policy;
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regulatory changes affecting our industry generally or our business;
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general market and economic conditions; and
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future sales of our shares of common stock or securities convertible into, or exchangeable or exercisable for, our shares of common stock.
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the profitability of the investments of net proceeds from our equity raises;
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our ability to make profitable investments;
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margin calls or other expenses that reduce our cash flow;
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defaults in our asset portfolio or decreases in the value of our portfolio; and
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the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
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There are ownership limits and restrictions on transferability and ownership in our charter.
To qualify as a REIT for each taxable year after 2007, not more than 50% of the value of our outstanding stock may be owned, directly or constructively, by five or fewer individuals during the second half of any calendar year. In addition, our shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year for each taxable year after 2007. To assist us in satisfying these tests, our charter generally prohibits any person from beneficially or constructively owning more than 9.8% in value or number of shares, whichever is more restrictive, of any class or series of our outstanding capital stock. These restrictions may discourage a tender offer or other transactions or a change in the composition of our board of directors or control that might involve a premium price for our shares or otherwise be in the best interests of our stockholders and any shares issued or transferred in violation of such restrictions being automatically transferred to a trust for a charitable beneficiary, thereby resulting in a forfeiture of the additional shares.
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Our charter permits our board of directors to issue stock with terms that may discourage a third party from acquiring us
. Our charter permits our board of directors to amend the charter without stockholder approval to increase the total number of authorized shares of stock or the number of shares of any class or series and to issue common or preferred stock, having preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms or conditions of redemption as determined by our board. Thus, our board could authorize the issuance of stock with terms and conditions that could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of our shares might receive a premium for their shares over the then-prevailing market price of our shares.
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Maryland Control Share Acquisition Act.
Maryland law provides that ‘‘control shares’’ of a corporation acquired in a ‘‘control share acquisition’’ will have no voting rights except to the extent approved by a vote of two-thirds of the votes eligible to be cast on the matter under the Maryland Control Share Acquisition Act. ‘‘Control shares’’ means voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: one-tenth or more but less than one-third, one-third or more but less than a majority, or a majority or more of all voting power. A ‘‘control share acquisition’’ means the acquisition of control shares, subject to certain exceptions.
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Business Combinations
. Under Maryland law, ‘‘business combinations’’ between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:
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any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or
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an affiliate or associate of the corporation who, at any time within the two-year period before the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.
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80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and
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two-thirds of the votes entitled to be cast by holders of voting stock of the corporation, other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.
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Staggered board.
Our board of directors is divided into three classes of directors. Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected by the stockholders. The staggered terms of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interests of our stockholders.
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Our charter and bylaws contain other possible anti-takeover provisions.
Our charter and bylaws contains other provisions that may have the effect of delaying, deferring or preventing a change in control of us or the removal of existing directors and, as a result, could prevent our stockholders from being paid a premium for their common stock over the then-prevailing market price.
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actual receipt of an improper benefit or profit in money, property or services; or
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a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated for which Maryland law prohibits such exemption from liability.
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not be allowed to be offset by a stockholder’s net operating losses;
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be subject to a tax as unrelated business income if a stockholder were a tax-exempt stockholder;
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be subject to the application of federal income tax withholding at the maximum rate (without reduction for any otherwise applicable income tax treaty) with respect to amounts allocable to foreign stockholders; and
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be taxable (at the highest corporate tax rate) to us, rather than to our stockholders, to the extent the excess inclusion income relates to stock held by disqualified organizations (generally, tax-exempt organizations not subject to tax on unrelated business income, including governmental organizations).
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85% of our REIT ordinary income for that year;
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95% of our REIT capital gain net income for that year; and
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any undistributed taxable income from prior years.
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Stock Price
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High
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Low
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Close
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Quarter Ended December 31, 2012
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$ | 2.78 | $ | 2.53 | $ | 2.61 | ||||||
Quarter Ended September 30, 2012
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$ | 2.81 | $ | 2.13 | $ | 2.71 | ||||||
Quarter Ended June 30, 2012
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$ | 2.93 | $ | 2.36 | $ | 2.36 | ||||||
Quarter Ended March 31, 2012
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$ | 3.12 | $ | 2.51 | $ | 2.83 | ||||||
Quarter Ended December 31, 2011
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$ | 3.04 | $ | 2.51 | $ | 2.51 | ||||||
Quarter Ended September 30, 2011
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$ | 3.54 | $ | 2.77 | $ | 2.77 | ||||||
Quarter Ended June 30, 2011
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$ | 4.05 | $ | 3.40 | $ | 3.46 | ||||||
Quarter Ended March 31, 2011
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$ | 4.31 | $ | 3.96 | $ | 3.96 |
Common Dividends Declared Per Share
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Quarter Ended December 31, 2012
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$ 0.09 | |
Quarter Ended September 30, 2012
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$ 0.09 | |
Quarter Ended June 30, 2012
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$ 0.09 | |
Quarter Ended March 31, 2012
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$ 0.11 | |
Quarter Ended December 31, 2011
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$ 0.11 | |
Quarter Ended September 30, 2011
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$ 0.13 | |
Quarter Ended June 30, 2011
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$ 0.13 | |
Quarter Ended March 31, 2011
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$ 0.14 |
12/31/2007
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12/31/2008
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12/31/2009
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12/31/2010
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12/31/2011
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12/31/2012
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Chimera
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100
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23
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28
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33
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27
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30
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S&P 500 Index
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100
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64
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80
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91
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93
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106
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BBG REIT Index
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100
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65
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77
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88
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87
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95
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Commercial Mortgage Loans
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First or second lien loans secured by multifamily properties, which are residential rental properties consisting of five or more dwelling units; and mixed residential or other commercial properties; retail properties; office properties; or industrial properties, which may or may not conform to the Agency Guidelines
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Other Asset-Backed Securities
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CMBS
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Debt and equity tranches of CDOs
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Consumer and non-consumer ABS, including investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes
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Hedging Instruments
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Swaps
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Swaptions
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Futures
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Index Options
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Mortgage Options
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December 31, 2012
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GAAP Book Value
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Adjustments
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Estimated
Economic Book Value |
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(dollars in thousands, except per share data)
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Assets:
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Non-Agency RMBS, at fair value
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Senior
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$ | 88 | $ | - | $ | 88 | ||||||
Senior interest-only
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122,869 | - | 122,869 | |||||||||
Subordinated
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547,794 | - | 547,794 | |||||||||
Subordinated interest-only
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16,253 | - | 16,253 | |||||||||
RMBS transferred to consolidated VIEs
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3,274,204 | (1,730,422 | ) | 1,543,782 | ||||||||
Agency Mortgage-Backed Securities, at fair value
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1,806,697 | - | 1,806,697 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
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1,300,131 | (1,191,607 | ) | 108,524 | ||||||||
Other assets
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674,453 | - | 674,453 | |||||||||
Total assets
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$ | 7,742,489 | $ | (2,922,029 | ) | $ | 4,820,460 | |||||
Liabilities:
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Repurchase agreements, Agency RMBS
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1,528,025 | - | 1,528,025 | |||||||||
Securitized debt, collateralized by Non-Agency RMBS
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1,336,261 | (1,336,261 | ) | - | ||||||||
Securitized debt, collateralized by loans held for investment
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1,169,710 | (1,169,710 | ) | - | ||||||||
Other liabilities
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166,014 | - | 166,014 | |||||||||
Total liabilities
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4,200,010 | (2,505,971 | ) | 1,694,039 | ||||||||
Total stockholders' equity
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3,542,479 | (416,058 | ) | 3,126,421 | ||||||||
Total liabilities and stockholders' equity
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$ | 7,742,489 | $ | (2,922,029 | ) | $ | 4,820,460 | |||||
Book Value Per Share
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$ | 3.45 | $ | (0.40 | ) | $ | 3.05 |
December 31, 2011
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GAAP Book Value
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Adjustments
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Estimated
Economic Book Value |
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(dollars in thousands, except per share data)
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Assets:
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Non-Agency RMBS, at fair value
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Senior
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$ | 1,020 | $ | - | $ | 1,020 | ||||||
Senior interest-only
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188,679 | - | 188,679 | |||||||||
Subordinated
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606,895 | - | 606,895 | |||||||||
Subordinated interest-only
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22,019 | - | 22,019 | |||||||||
RMBS transferred to consolidated VIEs
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3,270,332 | (1,789,514 | ) | 1,480,818 | ||||||||
Agency Mortgage-Backed Securities, at fair value
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3,144,531 | - | 3,144,531 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
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256,632 | (232,880 | ) | 23,752 | ||||||||
Other assets
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257,027 | - | 257,027 | |||||||||
Total assets
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$ | 7,747,135 | $ | (2,022,394 | ) | $ | 5,724,741 | |||||
Liabilities:
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Repurchase agreements, Agency RMBS
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2,672,989 | - | 2,672,989 | |||||||||
Securitized debt, collateralized by Non-Agency RMBS
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1,630,276 | (1,630,276 | ) | - | ||||||||
Securitized debt, collateralized by loans held for investment
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212,778 | (212,778 | ) | - | ||||||||
Other liabilities
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183,473 | - | 183,473 | |||||||||
Total liabilities
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4,699,516 | (1,843,054 | ) | 2,856,462 | ||||||||
Total stockholders' equity
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3,047,619 | (179,340 | ) | 2,868,279 | ||||||||
Total liabilities and stockholders' equity
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$ | 7,747,135 | $ | (2,022,394 | ) | $ | 5,724,741 | |||||
Book Value Per Share
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$ | 2.97 | $ | (0.17 | ) | $ | 2.80 |
December 31, 2012
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December 31, 2011
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(dollars in thousands) | ||||||||
Interest earning assets at period-end *
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$ | 7,068,036 | $ | 7,490,108 | ||||
Interest bearing liabilities at period-end
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$ | 4,033,996 | $ | 4,516,043 | ||||
Leverage at period-end
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1.1:1
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1.5:1
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Leverage at period-end (recourse)
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0.4:1
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0.9:1
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Portfolio Composition, at principal value
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Non-Agency RMBS
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74.6 | % | 75.4 | % | ||||
Senior
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0.0 | % | 0.0 | % | ||||
Senior, interest only
|
25.2 | % | 26.1 | % | ||||
Subordinated
|
8.8 | % | 9.7 | % | ||||
Subordinated, interest only
|
2.1 | % | 1.9 | % | ||||
RMBS transferred to consolidated VIEs
|
38.5 | % | 37.7 | % | ||||
Agency RMBS
|
14.7 | % | 21.1 | % | ||||
Securitized loans
|
10.7 | % | 3.5 | % | ||||
Fixed-rate percentage of portfolio
|
75.4 | % | 74.9 | % | ||||
Adjustable-rate percentage of portfolio
|
24.6 | % | 25.1 | % | ||||
Annualized yield on average interest earning assets for the year ended
|
4.88 | % | 6.16 | % | ||||
Annualized cost of funds on average borrowed funds for the year ended**
|
3.91 | % | 2.52 | % |
*
|
Excludes cash and cash equivalents.
|
**
|
Includes the effect of realized losses on interest rate swaps.
|
December 31, 2012
|
||||||||||||||||||||||||||||||||||||||||||||
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)
|
Weighted Average 3 Month CPR at Period-End
|
Weighted Average 12 Month CPR at Period-End
|
Weighted Average Delinquency Pipeline 60+
|
Weighted Average Loss Severity (2)
|
Weighted Average
Credit Enhancement |
Principal Writedowns During Period
(dollars in thousands)
|
||||||||||||||||||||||||||||||||||
Non-Agency
Mortgage-Backed Securities |
||||||||||||||||||||||||||||||||||||||||||||
Senior
|
$ | 126 | $ | 57.02 | $ | 67.00 | 0.00 | % | 11.90 | % | 22.60 | % | 38.60 | % | 0.00 | % | 0.00 | % | 12.80 | % | $ | - | ||||||||||||||||||||||
Senior, interest only
|
$ | 3,012,868 | $ | 4.51 | $ | 4.08 | 1.76 | % | 10.36 | % | 17.35 | % | 17.44 | % | 20.13 | % | 50.43 | % | 0.00 | % | $ | - | ||||||||||||||||||||||
Subordinated
|
$ | 1,057,821 | $ | 44.72 | $ | 51.79 | 3.18 | % | 11.07 | % | 17.36 | % | 18.74 | % | 18.72 | % | 51.03 | % | 15.22 | % | $ | 15,807 | ||||||||||||||||||||||
Subordinated,
interest only |
$ | 256,072 | $ | 6.32 | $ | 6.35 | 2.25 | % | 8.90 | % | 20.93 | % | 16.79 | % | 19.97 | % | 44.82 | % | 0.00 | % | $ | - | ||||||||||||||||||||||
RMBS transferred to consolidated variable interest entities
|
$ | 4,610,109 | $ | 53.96 | $ | 72.50 | 4.88 | % | 15.44 | % | 14.85 | % | 14.86 | % | 29.42 | % | 59.02 | % | 2.29 | % | $ | 70,953 | ||||||||||||||||||||||
Agency Mortgage-Backed Securities
|
$ | 1,756,580 | $ | 103.09 | $ | 108.24 | 4.65 | % | 3.59 | % | 28.39 | % | 24.12 | % |
NA
|
NA
|
0.00 | % | $ | - | ||||||||||||||||||||||||
Securitized loans
|
$ | 1,284,845 | $ | 102.09 | $ | 102.79 | 4.68 | % | 3.88 | % | 35.21 | % | 4.45 | % | 0.84 | % | 4.35 | % | 11.18 | % | $ | 404 |
(1) Bond Equivalent Yield at period end.
|
(2) Calculated based on reported losses to date, utilizing widest data set available (i.e., life-time losses, 12-month loss, etc.).
|
December 31, 2011
|
||||||||||||||||||||||||||||||||||||||||||||
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)
|
Weighted Average 3 Month CPR at Period-End
|
Weighted Average 12 Month CPR at Period-End
|
Weighted Average Delinquency Pipeline 60+
|
Weighted Average Loss Severity (2)
|
Weighted Average
Credit Enhancement |
Principal Writedowns During Period
(dollars in thousands)
|
||||||||||||||||||||||||||||||||||
Non-Agency
Mortgage-Backed Securities |
||||||||||||||||||||||||||||||||||||||||||||
Senior
|
$ | 1,115 | $ | 95.13 | $ | 91.55 | 1.02 | % | 2.95 | % | 20.23 | % | 14.55 | % | 30.99 | % | 68.49 | % | 75.11 | % | $ | - | ||||||||||||||||||||||
Senior, interest only
|
$ | 3,734,452 | $ | 5.34 | $ | 5.05 | 1.96 | % | 13.28 | % | 15.80 | % | 17.02 | % | 19.77 | % | 49.98 | % | 0.00 | % | $ | - | ||||||||||||||||||||||
Subordinated
|
$ | 1,378,891 | $ | 47.44 | $ | 44.01 | 3.44 | % | 9.57 | % | 16.48 | % | 17.56 | % | 19.48 | % | 50.07 | % | 19.03 | % | $ | 19,964 | ||||||||||||||||||||||
Subordinated,
interest only |
$ | 277,560 | $ | 7.89 | $ | 7.93 | 2.94 | % | 9.93 | % | 13.31 | % | 15.07 | % | 24.30 | % | 45.80 | % | 0.00 | % | $ | - | ||||||||||||||||||||||
RMBS transferred to consolidated variable interest entities
|
$ | 5,265,128 | $ | 55.14 | $ | 62.11 | 5.32 | % | 14.56 | % | 12.40 | % | 14.70 | % | 32.26 | % | 57.61 | % | 4.15 | % | $ | 161,263 | ||||||||||||||||||||||
Agency Mortgage-Backed Securities
|
$ | 3,018,347 | $ | 103.07 | $ | 107.06 | 4.66 | % | 3.83 | % | 28.49 | % | 24.59 | % |
NA
|
NA
|
100.00 | % | $ | - | ||||||||||||||||||||||||
Securitized loans
|
$ | 268,122 | $ | 100.92 | $ | 83.14 | 3.05 | % | 4.77 | % | 24.91 | % | 23.51 | % | 6.17 | % | 39.86 | % | 8.86 | % | $ | 1,323 |
(1) Bond Equivalent Yield at period end.
|
(2) Calculated based on reported losses to date, utilizing widest data set available (i.e., life-time losses, 12-month loss, etc.).
|
For the Year Ended
|
||||||||||||||||
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||
Accretable
Discount |
Non-Accretable Difference
|
Accretable
Discount |
Non-Accretable Difference
|
|||||||||||||
Balance at beginning of period
|
$ | 1,176,019 | $ | 1,931,930 | $ | 1,098,061 | $ | 1,879,475 | ||||||||
Accretion of discount
|
(151,579 | ) | - | (142,136 | ) | - | ||||||||||
Principal Writedowns
|
- | (315,443 | ) | - | (181,227 | ) | ||||||||||
Purchases
|
29,562 | 16,063 | (11,414 | ) | 265,384 | |||||||||||
Sales
|
(47,743 | ) | (115,011 | ) | 12,821 | (169,931 | ) | |||||||||
Net other-than-temporary credit impairment losses
|
- | 132,250 | - | 356,916 | ||||||||||||
Transfers from credit reserve
|
192,296 | (192,296 | ) | 503,869 | (503,869 | ) | ||||||||||
Transfers to credit reserve
|
(83,287 | ) | 83,287 | (285,182 | ) | 285,182 | ||||||||||
Balance at end of period
|
$ | 1,115,268 | $ | 1,540,780 | $ | 1,176,019 | $ | 1,931,930 |
·
|
If there is a positive change in the amount and timing of future cash flows expected to be collected from the previous estimate used for accounting purposes, the effective interest rate in future accounting periods may increase resulting in an increase in the reported amount of interest income in future periods. A positive change in the amount and timing of future cash flows expected to be collected from the previous estimate used for accounting purposes must be considered significant for Non-Agency RMBS accounted for under ASC 310-30 for the effective interest rate in future accounting periods to increase. An OTTI loss will not be recorded in earnings in the period we determine there is a positive change in the amount and timing of future estimated cash flows. A positive change in the amount and timing of future cash flows expected to be collected is considered to have occurred when the net present value of future cash flows expected to be collected has increased from the previous estimate. This can occur from a change in either the timing of when cash flows are expected to be collected (i.e., from changes in prepayment speeds or the timing of estimated defaults) or in the amount of cash flows expected to be collected (i.e., from reductions in estimates of future defaults). Furthermore, a positive change could occur on an overall basis in situations where the positive impact of a change in the timing of cash flows exceeds the negative impact of increased defaults, or when the positive impact of a decline in estimated defaults exceeds the negative impact of an extension of the timing of receipt of cash flows.
|
·
|
If there is a negative (or adverse) change in the amount and timing of future cash flows expected to be collected from the previous estimate used for accounting purposes, and the securities’ fair value is below its amortized cost, an OTTI loss equal to the adverse change in cash flows expected to be collected, discounted using the securities’ effective rate before impairment, is required to be recorded in current period earnings. For Non-Agency RMBS accounted for under ASC 310-30, while the effective interest rate used to accrete interest income after an OTTI has been recognized will be the same, the amount of interest income recorded in future periods will decline because of the reduced amount of the amortized cost basis of the investment to which such effective interest rate is applied. Additionally, for Non-Agency RMBS accounted for under ASC 325-40, while the effective interest rate used to accrete interest income during the period directly after an OTTI has been recognized will be the same, the amount of interest income recorded in such future period will decline, absent an increase in cash flows expected to be collected, because of the reduced amount of the amortized cost basis of the investment to which such effective interest rate is applied. An adverse change in the amount and timing of future cash flows expected to be collected is considered to have occurred when the net present value of future cash flows expected to be collected has decreased from the most previous estimate. This change can occur from a change in either the timing of when cash flows are expected to be collected (i.e., from changes in prepayment speeds or the timing of estimated defaults) or in the amount of cash flows expected to be collected (i.e., from increases in estimates of future defaults). Furthermore, an adverse change could occur on an overall basis in situations where the negative impact of a change in the timing of cash flows exceeds the positive impact of a decline in estimated defaults, or when the negative impact of an increase in estimated defaults exceeds the positive impact of an shortening of the timing of receipt of cash flows.
|
·
|
Our assessment of the credit quality of the asset, including its credit rating at the acquisition date and whether the security has experienced deterioration in credit quality since its inception.
|
·
|
Our assessment of the probability of collection of all contractual cash flows.
|
·
|
Our assessment of whether the security can be contractually prepaid such that we would not recover our initial investment.
|
GAAP Net
Interest Income |
Less:
Realized Net Losses on Interest Rate Swaps |
Economic
Net Interest Income (1) |
GAAP
Interest Expense |
Add:
Realized Net Losses on Interest Rate Swaps |
Economic
Interest Expense |
|||||||||||||||||||
For the Year Ended December 31, 2012
|
$ | 462,882 | $ | 20,223 | $ | 442,639 | $ | 126,558 | $ | 20,223 | $ | 146,781 | ||||||||||||
For the Year Ended December 31, 2011
|
$ | 570,166 | $ | 15,929 | $ | 554,223 | $ | 134,858 | $ | 15,929 | $ | 150,787 | ||||||||||||
For the Year Ended December 31, 2010
|
$ | 429,652 | $ | 5,788 | $ | 423,824 | $ | 146,448 | $ | 5,788 | $ | 152,236 | ||||||||||||
For the Quarter Ended December 31, 2012
|
$ | 99,678 | $ | 5,333 | $ | 94,334 | $ | 33,874 | $ | 5,333 | $ | 39,207 | ||||||||||||
For the Quarter Ended September 30, 2012
|
$ | 110,340 | $ | 5,298 | $ | 105,038 | $ | 34,356 | $ | 5,298 | $ | 39,654 | ||||||||||||
For the Quarter Ended June 30, 2012
|
$ | 139,571 | $ | 5,194 | $ | 134,375 | $ | 21,953 | $ | 5,194 | $ | 27,147 | ||||||||||||
For the Quarter Ended March 31, 2012
|
$ | 113,293 | $ | 4,398 | $ | 108,892 | $ | 36,375 | $ | 4,398 | $ | 40,773 | ||||||||||||
(1) Excludes cash and cash equivalents.
|
Net Income (Loss)
|
||||||||||||
(dollars in thousands)
|
||||||||||||
For the Year Ended
|
||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
Net Interest Income:
|
||||||||||||
Interest income
|
$ | 172,089 | $ | 254,028 | $ | 103,360 | ||||||
Interest expense
|
(10,678 | ) | (11,941 | ) | (7,749 | ) | ||||||
Interest income, Assets of consolidated VIEs
|
417,351 | 450,996 | 472,740 | |||||||||
Interest expense, Non-recourse liabilities of VIEs
|
(115,880 | ) | (122,917 | ) | (138,699 | ) | ||||||
Net interest income (expense)
|
462,882 | 570,166 | 429,652 | |||||||||
Other-than-temporary impairments:
|
||||||||||||
Total other-than-temporary impairment losses
|
(47,632 | ) | (241,962 | ) | (40,833 | ) | ||||||
Portion of loss recognized in other comprehensive income (loss)
|
(84,618 | ) | (115,143 | ) | (91,012 | ) | ||||||
Net other-than-temporary credit impairment losses
|
(132,250 | ) | (357,105 | ) | (131,845 | ) | ||||||
Other gains (losses):
|
||||||||||||
Unrealized gains (losses) on interest rate swaps
|
(9,473 | ) | (34,478 | ) | (9,989 | ) | ||||||
Realized gains (losses) on interest rate swaps
|
(20,223 | ) | (15,929 | ) | (5,788 | ) | ||||||
Gains (losses) on interest rate swaps
|
(29,696 | ) | (50,407 | ) | (15,777 | ) | ||||||
Net unrealized gains (losses) on interest-only RMBS
|
833 | (14,545 | ) | 3,846 | ||||||||
Realized gains (losses) on sales of investments, net
|
85,166 | 54,353 | 17,333 | |||||||||
Total other gains (losses)
|
56,303 | (10,599 | ) | 5,402 | ||||||||
Net investment income (loss)
|
386,935 | 202,462 | 303,209 | |||||||||
Other expenses:
|
||||||||||||
Management fees
|
49,525 | 51,969 | 40,924 | |||||||||
Expense recoveries from Manager
|
(4,712 | ) | - | - | ||||||||
Net Management fees
|
44,813 | 51,969 | 40,924 | |||||||||
Provision for loan losses
|
368 | 5,291 | 7,109 | |||||||||
General and administrative expenses
|
13,986 | 7,267 | 6,015 | |||||||||
Total other expenses
|
59,167 | 64,527 | 54,048 | |||||||||
Income (loss) before income taxes
|
327,768 | 137,935 | 249,161 | |||||||||
Income taxes
|
1 | 606 | 756 | |||||||||
Net income (loss)
|
$ | 327,767 | $ | 137,329 | $ | 248,405 |
Management Fees, G&A Expenses and Operating Expense Ratios
|
||||||||||||
Total Management
Fee and G&A Expenses |
Total Management
Fee and G&A Expenses/Total Assets |
Total Management
Fee and G&A Expenses/Average Equity |
||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||
For the year ended December 31, 2012
|
$ | 58,799 | 0.76 | % | 1.78 | % | ||||||
For the year ended December 31, 2011
|
$ | 59,236 | 0.75 | % | 1.76 | % | ||||||
For the year ended December 31, 2010
|
$ | 46,939 | 0.74 | % | 1.62 | % | ||||||
For the quarter ended December 31, 2012
|
$ | 12,658 | 0.66 | % | 1.45 | % | ||||||
For the quarter ended September 30, 2012
|
$ | 15,799 | 0.80 | % | 1.92 | % | ||||||
For the quarter ended June 30, 2012
|
$ | 15,444 | 0.75 | % | 1.95 | % | ||||||
For the quarter ended March 31, 2012
|
$ | 14,898 | 0.74 | % | 1.92 | % |
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands) | ||||||||
Overnight
|
$ | - | $ | - | ||||
1-29 days
|
732,809 | 1,368,945 | ||||||
30 to 59 days
|
325,915 | 836,007 | ||||||
60 to 89 days
|
- | - | ||||||
90 to 119 days
|
211,137 | 171,836 | ||||||
Greater than or equal to 120 days
|
258,164 | 296,201 | ||||||
Total
|
$ | 1,528,025 | $ | 2,672,989 |
Period
|
Average Repurchase Balance
|
Repurchase Balance at Period End
|
||||||
(dollars in thousands)
|
||||||||
Year Ended December 31, 2012
|
$ | 2,122,421 | $ | 1,528,025 | ||||
Year Ended December 31, 2011
|
$ | 3,843,683 | $ | 2,672,989 | ||||
Quarter Ended December 31, 2012
|
$ | 1,567,605 | $ | 1,528,025 | ||||
Quarter Ended September 30, 2012
|
$ | 1,954,958 | $ | 1,658,906 | ||||
Quarter Ended June 30, 2012
|
$ | 2,412,827 | $ | 2,362,088 | ||||
Quarter Ended March 31, 2012
|
$ | 2,554,295 | $ | 2,502,870 |
December 31, 2012
|
||||||||||||||||||||
Contractual Obligations
|
Within
One Year |
One to Three
Years |
Three to Five
Years |
Greater Than
or Equal to Five Years |
Total
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Repurchase agreements for RMBS
|
$ | 1,528,025 | $ | - | $ | - | $ | - | $ | 1,528,025 | ||||||||||
Securitized debt
|
658,423 | 793,150 | 430,993 | 555,717 | 2,438,283 | |||||||||||||||
Interest expense on RMBS repurchase agreements (1)
|
3,481 | 5 | - | - | 3,486 | |||||||||||||||
Interest expense on securitized debt (1)
|
88,177 | 113,931 | 72,902 | 201,721 | 476,731 | |||||||||||||||
Total
|
$ | 2,278,106 | $ | 907,086 | $ | 503,895 | $ | 757,438 | $ | 4,446,525 | ||||||||||
(1) Interest is based on variable rates in effect as of December 31, 2012.
|
||||||||||||||||||||
December 31, 2011
|
||||||||||||||||||||
Contractual Obligations
|
Within
One Year |
One to Three
Years |
Three to Five
Years |
Greater Than
or Equal to Five Years |
Total
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Repurchase agreements for RMBS
|
$ | 2,672,989 | $ | - | $ | - | $ | - | $ | 2,672,989 | ||||||||||
Securitized debt
|
488,886 | 598,921 | 276,966 | 404,385 | 1,769,158 | |||||||||||||||
Interest expense on RMBS repurchase agreements (1)
|
1,349 | - | - | - | 1,349 | |||||||||||||||
Interest expense on securitized debt (1)
|
79,558 | 107,369 | 69,826 | 244,069 | 500,822 | |||||||||||||||
Total
|
$ | 3,242,782 | $ | 706,290 | $ | 346,792 | $ | 648,454 | $ | 4,944,318 | ||||||||||
(1) Interest is based on variable rates in effect as of December 31, 2011.
|
·
|
Limit the initial margin and premiums required to establish its commodity interest positions to no more than five percent of the fair market value of the mortgage real estate investment trust’s total assets;
|
·
|
Limit the net income derived annually from its commodity interest positions that are not qualifying hedging transactions to less than five percent of the mortgage real estate investment trust’s gross income;
|
·
|
Ensure that interests in the mortgage real estate investment trust are not marketed to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity futures, commodity options, or swaps markets; and
|
·
|
Either:
|
o
|
identify itself as a “mortgage REIT” in Item G of its last U.S. income tax return on Form 1120-REIT; or
|
o
|
if it has not yet filed its first U.S. income tax return on Form 1120-REIT, disclose to its shareholders that it intends to identify itself as a “mortgage REIT” in its first U.S. income tax return on Form 1120-REIT.
|
December 31, 2012 | ||||||||
Change in Interest Rate
|
Projected Percentage Change in Net Interest
Income (1) |
Projected Percentage Change in
Portfolio Value, with Effect of Interest Rate Swaps and Other Hedging Transactions (2) |
||||||
-75 Basis Points
|
(4.74 | %) | 0.96 | % | ||||
-50 Basis Points
|
(3.14 | %) | 0.43 | % | ||||
-25 Basis Points
|
(1.54 | %) | 0.17 | % | ||||
Base Interest Rate
|
- | - | ||||||
+25 Basis Points
|
1.49 | % | (0.08 | %) | ||||
+50 Basis Points
|
3.31 | % | (0.26 | %) | ||||
+75 Basis Points
|
5.52 | % | (0.49 | %) |
(1) |
Change in annual economic net interest income. Includes interest expense on interest rate swaps.
|
(2) |
Projected Percentage Change in Portfolio Value is based on instantaneous moves in interest rates.
|
·
|
monitoring and adjusting, if necessary, the reset index and interest rate related to our RMBS and our financings;
|
·
|
attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;
|
·
|
using derivatives, financial futures, swaps, options, caps, floors and forward sales to adjust the interest rate sensitivity of our investments and our borrowings;
|
·
|
using securitization financing to lower average cost of funds relative to short-term financing vehicles further allowing us to receive the benefit of attractive terms for an extended period of time in contrast to short term financing and maturity dates of the investments included in the securitization; and
|
·
|
actively managing, on an aggregate basis, the interest rate indices, interest rate adjustment periods, and gross reset margins of our investments and the interest rate indices and adjustment periods of our financings.
|
·
|
Our resources and level of technical accounting expertise within the accounting function were insufficient to properly evaluate and account for the complexity of our investments in Non-Agency RMBS securities, Interest-Only Strips, impairment of securitized loans held for investment, effective interest calculations and related disclosures in accordance with generally accepted accounting principles.
|
·
|
We did not design and maintain
adequate procedures or effective review and approval controls, including the review of journal entries and reconciliations, over routine processes. Specifically there
was insufficient evidence that our review controls were designed and executed at a precision level that would prevent or detect a material misstatement.
|
·
|
We did not design and maintain adequate review and approval controls
over significant estimates and their related disclosure process to prevent or detect a material misstatement.
Specifically, we did not establish adequate procedures or design effective controls as follows:
|
o
|
There was no precise or direct independent review and validation of inputs used in significant estimates and their related disclosures, such as the determination of the fair value, other-than-temporary impairment, or interest income related to investments in RMBS and securitized loans held for investment.
|
o
|
There
was inadequate evidence of independent validation of calculations used in significant accounting estimates to ensure the accounting policies were appropriately implemented.
|
o
|
There was inadequate evidence of review of the schedules supporting the amounts and disclosures in the consolidated financial statements by a person, other than the preparer, with the necessary competency and authority.
|
·
|
We have identified an overreliance on spreadsheets consisting of manual inputs and complex calculations used to record transactions and estimates supporting the financial statement amounts and disclosures. Our controls over this electronic data were not performed at a level of precision sufficient to rely on the completeness and accuracy of the source data or manual input. The safeguarding and management of electronic data was insufficient to evidence the existence or extent of management's review and validation over the complex spreadsheets by a person with the necessary competency and authority.
|
Name
|
Age
|
Position Held with Us
|
Matthew Lambiase
|
47
|
Chief Executive Officer, President and Director
|
Robert Colligan
|
42
|
Chief Financial Officer and Secretary
|
Mohit Marria
|
35
|
Chief Investment Officer
|
William B. Dyer
|
66
|
Head of Underwriting
|
·
|
evaluate the performance of our officers;
|
·
|
evaluate the performance of our Manager;
|
·
|
review the compensation and fees payable to our Manager under our management agreement;
|
·
|
recommend to the board of directors the compensation for our independent directors; and
|
·
|
administer the issuance of any securities under our equity incentive plan to our executives or the employees of our Manager.
|
·
|
our accounting and financial reporting processes;
|
·
|
the integrity and audits of our consolidated financial statements;
|
·
|
our compliance with legal and regulatory requirements;
|
·
|
the qualifications and independence of our independent registered public accounting firm; and
|
·
|
the performance of our independent registered public accounting firm.
|
Name
|
Current Age
|
Position Held with Us
|
Matthew Lambiase
|
47
|
Chief Executive Officer, President and Director
|
Christian J. Woschenko
|
53
|
Head of Investments
|
A. Alexandra Denahan
|
43
|
Chief Financial Officer and Secretary
|
William B. Dyer
|
66
|
Head of Underwriting
|
Stock Awards | ||||||||
Name
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#)(1) |
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested($)(2) |
||||||
Matthew Lambiase
|
45,000 | $ | 117,450 | |||||
Christian Woschenko
|
45,000 | $ | 117,450 | |||||
A. Alexandra Denahan
|
35,000 | $ | 91,350 | |||||
William Dyer
|
35,000 | $ | 91,350 |
Stock Awards
|
||||||||
Name
|
Number of
Shares Acquired on Vesting (#) |
Value
Realized on Vesting(1) ($) |
||||||
Matthew Lambiase
|
9,000 | $ | 24,030 | |||||
Christian Woschenko
|
9,000 | $ | 24,030 | |||||
A. Alexandra Denahan
|
7,000 | $ | 18,690 | |||||
William Dyer
|
7,000 | $ | 18,690 |
Name
|
Benefit
|
Termination
with Cause or Voluntary Termination |
Termination
without Cause or for Good Reason |
Death or
Disability (1) |
Other Post
Employment Obligations |
||||||||||||
Matthew Lambiase
|
Stock vesting
|
$ | - | $ | - | $ | 117,450 | $ | - | ||||||||
Christian Woschenko
|
Stock vesting
|
$ | - | $ | - | $ | 117,450 | $ | - | ||||||||
A. Alexandra Denahan
|
Stock vesting
|
$ | - | $ | - | $ | 91,350 | $ | - | ||||||||
William Dyer
|
Stock vesting
|
$ | - | $ | - | $ | 91,350 | $ | - |
Name
|
Fees
Earned or Paid in Cash |
Stock
Awards (2) |
Option
Awards |
Non-Equity
Incentive Plan Compensation |
Change in
Pension Value and Deferred Compensation Earnings |
All Other
Compensation |
Total
|
|||||||||||||||||||||
Mark Abrams
|
$ | 80,000 | $ | 50,000 | $ | - | $ | - | $ | - | $ | - | $ | 130,000 | ||||||||||||||
Gerard Creagh
|
$ | 78,510 | $ | 50,000 | $ | - | $ | - | $ | - | $ | - | $ | 128,510 | ||||||||||||||
Paul Donlin
|
$ | 86,750 | $ | 50,000 | $ | - | $ | - | $ | - | $ | - | $ | 136,750 | ||||||||||||||
Paul A. Keenan(1)
|
$ | 83,750 | $ | 50,000 | $ | - | $ | - | $ | - | $ | - | $ | 133,750 | ||||||||||||||
Dennis M. Mahoney
|
$ | 99,250 | $ | 50,000 | $ | - | $ | - | $ | - | $ | - | $ | 149,250 | ||||||||||||||
John P. Reilly
|
$ | 83,750 | $ | 50,000 | $ | - | $ | - | $ | - | $ | - | $ | 133,750 |
Name of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership |
Percent of
Class |
||||||
Matthew Lambiase(1)
|
525,000 | * | ||||||
Robert Colligan(2)
|
0 | * | ||||||
Mohit Marria(3)
|
131,589 | * | ||||||
William B. Dyer(4)
|
99,649 | * | ||||||
Mark Abrams(5)
|
112,032 | * | ||||||
Gerard Creagh(6)
|
228,170 | * | ||||||
Paul Donlin(7)
|
654,137 | * | ||||||
Paul A. Keenan(8)
|
136,357 | * | ||||||
Dennis M. Mahoney(9)
|
81,307 | * | ||||||
John P. Reilly(10)
|
130,927 | * | ||||||
All Directors and Officers As a Group
|
2,099,168 | * | ||||||
Wells Fargo & Company(11)
|
63,019,860 | 6.13 | % | |||||
BlackRock, Inc.(12) | 56,082,750 | 5.46 | % | |||||
Thornburg Investment Management Inc.(13) | 64,181,670 | 6.25 | % | |||||
Leon G. Cooperman(14)
|
55,120,975 | 5.36 | % |
(1)
|
Mr. Lambiase, our Chief Executive Officer, President and one of our directors, is the beneficial owner of 90,000 shares of restricted common stock issued under our equity incentive plan which vests in equal installments on the first business day of each fiscal quarter over a period of ten years beginning on January 2, 2008. Includes 54,000 shares of restricted common stock that have vested as of December 13, 2013; 2,250 shares of restricted common stock that will vest within 60 days after December 13, 2013; and 33,750 shares which vest more than 60 days after December 13, 2013. Includes 43,000 shares of common stock held by Mr. Lambiase in a 401(k) plan.
|
(2)
|
Mr. Colligan was named our Chief Financial Officer and Secretary in May 2013.
|
(3)
|
Mr. Marria, our Chief Investment Officer, is the beneficial owner of 20,000 shares of restricted common stock issued under our equity incentive plan which vests in equal installments on the first business day of each fiscal quarter over a period of ten years beginning on January 2, 2008. Includes 12,000 shares of restricted common stock that have vested as of December 13, 2013; 500 shares of restricted common stock that will vest within 60 days after December 13, 2013; and 7,500 shares which vest more than 60 days after December 13, 2013. Includes 54,000 shares of common stock held by Mr. Marria in a 401(k) plan.
|
(4)
|
Mr. Dyer, our Head of Underwriting, is the beneficial owner of 69,649 shares of restricted common stock issued under our equity incentive plan which vests in equal installments on the first business day of each fiscal quarter over a period of ten years beginning on January 2, 2008. Includes 42,000 shares of restricted common stock that have vested as of December 13, 2013; 1,750 shares of restricted common stock that will vest within 60 days after December 13, 2013; and 26,250 shares which vest more than 60 days after December 13, 2013.
|
(5)
|
Mr. Abrams is one of our directors.
|
(6)
|
Mr. Creagh is one of our directors.
|
(7)
|
Mr. Donlin is one of our directors. Includes 20,000 shares of common stock held by Mr. Donlin in a Family Trust.
|
(8)
|
Mr. Keenan is one of our directors.
|
(9)
|
Mr. Mahoney is one of our directors.
|
|
(10)
|
Mr. Reilly is one of our directors. Includes 14,500 shares of common stock held by members of Mr. Reilly’s immediate family.
|
(11)
|
The address for this stockholder is 420 Montgomery Street, San Francisco, CA 94104. The shares shown as beneficially owned by Wells Fargo & Company reflect shares owned on its own behalf and on behalf of the following subsidiaries: Wells Capital Management Incorporated; Wells Fargo Advisors Financial Network, LLC; Wells Fargo Advisors, LLC; Wells Fargo Funds Management, LLC; and Wells Fargo Bank, National Association. Aggregate beneficial ownership reported by Wells Fargo & Company is on a consolidated basis and includes any beneficial ownership of a subsidiary. Wells Capital Management Incorporated reported beneficially owning 61,316,782 shares of common stock with the sole power to vote or to direct the vote of zero shares, the shared power to vote or to direct the vote of 12,636,442 of common stock, the sole power to dispose or to direct the disposition of zero shares of common stock and the shared power to dispose or to direct the disposition of 61,316,782 shares of common stock. Wells Fargo & Company reported beneficially owning 63,019,860 shares of common stock with the sole power to vote or to direct the vote of 3 shares of common stock, the shared power to vote or to direct the vote of 62,989,808 of common stock, the sole power to dispose or to direct the disposition of 3 shares of common stock and the shared power to dispose or to direct the disposition of 63,019,860 shares of common stock. Based solely on information contained in a Schedule 13G/A filed by Wells Fargo & Company on March 29, 2013.
|
(12)
|
The address for this stockholder is 40 East 52nd Street, New York, NY 10022. The shares shown as beneficially owned by BlackRock, Inc. reflect shares owned on its own behalf and on behalf of the following subsidiaries: BlackRock Advisors, LLC; BlackRock Investment Management, LLC; BlackRock Life Limited; BlackRock Asset Management Australia Limited; BlackRock Asset Management Canada Limited; BlackRock Advisors (UK) Limited; BlackRock Fund Advisors; BlackRock International Limited; BlackRock Institutional Trust Company, N.A.; BlackRock Japan Co. Ltd. and BlackRock Investment Management (UK) Limited. Aggregate beneficial ownership reported by BlackRock, Inc. includes any beneficial ownership of a subsidiary. BlackRock, Inc. reported beneficially owning 56,082,750 shares of common stock with the sole power to vote or to direct the vote of 56,082,750 shares of common stock, the shared power to vote or to direct the vote of zero shares of common stock, the sole power to dispose or to direct the disposition of 56,082,750 shares of common stock and the shared power to dispose or to direct the disposition of zero shares of common stock. Based solely on information contained in a Schedule 13G filed by BlackRock, Inc. on January 30, 2013.
|
|
(13)
|
The address for this stockholder is 2300 North Ridgetop Road Santa Fe, NM 87506. Thornburg Investment Management Inc. reported beneficially owning shares of common stock with the sole power to vote or to direct the vote of 64,181,670 shares of common stock, the shared power to vote or to direct the vote of zero shares of common stock, the sole power to dispose or to direct the disposition of 64,181,670 shares of common stock and the shared power to dispose or to direct the disposition of zero shares of common stock. Based solely on information contained in a Schedule 13G filed by Thornburg Investment Management Inc. on January 31, 2013.
|
(14)
|
The address for this stockholder is 2700 No. Military Trail, Suite 230, Boca Raton FL 33431. The shares shown as beneficially owned by Leon G. Cooperman reflect shares owned on his own behalf and on behalf of the following entities: Omega Capital Partners, L.P.; Omega Capital Investors, L.P.; Omega Equity Investors, L.P.; Omega Overseas Partners, Ltd.; a limited number of Managed Accounts; JCF Metrowest of NJ; the Cooperman Family Fund for a Jewish Future; the Michael S. Cooperman WRA Trust; the UTMA account for Asher Silvin Cooperman; Toby Cooperman and Michael S. Cooperman. Mr. Cooperman reported that he may be deemed the beneficial owner of 55,120,975 shares. This consists of 9,598,400 shares owned by Omega Capital Partners, L.P.; 2,706,053 shares owned by Omega Capital Investors, L.P.; 3,920,380 shares owned by Omega Equity Investors, L.P.; 8,989,553 shares owned by Omega Overseas Partners, Ltd.; 17,161,489 shares owned by a limited number of managed accounts; 50,000 shares owned by the Cooperman Family Fund for a Jewish Future; 10,019,200 shares owned by Mr. Cooperman; 600,000 shares owned by Toby Cooperman; 11,900 shares owned by the UTMA account for Asher Silvin Cooperman; 64,000 shares owned by JCF Metrowest of NJ; 1,000,000 shares owned by Michael S. Cooperman; and 1,000,000 shares owned by the Michael S. Cooperman WRA Trust. Mr. Cooperman reported having the sole power to vote or to direct the vote of 37,959,486 shares, the shared power to vote or to direct the vote of 17,161,489 shares, the sole power to dispose or to direct the disposition of 37,959,486 shares, and the shared power to dispose or to direct the disposition of 17,161,489 shares. Based solely on information contained in a Schedule 13G filed by Leon G. Cooperman on February 11, 2013.
|
Exhibit
Number
|
Description
|
3.1
|
Articles of Amendment and Restatement of Chimera Investment Corporation (filed as Exhibit 3.1 to the Company’s Registration Statement on Amendment No. 1 to Form S-11 (File No. 333-145525) filed on September 27, 2007 and incorporated herein by reference)
|
3.2
|
Articles of Amendment of Chimera Investment Corporation (filed as Exhibit 3.1 to the Company’s Report on Form 8-K filed on May 28, 2009 and incorporated herein by reference)
|
3.3
|
Articles of Amendment of Chimera Investment Corporation (filed as Exhibit 3.1 to the Company’s Report on Form 8-K filed on November 5, 2010 and incorporated herein by reference)
|
3.4
|
Amended and Restated Bylaws of Chimera Investment Corporation (filed as Exhibit 3.2 to the Company’s Report on Form 8-K filed on December 19, 2011 and incorporated herein by reference)
|
4.1
|
Specimen Common Stock Certificate of Chimera Investment Corporation (filed as Exhibit 4.1 to the Company’s Registration Statement on Amendment No. 1 to Form S-11 (File No. 333-145525) filed on September 27, 2007 and incorporated herein by reference)
|
10.1
|
Form of Management Agreement between Chimera Investment Corporation and Fixed Income Discount Advisory Company (filed as Exhibit 10.1 to the Company’s Registration Statement on Amendment No. 1 to Form S-11 (File No. 333-145525) filed on September 27, 2007 and incorporated herein by reference)
|
F-1
|
|
Consolidated Financial Statements
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-9
|
|
·
|
The Company’s resources and level of technical accounting expertise within the accounting function were insufficient to properly evaluate and account for the complexity of the Company’s investments in Non-Agency RMBS securities, Interest-Only Strips, impairment of securitized loans held for investment, effective interest calculations and related disclosures in accordance with generally accepted accounting principles.
|
|
·
|
Management identified that its design, procedures, and execution of review controls, including the review of journal entries and reconciliations, for routine processes were ineffective. Specifically there was insufficient evidence that the Company’s review controls were designed and executed at a precision level that would prevent or detect a material misstatement.
|
|
·
|
Management identified that the Company’s review controls over significant estimates and their related disclosure process were not designed precisely enough to prevent or detect a material misstatement as follows:
|
|
o
|
There was no precise or direct independent review and validation of inputs used in significant estimates and their related disclosures, such as the determination of the fair value, other-than-temporary impairment, or interest income related to investments in RMBS and securitized loans held for investment.
|
|
o
|
There was inadequate evidence of independent validation of calculations used in significant accounting estimates to ensure the accounting policies were appropriately implemented.
|
|
o
|
There was inadequate evidence of review of the schedules supporting the amounts and disclosures in the consolidated financial statements by a person, other than the preparer, with the necessary competency and authority.
|
|
·
|
Management has identified an overreliance on spreadsheets consisting of manual inputs and complex calculations used to record transactions and estimates supporting the financial statement amounts and disclosures. Management's controls over this electronic data were not performed at a level of precision sufficient to rely on the completeness and accuracy of the source data or manual input. The safeguarding and management of electronic data were insufficient to evidence the existence or extent of management's review and validation over the complex spreadsheets by a person with the necessary competency and authority.
|
CHIMERA
INVESTMENT CORPORATION
|
||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
||||||||
(dollars in thousands, except share and per share data)
|
||||||||
December 31, 2012
|
December 31, 2011
|
|||||||
Assets:
|
||||||||
Cash and cash equivalents
|
$ | 621,153 | $ | 206,299 | ||||
Non-Agency RMBS, at fair value
|
||||||||
Senior
|
88 | 1,020 | ||||||
Senior interest-only
|
122,869 | 188,679 | ||||||
Subordinated
|
547,794 | 606,895 | ||||||
Subordinated interest-only
|
16,253 | 22,019 | ||||||
Agency RMBS, at fair value
|
1,806,697 | 3,144,531 | ||||||
Accrued interest receivable
|
15,248 | 22,709 | ||||||
Other assets
|
13,970 | 1,403 | ||||||
Subtotal
|
3,144,072 | 4,193,555 | ||||||
Assets of Consolidated VIEs:
|
||||||||
Non-Agency RMBS transferred to consolidated variable interest entities
("VIEs"), at fair value
|
3,274,204 | 3,270,332 | ||||||
Securitized loans held for investment, net of allowance for loan losses of
$11.6 million and $13.9 million, respectively
|
1,300,131 | 256,632 | ||||||
Accrued interest receivable
|
24,082 | 26,616 | ||||||
Subtotal
|
4,598,417 | 3,553,580 | ||||||
Total assets
|
$ | 7,742,489 | $ | 7,747,135 | ||||
Liabilities:
|
||||||||
Repurchase agreements, Agency RMBS ($1.6 billion and $2.9 billion pledged as
collateral, respectively)
|
$ | 1,528,025 | $ | 2,672,989 | ||||
Accrued interest payable
|
2,441 | 3,294 | ||||||
Dividends payable
|
92,431 | 112,937 | ||||||
Accounts payable and other liabilities
|
1,170 | 1,687 | ||||||
Investment management fees and expenses payable to affiliate
|
7,675 | 12,958 | ||||||
Interest rate swaps, at fair value
|
53,939 | 44,467 | ||||||
Subtotal
|
1,685,681 | 2,848,332 | ||||||
Non-Recourse Liabilities of Consolidated VIEs
|
||||||||
Securitized debt, collateralized by Non-Agency RMBS ($3.3 billion and $3.3 billion pledged as collateral, respectively)
|
1,336,261 | 1,630,276 | ||||||
Securitized debt, collateralized by loans held for investment ($1.3 billion and $238.0 million pledged as collateral, respectively)
|
1,169,710 | 212,778 | ||||||
Accrued interest payable
|
8,358 | 8,130 | ||||||
Subtotal
|
2,514,329 | 1,851,184 | ||||||
Total liabilities
|
$ | 4,200,010 | $ | 4,699,516 | ||||
Commitments and Contingencies (See Note 15)
|
||||||||
Stockholders' Equity:
|
||||||||
Preferred Stock: par value $0.01 per share; 100,000,000 shares authorized, 0 shares issued and outstanding, respectively
|
- | - | ||||||
Common stock: par value $0.01 per share; 1,500,000,000 shares authorized, 1,027,597,458 and 1,027,467,089 shares issued and outstanding, respectively
|
10,268 | 10,267 | ||||||
Additional paid-in-capital
|
3,604,554 | 3,603,739 | ||||||
Accumulated other comprehensive income (loss)
|
989,936 | 433,453 | ||||||
Retained earnings (accumulated deficit)
|
(1,062,279 | ) | (999,840 | ) | ||||
Total stockholders' equity
|
$ | 3,542,479 | $ | 3,047,619 | ||||
Total liabilities and stockholders' equity
|
$ | 7,742,489 | $ | 7,747,135 | ||||
See accompanying notes to consolidated financial statements.
|
CHIMERA
INVESTMENT CORPORATION
|
||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
||||||||||||
(dollars in thousands, except share and per share data)
|
||||||||||||
For the Year Ended | ||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
Net Interest Income:
|
||||||||||||
Interest income
|
$ | 172,089 | $ | 254,028 | $ | 103,360 | ||||||
Interest expense
|
(10,678 | ) | (11,941 | ) | (7,749 | ) | ||||||
Interest income, Assets of consolidated VIEs
|
417,351 | 450,996 | 472,740 | |||||||||
Interest expense, Non-recourse liabilities of consolidated VIEs
|
(115,880 | ) | (122,917 | ) | (138,699 | ) | ||||||
Net interest income (expense)
|
462,882 | 570,166 | 429,652 | |||||||||
Other-than-temporary impairments:
|
||||||||||||
Total other-than-temporary impairment losses
|
(47,632 | ) | (241,962 | ) | (40,833 | ) | ||||||
Portion of loss recognized in other comprehensive income (loss)
|
(84,618 | ) | (115,143 | ) | (91,012 | ) | ||||||
Net other-than-temporary credit impairment losses
|
(132,250 | ) | (357,105 | ) | (131,845 | ) | ||||||
Other gains (losses):
|
||||||||||||
Net unrealized gains (losses) on interest rate swaps
|
(9,473 | ) | (34,478 | ) | (9,989 | ) | ||||||
Net realized gains (losses) on interest rate swaps
|
(20,223 | ) | (15,929 | ) | (5,788 | ) | ||||||
Net gains (losses) on interest rate swaps
|
(29,696 | ) | (50,407 | ) | (15,777 | ) | ||||||
Net unrealized gains (losses) on interest-only RMBS
|
833 | (14,545 | ) | 3,846 | ||||||||
Net realized gains (losses) on sales of investments
|
85,166 | 54,353 | 17,333 | |||||||||
Total other gains (losses)
|
56,303 | (10,599 | ) | 5,402 | ||||||||
Net investment income (loss)
|
386,935 | 202,462 | 303,209 | |||||||||
Other expenses:
|
||||||||||||
Management fees
|
49,525 | 51,969 | 40,924 | |||||||||
Expense recoveries from Manager
|
(4,712 | ) | - | - | ||||||||
Net Management fees
|
44,813 | 51,969 | 40,924 | |||||||||
Provision for loan losses, net
|
368 | 5,291 | 7,109 | |||||||||
General and administrative expenses
|
13,986 | 7,267 | 6,015 | |||||||||
Total other expenses
|
59,167 | 64,527 | 54,048 | |||||||||
Income (loss) before income taxes
|
327,768 | 137,935 | 249,161 | |||||||||
Income taxes
|
1 | 606 | 756 | |||||||||
Net income (loss)
|
$ | 327,767 | $ | 137,329 | $ | 248,405 | ||||||
Net income (loss) per share available to common shareholders:
|
||||||||||||
Basic
|
$ | 0.32 | $ | 0.13 | $ | 0.30 | ||||||
Diluted
|
$ | 0.32 | $ | 0.13 | $ | 0.30 | ||||||
Weighted average number of common shares outstanding:
|
||||||||||||
Basic
|
1,026,831,033 | 1,026,365,197 | 821,675,803 | |||||||||
Diluted
|
1,027,499,255 | 1,027,171,387 | 822,617,319 | |||||||||
Dividends declared per share of common stock
|
$ | 0.38 | $ | 0.51 | $ | 0.69 | ||||||
Comprehensive income (loss):
|
||||||||||||
Net income (loss)
|
$ | 327,767 | $ | 137,329 | $ | 248,405 | ||||||
Other comprehensive income (loss):
|
||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
509,399 | (549,422 | ) | 555,835 | ||||||||
Reclassification adjustment for net losses included in net income (loss) for other-than-
temporary credit impairment losses
|
132,250 | 357,105 | 131,845 | |||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
(85,166 | ) | (54,353 | ) | (17,333 | ) | ||||||
Other comprehensive income (loss)
|
556,483 | (246,670 | ) | 670,347 | ||||||||
Comprehensive income (loss)
|
$ | 884,250 | $ | (109,341 | ) | $ | 918,752 | |||||
See accompanying notes to consolidated financial statements.
|
CHIMERA
INVESTMENT CORPORATION
|
||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||||||
Common Stock
Par Value
|
Additional Paid
-
in Capital
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Retained
Earnings
(Accumulated
Deficit)
|
Total
|
||||||||||||||||
Balance, December 31, 2009
|
$ | 6,693 | $ | 2,290,614 | $ | 9,776 | $ | (180,521 | ) | $ | 2,126,562 | |||||||||
Net income (loss)
|
- | - | - | 248,405 | 248,405 | |||||||||||||||
Cumulative effect of change in accounting principle
|
- | - | - | (104,103 | ) | (104,103 | ) | |||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
- | - | 555,835 | - | 555,835 | |||||||||||||||
Reclassification adjustment for net losses included in net income (loss) for
other-than- temporary credit impairment losses |
- | - | 131,845 | - | 131,845 | |||||||||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
- | - | (17,333 | ) | - | (17,333 | ) | |||||||||||||
Proceeds from direct purchase and dividend reinvestment
|
- | 504 | - | - | 504 | |||||||||||||||
Proceeds from common stock offerings
|
3,567 | 1,310,057 | - | - | 1,313,624 | |||||||||||||||
Proceeds from restricted stock grants
|
1 | 715 | - | - | 716 | |||||||||||||||
Common dividends declared, $0.69 per share
|
- | (577,469 | ) | (577,469 | ) | |||||||||||||||
Balance, December 31, 2010
|
$ | 10,261 | $ | 3,601,890 | $ | 680,123 | $ | (613,688 | ) | $ | 3,678,586 | |||||||||
Net income (loss)
|
- | - | - | 137,329 | 137,329 | |||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
- | - | (549,422 | ) | - | (549,422 | ) | |||||||||||||
Reclassification adjustment for net losses included in net income (loss) for
other-than- temporary credit impairment losses |
- | - | 357,105 | - | 357,105 | |||||||||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
- | - | (54,353 | ) | - | (54,353 | ) | |||||||||||||
Proceeds from direct purchase and dividend reinvestment
|
4 | 1,116 | - | - | 1,120 | |||||||||||||||
Proceeds from common stock offerings
|
- | 22 | - | - | 22 | |||||||||||||||
Proceeds from restricted stock grants
|
2 | 711 | - | - | 713 | |||||||||||||||
Common dividends declared, $0.51 per share
|
- | - | - | (523,481 | ) | (523,481 | ) | |||||||||||||
Balance, December 31, 2011
|
$ | 10,267 | $ | 3,603,739 | $ | 433,453 | $ | (999,840 | ) | $ | 3,047,619 | |||||||||
Net income (loss)
|
- | - | - | 327,767 | 327,767 | |||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
- | - | 509,399 | - | 509,399 | |||||||||||||||
Reclassification adjustment for net losses included in net income (loss) for
other-than- temporary credit impairment losses |
- | - | 132,250 | - | 132,250 | |||||||||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
- | - | (85,166 | ) | - | (85,166 | ) | |||||||||||||
Proceeds from direct purchase and dividend reinvestment
|
1 | 116 | - | - | 117 | |||||||||||||||
Proceeds from restricted stock grants
|
- | 699 | - | - | 699 | |||||||||||||||
Common dividends declared, $0.38 per share
|
- | - | - | (390,206 | ) | (390,206 | ) | |||||||||||||
Balance, December 31, 2012
|
$ | 10,268 | $ | 3,604,554 | $ | 989,936 | $ | (1,062,279 | ) | $ | 3,542,479 | |||||||||
See accompanying notes to consolidated financial statements.
|
CHIMERA
INVESTMENT CORPORATION
|
||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||
(dollars in thousands)
|
||||||||||||
For the Year Ended
|
||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
Cash Flows From Operating Activities:
|
||||||||||||
Net income (loss)
|
$ | 327,767 | $ | 137,329 | $ | 248,405 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||||||
(Accretion) amortization of investment discounts/premiums, net
|
(67,262 | ) | (60,705 | ) | (66,483 | ) | ||||||
Amortization of deferred financing costs
|
8,546 | |||||||||||
Accretion (amortization) of securitized debt discounts/premiums, net
|
6,985 | 12,551 | 16,655 | |||||||||
Net unrealized losses (gains) on interest rate swaps
|
9,473 | 34,478 | 9,989 | |||||||||
Net unrealized losses (gains) on interest-only RMBS
|
(833 | ) | 14,545 | (3,846 | ) | |||||||
Net realized losses (gains) on sales of investments
|
(85,166 | ) | (54,353 | ) | (17,333 | ) | ||||||
Net other-than-temporary credit impairment losses
|
132,250 | 357,105 | 131,845 | |||||||||
Provision for loan losses, net
|
368 | 5,291 | 7,109 | |||||||||
Equity-based compensation expense
|
449 | 713 | 716 | |||||||||
Changes in operating assets:
|
||||||||||||
Decrease (increase) in accrued interest receivable, net
|
9,111 | (672 | ) | (17,570 | ) | |||||||
Decrease (increase) in other assets
|
(348 | ) | (190 | ) | 282 | |||||||
Changes in operating liabilities:
|
||||||||||||
Increase (decrease) in accounts payable and other liabilities
|
(517 | ) | 1,294 | (79 | ) | |||||||
Increase (decrease) in investment management fees and expenses payable to affiliate | (5,283 | ) | 536 | 3,903 | ||||||||
Increase (decrease) in accrued interest payable, net
|
(625 | ) | (217 | ) | 8,406 | |||||||
Net cash provided by (used in) operating activities
|
$ | 334,915 | $ | 447,705 | 321,999 | |||||||
Cash Flows From Investing Activities:
|
||||||||||||
RMBS portfolio:
|
||||||||||||
Purchases
|
(124,216 | ) | (4,174,746 | ) | (4,022,951 | ) | ||||||
Sales
|
943,350 | 2,628,994 | 896,261 | |||||||||
Principal payments
|
717,352 | 677,190 | 808,678 | |||||||||
Non-Agency RMBS transferred to consolidated VIEs:
|
||||||||||||
Principal payments
|
505,779 | 668,924 | 619,795 | |||||||||
Securitized loans held for investment:
|
||||||||||||
Purchases
|
(1,531,014 | ) | - | - | ||||||||
Principal payments
|
477,555 | 85,526 | 113,330 | |||||||||
Net cash provided by (used in) investing activities
|
$ | 988,806 | $ | (114,112 | ) | $ | (1,584,887 | ) | ||||
Cash Flows From Financing Activities:
|
||||||||||||
Proceeds from repurchase agreements
|
6,826,546 | 15,247,543 | 15,370,110 | |||||||||
Payments on repurchase agreements
|
(7,971,512 | ) | (14,383,351 | ) | (15,536,715 | ) | ||||||
Net proceeds from common stock offerings
|
- | 22 | 1,313,623 | |||||||||
Payment of deferred financing costs
|
(9,488 | ) | - | - | ||||||||
Proceeds from securitized debt borrowings, collateralized by loans held for investment
|
1,426,983 | - | - | |||||||||
Payments on securitized debt borrowings, collateralized by loans held for investment
|
(470,788 | ) | (80,181 | ) | (106,186 | ) | ||||||
Proceeds from securitized debt borrowings, collateralized by Non-Agency RMBS
|
181,201 | 310,972 | 1,295,657 | |||||||||
Payments on securitized debt borrowings, collateralized by Non-Agency RMBS
|
(481,464 | ) | (645,603 | ) | (574,399 | ) | ||||||
Net proceeds from direct purchase and dividend reinvestment
|
367 | 1,120 | 504 | |||||||||
Common dividends paid
|
(410,712 | ) | (584,989 | ) | (516,812 | ) | ||||||
Net cash provided by (used in) financing activities
|
$ | (908,867 | ) | $ | (134,467 | ) | $ | 1,245,782 | ||||
Net increase (decrease) in cash and cash equivalents
|
$ | 414,854 | 199,126 | (17,106 | ) | |||||||
Cash and cash equivalents at beginning of period
|
206,299 | 7,173 | 24,279 | |||||||||
Cash and cash equivalents at end of period
|
$ | 621,153 | $ | 206,299 | $ | 7,173 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Interest received
|
$ | 530,578 | $ | 640,199 | $ | 521,643 | ||||||
Interest paid
|
$ | 120,734 | $ | 120,688 | $ | 129,419 | ||||||
Taxes paid
|
$ | - | $ | - | $ | 756 | ||||||
Management fees and expenses paid to affiliate
|
$ | 54,808 | $ | 51,383 | $ | 37,212 | ||||||
Non-cash investing activities:
|
||||||||||||
Payable for investments purchased
|
$ | - | $ | - | $ | 127,693 | ||||||
Net change in unrealized gain (loss) on available-for sale securities
|
$ | 556,483 | $ | (246,670 | ) | $ | 670,347 | |||||
Non-cash financing activities:
|
||||||||||||
Common dividends declared, not yet paid
|
$ | 92,431 | $ | 112,937 | $ | 174,445 | ||||||
See accompanying notes to consolidated financial statements.
|
●
|
Agency RMBS
|
●
|
Non-Agency RMBS that meet all of the following conditions at the acquisition date (referred to hereafter as “Non-Agency RMBS of High Credit Quality”):
|
1.
|
Rated AA or higher by a nationally recognized credit rating agency. The Company uses the lowest rating available.
|
2.
|
The Company expects to collect all of the security’s contractual cash flows.
|
3.
|
The security cannot be contractually prepaid such that the Company would not recover substantially all of its recorded investment.
|
1.
|
There is evidence of deterioration in credit quality of the security from its inception.
|
2.
|
It is probable that the Company will be unable to collect all contractual cash flows of the security.
|
1.
|
The security is not of high credit quality (defined as rated below AA or is unrated), or
|
2.
|
The security can contractually be prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment.
|
December 31, 2012
|
|||||||||||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||||||
Principal or
Notional
Value
|
Total
Premium
|
Total
Discount
|
Amortized
Cost
|
Fair Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Net
Unrealized
Gain/(Loss)
|
||||||||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||||||||||
Senior
|
$ | 126 | $ | - | $ | (54 | ) | $ | 72 | $ | 88 | $ | 16 | $ | - | $ | 16 | ||||||||||||||||
Senior interest-only
|
3,012,868 | 135,868 | - | 135,868 | 122,869 | 7,976 | (20,975 | ) | (12,999 | ) | |||||||||||||||||||||||
Subordinated
|
1,057,821 | - | (584,772 | ) | 473,049 | 547,794 | 81,492 | (6,747 | ) | 74,745 | |||||||||||||||||||||||
Subordinated interest-only
|
256,072 | 16,180 | - | 16,180 | 16,253 | 1,466 | (1,393 | ) | 73 | ||||||||||||||||||||||||
RMBS transferred to consolidated variable interest entities ("VIEs")
|
4,610,109 | 8,955 | (2,088,125 | ) | 2,437,048 | 3,274,204 | 837,353 | (197 | ) | 837,156 | |||||||||||||||||||||||
Agency RMBS
|
1,756,580 | 51,502 | - | 1,720,595 | 1,806,697 | 86,419 | (317 | ) | 86,102 | ||||||||||||||||||||||||
Total
|
$ | 10,693,576 | $ | 212,505 | $ | (2,672,951 | ) | $ | 4,782,812 | $ | 5,767,905 | $ | 1,014,722 | $ | (29,629 | ) | $ | 985,093 | |||||||||||||||
December 31, 2011
|
|||||||||||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||||||
Principal or
Notional
Value
|
Total
Premium
|
Total
Discount
|
Amortized
Cost
|
Fair Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Net
Unrealized
Gain/(Loss)
|
||||||||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||||||||||
Senior
|
$ | 1,115 | $ | - | $ | (56 | ) | $ | 1,059 | $ | 1,020 | $ | 2 | $ | (41 | ) | $ | (39 | ) | ||||||||||||||
Senior interest-only
|
3,734,452 | 199,288 | - | 199,288 | 188,679 | 11,308 | (21,917 | ) | (10,609 | ) | |||||||||||||||||||||||
Subordinated
|
1,378,891 | - | (724,739 | ) | 654,152 | 606,895 | 30,997 | (78,254 | ) | (47,257 | ) | ||||||||||||||||||||||
Subordinated interest-only
|
277,560 | 21,910 | - | 21,910 | 22,019 | 1,663 | (1,554 | ) | 109 | ||||||||||||||||||||||||
RMBS transferred to consolidated variable interest entities ("VIEs")
|
5,265,128 | 19,869 | (2,382,995 | ) | 2,902,002 | 3,270,332 | 420,505 | (52,175 | ) | 368,330 | |||||||||||||||||||||||
Agency RMBS
|
3,018,347 | 90,403 | (159 | ) | 3,027,285 | 3,144,531 | 117,601 | (355 | ) | 117,246 | |||||||||||||||||||||||
Total
|
$ | 13,675,493 | $ | 331,470 | $ | (3,107,949 | ) | $ | 6,805,696 | $ | 7,233,476 | $ | 582,076 | $ | (154,296 | ) | $ | 427,780 |
For the Year Ended
|
||||||||
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands)
|
||||||||
Balance at beginning of period
|
$ | 2,342,462 | $ | 2,521,723 | ||||
Purchases
|
86,847 | 139,347 | ||||||
Accretion
|
(364,282 | ) | (392,779 | ) | ||||
Reclassification (to) from non-accretable difference
|
64,017 | 127,978 | ||||||
Sales
|
(21,657 | ) | (53,807 | ) | ||||
Balance at end of period
|
$ | 2,107,387 | $ | 2,342,462 |
For the Year Ended | ||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
(dollars in thousands) | ||||||||||||
Total other-than-temporary impairment losses
|
$ | (47,632 | ) | $ | (241,962 | ) | $ | (40,833 | ) | |||
Portion of loss recognized in other comprehensive income (loss)
|
(84,618 | ) | (115,143 | ) | (91,012 | ) | ||||||
Net other-than-temporary credit impairment losses
|
$ | (132,250 | ) | $ | (357,105 | ) | $ | (131,845 | ) |
For the Year Ended | |||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
|||||||||||
(dollars in thousands) | |||||||||||||
Cumulative credit loss beginning balance | $ | 452,060 | $ | 237,746 | $ | 128,582 | |||||||
Additions: | |||||||||||||
Other-than-temporary impairments not previously recognized
|
98,324 | 268,795 | 55,772 | ||||||||||
Reductions for securities sold during the period
|
(34,577 | ) | (1,300 | ) | (9,704 | ) | |||||||
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments |
33,926
|
88,310 | 76,073 | ||||||||||
Reductions for increases in cash flows expected to be collected over the remaining life of the securities | (39,644 | ) | (141,491 | ) | (12,977 | ) | |||||||
Cumulative credit impairment loss ending balance | $ | 510,089 | $ | 452,060 | $ | 237,746 |
December 31, 2012
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||
Gross Unrealized Gain
Included in Ac
cumulated
Other Comprehensive
Income
|
Gross Unrealized Gain
Included in Accumulated
Deficit
|
Total Gross
Unrealized
Gain
|
Gross Unrealized Loss
Included in Accumulated
Other Comprehensive
Income
|
Gross Unrealized Loss
Included in Accumulated
Deficit
|
Total Gross
Unrealized
Loss
|
||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||
Senior
|
$ | 13 | $ | - | $ | 16 | $ | - | $ | - | $ | - | |||||||||||||
Senior interest-only
|
- | 7,977 | 7,976 | - | (20,975 | ) | (20,975 | ) | |||||||||||||||||
Subordinated
|
81,490 | - | 81,492 | (6,747 | ) | - | (6,747 | ) | |||||||||||||||||
Subordinated interest-only
|
- | 1,467 | 1,466 | - | (1,393 | ) | (1,393 | ) | |||||||||||||||||
RMBS transferred to consolidated VIEs
|
829,315 | 8,045 | 837,353 | (197 | ) | - | (197 | ) | |||||||||||||||||
Agency RMBS
|
86,062 | 357 | 86,419 | - | (317 | ) | (317 | ) | |||||||||||||||||
Total
|
$ | 996,880 | $ | 17,846 | $ | 1,014,722 | $ | (6,944 | ) | $ | (22,685 | ) | $ | (29,629 | ) | ||||||||||
December 31, 2011
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||
Gross Unrealized Gain
Included in
Accumulated
Other Comprehensive
Income
|
Gross Unrealized Gain
Included in
Accumulated
Deficit
|
Total Gross
Unrealized
Gain
|
Gross Unrealized Loss
Included in
Accumulated
Other Comprehensive
Income
|
Gross Unrealized Loss
Included in
Accumulated
Deficit
|
Total Gross
Unrealized
Loss
|
||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||
Senior
|
$ | 2 | $ | - | $ | 2 | $ | (41 | ) | $ | - | $ | (41 | ) | |||||||||||
Senior interest-only
|
- | 11,308 | 11,308 | - | (21,917 | ) | (21,917 | ) | |||||||||||||||||
Subordinated
|
30,997 | - | 30,997 | (78,254 | ) | - | (78,254 | ) | |||||||||||||||||
Subordinated interest-only
|
- | 1,663 | 1,663 | - | (1,554 | ) | (1,554 | ) | |||||||||||||||||
RMBS transferred to consolidated VIEs
|
415,688 | 4,817 | 420,505 | (52,175 | ) | - | (52,175 | ) | |||||||||||||||||
Agency RMBS
|
117,236 | 365 | 117,601 | - | (355 | ) | (355 | ) | |||||||||||||||||
Total
|
$ | 563,923 | $ | 18,153 | $ | 582,076 | $ | (130,470 | ) | $ | (23,826 | ) | $ | (154,296 | ) |
December 31, 2012
|
December 31, 2011
|
|
AAA
|
0.01%
|
0.53%
|
AA
|
0.46%
|
0.14%
|
A
|
0.00%
|
0.45%
|
BBB
|
0.00%
|
1.54%
|
BB
|
1.41%
|
0.00%
|
B
|
1.19%
|
0.43%
|
Below B or not rated
|
96.93%
|
96.91%
|
Total
|
100.00%
|
100.00%
|
December 31, 2012
|
|||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||
Weighted Average Life
|
|||||||||||||||||||||
Less than one year
|
Greater than one
year and less than
five years
|
Greater than five
years and less
than ten years
|
Greater than ten
years
|
Total
|
|||||||||||||||||
Fair value
|
|||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||
Senior
|
$ | - | $ | - | $ | 88 | $ | - | $ | 88 | |||||||||||
Senior interest-only
|
358 | 47,205 | 66,927 | 8,379 | 122,869 | ||||||||||||||||
Subordinated
|
4,092 | 23,948 | 359,310 | 160,444 | 547,794 | ||||||||||||||||
Subordinated interest-only
|
- | - | 9,658 | 6,595 | 16,253 | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
12,118 | 312,690 | 2,055,568 | 893,828 | 3,274,204 | ||||||||||||||||
Agency RMBS
|
146 | 1,802,720 | 3,831 | - | 1,806,697 | ||||||||||||||||
Total fair value
|
$ | 16,714 | $ | 2,186,563 | $ | 2,495,382 | $ | 1,069,246 | $ | 5,767,905 | |||||||||||
Amortized cost
|
|||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||
Senior
|
$ | - | $ | - | $ | 72 | $ | - | $ | 72 | |||||||||||
Senior interest-only
|
657 | 58,037 | 70,044 | 7,130 | 135,868 | ||||||||||||||||
Subordinated
|
2,649 | 20,593 | 318,422 | 131,385 | 473,049 | ||||||||||||||||
Subordinated interest-only
|
- | - | 11,051 | 5,129 | 16,180 | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
11,184 | 248,699 | 1,493,647 | 683,518 | 2,437,048 | ||||||||||||||||
Agency RMBS
|
157 | 1,716,964 | 3,474 | - | 1,720,595 | ||||||||||||||||
Total amortized cost
|
$ | 14,647 | $ | 2,044,293 | $ | 1,896,710 | $ | 827,162 | $ | 4,782,812 | |||||||||||
December 31, 2011
|
|||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||
Weighted Average Life
|
|||||||||||||||||||||
Less than one year
|
Greater than one
year and less than
five years
|
Greater than five
years and less
than ten years
|
Greater than ten
years
|
Total
|
|||||||||||||||||
Fair value
|
|||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||
Senior
|
$ | 892 | $ | - | $ | 128 | $ | - | $ | 1,020 | |||||||||||
Senior interest-only
|
- | 85,633 | 69,204 | 33,842 | 188,679 | ||||||||||||||||
Subordinated
|
6,530 | 101,984 | 259,549 | 238,832 | 606,895 | ||||||||||||||||
Subordinated interest-only
|
- | - | 1,812 | 20,207 | 22,019 | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
25,375 | 338,616 | 2,119,030 | 787,311 | 3,270,332 | ||||||||||||||||
Agency RMBS
|
17,932 | 1,735,106 | 824,645 | 566,848 | 3,144,531 | ||||||||||||||||
Total fair value
|
$ | 50,729 | $ | 2,261,339 | $ | 3,274,368 | $ | 1,647,040 | $ | 7,233,476 | |||||||||||
Amortized cost
|
|||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||
Senior
|
$ | 891 | $ | - | $ | 168 | $ | - | $ | 1,059 | |||||||||||
Senior interest-only
|
- | 95,974 | 69,953 | 33,361 | 199,288 | ||||||||||||||||
Subordinated
|
5,616 | 98,657 | 300,489 | 249,390 | 654,152 | ||||||||||||||||
Subordinated interest-only
|
- | - | 1,946 | 19,964 | 21,910 | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
32,806 | 296,144 | 1,827,000 | 746,052 | 2,902,002 | ||||||||||||||||
Agency RMBS
|
17,610 | 1,663,917 | 798,632 | 547,126 | 3,027,285 | ||||||||||||||||
Total amortized cost
|
$ | 56,923 | $ | 2,154,692 | $ | 2,998,188 | $ | 1,595,893 | $ | 6,805,696 |
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands) | ||||||||
Balance, beginning of period
|
$ | 256,632 | $ | 349,112 | ||||
Purchases
|
1,531,014 | - | ||||||
Principal paydowns
|
(477,555 | ) | (85,526 | ) | ||||
Net periodic amortization (accretion)
|
(9,592 | ) | (1,663 | ) | ||||
Change to loan loss provision
|
(368 | ) | (5,291 | ) | ||||
Balance, end of period
|
$ | 1,300,131 | $ | 256,632 |
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands)
|
||||||||
Securitized loans, at amortized cost
|
$ | 1,311,755 | $ | 270,570 | ||||
Less: allowance for loan losses
|
11,624 | 13,938 | ||||||
Securitized loans held for investment
|
$ | 1,300,131 | $ | 256,632 |
For the Year Ended | ||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
(dollars in thousands) | ||||||||||||
Balance, beginning of period
|
$ | 13,938 | $ | 11,006 | $ | 4,551 | ||||||
Provision for loan losses
|
368 | 5,291 | 7,109 | |||||||||
Charge-offs
|
(2,682 | ) | (2,359 | ) | (654 | ) | ||||||
Balance, end of period
|
$ | 11,624 | $ | 13,938 | $ | 11,006 |
30 Days
Delinquent
|
60 Days
Delinquent
|
90+ Days
Delinquent
|
Bankruptcy
|
Foreclosure
|
REO
|
Total
|
|
(dollars in thousands)
|
|||||||
December 31, 2012
|
$3,110
|
$1,186
|
$4,045
|
$0
|
$4,247
|
$1,390
|
$13,978
|
December 31, 2011
|
$1,342
|
$1,828
|
$2,338
|
$1,659
|
$3,626
|
$5,201
|
$15,994
|
Number of Loans
Modified
During
Period
|
Unpaid Principal
Balance of Modified
Loans
(Pre-
modification)
|
Unpaid Principal
Balance of Modified
Loans (Post-
modification)
|
Amortized Cost of
Modified Loans
|
Amortized Cost of
Modified Loans For Which
There is an Allowance for
Loan Losses
|
Amortized Cost of Modified
Loans For Which There is
No Allowance for Loan
Losses
|
|
(dollars in thousands)
|
||||||
Year Ended
|
||||||
December 31, 2012
|
9
|
$5,163
|
$5,312
|
$5,256
|
$5,256
|
$0
|
December 31, 2011
|
7
|
$5,496
|
$5,867
|
$5,931
|
$5,931
|
$0
|
December 31, 2012
|
|||||||||||||
Level 1
|
Level 2
|
Level 3
|
|||||||||||
(dollars in thousands)
|
|||||||||||||
Assets:
|
|||||||||||||
Non-Agency RMBS
|
|||||||||||||
Senior
|
$ | - | $ | - | $ | 88 | |||||||
Senior interest-only
|
- | - | 122,869 | ||||||||||
Subordinated
|
- | - | 547,794 | ||||||||||
Subordinated interest-only
|
- | - | 16,253 | ||||||||||
RMBS transferred to consolidated VIEs
|
- | - | 3,274,204 | ||||||||||
Agency mortgage-backed securities
|
- | 1,806,697 | - | ||||||||||
Liabilities:
|
|||||||||||||
Interest rate swaps
|
- | 53,939 | - | ||||||||||
Total
|
$ | - | $ | 1,860,636 | $ | 3,961,208 | |||||||
December 31, 2011
|
|||||||||||||
Level 1
|
Level 2
|
Level 3
|
|||||||||||
(dollars in thousands)
|
|||||||||||||
Assets:
|
|||||||||||||
Non-Agency RMBS
|
|||||||||||||
Senior
|
$ | - | $ | - | $ | 1,020 | |||||||
Senior interest-only
|
- | - | 188,679 | ||||||||||
Subordinated
|
- | - | 606,895 | ||||||||||
Subordinated interest-only
|
- | - | 22,019 | ||||||||||
RMBS transferred to consolidated VIEs
|
- | - | 3,270,332 | ||||||||||
Agency mortgage-backed securities
|
- | 3,144,531 | - | ||||||||||
Liabilities:
|
|||||||||||||
Interest rate swaps
|
- | 44,467 | - | ||||||||||
Total
|
$ | - | $ | 3,188,998 | $ | 4,088,945 |
Fair Value Reconciliation, Level 3
|
||||||||
(dollars in thousands)
|
||||||||
For the Year Ended
|
||||||||
December 31, 2012
|
December 31, 2011
|
|||||||
Non-Agency RMBS
|
||||||||
Beginning balance Level 3 assets
|
$ | 4,088,945 | $ | 5,529,109 | ||||
Transfers in to Level 3 assets
|
- | - | ||||||
Transfers out of Level 3 assets
|
- | - | ||||||
Purchases
|
122,509 | 446,207 | ||||||
Principal payments
|
(516,370 | ) | (695,277 | ) | ||||
Sales
|
(328,261 | ) | (631,642 | ) | ||||
Accretion of purchase discounts
|
98,804 | 81,224 | ||||||
Gains (losses) included in net income
|
||||||||
Other than temporary credit impairment losses
|
(132,250 | ) | (357,105 | ) | ||||
Realized gains (losses) on sales
|
48,435 | 445 | ||||||
Net unrealized gains (losses) on interest-only RMBS
|
804 | (14,717 | ) | |||||
Gains (losses) included in other comprehensive income
|
||||||||
Total unrealized gains (losses) for the period
|
578,592 | (269,299 | ) | |||||
Ending balance Level 3 assets
|
$ | 3,961,208 | $ | 4,088,945 |
December 31, 2012
|
|||||
Significant Inputs
|
|||||
Weighted
Average Discount
Rate
|
Prepayment
Speed (CPR)
|
Cumulative
Default Rate
|
Loss Severity
|
||
Range
|
|||||
Non-Agency RMBS
|
|||||
Senior
|
7.5%
|
11% - 11%
|
0% - 3%
|
50% - 58%
|
|
Senior interest-only
|
13.9%
|
1% - 25%
|
0% - 25%
|
50% - 85%
|
|
Subordinated
|
25.9%
|
1% - 18%
|
0% - 21%
|
50% - 85%
|
|
Subordinated interest-only
|
13.3%
|
4% - 11%
|
0% - 21%
|
50% - 68%
|
|
RMBS transferred to consolidated VIEs
|
5.8%
|
1% - 15%
|
0% - 36%
|
50% - 85%
|
December 31, 2012
|
December 31, 2011
|
||||||||||||||||||
Level in Fair
Value
Hierarchy
|
Carrying
Amount
|
Fair Value
|
Carrying
Amount
|
Fair Value
|
|||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Non-Agency RMBS
|
3 | $ | 3,961,208 | $ | 3,961,208 | $ | 4,088,945 | $ | 4,088,945 | ||||||||||
Agency RMBS
|
2 | 1,806,697 | 1,806,697 | 3,144,531 | 3,144,531 | ||||||||||||||
Securitized loans held for investment
|
3 | 1,300,131 | 1,320,696 | 256,632 | 237,977 | ||||||||||||||
Repurchase agreements
|
2 | (1,528,025 | ) | (1,531,511 | ) | (2,672,989 | ) | (2,677,402 | ) | ||||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
3 | (1,336,261 | ) | (1,334,551 | ) | (1,630,276 | ) | (1,546,237 | ) | ||||||||||
Securitized debt, collateralized by loans held for investment
|
3 | (1,169,710 | ) | (1,194,747 | ) | (212,778 | ) | (222,921 | ) | ||||||||||
Interest rate swaps
|
2 | (53,939 | ) | (53,939 | ) | (44,467 | ) | (44,467 | ) |
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands) | ||||||||
Overnight
|
$ | - | $ | - | ||||
1-29 days
|
732,809 | 1,368,945 | ||||||
30 to 59 days
|
325,915 | 836,007 | ||||||
60 to 89 days
|
- | - | ||||||
90 to 119 days
|
211,137 | 171,836 | ||||||
Greater than or equal to 120 days
|
258,164 | 296,201 | ||||||
Total
|
$ | 1,528,025 | $ | 2,672,989 |
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands) | ||||||||
Within One Year
|
$ | 658,423 | $ | 488,886 | ||||
One to Three Years
|
793,150 | 598,921 | ||||||
Three to Five Years
|
430,993 | 276,965 | ||||||
Greater Than or Equal to Five Years
|
555,717 | 404,386 | ||||||
Total
|
$ | 2,438,283 | $ | 1,769,158 |
December 31, 2012
|
December 31, 2011
|
|||||||
(dollars in thousands) | ||||||||
Assets
|
||||||||
Non-Agency RMBS transferred to consolidated VIEs
|
$ | 3,274,204 | $ | 3,270,332 | ||||
Securitized loans held for investment
|
1,300,131 | 256,632 | ||||||
Accrued interest receivable
|
24,082 | 26,616 | ||||||
Liabilities
|
||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
$ | 1,336,261 | $ | 1,630,276 | ||||
Securitized debt, collateralized by loans held for investment
|
1,169,710 | 212,778 | ||||||
Accrued interest payable
|
8,358 | 8,130 |
For the Year Ended | ||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
(dollars in thousands) | ||||||||||||
Interest income, Assets of consolidated VIEs
|
$ | 417,351 | $ | 450,996 | $ | 472,740 | ||||||
Interest expense, Non-recourse liabilities of VIEs
|
(115,880 | ) | (122,917 | ) | (138,699 | ) | ||||||
Net interest income
|
$ | 301,471 | $ | 328,079 | $ | 334,041 | ||||||
Total other-than-temporary impairment losses
|
$ | (7,619 | ) | $ | (113,047 | ) | $ | (19,583 | ) | |||
Portion of loss recognized in other comprehensive income (loss)
|
(76,699 | ) | $ | (145,512 | ) | $ | (68,407 | ) | ||||
Net other-than-temporary credit impairment losses
|
$ | (84,318 | ) | $ | (258,559 | ) | $ | (87,990 | ) |
For the Year Ended | ||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
(dollars in thousands) | ||||||||||||
Amortization of deferred financing costs
|
8,546 | $ | 1,733 | 1,499 | ||||||||
Accretion (amortization) of securitized debt discounts/premiums, net
|
6,985 | 12,551 | 16,655 | |||||||||
Payment of deferred financing costs
|
(9,488 | ) | - | (5,039 | ) | |||||||
Principal payments, Non-Agency RMBS transferred to consolidated VIE's
|
505,779 | 668,924 | 619,795 | |||||||||
Principal payments, Securitized loans held for investment
|
477,555 | 85,526 | 113,330 | |||||||||
Proceeds from securitized debt borrowings, collateralized by loans held for investment
|
1,426,983 | - | - | |||||||||
Payments on securitized debt borrowings, collateralized by loans held for investment
|
(470,788 | ) | (80,181 | ) | (106,186 | ) | ||||||
Proceeds from securitized debt borrowings, collateralized by Non-Agency RMBS
|
181,201 | 310,972 | 1,295,657 | |||||||||
Payments on securitized debt borrowings, collateralized by Non-Agency RMBS
|
(481,464 | ) | (645,603 | ) | (574,399 | ) | ||||||
Decrease (increase) in accrued interest receivable
|
2,534 | (4,832 | ) | 27,986 | ||||||||
Increase (decrease) in accrued interest payable
|
228 | (1,836 | ) | 8,032 | ||||||||
Net cash provided by/(used in) consolidated VIEs
|
$ | 1,648,071 | $ | 347,254 | $ | 1,397,330 |
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Assets
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 72 | $ | 85 | $ | 168 | $ | 127 | ||||||||
Senior interest-only
|
- | 128 | 128 | 266 | ||||||||||||
Subordinated
|
581 | 2,266 | 4,651 | 4,858 | ||||||||||||
Agency RMBS
|
1,198 | 1,001 | 1,890 | 2,273 | ||||||||||||
Total
|
$ | 1,851 | $ | 3,480 | $ | 6,837 | $ | 7,524 |
Location on Consolidated
Statements of Financial
Condition
|
Notional Amount
|
Net Estimated Fair
Value/Carrying Value
|
Net Estimated Fair Value
of Agency RMBS
Pledged as Collateral
|
||||||||||
(dollars in thousands) | |||||||||||||
December 31, 2012
|
Liabilities
|
$ | 1,355,000 | $ | (53,939 | ) | $ | 60,382 | |||||
December 31, 2011
|
Liabilities
|
$ | 950,000 | $ | (44,467 | ) | $ | 46,647 |
Location on Consolidated Statements of Operations and
Comprehensive Income (Loss)
|
||||||||
Net Unrealized Gains (Losses)
on Interest Rate Swaps
|
Net Realized Gains (Losses)
on Interest Rate Swaps
|
|||||||
(dollars in thousands)
|
||||||||
For the Year Ended:
|
||||||||
December 31, 2012
|
$ | (9,473 | ) | $ | (20,223 | ) | ||
December 31, 2011
|
$ | (34,478 | ) | $ | (15,929 | ) | ||
December 31, 2010
|
$ | (9,989 | ) | $ | (5,788 | ) |
December 31, 2012
|
||||||||||||||||
Interest Rate Swaps - Asset
|
Interest Rate Swaps - Liability
|
|||||||||||||||
Notional
|
Unrealized Gains
|
Notional
|
Unrealized Losses
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Gross Amounts
|
$ | - | $ | - | $ | 1,355,000 | $ | 53,939 | ||||||||
Amounts Offset
|
- | - | - | - | ||||||||||||
Netted Amounts
|
$ | - | $ | - | $ | 1,355,000 | $ | 53,939 | ||||||||
December 31, 2011
|
||||||||||||||||
Interest Rate Swaps - Asset
|
Interest Rate Swaps - Liability
|
|||||||||||||||
Notional
|
Unrealized Gains
|
Notional
|
Unrealized Losses
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Gross Amounts
|
$ | - | $ | - | $ | 950,000 | $ | 44,467 | ||||||||
Amounts Offset
|
- | - | - | - | ||||||||||||
Netted Amounts
|
$ | - | $ | - | $ | 950,000 | $ | 44,467 |
For the Year Ended | ||||||||||||
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||||||
(dollars in thousands) | ||||||||||||
Numerator:
|
||||||||||||
Net income
|
$ | 327,767 | $ | 137,329 | $ | 248,405 | ||||||
Effect of dilutive securities:
|
- | - | - | |||||||||
Dilutive net income available to stockholders
|
$ | 327,767 | $ | 137,329 | $ | 248,405 | ||||||
Denominator:
|
||||||||||||
Weighted average basic shares
|
1,026,831,033 | 1,026,365,197 | 821,675,803 | |||||||||
Effect of dilutive securities
|
668,222 | 806,190 | 941,516 | |||||||||
Weighted average dilutive shares
|
1,027,499,255 | 1,027,171,387 | 822,617,319 | |||||||||
Net income per average share attributable to common stockholders - Basic | $ | 0.32 | $ | 0.13 | $ | 0.30 | ||||||
Net income per average share attributable to common stockholders - Diluted | $ | 0.32 | $ | 0.13 | $ | 0.30 |
For the Year Ended
|
||||||||||||||||
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Number of Shares
|
Weighted Average
Grant Date Fair
Value
|
Number of Shares
|
Weighted Average
Grant Date Fair
Value
|
|||||||||||||
Unvested shares outstanding - beginning of period
|
758,400 | 17.72 | 884,800 | 17.72 | ||||||||||||
Granted
|
111,528 | 2.69 | 98,544 | 2.74 | ||||||||||||
Vested
|
(264,232 | ) | 17.72 | (222,994 | ) | 11.16 | ||||||||||
Forfeited
|
(19,696 | ) | 17.72 | (1,950 | ) | 17.72 | ||||||||||
Unvested shares outstanding - end of period
|
586,000 | 17.72 | 758,400 | 17.72 |
December 31, 2012
|
September 30, 2012
|
June 30, 2012
|
March 31, 2012
|
|||||||||||||
(dollars in thousands, except per share date) | ||||||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 133,552 | $ | 144,696 | $ | 161,524 | $ | 149,668 | ||||||||
Less interest expense
|
(33,874 | ) | (34,356 | ) | (21,953 | ) | (36,375 | ) | ||||||||
Net interest income (expense)
|
99,678 | 110,340 | 139,571 | 113,293 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(368 | ) | (2,713 | ) | (12,474 | ) | (32,077 | ) | ||||||||
Portion of loss recognized in other comprehensive income (loss)
|
(7,817 | ) | (7,301 | ) | (53,213 | ) | (16,287 | ) | ||||||||
Net other-than-temporary credit impairment losses
|
(8,185 | ) | (10,014 | ) | (65,687 | ) | (48,364 | ) | ||||||||
Net gains (losses) on interest rate swaps
|
(199 | ) | (9,725 | ) | (16,186 | ) | (3,586 | ) | ||||||||
Net unrealized gains (losses) on interest-only RMBS
|
811 | (15,393 | ) | (2,532 | ) | 17,947 | ||||||||||
Net realized gains (losses) on sales of investments
|
1 | 69,155 | - | 16,010 | ||||||||||||
Total other expenses
|
13,422 | 16,295 | 14,385 | 15,065 | ||||||||||||
Net income (loss)
|
$ | 78,685 | $ | 128,068 | $ | 40,781 | $ | 80,233 | ||||||||
Net income (loss) per share-basic and diluted
|
$ | 0.08 | $ | 0.12 | $ | 0.04 | $ | 0.08 |
December 31, 2011
|
September 30, 2011
|
June 30, 2011
|
March 31, 2011
|
|||||||||||||
(dollars in thousands, except per share date) | ||||||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 167,541 | $ | 185,581 | $ | 179,859 | $ | 172,043 | ||||||||
Less interest expense
|
(30,696 | ) | (32,792 | ) | (35,793 | ) | (35,577 | ) | ||||||||
Net interest income (expense)
|
136,845 | 152,789 | 144,066 | 136,466 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(80,038 | ) | (78,950 | ) | (57,926 | ) | (25,048 | ) | ||||||||
Portion of loss recognized in other comprehensive income (loss)
|
(31,154 | ) | (71,610 | ) | (4,244 | ) | (8,135 | ) | ||||||||
Net other-than-temporary credit impairment losses
|
(111,192 | ) | (150,560 | ) | (62,170 | ) | (33,183 | ) | ||||||||
Net gains (losses) on interest rate swaps
|
(3,782 | ) | (29,812 | ) | (23,797 | ) | 6,984 | |||||||||
Net unrealized gains (losses) on interest-only RMBS
|
(12,934 | ) | (17,600 | ) | 11,883 | 4,106 | ||||||||||
Net realized gains (losses) on sales of investments
|
52,566 | 58 | (913 | ) | 2,642 | |||||||||||
Total other expenses
|
18,794 | 15,082 | 14,972 | 15,679 | ||||||||||||
Net income (loss)
|
$ | 42,748 | $ | (60,036 | ) | $ | 53,979 | $ | 100,638 | |||||||
Net income (loss) per share-basic and diluted
|
$ | 0.04 | $ | (0.06 | ) | $ | 0.05 | $ | 0.10 |
By: | /s/ Matthew Lambiase | ||
Matthew Lambiase | |||
Chief Executive Officer and President | |||
December 31, 2013 |
Signatures
|
Title
|
Date
|
||
/s/ Matthew Lambiase
|
Chief Executive Officer, President, and
Director (Principal Executive Officer)
|
December 31, 2013
|
||
Matthew Lambiase
|
||||
/s/ Robert Colligan
|
Chief Financial Officer (Principal Financial
and Accounting Officer)
|
December 31, 2013
|
||
Robert Colligan
|
||||
/s/ Mark Abrams
|
Director
|
December 31, 2013
|
||
Mark Abrams
|
||||
/s/ Paul A. Keenan
|
Director
|
December 31, 2013
|
||
Paul A. Keenan
|
||||
/s/ Paul Donlin
|
Director
|
December 31, 2013
|
||
Paul Donlin
|
/s/ Gerard Creagh
|
Director
|
December 31, 2013
|
||
Gerard Creagh
|
||||
/s/ Dennis Mahoney
|
Director
|
December 31, 2013
|
||
Dennis Mahoney
|
||||
/s/ John P. Reilly
|
Director
|
December 31, 2013
|
||
John P. Reilly
|
1.
|
I have reviewed this annual report on Form 10-K of Chimera Investment Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Matthew Lambiase | |
Matthew Lambiase | |
Chief Executive Officer and President (Principal Executive Officer)
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1.
|
I have reviewed this annual report on Form 10-K of Chimera Investment Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Robert Colligan | |
Robert Colligan | |
Chief Financial Officer (Principal Financial Officer) |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
/s/ Matthew Lambiase | |
Matthew Lambiase | |
Chief Executive Officer and President | |
December 31, 2013 |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
/s/ Robert Colligan
|
|
Robert Colligan
|
|
Chief Financial Officer
|
|
December 31, 2013 |