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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PAGE
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PART I
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ITEM 1.
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BUSINESS
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3 |
ITEM 1A.
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RISK FACTORS
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13
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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49
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ITEM 2.
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PROPERTIES
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49
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ITEM 3.
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LEGAL PROCEEDINGS
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49
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ITEM 4.
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MINE SAFETY DISCLOSURES
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50
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PART II
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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51
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ITEM 6.
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SELECTED FINANCIAL DATA
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53
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ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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54
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ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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82
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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87
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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87
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ITEM 9A.
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CONTROLS AND PROCEDURES
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87
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ITEM 9B.
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OTHER INFORMATION
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89
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PART III
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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89
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ITEM 11.
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EXECUTIVE COMPENSATION
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95
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
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101
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
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104
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ITEM 14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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106
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PART IV
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ITEM 15.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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108
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FINANCIAL STATEMENTS
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F-1
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SIGNATURES
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S-1
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EXHIBITS
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●
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our business and investment strategy;
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our ability to maintain existing financing arrangements and our ability to obtain future financing arrangements;
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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
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Futures
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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 to offset interest rate losses may be 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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o
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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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o
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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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o
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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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o
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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, 2013
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$ | 3.19 | $ | 2.93 | $ | 3.10 | ||||||
Quarter Ended September 30, 2013
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$ | 3.07 | $ | 2.82 | $ | 3.04 | ||||||
Quarter Ended June 30, 2013
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$ | 3.32 | $ | 2.90 | $ | 3.00 | ||||||
Quarter Ended March 31, 2013
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$ | 3.28 | $ | 2.67 | $ | 3.19 | ||||||
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 |
Common Dividends Declared Per Share
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Quarter Ended December 31, 2013
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$ | 0.29 | ||
Quarter Ended September 30, 2013
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$ | 0.09 | ||
Quarter Ended June 30, 2013
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$ | 0.09 | ||
Quarter Ended March 31, 2013
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$ | 0.09 | ||
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 |
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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12/31/2013
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|||||||
Chimera
|
100
|
125
|
155
|
114
|
135
|
179
|
||||||
S&P 500 Index
|
100
|
126
|
145
|
148
|
171
|
226
|
||||||
BBG REIT Index
|
100
|
125
|
154
|
152
|
180
|
177
|
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
|
Other Asset-Backed Securities
|
● |
CMBS
|
● |
Debt and equity tranches of CDOs
|
|
● |
Consumer and non-consumer ABS, including investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes
|
|
Hedging Instruments
|
● |
Swaps
|
● |
Swaptions
|
|
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Futures
|
|
● |
Index options
|
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Mortgage options
|
Net Income (Loss)
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(dollars in thousands)
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For the Year Ended
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||||||||||||
December 31, 2013
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December 31, 2012
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December 31, 2011
|
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Net Interest Income:
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Interest income
|
$ | 140,224 | $ | 172,089 | $ | 254,028 | ||||||
Interest expense
|
(6,770 | ) | (10,678 | ) | (11,941 | ) | ||||||
Interest income, Assets of consolidated VIEs
|
371,559 | 417,351 | 450,996 | |||||||||
Interest expense, Non-recourse liabilities of consolidated VIEs
|
(95,229 | ) | (115,880 | ) | (122,917 | ) | ||||||
Net interest income (expense)
|
409,784 | 462,882 | 570,166 | |||||||||
Other-than-temporary impairments:
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|
|||||||||||
Total other-than-temporary impairment losses
|
(4,356 | ) | (47,632 | ) | (241,962 | ) | ||||||
Portion of loss recognized in other comprehensive income (loss)
|
(40,811 | ) | (84,618 | ) | (115,143 | ) | ||||||
Net other-than-temporary credit impairment losses
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(45,167 | ) | (132,250 | ) | (357,105 | ) | ||||||
Other gains (losses):
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Net unrealized gains (losses) on derivatives
|
34,369 | (9,473 | ) | (34,478 | ) | |||||||
Net realized gains (losses) on derivatives
|
(7,713 | ) | (20,223 | ) | (15,929 | ) | ||||||
Gains (losses) on derivatives
|
26,656 | (29,696 | ) | (50,407 | ) | |||||||
Net unrealized gains (losses) on interest-only RMBS
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(44,277 | ) | 833 | (14,545 | ) | |||||||
Net realized gains (losses) on sales of investments
|
68,107 | 85,166 | 54,353 | |||||||||
Realized losses on principal write-downs of Non-Agency RMBS
|
(18,316 | ) | - | - | ||||||||
Total other gains (losses)
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32,170 | 56,303 | (10,599 | ) | ||||||||
Net investment income (loss)
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396,787 | 386,935 | 202,462 | |||||||||
Other expenses:
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Management fees
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25,952 | 49,525 | 51,969 | |||||||||
Expense recoveries from Manager
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(6,788 | ) | (4,712 | ) | - | |||||||
Net Management fees
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19,164 | 44,813 | 51,969 | |||||||||
Provision for loan losses, net
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(1,799 | ) | 368 | 5,291 | ||||||||
General and administrative expenses
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16,734 | 13,986 | 7,267 | |||||||||
Total other expenses
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34,099 | 59,167 | 64,527 | |||||||||
Income (loss) before income taxes
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362,688 | 327,768 | 137,935 | |||||||||
Income taxes
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2 | 1 | 606 | |||||||||
Net income (loss)
|
$ | 362,686 | $ | 327,767 | $ | 137,329 | ||||||
Net income (loss) per share available to common shareholders:
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Basic
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$ | 0.35 | $ | 0.32 | $ | 0.13 | ||||||
Diluted
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$ | 0.35 | $ | 0.32 | $ | 0.13 | ||||||
Weighted average number of common shares outstanding:
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||||||||||||
Basic
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1,027,094,379 | 1,026,831,033 | 1,026,365,197 | |||||||||
Diluted
|
1,027,570,343 | 1,027,499,255 | 1,027,171,387 |
December 31, 2013
|
||||||||||||
(dollars in thousands, except per share data)
|
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GAAP Book Value
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Adjustments
|
Estimated Economic Book Value
|
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Assets:
|
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Non-Agency RMBS, at fair value
|
||||||||||||
Senior
|
$ | 89,687 | $ | - | $ | 89,687 | ||||||
Senior interest-only
|
229,065 | - | 229,065 | |||||||||
Subordinated
|
457,569 | - | 457,569 | |||||||||
Subordinated interest-only
|
16,571 | - | 16,571 | |||||||||
RMBS transferred to consolidated VIEs
|
2,981,571 | (1,352,028 | ) | 1,629,543 | ||||||||
Agency RMBS, at fair value
|
1,997,578 | - | 1,997,578 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
|
783,484 | (689,507 | ) | 93,977 | ||||||||
Other assets
|
380,556 | - | 380,556 | |||||||||
Total assets
|
$ | 6,936,081 | $ | (2,041,535 | ) | $ | 4,894,546 | |||||
Liabilities:
|
||||||||||||
Repurchase agreements, Agency RMBS
|
1,658,561 | - | 1,658,561 | |||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
933,732 | (933,732 | ) | - | ||||||||
Securitized debt, collateralized by loans held for investment
|
669,981 | (669,981 | ) | - | ||||||||
Other liabilities
|
342,297 | - | 342,297 | |||||||||
Total liabilities
|
3,604,571 | (1,603,713 | ) | 2,000,858 | ||||||||
Total stockholders' equity
|
3,331,510 | (437,822 | ) | 2,893,688 | ||||||||
Total liabilities and stockholders' equity
|
$ | 6,936,081 | $ | (2,041,535 | ) | $ | 4,894,546 | |||||
Book Value Per Share
|
$ | 3.24 | $ | (0.42 | ) | $ | 2.82 |
December 31, 2012
|
||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||
GAAP Book Value
|
Adjustments
|
Estimated Economic Book Value
|
||||||||||
Assets:
|
||||||||||||
Non-Agency RMBS, at fair value
|
||||||||||||
Senior
|
$ | 88 | $ | - | $ | 88 | ||||||
Senior interest-only
|
122,869 | - | 122,869 | |||||||||
Subordinated
|
547,794 | - | 547,794 | |||||||||
Subordinated interest-only
|
16,253 | - | 16,253 | |||||||||
RMBS transferred to consolidated VIEs
|
3,274,204 | (1,730,422 | ) | 1,543,782 | ||||||||
Agency RMBS, at fair value
|
1,806,697 | - | 1,806,697 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
|
1,300,131 | (1,191,607 | ) | 108,524 | ||||||||
Other assets
|
674,453 | - | 674,453 | |||||||||
Total assets
|
$ | 7,742,489 | $ | (2,922,029 | ) | $ | 4,820,460 | |||||
Liabilities:
|
||||||||||||
Repurchase agreements, Agency RMBS
|
1,528,025 | - | 1,528,025 | |||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
1,336,261 | (1,336,261 | ) | - | ||||||||
Securitized debt, collateralized by loans held for investment
|
1,169,710 | (1,169,710 | ) | - | ||||||||
Other liabilities
|
166,014 | - | 166,014 | |||||||||
Total liabilities
|
4,200,010 | (2,505,971 | ) | 1,694,039 | ||||||||
Total stockholders' equity
|
3,542,479 | (416,058 | ) | 3,126,421 | ||||||||
Total liabilities and stockholders' equity
|
$ | 7,742,489 | $ | (2,922,029 | ) | $ | 4,820,460 | |||||
Book Value Per Share
|
$ | 3.45 | $ | (0.40 | ) | $ | 3.05 |
December 31, 2013
|
December 31, 2012
|
|||||||
Interest earning assets at period-end (1)
|
$ | 6,555,525 | $ | 7,068,036 | ||||
Interest bearing liabilities at period-end
|
$ | 3,262,274 | $ | 4,033,996 | ||||
Leverage at period-end
|
1.0:1
|
1.1:1
|
||||||
Leverage at period-end (recourse)
|
0.5:1
|
0.4:1
|
||||||
Portfolio Composition, at amortized cost
|
||||||||
Non-Agency RMBS
|
49.8 | % | 50.3 | % | ||||
Senior
|
1.5 | % | 0.0 | % | ||||
Senior, interest only
|
5.1 | % | 2.3 | % | ||||
Subordinated
|
6.0 | % | 7.8 | % | ||||
Subordinated, interest only
|
0.3 | % | 0.3 | % | ||||
RMBS transferred to consolidated VIEs
|
36.9 | % | 39.9 | % | ||||
Agency RMBS
|
36.1 | % | 28.2 | % | ||||
Securitized loans
|
14.1 | % | 21.5 | % | ||||
Fixed-rate percentage of portfolio
|
76.3 | % | 75.5 | % | ||||
Adjustable-rate percentage of portfolio
|
23.7 | % | 24.5 | % | ||||
Annualized yield on average interest earning assets for the year ended
|
8.81 | % | 8.59 | % | ||||
Annualized cost of funds on average borrowed funds for the year ended (2)
|
3.51 | % | 3.29 | % | ||||
(1) Excludes interest income on cash and cash equivalents.
|
||||||||
(2) Includes the effect of realized losses on interest rate swaps and US Treasury futures.
|
Accretable Discount
|
||||||||||||||||||||
For the Quarter Ended
|
||||||||||||||||||||
December 31, 2013
|
September 30, 2013
|
June 30, 2013
|
March 31, 2013
|
December 31, 2012
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Balance, beginning of period
|
$ | 1,012,513 | $ | 1,026,921 | $ | 1,088,157 | $ | 1,115,268 | $ | 1,118,478 | ||||||||||
Accretion of discount
|
(40,812 | ) | (40,001 | ) | (40,042 | ) | (39,326 | ) | (40,282 | ) | ||||||||||
Purchases
|
- | - | - | 935 | - | |||||||||||||||
Sales
|
- | (6,655 | ) | (46,125 | ) | (17 | ) | 8 | ||||||||||||
Transfers from credit reserve
|
28,962 | 35,054 | 30,744 | 18,419 | 39,475 | |||||||||||||||
Transfers to credit reserve
|
(3,969 | ) | (2,806 | ) | (5,813 | ) | (7,122 | ) | (2,411 | ) | ||||||||||
Balance, end of period
|
$ | 996,694 | $ | 1,012,513 | $ | 1,026,921 | $ | 1,088,157 | $ | 1,115,268 |
Non-Accretable Difference
|
||||||||||||||||||||
For the Quarter Ended
|
||||||||||||||||||||
December 31, 2013
|
September 30, 2013
|
June 30, 2013
|
March 31, 2013
|
December 31, 2012
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Balance, beginning of period
|
$ | 1,261,945 | $ | 1,370,792 | $ | 1,464,558 | $ | 1,540,780 | $ | 1,655,222 | ||||||||||
Principal Writedowns
|
(41,708 | ) | (93,054 | ) | (68,835 | ) | (72,055 | ) | (85,555 | ) | ||||||||||
Purchases
|
- | - | - | 935 | - | |||||||||||||||
Sales
|
- | - | - | 32 | (8 | ) | ||||||||||||||
Net other-than-temporary credit impairment losses
|
22,549 | 16,455 | - | 6,163 | 8,185 | |||||||||||||||
Transfers from credit reserve
|
(28,962 | ) | (35,054 | ) | (30,744 | ) | (18,419 | ) | (39,475 | ) | ||||||||||
Transfers to credit reserve
|
3,969 | 2,806 | 5,813 | 7,122 | 2,411 | |||||||||||||||
Balance, end of period
|
$ | 1,217,793 | $ | 1,261,945 | $ | 1,370,792 | $ | 1,464,558 | $ | 1,540,780 |
●
|
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 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.
|
Average
Earning
Assets Held (1)
|
Interest
Earned on
Assets (1)
|
Yield on
Average
Interest
Earning Assets
|
Average Debt Balance
|
Economic
Interest
Expense (2)
|
Economic
Average Cost
of Funds
|
Economic
Net
Interest
Income (1) (2)
|
Net Interest
Rate Spread
|
|||||||||||||||||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||||||||||||||||||||||
For The Year Ended December 31, 2013
|
$ | 5,805,591 | $ | 511,745 | 8.81 | % | $ | 3,527,712 | $ | 123,788 | 3.51 | % | $ | 387,957 | 5.30 | % | ||||||||||||||||
For The Year Ended December 31, 2012
|
$ | 6,862,452 | $ | 589,420 | 8.59 | % | $ | 4,466,695 | $ | 146,781 | 3.29 | % | $ | 442,639 | 5.30 | % | ||||||||||||||||
For the Year Ended December 31, 2011
|
$ | 8,483,420 | $ | 705,010 | 8.31 | % | $ | 5,443,234 | $ | 150,787 | 2.77 | % | $ | 554,223 | 5.54 | % | ||||||||||||||||
For The Quarter Ended December 31, 2013
|
$ | 5,667,515 | $ | 128,054 | 9.04 | % | $ | 3,285,584 | $ | 25,372 | 3.09 | % | $ | 102,682 | 5.95 | % | ||||||||||||||||
For The Quarter Ended September 30, 2013
|
$ | 5,836,025 | $ | 130,357 | 8.93 | % | $ | 3,360,508 | $ | 32,055 | 3.82 | % | $ | 98,302 | 5.11 | % | ||||||||||||||||
For The Quarter Ended June 30, 2013
|
$ | 5,799,179 | $ | 127,553 | 8.80 | % | $ | 3,516,698 | $ | 32,002 | 3.64 | % | $ | 95,551 | 5.16 | % | ||||||||||||||||
For The Quarter Ended March 31, 2013
|
$ | 5,866,501 | $ | 125,781 | 8.58 | % | $ | 3,827,635 | $ | 34,359 | 3.59 | % | $ | 91,422 | 4.99 | % | ||||||||||||||||
(1) Excludes interest income on cash and cash equivalents.
|
||||||||||||||||||||||||||||||||
(2) Includes effect of realized losses on interest rate swaps and US Treasury futures.
|
Average Debt Balance
|
Economic
Interest
Expense (1)
|
Average
Cost of
Funds
|
Average
One-Month
LIBOR
|
Average
Six-Month
LIBOR
|
Average
One-Month
LIBOR
Relative to
Average
Six-Month
LIBOR
|
Average
Cost
of Funds
Relative to
Average
One-Month
LIBOR
|
Average Cost
of Funds
Relative to
Average
Six-Month
LIBOR
|
|||||||||||||||||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||||||||||||||||||||||
For The Year Ended December 31, 2013
|
$ | 3,527,712 | $ | 123,788 | 3.51 | % | 0.19 | % | 0.41 | % | (0.22 | %) | 3.32 | % | 3.10 | % | ||||||||||||||||
For The Year Ended December 31, 2012
|
$ | 4,466,695 | $ | 146,781 | 3.29 | % | 0.24 | % | 0.74 | % | (0.49 | %) | 3.05 | % | 2.55 | % | ||||||||||||||||
For the Year Ended December 31, 2011
|
$ | 5,443,234 | $ | 150,787 | 2.77 | % | 0.23 | % | 0.51 | % | (0.28 | %) | 2.54 | % | 2.26 | % | ||||||||||||||||
For The Quarter Ended December 31, 2013
|
$ | 3,285,584 | $ | 25,372 | 3.09 | % | 0.17 | % | 0.35 | % | (0.18 | %) | 2.92 | % | 2.74 | % | ||||||||||||||||
For The Quarter Ended September 30, 2013
|
$ | 3,360,508 | $ | 32,055 | 3.82 | % | 0.19 | % | 0.39 | % | (0.21 | %) | 3.63 | % | 3.42 | % | ||||||||||||||||
For The Quarter Ended June 30, 2013
|
$ | 3,516,698 | $ | 32,002 | 3.64 | % | 0.20 | % | 0.42 | % | (0.23 | %) | 3.44 | % | 3.22 | % | ||||||||||||||||
For The Quarter Ended March 31, 2013
|
$ | 3,827,635 | $ | 34,359 | 3.59 | % | 0.26 | % | 0.76 | % | (0.51 | %) | 3.33 | % | 2.83 | % | ||||||||||||||||
(1) Includes effect of realized losses on interest rate swaps and US Treasury futures.
|
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, 2013
|
$ | 35,898 | 0.49 | % | 1.04 | % | ||||||
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 Quarter Ended December 31, 2013
|
$ | 8,965 | 0.51 | % | 1.04 | % | ||||||
For The Quarter Ended September 30, 2013
|
$ | 9,112 | 0.51 | % | 1.01 | % | ||||||
For The Quarter Ended June 30, 2013
|
$ | 8,380 | 0.46 | % | 0.92 | % | ||||||
For The Quarter Ended March 31, 2013
|
$ | 9,441 | 0.50 | % | 1.05 | % |
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands)
|
||||||||
Overnight
|
$ | - | $ | - | ||||
1-29 days
|
644,332 | 732,809 | ||||||
30 to 59 days
|
606,945 | 325,915 | ||||||
60 to 89 days
|
- | - | ||||||
90 to 119 days
|
129,049 | 211,137 | ||||||
Greater than or equal to 120 days
|
278,235 | 258,164 | ||||||
Total
|
$ | 1,658,561 | $ | 1,528,025 |
Period
|
Average
Repurchase
Balance
|
Repurchase
Balance at
Period End
|
||||||
(dollars in thousands)
|
||||||||
Year Ended December 31, 2013
|
$ | 1,480,666 | $ | 1,658,561 | ||||
Year Ended December 31, 2012
|
$ | 2,122,421 | $ | 1,528,025 | ||||
Quarter Ended December 31, 2013
|
$ | 1,574,872 | $ | 1,658,561 | ||||
Quarter Ended September 30, 2013
|
$ | 1,464,677 | $ | 1,589,325 | ||||
Quarter Ended June 30, 2013
|
$ | 1,422,485 | $ | 1,478,141 | ||||
Quarter Ended March 31, 2013
|
$ | 1,460,629 | $ | 1,420,375 |
December 31, 2013
|
||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Contractual Obligations
|
Within One
Year
|
One to Three
Years
|
Three to Five
Years
|
Greater Than
or Equal to
Five Years
|
Total
|
|||||||||||||||
Repurchase agreements for RMBS
|
$ | 1,658,561 | $ | - | $ | - | $ | - | $ | 1,658,561 | ||||||||||
Securitized debt
|
370,250 | 497,943 | 264,456 | 396,916 | 1,529,565 | |||||||||||||||
Interest expense on RMBS repurchase agreements (1)
|
2,380 | - | - | - | 2,380 | |||||||||||||||
Interest expense on securitized debt (1)
|
57,546 | 80,446 | 58,620 | 178,391 | 375,003 | |||||||||||||||
Total
|
$ | 2,088,737 | $ | 578,389 | $ | 323,076 | $ | 575,307 | $ | 3,565,509 | ||||||||||
(1) Interest is based on variable rates in effect as of December 31, 2013.
|
●
|
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
|
●
|
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 not 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.
|
●
|
Weakness:
|
●
|
Remediation:
|
●
|
Weakness:
|
|
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 fair value.
|
●
|
Remediation:
|
|
●
|
We have identified that our design, procedures, and execution of review controls, including the review of journal entries and reconciliations, for routine processes were not timely or effective. 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 inadequate or delayed review and validation of inputs used in significant estimates and their related disclosures, such as other-than-temporary impairment, interest income related to investments in RMBS and securitized loans held for investment.
|
|
o
|
There was inadequate or delayed evidence of independent validation of calculations used in significant accounting estimates to ensure the accounting policies were appropriately implemented.
|
|
o
|
There was inadequate or delayed evidence of review of the schedules supporting the amounts and disclosures in the consolidated financial statements
.
|
|
●
|
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 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.
|
Name
|
Age
|
Position Held with Us
|
Matthew Lambiase
|
48
|
Chief Executive Officer, President and Director
|
Robert Colligan
|
43
|
Chief Financial Officer and Secretary
|
Mohit Marria
|
36
|
Chief Investment Officer
|
William B. Dyer
|
67
|
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
|
48
|
Chief Executive Officer, President and Director
|
Rob Colligan
|
43
|
Chief Financial Officer and Secretary
|
Mohit Marria
|
36
|
Chief Investment Officer
|
William B. Dyer
|
66
|
Head of Underwriting
|
A. Alexandra Denahan
|
44
|
Former Chief Financial Officer and Secretary
|
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
|
36,000
|
$111,600
|
Mohit Marria
|
8,000
|
$24,800
|
William Dyer
|
35,000
|
$108,500
|
A. Alexandra Denahan
|
35,000
|
$108,500
|
Stock Awards
|
||
Name
|
Number of
Shares
Acquired on
Vesting (#)
|
Value
Realized on
Vesting(1) ($)
|
Matthew Lambiase
|
9,000
|
$26,775
|
Mohit Marria
|
1,500
|
$4,463
|
William Dyer
|
7,000
|
$20,825
|
A. Alexandra Denahan
|
7,000
|
$20,825
|
(1)
|
Reflects fair value of vested shares using closing price on date of vesting.
|
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
|
$ | - | $ | - | $ | 111,600 | $ | - | ||||||||
Mohit Marria
|
Stock vesting
|
$ | - | $ | - | $ | 24,800 | $ | - | ||||||||
William Dyer
|
Stock vesting
|
$ | - | $ | - | $ | 108,500 | $ | - | ||||||||
A. Alexandra Denahan
|
Stock vesting
|
$ | - | $ | - | $ | 108,500 | $ | - |
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
|
$61,250
|
$50,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$111,250
|
Gerard Creagh
|
$57,500
|
$50,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$107,500
|
Paul Donlin
|
$65,500
|
$50,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$115,500
|
Paul A. Keenan(1)
|
$58,250
|
$50,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$108,250
|
Dennis M. Mahoney
|
$73,750
|
$50,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$123,750
|
John P. Reilly
|
$58,250
|
$50,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$108,250
|
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)
|
63,740,765
|
6.2%
|
BlackRock, Inc.(12) |
55,259,856
|
5.4%
|
Thornburg Investment Management Inc.(13) |
61,360,859
|
6.0%
|
Leon G. Cooperman(14)
|
77,886,720
|
7.6%
|
Credit Suisse AG(15)
|
55,069,189
|
5.4%
|
The Vanguard Group(16)
|
56,775,946
|
5.5%
|
|
* Less than 1 percent.
|
(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 58,500 shares of restricted common stock that have vested as of May 16, 2013; 2,250 shares of restricted common stock that will vest within 60 days after May 16, 2013; and 29,250 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 effective May 16, 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 13,000 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 6,500 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 70,000 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 45,500 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 22,750 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 62,415,720 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 13,685,920 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 62,415,720 shares of common stock. Wells Fargo & Company reported beneficially owning 63,740,765 shares of common stock with the sole power to vote or to direct the vote of 4 shares of common stock, the shared power to vote or to direct the vote of 63,716,222 of common stock, the sole power to dispose or to direct the disposition of 4 shares of common stock and the shared power to dispose or to direct the disposition of 63,740,761 shares of common stock. Based solely on information contained in a Schedule 13G/A filed by Wells Fargo & Company on January 28, 2014.
|
(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 Asset Management Canada Limited; BlackRock Advisors (UK) Limited; BlackRock Fund Advisors; BlackRock International Limited; BlackRock Institutional Trust Company, N.A.; BlackRock Investment Management (UK) Limited. Aggregate beneficial ownership reported by BlackRock, Inc. includes any beneficial ownership of a subsidiary. BlackRock, Inc. reported beneficially owning 55,259,856 shares of common stock with the sole power to vote or to direct the vote of 51,237,802 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 55,259,856 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 28, 2014.
|
(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 61,360,859 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 61,360,859 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 21, 2014.
|
(14)
|
The address for this stockholder is 11431 W. Palmetto Park Road, Boca Raton FL 33428. 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.; Omega Credit Opportunities Fund, LTD. L.P.; a limited number of Managed Accounts; 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; and The Leon and Toby Cooperman Family Foundation. Mr. Cooperman reported that he may be deemed the beneficial owner of 77,886,720 shares. This consists of 12,558,165 shares owned by Omega Capital Partners, L.P.; 5,274,929 shares owned by Omega Capital Investors, L.P.; 5,552,654 shares owned by Omega Equity Investors, L.P.; 14,048,767 shares owned by Omega Overseas Partners, Ltd.; 2,224,000 shares owned by Omega Credit Opportunities Fund, Ltd. L.P.; 23,626,905 shares owned by a limited number of managed accounts; 85,000 shares owned by the Cooperman Family Fund for a Jewish Future; 11,632,500 shares owned by Mr. Cooperman; 600,000 shares owned by Toby Cooperman; 33,800 shares owned by the UTMA account for Asher Silvin Cooperman; 250,000 shares owned by The Leon and Toby Cooperman Family Foundation; 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 54,259,815 shares, the shared power to vote or to direct the vote of 23,626,905 shares, the sole power to dispose or to direct the disposition of 54,259,815 shares, and the shared power to dispose or to direct the disposition of 23,626,905 shares. Based solely on information contained in a Schedule 13D filed by Leon G. Cooperman on February 24, 2014.
|
(15)
|
The address for this stockholder in the United States is Eleven Madison Avenue, New York, NY 10010. Credit Suisse AG reported beneficially owning shares of common stock with the sole power to vote or to direct the vote of zero shares of common stock, the shared power to vote or to direct the vote of 55,069,189 shares 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 55,069,189 shares of common stock. Based solely on information contained in a Schedule 13G filed by Credit Suisse AG on January 14, 2014.
|
(16)
|
The address for this stockholder is 100 Vanguard Blvd., Malvern, PA 19355. The shares shown as beneficially owned by The Vanguard Group reflect shares owned on its own behalf and on behalf of the following subsidiaries: Vanguard Fiduciary Trust Company, and Vanguard Investments Australia, LTD. The Vanguard Group reported beneficially owning shares of common stock with the sole power to vote or to direct the vote of 637,652 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 56,205,994 shares of common stock and the shared power to dispose or to direct the disposition of 569,952 shares of common stock. Based solely on information contained in a Schedule 13G filed by The Vanguard Group on February 12, 2014.
|
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)
|
10.2
|
Form of Amendment No. 1 to the Management Agreement between Chimera Investment Corporation and Fixed Income Discount Advisory Company (filed as Exhibit 10.2 to the Company’s Registration Statement on Amendment No. 1 to Form S-11 (File No. 333-151403) filed on October 14, 2008 and incorporated herein by reference)
|
10.3
|
Form of Amendment No. 2 to the Management Agreement between Chimera Investment Corporation and Fixed Income Discount Advisory Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 20, 2008 and incorporated herein by reference)
|
10.4
|
Amendment No. 3 to the Management Agreement between Chimera Investment Corporation and Fixed Income Discount Advisory Company (filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed on March 8, 2013 and incorporated herein by reference)
|
10.5†
|
Form of Equity Incentive Plan (filed as Exhibit 10.2 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)
|
10.6†
|
Form of Restricted Common Stock Award (filed as Exhibit 10.3 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)
|
10.7†
|
Form of Stock Option Grant (filed as Exhibit 10.4 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)
|
10.8
|
Form of Master Securities Repurchase Agreement (filed as Exhibit 10.5 to the Company’s Registration Statement on Amendment No. 3 to Form S-11 (File No. 333-145525) filed on November 13, 2007 and incorporated herein by reference)
|
12.1
|
Computation of Ratio of Earnings to Fixed Charges
|
21.1
|
Subsidiaries of Registrant
|
31.1
|
Certification of Matthew Lambiase, Chief Executive Officer and President of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Robert Colligan, Chief Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Matthew Lambiase, Chief Executive Officer and President of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Robert Colligan, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 101.INS XBRL
|
Instance Document **
|
Exhibit 101.SCH XBRL
|
Taxonomy Extension Schema Document **
|
Exhibit 101.CAL XBRL
|
Taxonomy Extension Calculation Linkbase Document **
|
Exhibit 101.DEF XBRL
|
Additional Taxonomy Extension Definition Linkbase Document Created**
|
Exhibit 101.LAB XBRL
|
Taxonomy Extension Label Linkbase Document **
|
Exhibit 101.PRE XBRL
|
Taxonomy Extension Presentation Linkbase Document **
|
Reports of Independent Registered Public Accounting Firm |
F-1
|
|
Consolidated Financial Statements | ||
Consolidated Statements of Financial Condition as of December 31, 2013 and 2012
|
F-5
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended
|
||
December 31, 2013, 2012 and 2011
|
F-6
|
|
|
||
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended | ||
December 31, 2013, 2012 and 2011
|
F-7
|
|
|
||
Consolidated Statements of Cash Flows for the Years Ended
|
|
|
December 31, 2013, 2012 and 2011
|
F-8 | |
Notes to Consolidated Financial Statements
|
F-9
|
●
|
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 inadequate or delayed review and validation of inputs used in significant estimates and their related disclosures, such as other-than-temporary impairment, interest income related to investments in RMBS and securitized loans held for investment.
|
o
|
There was inadequate or delayed evidence of independent validation of calculations used in significant accounting estimates to ensure the accounting policies were appropriately implemented.
|
o
|
There was inadequate or delayed evidence of review of the schedules supporting the amounts and disclosures in the consolidated financial statements by a person with the necessary competency and authority to review such schedules.
|
●
|
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.
|
●
|
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, 2013
|
|||||||||||||||||||||||||||||||||
(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
|
$ | 128,217 | $ | - | $ | (39,395 | ) | $ | 88,822 | $ | 89,687 | $ | 974 | $ | (109 | ) | $ | 865 | |||||||||||||||
Senior interest-only
|
5,742,781 | 283,271 | - | 283,271 | 229,065 | 11,802 | (66,008 | ) | (54,206 | ) | |||||||||||||||||||||||
Subordinated
|
830,632 | - | (490,400 | ) | 340,232 | 457,569 | 119,233 | (1,896 | ) | 117,337 | |||||||||||||||||||||||
Subordinated interest-only
|
274,462 | 14,666 | - | 14,666 | 16,571 | 2,483 | (578 | ) | 1,905 | ||||||||||||||||||||||||
RMBS transferred to consolidated variable interest
entities ("VIEs")
|
3,912,376 | 7,490 | (1,763,401 | ) | 2,075,628 | 2,981,571 | 905,943 | - | 905,943 | ||||||||||||||||||||||||
Agency RMBS
|
2,145,475 | 134,609 | (5,004 | ) | 2,027,736 | 1,997,578 | 22,652 | (52,810 | ) | (30,158 | ) | ||||||||||||||||||||||
Total
|
$ | 13,033,943 | $ | 440,036 | $ | (2,298,200 | ) | $ | 4,830,355 | $ | 5,772,041 | $ | 1,063,087 | $ | (121,401 | ) | $ | 941,686 | |||||||||||||||
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 |
For the Year Ended
|
||||||||
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands)
|
||||||||
Balance at beginning of period
|
$ | 2,107,387 | $ | 2,342,462 | ||||
Purchases
|
29,064 | 86,847 | ||||||
Accretion
|
(328,491 | ) | (364,282 | ) | ||||
Reclassification (to) from non-accretable difference
|
15,957 | 64,017 | ||||||
Sales
|
(29,340 | ) | (21,657 | ) | ||||
Balance at end of period
|
$ | 1,794,577 | $ | 2,107,387 |
December 31, 2013
|
|||||||||||||||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||||||||||
Unrealized Loss Position for Less than 12 Months
|
Unrealized Loss Position for 12 Months or More
|
Total
|
|||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
|||||||||||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||||||||||||||
Senior
|
$ | 28,163 | $ | (109 | ) | 3 | $ | - | $ | - | - | $ | 28,163 | $ | (109 | ) | 3 | ||||||||||||||||||||
Senior interest-only
|
119,913 | (35,252 | ) | 54 | 45,167 | (30,756 | ) | 28 | 165,080 | (66,008 | ) | 82 | |||||||||||||||||||||||||
Subordinated
|
- | - | 4 | 17,661 | (1,896 | ) | 2 | 17,661 | (1,896 | ) | 6 | ||||||||||||||||||||||||||
Subordinated interest-only
|
1,062 | (578 | ) | 2 | - | - | - | 1,062 | (578 | ) | 2 | ||||||||||||||||||||||||||
RMBS transferred to consolidated VIEs
|
- | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
Agency RMBS
|
1,149,126 | (52,512 | ) | 34 | 491 | (298 | ) | 3 | 1,149,617 | (52,810 | ) | 37 | |||||||||||||||||||||||||
Total
|
$ | 1,298,264 | $ | (88,451 | ) | 97 | $ | 63,319 | $ | (32,950 | ) | 33 | $ | 1,361,583 | $ | (121,401 | ) | 130 | |||||||||||||||||||
December 31, 2012
|
|||||||||||||||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||||||||||
Unrealized Loss Position for Less than 12 Months
|
Unrealized Loss Position for 12 Months or More
|
Total
|
|||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
|||||||||||||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||||||||||||||
Senior
|
$ | - | $ | - | - | $ | - | $ | - | - | $ | - | $ | - | - | ||||||||||||||||||||||
Senior interest-only
|
17,764 | (2,828 | ) | 12 | 52,920 | (18,147 | ) | 26 | 70,684 | (20,975 | ) | 38 | |||||||||||||||||||||||||
Subordinated
|
- | - | - | 54,774 | (6,747 | ) | 5 | 54,774 | (6,747 | ) | 5 | ||||||||||||||||||||||||||
Subordinated interest-only
|
- | - | - | 9,659 | (1,393 | ) | 1 | 9,659 | (1,393 | ) | 1 | ||||||||||||||||||||||||||
RMBS transferred to consolidated VIEs
|
- | - | - | 22,490 | (197 | ) | 1 | 22,490 | (197 | ) | 1 | ||||||||||||||||||||||||||
Agency RMBS
|
234 | (76 | ) | 2 | 993 | (241 | ) | 2 | 1,227 | (317 | ) | 4 | |||||||||||||||||||||||||
Total
|
$ | 17,998 | $ | (2,904 | ) | 14 | $ | 140,836 | $ | (26,725 | ) | 35 | $ | 158,834 | $ | (29,629 | ) | 49 |
For the Year Ended | ||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands) | ||||||||||||
Total other-than-temporary impairment losses
|
$ | (4,356 | ) | $ | (47,632 | ) | $ | (241,962 | ) | |||
Portion of loss recognized in other comprehensive income (loss)
|
(40,811 | ) | (84,618 | ) | (115,143 | ) | ||||||
Net other-than-temporary credit impairment losses
|
$ | (45,167 | ) | $ | (132,250 | ) | $ | (357,105 | ) |
For the Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands)
|
||||||||||||
Cumulative credit loss beginning balance
|
$ | 510,089 | $ | 452,060 | $ | 237,746 | ||||||
Additions:
|
||||||||||||
Other-than-temporary impairments not previously recognized
|
39,098 | 98,324 | 268,795 | |||||||||
Reductions for securities sold during the period
|
(14,038 | ) | (34,577 | ) | (1,300 | ) | ||||||
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments
|
6,069 | 33,926 | 88,310 | |||||||||
Reductions for increases in cash flows expected to be collected over the remaining life of the securities
|
(16,786 | ) | (39,644 | ) | (141,491 | ) | ||||||
Cumulative credit impairment loss ending balance
|
$ | 524,432 | $ | 510,089 | $ | 452,060 |
December 31, 2013
|
|||||||||||||||||||||||||
(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
|
$ | 974 | $ | - | $ | 974 | $ | (109 | ) | $ | - | $ | (109 | ) | |||||||||||
Senior interest-only
|
- | 11,802 | 11,802 | - | (66,008 | ) | (66,008 | ) | |||||||||||||||||
Subordinated
|
119,233 | - | 119,233 | (1,896 | ) | - | (1,896 | ) | |||||||||||||||||
Subordinated interest-only
|
- | 2,483 | 2,483 | - | (578 | ) | (578 | ) | |||||||||||||||||
RMBS transferred to consolidated VIEs
|
901,773 | 4,170 | 905,943 | - | - | - | |||||||||||||||||||
Agency RMBS
|
22,322 | 330 | 22,652 | (51,494 | ) | (1,316 | ) | (52,810 | ) | ||||||||||||||||
Total
|
$ | 1,044,302 | $ | 18,785 | $ | 1,063,087 | $ | (53,499 | ) | $ | (67,902 | ) | $ | (121,401 | ) | ||||||||||
December 31, 2012
|
|||||||||||||||||||||||||
(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
|
$ | 16 | $ | - | $ | 16 | $ | - | $ | - | $ | - | |||||||||||||
Senior interest-only
|
- | 7,976 | 7,976 | - | (20,975 | ) | (20,975 | ) | |||||||||||||||||
Subordinated
|
81,492 | - | 81,492 | (6,747 | ) | - | (6,747 | ) | |||||||||||||||||
Subordinated interest-only
|
- | 1,466 | 1,466 | - | (1,393 | ) | (1,393 | ) | |||||||||||||||||
RMBS transferred to consolidated VIEs
|
829,308 | 8,045 | 837,353 | (197 | ) | - | (197 | ) | |||||||||||||||||
Agency RMBS
|
86,062 | 357 | 86,419 | - | (317 | ) | (317 | ) | |||||||||||||||||
Total
|
$ | 996,878 | $ | 17,844 | $ | 1,014,722 | $ | (6,944 | ) | $ | (22,685 | ) | $ | (29,629 | ) |
December 31, 2013
|
||||||||||||||||||||
Principal or
Notional Value
at Period-End
(dollars in
thousands)
|
Weighted
Average
Amortized Cost
Basis
|
Weighted
Average Fair
Value
|
Weighted
Average
Coupon
|
Weighted
Average Yield
at Period-End
(1)
|
||||||||||||||||
Non-Agency Mortgage-Backed Securities
|
||||||||||||||||||||
Senior
|
$ | 128,217 | $ | 69.27 | $ | 69.95 | 1.42 | % | 5.87 | % | ||||||||||
Senior, interest only
|
$ | 5,742,781 | $ | 4.93 | $ | 3.99 | 1.44 | % | 17.17 | % | ||||||||||
Subordinated
|
$ | 830,632 | $ | 40.96 | $ | 55.09 | 2.94 | % | 13.49 | % | ||||||||||
Subordinated, interest only
|
$ | 274,462 | $ | 5.34 | $ | 6.04 | 1.73 | % | 8.97 | % | ||||||||||
RMBS transferred to consolidated variable
interest entities
|
$ | 3,912,376 | $ | 54.17 | $ | 77.82 | 4.66 | % | 15.84 | % | ||||||||||
Agency Mortgage-Backed Securities
|
$ | 2,145,475 | $ | 106.83 | $ | 105.24 | 3.99 | % | 3.43 | % | ||||||||||
(1) Bond Equivalent Yield at period end.
|
||||||||||||||||||||
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)
|
||||||||||||||||
Non-Agency Mortgage-Backed Securities
|
||||||||||||||||||||
Senior
|
$ | 126 | $ | 57.02 | $ | 67.00 | 0.00 | % | 11.90 | % | ||||||||||
Senior, interest only
|
$ | 3,012,868 | $ | 4.51 | $ | 4.08 | 1.76 | % | 10.36 | % | ||||||||||
Subordinated
|
$ | 1,057,821 | $ | 44.72 | $ | 51.79 | 3.18 | % | 11.07 | % | ||||||||||
Subordinated, interest only
|
$ | 256,072 | $ | 6.32 | $ | 6.35 | 2.25 | % | 8.90 | % | ||||||||||
RMBS transferred to consolidated variable
interest entities
|
$ | 4,610,109 | $ | 53.96 | $ | 72.50 | 4.88 | % | 15.44 | % | ||||||||||
Agency Mortgage-Backed Securities
|
$ | 1,756,580 | $ | 103.09 | $ | 108.24 | 4.65 | % | 3.59 | % | ||||||||||
(1) Bond Equivalent Yield at period end.
|
December 31, 2013
|
December 31, 2012
|
|
AAA
|
0.00%
|
0.01%
|
AA
|
0.71%
|
0.46%
|
A
|
0.01%
|
0.00%
|
BB
|
1.38%
|
1.41%
|
B
|
4.26%
|
1.19%
|
Below B or not rated
|
93.64%
|
96.93%
|
Total
|
100.00%
|
100.00%
|
December 31, 2013
|
||||||||||||||||||||
(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
|
$ | - | $ | 29,283 | $ | 60,404 | $ | - | $ | 89,687 | ||||||||||
Senior interest-only
|
376 | 103,688 | 96,968 | 28,033 | 229,065 | |||||||||||||||
Subordinated
|
3,359 | 63,177 | 321,333 | 69,700 | 457,569 | |||||||||||||||
Subordinated interest-only
|
- | - | 14,862 | 1,709 | 16,571 | |||||||||||||||
RMBS transferred to consolidated VIEs
|
5,724 | 276,752 | 1,986,879 | 712,216 | 2,981,571 | |||||||||||||||
Agency RMBS
|
54 | 21,011 | 1,850,438 | 126,075 | 1,997,578 | |||||||||||||||
Total fair value
|
$ | 9,513 | $ | 493,911 | $ | 4,330,884 | $ | 937,733 | $ | 5,772,041 | ||||||||||
Amortized cost
|
||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||
Senior
|
$ | - | $ | 28,900 | $ | 59,922 | $ | - | $ | 88,822 | ||||||||||
Senior interest-only
|
1,017 | 131,159 | 117,008 | 34,087 | 283,271 | |||||||||||||||
Subordinated
|
2,877 | 50,483 | 243,350 | 43,522 | 340,232 | |||||||||||||||
Subordinated interest-only
|
- | - | 13,344 | 1,322 | 14,666 | |||||||||||||||
RMBS transferred to consolidated VIEs
|
4,744 | 211,925 | 1,356,981 | 501,978 | 2,075,628 | |||||||||||||||
Agency RMBS
|
122 | 19,433 | 1,880,430 | 127,751 | 2,027,736 | |||||||||||||||
Total amortized cost
|
$ | 8,760 | $ | 441,900 | $ | 3,671,035 | $ | 708,660 | $ | 4,830,355 | ||||||||||
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 |
Origination Year
|
December 31, 2013
|
December 31, 2012
|
||||||
2000
|
0.6 | % | 0.2 | % | ||||
2001
|
1.2 | % | 0.2 | % | ||||
2002
|
1.0 | % | 0.0 | % | ||||
2003
|
1.4 | % | 0.4 | % | ||||
2004
|
3.6 | % | 0.6 | % | ||||
2005
|
17.8 | % | 14.3 | % | ||||
2006
|
32.2 | % | 34.6 | % | ||||
2007
|
40.1 | % | 46.7 | % | ||||
2008
|
2.1 | % | 3.0 | % | ||||
Total
|
100.0 | % | 100.0 | % |
For the Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands)
|
||||||||||||
Proceeds from sales
|
$ | 1,079,649 | $ | 943,350 | $ | 2,628,994 | ||||||
Gross realized gains
|
72,946 | 85,166 | 54,353 | |||||||||
Gross realized losses
|
(4,839 | ) | - | - | ||||||||
Net realized gain
|
$ | 68,107 | $ | 85,166 | $ | 54,353 |
For the Year Ended
|
||||||||
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands) | ||||||||
Balance, beginning of period
|
$ | 1,300,131 | $ | 256,632 | ||||
Purchases
|
- | 1,531,014 | ||||||
Principal paydowns
|
(507,683 | ) | (477,555 | ) | ||||
Net periodic amortization (accretion)
|
(10,763 | ) | (9,592 | ) | ||||
Change to loan loss provision
|
1,799 | (368 | ) | |||||
Balance, end of period
|
$ | 783,484 | $ | 1,300,131 |
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands) | ||||||||
Securitized loans, at amortized cost
|
$ | 792,547 | $ | 1,311,755 | ||||
Less: allowance for loan losses
|
9,063 | 11,624 | ||||||
Securitized loans held for investment
|
$ | 783,484 | $ | 1,300,131 |
For the Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands)
|
||||||||||||
Balance, beginning of period
|
$ | 11,624 | $ | 13,938 | $ | 11,006 | ||||||
Provision for loan losses
|
(1,799 | ) | 368 | 5,291 | ||||||||
Charge-offs
|
(762 | ) | (2,682 | ) | (2,359 | ) | ||||||
Balance, end of period
|
$ | 9,063 | $ | 11,624 | $ | 13,938 |
30 Days
Delinquent
|
60 Days
Delinquent
|
90+ Days
Delinquent
|
Bankruptcy
|
Foreclosure
|
REO
|
Total
|
||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
December 31, 2013
|
$ | 999 | $ | 570 | $ | 2,087 | $ | 473 | $ | 7,530 | $ | 1,179 | $ | 12,838 | ||||||||||||||
December 31, 2012
|
$ | 3,110 | $ | 1,186 | $ | 4,045 | $ | 0 | $ | 4,247 | $ | 1,390 | $ | 13,978 |
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, 2013
|
3 | $ | 2,349 | $ | 2,358 | $ | 2,248 | $ | 2,248 | $ | 0 | |||||||||||||
December 31, 2012
|
9 | $ | 5,163 | $ | 5,312 | $ | 5,256 | $ | 5,256 | $ | 0 |
December 31, 2013
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Level 1
|
Level 2
|
Level 3
|
||||||||||
(dollars in thousands)
|
||||||||||||
Assets:
|
||||||||||||
Non-Agency RMBS
|
||||||||||||
Senior
|
$ | - | $ | - | $ | 89,687 | ||||||
Senior interest-only
|
- | - | 229,065 | |||||||||
Subordinated
|
- | - | 457,569 | |||||||||
Subordinated interest-only
|
- | - | 16,571 | |||||||||
RMBS transferred to consolidated VIEs
|
- | - | 2,981,571 | |||||||||
Agency RMBS
|
- | 1,997,578 | - | |||||||||
Derivatives
|
- | 8,095 | - | |||||||||
Liabilities:
|
||||||||||||
Derivatives
|
- | (30,199 | ) | - | ||||||||
Total
|
$ | - | $ | 1,975,474 | $ | 3,774,463 | ||||||
December 31, 2012
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Level 1
|
Level 2
|
Level 3
|
||||||||||
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 RMBS
|
- | 1,806,697 | - | |||||||||
Liabilities:
|
||||||||||||
Derivatives
|
- | (53,939 | ) | - | ||||||||
Total
|
$ | - | $ | 1,752,758 | $ | 3,961,208 |
Fair Value Reconciliation, Level 3
|
||||||||
For the Year Ended
|
||||||||
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands) | ||||||||
Non-Agency RMBS
|
||||||||
Beginning balance Level 3 assets
|
$ | 3,961,208 | $ | 4,088,945 | ||||
Transfers in to Level 3 assets
|
- | - | ||||||
Transfers out of Level 3 assets
|
- | - | ||||||
Purchases
|
317,299 | 122,509 | ||||||
Principal payments
|
(475,092 | ) | (516,370 | ) | ||||
Sales
|
(191,436 | ) | (328,261 | ) | ||||
Accretion of purchase discounts
|
106,290
|
98,804 | ||||||
Gains (losses) included in net income
|
||||||||
Other than temporary credit impairment losses
|
(45,167 | ) | (132,250 | ) | ||||
Realized gains (losses) on sales
|
46,866 | 48,435 | ||||||
Realized losses on principal write-downs of Non-Agency RMBS
|
(18,316 | ) | - | |||||
Net unrealized gains (losses) on interest-only RMBS
|
(43,252 | ) | 804 | |||||
Gains (losses) included in other comprehensive income
|
||||||||
Total unrealized gains (losses) for the period
|
116,063
|
578,592 | ||||||
Ending balance Level 3 assets
|
$ |
3,774,463
|
$ | 3,961,208 |
December 31, 2013
|
December 31, 2012
|
|||||||||||||||||||||||||||||||
Significant Inputs
|
Significant Inputs
|
|||||||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||||||
Average | Loss | Average | Loss | |||||||||||||||||||||||||||||
Discount Rate |
CPR
|
CDR | Severity | Discount Rate | CPR | CDR | Severity | |||||||||||||||||||||||||
Range
|
Range | |||||||||||||||||||||||||||||||
Non-Agency RMBS | ||||||||||||||||||||||||||||||||
Senior
|
6.4 | % | 1% - 6 | % | 0% - 33 | % | 50% - 85 | % | 7.5 | % | 11% - 11 | % | 0% - 3 | % | 50% - 58 | % | ||||||||||||||||
Senior interest-only
|
14.4 | % | 1% - 28 | % | 0% - 33 | % | 50% - 85 | % | 13.9 | % | 1% - 25 | % | 0% - 25 | % | 50% - 85 | % | ||||||||||||||||
Subordinated
|
26.8 | % | 1% - 22 | % | 0% - 38 | % | 50% - 85 | % | 25.9 | % | 1% - 18 | % | 0% - 21 | % | 50% - 85 | % | ||||||||||||||||
Subordinated interest-only
|
12.7 | % | 2% - 13 | % | 0% - 18 | % | 50% - 73 | % | 13.3 | % | 4% - 11 | % | 0% - 21 | % | 50% - 68 | % | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
5.3 | % | 1% - 20 | % | 0% - 33 | % | 50% - 85 | % | 5.8 | % | 1% - 15 | % | 0% - 36 | % | 50% - 85 | % |
December 31, 2013
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Level in Fair Value Hierarchy
|
Carrying Amount
|
Fair Value
|
||||||||||
Securitized loans held for investment
|
3 | 783,484 | 762,550 | |||||||||
Repurchase agreements
|
2 | (1,658,561 | ) | (1,660,941 | ) | |||||||
Securitized debt, collateralized by Non-Agency RMBS
|
3 | (933,732 | ) | (940,712 | ) | |||||||
Securitized debt, collateralized by loans held for investment
|
3 | (669,981 | ) | (647,628 | ) | |||||||
December 31, 2012
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Level in Fair Value Hierarchy
|
Carrying Amount
|
Fair Value
|
||||||||||
Securitized loans held for investment
|
3 | 1,300,131 | 1,320,696 | |||||||||
Repurchase agreements
|
2 | (1,528,025 | ) | (1,531,511 | ) | |||||||
Securitized debt, collateralized by Non-Agency RMBS
|
3 | (1,336,261 | ) | (1,334,551 | ) | |||||||
Securitized debt, collateralized by loans held for investment
|
3 | (1,169,710 | ) | (1,194,747 | ) |
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands)
|
||||||||
Overnight
|
$ | - | $ | - | ||||
1-29 days
|
644,332 | 732,809 | ||||||
30 to 59 days
|
606,945 | 325,915 | ||||||
60 to 89 days
|
- | - | ||||||
90 to 119 days
|
129,049 | 211,137 | ||||||
Greater than or equal to 120 days
|
278,235 | 258,164 | ||||||
Total
|
$ | 1,658,561 | $ | 1,528,025 |
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands)
|
||||||||
Within One Year
|
$ | 370,250 | $ | 658,423 | ||||
One to Three Years
|
497,943 | 793,150 | ||||||
Three to Five Years
|
264,456 | 430,993 | ||||||
Greater Than or Equal to Five Years
|
396,916 | 555,717 | ||||||
Total
|
$ | 1,529,565 | $ | 2,438,283 |
December 31, 2013
|
December 31, 2012
|
|||||||
(dollars in thousands)
|
||||||||
Assets
|
||||||||
Non-Agency RMBS transferred to consolidated VIEs
|
$ | 2,981,571 | $ | 3,274,204 | ||||
Securitized loans held for investment
|
783,484 | 1,300,131 | ||||||
Accrued interest receivable
|
17,173 | 24,082 | ||||||
Liabilities
|
||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
$ | 933,732 | $ | 1,336,261 | ||||
Securitized debt, collateralized by loans held for investment
|
669,981 | 1,169,710 | ||||||
Accrued interest payable
|
5,278 | 8,358 |
For the Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands)
|
||||||||||||
Interest income, Assets of consolidated VIEs
|
$ | 371,559 | $ | 417,351 | $ | 450,996 | ||||||
Interest expense, Non-recourse liabilities of VIEs
|
(95,229 | ) | (115,880 | ) | (122,917 | ) | ||||||
Net interest income
|
$ | 276,330 | $ | 301,471 | $ | 328,079 | ||||||
Total other-than-temporary impairment losses
|
(4,170 | ) | $ | (7,619 | ) | $ | (113,047 | ) | ||||
Portion of loss recognized in other comprehensive income (loss)
|
(33,749 | ) |
(76,699
|
) | (145,512 | ) | ||||||
Net other-than-temporary credit impairment losses
|
$ | (37,919 | ) | $ | (84,318 | ) | $ | (258,559 | ) |
For the Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands) | ||||||||||||
Amortization of deferred financing costs
|
5,691 | 8,546 | $ | 1,733 | ||||||||
Accretion (amortization) of securitized debt discounts/premiums, net
|
11,981 | 6,985 | 12,551 | |||||||||
Payment of deferred financing costs
|
- | (9,488 | ) | - | ||||||||
Proceeds from securitized debt borrowings, collateralized by loans held for investment
|
- | 1,426,983 | - | |||||||||
Principal payments, Non-Agency RMBS transferred to consolidated VIE's
|
466,522 | 505,779 | 668,924 | |||||||||
Principal payments, Securitized loans held for investment
|
507,683 | 477,555 | 85,526 | |||||||||
Payments on securitized debt borrowings, collateralized by loans held for investment
|
(499,549 | ) | (470,788 | ) | (80,181 | ) | ||||||
Proceeds from securitized debt borrowings, collateralized by Non-Agency RMBS
|
- | 181,201 | 310,972 | |||||||||
Payments on securitized debt borrowings, collateralized by Non-Agency RMBS
|
(414,690 | ) | (481,464 | ) | (645,603 | ) | ||||||
Decrease (increase) in accrued interest receivable
|
6,909 | 2,534 | (4,832 | ) | ||||||||
Increase (decrease) in accrued interest payable
|
(3,080 | ) | 228 | (1,836 | ) | |||||||
Net cash provided by/(used in) consolidated VIEs
|
$ | 81,467 | $ | 1,648,071 | $ | 347,254 |
December 31, 2013
|
December 31, 2012
|
|||||||||||||||
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Assets
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 59 | $ | 68 | $ | 72 | $ | 85 | ||||||||
Senior interest-only
|
- | 75 | - | 128 | ||||||||||||
Subordinated
|
- | 1,731 | 581 | 2,266 | ||||||||||||
Agency RMBS
|
666 | 437 | 1,198 | 1,001 | ||||||||||||
Total
|
$ | 725 | $ | 2,311 | $ | 1,851 | $ | 3,480 |
December 31, 2013
|
||||||||||||||||
Derivative Assets
|
Derivative Liabilities
|
|||||||||||||||
Derivative Instruments
|
Notional Amount Outstanding
|
Location on Consolidated
Statements of Financial
Condition
|
Net Estimated Fair Value/Carrying
Value
|
Location on
Consolidated Statements
of Financial Condition
|
Net Estimated Fair Value/Carrying Value
|
|||||||||||
(dollars in thousands)
|
||||||||||||||||
Interest Rate Swaps
|
$ | 1,355,000 |
Derivatives, at fair value, net
|
$ | - |
Derivatives, at fair value
|
$ | (30,199 | ) | |||||||
Mortgage Options
|
- |
Derivatives, at fair value, net
|
- |
Derivatives, at fair value
|
- | |||||||||||
Treasury Futures
|
550,000 |
Derivatives, at fair value, net
|
8,095 |
Derivatives, at fair value
|
- | |||||||||||
Total
|
$ | 1,905,000 | $ | 8,095 | $ | (30,199 | ) | |||||||||
December 31, 2012
|
||||||||||||||||
Derivative Assets
|
Derivative Liabilities
|
|||||||||||||||
Derivative Instruments
|
Notional Amount Outstanding
|
Location on Consolidated Statements of Financial Condition
|
Net Estimated Fair Value/Carrying
Value
|
Location on
Consolidated Statements
of Financial Condition
|
Net Estimated Fair Value/Carrying Value
|
|||||||||||
(dollars in thousands)
|
||||||||||||||||
Interest Rate Swaps
|
$ | 1,355,000 |
Derivatives, at fair value, net
|
$ | - |
Derivatives, at fair value
|
$ | (53,939 | ) | |||||||
Total
|
$ | 1,355,000 | $ | - | $ | (53,939 | ) |
For the Year Ended
|
||||||||||||||
Derivative
Instruments
|
Location on Consolidated Statements of
Operations and Comprehensive Income (Loss)
|
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands)
|
||||||||||||||
Interest Rate Swaps
|
Net unrealized gains (losses) on derivatives
|
$ | 23,740 | $ | (9,473 | ) | $ | (34,478 | ) | |||||
Interest Rate Swaps
|
Net realized gains (losses) on derivatives
|
(21,857 | ) | (20,223 | ) | (15,929 | ) | |||||||
Mortgage Options
|
Net unrealized gains (losses) on derivatives
|
- | - | - | ||||||||||
Mortgage Options
|
Net realized gains (losses) on derivatives
|
12,115 | - | - | ||||||||||
Treasury Futures
|
Net unrealized gains (losses) on derivatives
|
10,629 | - | - | ||||||||||
Treasury Futures
|
Net realized gains (losses) on derivatives
|
2,029 | - | - | ||||||||||
Total
|
$ | 26,656 | $ | (29,696 | ) | $ | (50,407 | ) |
For the Year Ended | ||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
(dollars in thousands) | ||||||||||||
Numerator:
|
||||||||||||
Net income
|
$ | 362,686 | $ | 327,767 | $ | 137,329 | ||||||
Effect of dilutive securities:
|
- | - | - | |||||||||
Dilutive net income available to stockholders
|
$ | 362,686 | $ | 327,767 | $ | 137,329 | ||||||
Denominator:
|
||||||||||||
Weighted average basic shares
|
1,027,094,379 | 1,026,831,033 | 1,026,365,197 | |||||||||
Effect of dilutive securities
|
475,964 | 668,222 | 806,190 | |||||||||
Weighted average dilutive shares
|
1,027,570,343 | 1,027,499,255 | 1,027,171,387 | |||||||||
Net income per average share attributable to common stockholders - Basic
|
$ | 0.35 | $ | 0.32 | $ | 0.13 | ||||||
Net income per average share attributable to common stockholders - Diluted
|
$ | 0.35 | $ | 0.32 | $ | 0.13 |
December 31, 2013
|
||||||||
(dollars in thousands)
|
||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
Total Accumulated OCI Balance
|
|||||||
Balance as of December 31, 2012
|
$ | 989,936 | $ | 989,936 | ||||
OCI before reclassifications
|
23,807 | 23,807 | ||||||
Amounts reclassified from AOCI
|
(22,940 | ) | (22,940 | ) | ||||
Net current period OCI
|
867 | 867 | ||||||
Balance as of December 31, 2013
|
$ | 990,803 | $ | 990,803 |
December 31, 2013
|
|||||
(dollars in thousands)
|
|||||
Details about Accumulated OCI Components
|
Amounts
Reclassified from Accumulated OCI
|
Affected Line on the Consolidated
Statements Of Operations And
Comprehensive Income (Loss)
|
|||
Unrealized gains and losses on available-for-sale securities
|
|||||
$ | 68,107 |
Net realized gains (losses) on sales of investments
|
|||
(45,167 | ) |
Net other-than-temporary credit impairment losses
|
|||
$ | 22,940 |
Income (loss) before income taxes
|
|||
- |
Income taxes
|
||||
$ | 22,940 |
Net of tax
|
For the Year Ended
|
||||||||||||||||
December 31, 2013
|
December 31, 2012
|
|||||||||||||||
Number of Shares
|
Weighted
Average Grant
Date Fair Value
|
Number of Shares
|
Weighted
Average Grant
Date
Fair Value
|
|||||||||||||
Unvested shares outstanding - beginning of period
|
586,000 | 17.72 | 758,400 | 17.72 | ||||||||||||
Granted
|
98,688 | 3.04 | 111,528 | 2.69 | ||||||||||||
Vested
|
(230,779 | ) | 17.72 | (264,232 | ) | 17.72 | ||||||||||
Forfeited
|
(69,909 | ) | 17.72 | (19,696 | ) | 17.72 | ||||||||||
Unvested shares outstanding - end of period
|
384,000 | 17.72 | 586,000 | 17.72 |
December 31, 2013
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Gross Amounts Not Offset with Financial
Assets (Liabilities) in the Consolidated
Statements of Financial Position
|
||||||||||||||||||||||||
Gross Amounts of Recognized Assets (Liabilities)
|
Gross Amounts Offset in the Consolidated Statements
of Financial Position
|
Net Amounts Offset in the Consolidated Statements
of Financial Position
|
Financial Instruments
|
Cash Collateral
(Received) Pledged
|
Net Amount
|
|||||||||||||||||||
Repurchase agreements
|
$ | (1,658,561 | ) | $ | - | $ | (1,658,561 | ) | $ | 1,737,381 | $ | - | $ | 78,820 | ||||||||||
Interest Rate Swaps
|
(30,199 | ) | - | (30,199 | ) | 39,470 | - | 9,271 | ||||||||||||||||
Mortgage Options
|
- | - | - | - | - | - | ||||||||||||||||||
Treasury Futures
|
10,629 | (2,534 | ) | 8,095 | - | - | 8,095 | |||||||||||||||||
Total Liabilities
|
$ | (1,678,131 | ) | $ | (2,534 | ) | $ | (1,680,665 | ) | $ | 1,776,851 | $ | - | $ | 96,186 | |||||||||
December 31, 2012
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Gross Amounts Not Offset with Financial
Assets (Liabilities) in the Consolidated
Statements of Financial Position
|
||||||||||||||||||||||||
Gross Amounts of Recognized Assets (Liabilities)
|
Gross Amounts Offset in the Consolidated Statements
of Financial Position
|
Net Amounts Offset in the Consolidated Statements
of Financial Position
|
Financial Instruments
|
Cash Collateral
(Received) Pledged
|
Net Amount
|
|||||||||||||||||||
Repurchase Agreements
|
$ | (1,528,025 | ) | $ | - | $ | (1,528,025 | ) | $ | 1,604,560 | $ | - | $ | 76,535 | ||||||||||
Interest Rate Swaps
|
(53,939 | ) | - | (53,939 | ) | $ | 60,382 | - | 6,443 | |||||||||||||||
Total Liabilities
|
$ | (1,581,964 | ) | $ | - | $ | (1,581,964 | ) | $ | 1,664,942 | $ | - | $ | 82,978 |
For the Quarter Ended
|
||||||||||||||||
December 31, 2013
|
September 30, 2013
|
June 30, 2013
|
March 31, 2013
|
|||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 128,062 | $ | 130,361 | $ | 127,565 | $ | 125,795 | ||||||||
Less interest expense
|
(21,485 | ) | (25,074 | ) | (26,611 | ) | (28,829 | ) | ||||||||
Net interest income (expense)
|
106,577 | 105,287 | 100,954 | 96,966 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(2,147 | ) | (2,209 | ) | - | - | ||||||||||
Portion of loss recognized in other comprehensive income (loss)
|
(20,402 | ) | (14,246 | ) | - | (6,163 | ) | |||||||||
Net other-than-temporary credit impairment losses
|
(22,549 | ) | (16,455 | ) | - | (6,163 | ) | |||||||||
Net gains (losses) on derivatives
|
22,361 | (3,364 | ) | 7,787 | (128 | ) | ||||||||||
Net unrealized gains (losses) on interest-only RMBS
|
(2,416 | ) | (27,874 | ) | (12,974 | ) | (1,013 | ) | ||||||||
Net realized gains (losses) on sales of investments
|
(4,832 | ) | 18,816 | 54,117 | 6 | |||||||||||
Total other expenses
|
8,514 | 9,043 | 6,677 | 9,865 | ||||||||||||
Net income (loss)
|
$ | 72,311 | $ | 67,367 | $ | 143,207 | $ | 79,801 | ||||||||
Net income (loss) per share-basic and diluted
|
$ | 0.06 | $ | 0.07 | $ | 0.14 | $ | 0.08 |
For the Quarter Ended
|
||||||||||||||||
December 31, 2012
|
September 30, 2012
|
June 30, 2012
|
March 31, 2012
|
|||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||
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 derivatives
|
(199 | ) | (9,725 | ) | (16,186 | ) | (3,586 | ) | ||||||||
Net unrealized gains (losses) on interest-only RMBS
|
811 | (15,393 | ) | (2,532 | ) | 17,947 | ||||||||||
Net gains (losses) on embedded derivatives in interest-only RMBS
|
- | - | - | - | ||||||||||||
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 |
For the Quarter Ended
|
||||||||||||||||
December 31, 2011
|
September 30, 2011
|
June 30, 2011
|
March 31, 2011
|
|||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||
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 derivatives
|
(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
|
||
June 4, 2014
|
Signatures
|
Title
|
Date
|
||
/s/ Matthew Lambiase
|
Chief Executive Officer, President, and
Director (Principal Executive Officer)
|
June 4, 2014
|
||
Matthew Lambiase
|
||||
/s/ Robert Colligan
|
Chief Financial Officer (Principal Financial
and Accounting Officer)
|
June 4, 2014
|
||
Robert Colligan
|
||||
/s/ Mark Abrams
|
Director
|
June 4, 2014
|
||
Mark Abrams
|
||||
/s/ Paul A. Keenan
|
Director
|
June 4, 2014
|
||
Paul A. Keenan
|
||||
/s/ Paul Donlin
|
Director
|
June 4, 2014
|
||
Paul Donlin
|
||||
/s/ Gerard Creagh
|
Director
|
June 4, 2014
|
||
Gerard Creagh
|
||||
/s/ Dennis Mahoney
|
Director
|
June 4, 2014
|
||
Dennis Mahoney
|
||||
/s/ John P. Reilly
|
Director
|
June 4, 2014
|
||
John P. Reilly
|
Ratio of Income (Loss) To Combined Fixed Charges And Preferred Stock Dividends
|
|||||||||||||||||||||
The following table sets forth the calculation of our ratio of earnings to combined fixed charges and preferred stock
|
|||||||||||||||||||||
dividends for the periods shown:
|
|||||||||||||||||||||
For the Year Ended
|
|||||||||||||||||||||
December 31,
2013
|
December 31,
2012
|
December 31,
2011
|
December 31,
2010
|
December 31,
2009
|
|||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||
Net income (loss) before taxes
|
$ | 362,688 | $ | 327,768 | $ | 137,935 | $ | 249,161 | $ | 230,697 | |||||||||||
Add:
|
fixed charges (interest expense) (1)
|
123,856 | 146,781 | 150,787 | 152,236 | 35,083 | |||||||||||||||
preferred stock dividend
|
|||||||||||||||||||||
Income (loss) as adjusted
|
$ | 486,544 | $ | 474,549 | $ | 288,722 | $ | 401,397 | $ | 265,780 | |||||||||||
Fixed charges (interest expense) + preferred stock dividend
|
$ | 123,856 | $ | 146,781 | $ | 150,787 | $ | 152,236 | $ | 35,083 | |||||||||||
Ratio of income (losses) to combined fixed charges and preferred stock dividends
|
3.93 | x | 3.23 | x | 1.91 | x | 2.64 | x | 7.58 | x | |||||||||||
Deficiency
|
$ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
(1) Includes effect of realized losses on interest rate swaps.
|
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:
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a.
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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.
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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.
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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.
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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.
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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):
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a.
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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
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b.
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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
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Matthew Lambiase
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Chief Executive Officer and President (Principal Executive Officer)
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1.
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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.
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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.
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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.
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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.
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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.
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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.
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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):
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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
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b.
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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/
Robert Colligan
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Robert Colligan
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Chief Financial Officer (Principal Financial Officer)
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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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.
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/s/ Matthew Lambiase
Matthew Lambiase
Chief Executive Officer and President
June 4, 2014
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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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.
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/s/ Robert Colligan
Robert Colligan
Chief Financial Officer
June 4, 2014
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