MARYLAND
|
26-0630461
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
Class | Outstanding at August 4, 2011 |
Common Stock, $.01 par value | 1,027,125,679 |
Part I. FINANCIAL INFORMATION
|
||||
Item 1. Consolidated Financial Statements:
|
||||
1 | ||||
2 | ||||
3 | ||||
4 | ||||
6 | ||||
28 | ||||
48 | ||||
53 | ||||
54 | ||||
54 | ||||
55 | ||||
56 | ||||
CERTIFICATIONS
|
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
||||||||
(dollars in thousands, except share and per share data)
|
||||||||
June 30, 2011
(unaudited)
|
December 31,
2010 (1)
|
|||||||
Assets:
|
||||||||
Cash and cash equivalents
|
$ | 16,080 | $ | 7,173 | ||||
Non-Agency RMBS, at fair value
|
||||||||
Senior ($147.5 million and $484.1 million resulting from consolidation of VIEs)
|
347,900 | 987,685 | ||||||
Subordinated ($1.5 billion and $1.5 billion resulting from consolidation of VIEs)
|
2,173,005 | 2,210,858 | ||||||
Senior, non-retained (held in consolidated VIEs)
|
2,176,692 | 2,330,568 | ||||||
Agency RMBS, at fair value
|
5,013,760 | 2,133,584 | ||||||
Securitized loans held for investment (held in consolidated VIEs), net of allowance for loan losses of $7.5 million and $6.6 million, respectively
|
302,879 | 353,532 | ||||||
Accrued interest receivable
|
57,946 | 49,088 | ||||||
Other assets
|
847 | 1,212 | ||||||
Total assets
|
$ | 10,089,109 | $ | 8,073,700 | ||||
Liabilities:
|
||||||||
Repurchase agreements, Agency RMBS ($4.5 billion and $1.7 billion of RMBS pledged as collateral, respectively)
|
$ | 4,320,487 | $ | 1,600,078 | ||||
Repurchase agreements, non-Agency RMBS ($0.0 and $249.4 million of RMBS pledged as collateral, respectively)
|
- | 208,719 | ||||||
Securitized debt, loans held for investment, issued by consolidated VIEs ($302.9 million and $353.5 million of securitized loans pledged as collateral, respectively)
|
245,984 | 289,236 | ||||||
Securitized debt, non-Agency RMBS, issued by consolidated VIEs, non-retained ($3.8 billion and $4.4 billion of non-retained RMBS pledged as collateral, respectively)
|
1,904,936 | 1,956,079 | ||||||
Payable for investments purchased
|
- | 127,693 | ||||||
Accrued interest payable
|
11,529 | 11,641 | ||||||
Dividends payable
|
133,425 | 174,445 | ||||||
Accounts payable and other liabilities
|
1,355 | 393 | ||||||
Investment management fees payable to affiliate
|
13,196 | 12,422 | ||||||
Interest rate swaps, at fair value ($23.3 million and $12.8 million of RMBS pledged as collateral, respectively)
|
19,658 | 9,988 | ||||||
Total liabilities
|
$ | 6,650,570 | $ | 4,390,694 | ||||
Commitments and Contingencies (Note 15)
|
- | - | ||||||
Stockholders' Equity:
|
||||||||
Common stock: par value $0.01 per share; 1,500,000,000 shares authorized, 1,027,167,395 and 1,027,034,357 shares issued and outstanding, respectively
|
$ | 10,263 | $ | 10,261 | ||||
Additional paid-in-capital
|
3,602,671 | 3,601,890 | ||||||
Accumulated other comprehensive income (loss)
|
25,297 | 274,651 | ||||||
Retained earnings (accumulated deficit)
|
(199,692 | ) | (203,796 | ) | ||||
Total stockholders' equity
|
$ | 3,438,539 | $ | 3,683,006 | ||||
Total liabilities and stockholders' equity
|
$ | 10,089,109 | $ | 8,073,700 | ||||
(1) Derived from the audited consolidated financial statements at December 31, 2010.
|
||||||||
See notes to consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
(dollars in thousands, except share and per share data)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
For the Quarter Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2011
|
June 30, 2010
|
June 30, 2011
|
June 30, 2010
|
|||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 194,235 | $ | 133,522 | $ | 400,809 | $ | 262,506 | ||||||||
Interest expense
|
7,481 | 6,499 | 15,483 | 13,873 | ||||||||||||
Interest income, non-retained
|
28,428 | 49,829 | 49,587 | 100,690 | ||||||||||||
Interest expense, non-retained
|
28,312 | 21,421 | 55,887 | 55,251 | ||||||||||||
Net interest income (expense)
|
186,870 | 155,431 | 379,026 | 294,072 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(1,926 | ) | (24,746 | ) | (6,131 | ) | (47,433 | ) | ||||||||
Non-credit portion of loss recognized in other comprehensive income (loss)
|
882 | 17,853 | 2,462 | 37,996 | ||||||||||||
Net other-than-temporary credit impairment losses
|
(1,044 | ) | (6,893 | ) | (3,669 | ) | (9,437 | ) | ||||||||
Other gains (losses):
|
||||||||||||||||
Unrealized gains (losses) on interest rate swaps
|
(19,500 | ) | (11,237 | ) | (9,669 | ) | (11,237 | ) | ||||||||
Realized gains (losses) on interest rate swaps
|
(4,297 | ) | (699 | ) | (7,144 | ) | (699 | ) | ||||||||
Gains (losses) on interest rate swaps
|
(23,797 | ) | (11,936 | ) | (16,813 | ) | (11,936 | ) | ||||||||
Net gains (losses) on interest-only RMBS
|
(4,442 | ) | - | (4,442 | ) | - | ||||||||||
Net gains (losses) on embedded derivatives in interest-only RMBS
|
(2,234 | ) | - | (2,234 | ) | - | ||||||||||
Realized gains (losses) on sales of investments, net
|
(380 | ) | - | 2,364 | 342 | |||||||||||
Realized losses on principal write-downs of non-Agency RMBS
|
(22,040 | ) | (326 | ) | (41,560 | ) | (1,275 | ) | ||||||||
Total other gains (losses)
|
(52,893 | ) | (12,262 | ) | (62,685 | ) | (12,869 | ) | ||||||||
Net investment income (loss)
|
132,933 | 136,276 | 312,672 | 271,766 | ||||||||||||
Other expenses:
|
||||||||||||||||
Management fee
|
13,152 | 9,263 | 25,902 | 17,377 | ||||||||||||
Provision for loan losses
|
- | 1,024 | 1,442 | 1,630 | ||||||||||||
General and administrative expenses
|
1,820 | 1,409 | 3,307 | 2,569 | ||||||||||||
Total other expenses
|
14,972 | 11,696 | 30,651 | 21,576 | ||||||||||||
Income (loss) before income taxes
|
117,961 | 124,580 | 282,021 | 250,190 | ||||||||||||
Income taxes
|
118 | 1 | 816 | 1 | ||||||||||||
Net income (loss)
|
$ | 117,843 | $ | 124,579 | $ | 281,205 | $ | 250,189 | ||||||||
Net income (loss) per share-basic and diluted
|
$ | 0.11 | $ | 0.16 | $ | 0.27 | $ | 0.35 | ||||||||
Weighted average number of shares outstanding-basic and diluted
|
1,027,130,496 | 765,475,340 | 1,027,096,962 | 718,185,900 | ||||||||||||
Comprehensive income (loss):
|
||||||||||||||||
Net income (loss)
|
$ | 117,843 | $ | 124,579 | $ | 281,205 | $ | 250,189 | ||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
(112,067 | ) | (151,524 | ) | (292,219 | ) | 90,057 | |||||||||
Reclassification adjustment for net losses included in net income (loss) for other-than-temporary credit impairment losses
|
1,044 | 6,893 | 3,669 | 9,437 | ||||||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
22,420 | 326 | 39,196 | 933 | ||||||||||||
Other comprehensive income (loss)
|
(88,603 | ) | (144,305 | ) | (249,354 | ) | 100,427 | |||||||||
Comprehensive income (loss)
|
$ | 29,240 | $ | (19,726 | ) | $ | 31,851 | $ | 350,616 | |||||||
See notes to consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||
Common Stock
Par Value
|
Additional
Paid-in Capital
|
Accumulated Other Comprehensive Income (Loss)
|
Retained Earnings (Accumulated Deficit)
|
Total
|
||||||||||||||||
Balance, December 31, 2009
|
$ | 6,693 | $ | 2,290,614 | $ | (99,754 | ) | $ | (70,991 | ) | $ | 2,126,562 | ||||||||
Net income (loss)
|
- | - | - | 250,189 | 250,189 | |||||||||||||||
Cumulative effect of change in accounting principle
|
- | - | - | (88,187 | ) | (88,187 | ) | |||||||||||||
Other comprehensive income (loss)
|
- | - | 100,427 | - | 100,427 | |||||||||||||||
Proceeds from direct purchase and dividend reinvestment
|
- | 123 | - | - | 123 | |||||||||||||||
Proceeds from common stock offerings
|
2,128 | 765,584 | - | - | 767,712 | |||||||||||||||
Restricted stock grants
|
1 | 245 | - | - | 246 | |||||||||||||||
Common dividends declared, $0.34 per share
|
- | - | - | (244,213 | ) | (244,213 | ) | |||||||||||||
Balance, June 30, 2010
|
$ | 8,822 | $ | 3,056,566 | $ | 673 | $ | (153,202 | ) | $ | 2,912,859 | |||||||||
Balance, December 31, 2010
|
$ | 10,261 | $ | 3,601,890 | $ | 274,651 | $ | (203,796 | ) | $ | 3,683,006 | |||||||||
Net income (loss)
|
- | - | - | 281,205 | 281,205 | |||||||||||||||
Other comprehensive income (loss)
|
- | - | (249,354 | ) | - | (249,354 | ) | |||||||||||||
Proceeds from direct purchase and dividend reinvestment
|
2 | 540 | - | - | 542 | |||||||||||||||
Proceeds from common stock offerings
|
- | (8 | ) | - | - | (8 | ) | |||||||||||||
Restricted stock grants
|
- | 249 | - | - | 249 | |||||||||||||||
Common dividends declared, $0.27 per share
|
- | - | - | (277,101 | ) | (277,101 | ) | |||||||||||||
Balance, June 30, 2011
|
$ | 10,263 | $ | 3,602,671 | $ | 25,297 | $ | (199,692 | ) | $ | 3,438,539 | |||||||||
See notes to consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(dollars in thousands)
|
||||||||
(unaudited)
|
||||||||
For the Six Months Ended June 30, 2011
|
For the Six Months Ended June 30, 2010
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income (loss)
|
$ | 281,205 | $ | 250,189 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
(Accretion) amortization of investment discounts/premiums
|
(118,635 | ) | (118,811 | ) | ||||
Unrealized losses (gains) on interest rate swaps
|
9,669 | 11,237 | ||||||
Net losses (gains) on interest-only RMBS
|
4,442 | - | ||||||
Unrealized losses (gains) on embedded derivatives in interest-only RMBS
|
2,234 | |||||||
Realized losses (gains) on sales of investments
|
(2,364 | ) | (342 | ) | ||||
Realized losses on principal write-downs of non-Agency RMBS
|
41,560 | 1,275 | ||||||
Net other-than-temporary credit impairment losses
|
3,669 | 9,437 | ||||||
Provision for loan losses
|
1,442 | 1,630 | ||||||
Restricted stock grants
|
249 | 246 | ||||||
Changes in operating assets:
|
||||||||
Decrease (increase) in accrued interest receivable
|
(8,998 | ) | (12,554 | ) | ||||
Decrease (increase) in other assets
|
365 | 571 | ||||||
Changes in operating liabilities:
|
||||||||
Increase (decrease) in accounts payable and other liabilities
|
962 | 207 | ||||||
Increase (decrease) in investment management fees payable to affiliate
|
774 | 838 | ||||||
Increase (decrease) in accrued interest payable
|
(112 | ) | 8,910 | |||||
Net cash provided by (used in) operating activities
|
$ | 216,462 | $ | 152,833 | ||||
Cash Flows From Investing Activities:
|
||||||||
Mortgage-Backed Securities portfolio:
|
||||||||
Purchases
|
$ | (3,653,583 | ) | $ | (1,502,615 | ) | ||
Sales
|
668,529 | 89,877 | ||||||
Principal payments
|
262,632 | 377,108 | ||||||
Mortgage-Backed Securities portfolio, non-retained:
|
||||||||
Principal payments
|
366,757 | 289,733 | ||||||
Securitized loans:
|
||||||||
Principal payments
|
48,402 | 52,249 | ||||||
Net cash provided by (used in) investing activities
|
$ | (2,307,263 | ) | $ | (693,648 | ) | ||
Cash Flows From Financing Activities:
|
||||||||
Proceeds from repurchase agreements
|
$ | 9,335,704 | $ | 10,564,043 | ||||
Payments on repurchase agreements
|
(6,824,014 | ) | (11,201,640 | ) | ||||
Net proceeds from common stock offerings
|
(8 | ) | 767,712 | |||||
Payments on securitized debt borrowings, loans held for investment
|
(43,252 | ) | (48,417 | ) | ||||
Proceeds from securitized debt borrowings, non-retained
|
311,012 | 1,127,872 | ||||||
Payments on securitized debt borrowings, non-retained
|
(362,155 | ) | (229,362 | ) | ||||
Net proceeds from direct purchase and dividend reinvestment
|
542 | 123 | ||||||
Common dividends paid
|
(318,121 | ) | (227,581 | ) | ||||
Net cash provided by (used in) financing activities
|
$ | 2,099,708 | $ | 752,750 | ||||
Net increase (decrease) in cash and cash equivalents
|
8,907 | $ | 211,935 | |||||
Cash and cash equivalents at beginning of period
|
7,173 | 24,279 | ||||||
Cash and cash equivalents at end of period
|
$ | 16,080 | $ | 236,214 | ||||
See notes to consolidated financial statements.
|
||||||||
CHIMERA INVESTMENT CORPORATION
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(dollars in thousands)
|
||||||||
(unaudited)
|
||||||||
Supplemental disclosure of cash flow information:
|
||||||||
Interest paid
|
$ | 64,979 | $ | 60,913 | ||||
Taxes paid
|
$ | 816 | $ | 1 | ||||
Non-cash investing activities:
|
||||||||
Net change in unrealized gain on available-for sale securities
|
$ | (249,354 | ) | $ | 100,427 | |||
Non-cash financing activities:
|
||||||||
Common dividends declared, not yet paid
|
$ | 133,425 | $ | 130,420 | ||||
See notes to consolidated financial statements.
|
June 30, 2011
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Principal Value
|
Unamortized Premium
|
Unamortized Discount
|
Gross Unrealized Gain
|
Gross Unrealized Loss
|
Fair Value
|
|||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||
Senior
|
$ | 6,967 | $ | 405,648 | $ | (93 | ) | $ | 27,671 | $ | (92,293 | ) | $ | 347,900 | ||||||||||
Subordinated
|
4,938,497 | 57,946 | (2,562,459 | ) | 151,460 | (412,439 | ) | 2,173,005 | ||||||||||||||||
Senior, non-retained
|
1,948,002 | 40,468 | (79,394 | ) | 292,459 | (24,843 | ) | 2,176,692 | ||||||||||||||||
Agency RMBS
|
4,801,983 | 135,332 | (161 | ) | 88,065 | (11,459 | ) | 5,013,760 | ||||||||||||||||
Total
|
$ | 11,695,449 | $ | 639,394 | $ | (2,642,107 | ) | $ | 559,655 | $ | (541,034 | ) | $ | 9,711,357 | ||||||||||
December 31, 2010
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Principal Value
|
Unamortized Premium
|
Unamortized Discount
|
Gross Unrealized Gain
|
Gross Unrealized Loss
|
Fair Value
|
|||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||
Senior
|
$ | 664,251 | $ | 420,657 | $ | (9,320 | ) | $ | 21,758 | $ | (109,661 | ) | $ | 987,685 | ||||||||||
Subordinated
|
4,962,829 | 58,298 | (2,789,906 | ) | 206,189 | (226,552 | ) | 2,210,858 | ||||||||||||||||
Senior, non-retained
|
2,008,167 | 79,730 | (109,619 | ) | 428,213 | (75,923 | ) | 2,330,568 | ||||||||||||||||
Agency RMBS
|
2,035,823 | 67,134 | - | 47,717 | (17,090 | ) | 2,133,584 | |||||||||||||||||
Total
|
$ | 9,671,070 | $ | 625,819 | $ | (2,908,845 | ) | $ | 703,877 | $ | (429,226 | ) | $ | 7,662,695 |
June 30, 2011
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||
Unrealized Loss Position For:
|
|||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
|||||||||||||||||||||||
RMBS
|
Estimated Fair Value
|
Unrealized
Losses
|
Estimated Fair Value
|
Unrealized
Losses
|
Estimated Fair Value
|
Unrealized
Losses
|
|||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||
Senior
|
$ | 85,660 | $ | (12,081 | ) | $ | 90,720 | $ | (80,212 | ) | $ | 176,380 | $ | (92,293 | ) | ||||||||||
Subordinated
|
502,025 | (79,822 | ) | 920,078 | (332,617 | ) | 1,422,103 | (412,439 | ) | ||||||||||||||||
Senior, non-retained
|
- | - | 523,988 | (24,843 | ) | 523,988 | (24,843 | ) | |||||||||||||||||
Agency
|
588,905 | (11,459 | ) | - | - | 588,905 | (11,459 | ) | |||||||||||||||||
Total
|
$ | 1,176,590 | $ | (103,362 | ) | $ | 1,534,786 | $ | (437,672 | ) | $ | 2,711,376 | $ | (541,034 | ) |
December 31, 2010
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||
Unrealized Loss Position For:
|
|||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
|||||||||||||||||||||||
RMBS
|
Estimated Fair Value
|
Unrealized
Losses
|
Estimated Fair Value
|
Unrealized
Losses
|
Estimated Fair Value
|
Unrealized
Losses
|
|||||||||||||||||||
Non-Agency RMBS
|
|||||||||||||||||||||||||
Senior
|
$ | 549,968 | $ | (109,662 | ) | $ | - | $ | - | $ | 549,968 | $ | (109,662 | ) | |||||||||||
Subordinated
|
1,178,493 | (217,224 | ) | 12,826 | (9,328 | ) | 1,191,319 | (226,552 | ) | ||||||||||||||||
Senior, non-retained
|
764,724 | (75,923 | ) | - | - | 764,724 | (75,923 | ) | |||||||||||||||||
Agency
|
600,464 | (17,090 | ) | - | - | 600,464 | (17,090 | ) | |||||||||||||||||
Total
|
$ | 3,093,649 | $ | (419,899 | ) | $ | 12,826 | $ | (9,328 | ) | $ | 3,106,475 | $ | (429,227 | ) |
For the Quarter Ended
|
||||||||
June 30, 2011
|
June 30, 2010
|
|||||||
Cumulative credit loss beginning balance
|
$ | 25,299 | $ | 12,540 | ||||
Additions:
|
||||||||
Other-than-temporary impairments not previously recognized
|
286 | 6,340 | ||||||
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments
|
758 | 553 | ||||||
Cumulative credit loss ending balance
|
$ | 26,343 | $ | 19,433 | ||||
For the Six Months Ended
|
||||||||
June 30, 2011
|
June 30, 2010
|
|||||||
Cumulative credit loss beginning balance
|
$ | 22,674 | $ | 9,996 | ||||
Additions:
|
||||||||
Other-than-temporary impairments not previously recognized
|
1,274 | 8,802 | ||||||
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments
|
2,395 | 635 | ||||||
Cumulative credit loss ending balance
|
$ | 26,343 | $ | 19,433 |
June 30, 2011
|
||||||||||||||||
Weighted Average Coupon at Period-End
|
Weighted Average Yield (Loss Adjusted) at Period-End
|
Annualized Yield Over Current Quarter
|
Weighted Average 3 Month CPR at Period-End
|
|||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
1.91 | % | 14.06 | % | 4.08 | % | 17 | % | ||||||||
Subordinated
|
3.99 | % | 14.21 | % | 18.53 | % | 17 | % | ||||||||
Senior, non-retained
|
5.17 | % | 4.58 | % | 5.70 | % | 16 | % | ||||||||
Agency RMBS
|
4.71 | % | 4.34 | % | 4.34 | % | 7 | % | ||||||||
December 31, 2010
|
||||||||||||||||
Weighted Average Coupon at Period-End
|
Weighted Average Yield (Loss Adjusted) at Period-End
|
Annualized Yield Over Current Quarter
|
Weighted Average 3 Month CPR at Period-End
|
|||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
2.01 | % | 13.70 | % | 12.99 | % | 16 | % | ||||||||
Subordinated
|
4.04 | % | 17.41 | % | 25.16 | % | 15 | % | ||||||||
Senior, non-retained
|
5.17 | % | 4.36 | % | 6.85 | % | 15 | % | ||||||||
Agency RMBS
|
5.05 | % | 4.51 | % | 3.34 | % | 24 | % |
June 30, 2011
|
December 31, 2010
|
|
AAA
|
14.03%
|
14.67%
|
AA
|
0.67%
|
5.34%
|
A
|
0.48%
|
0.92%
|
BBB
|
0.53%
|
0.61%
|
BB
|
0.01%
|
0.01%
|
B
|
0.00%
|
0.00%
|
Below B or not rated
|
84.28%
|
78.45%
|
Total
|
100.00%
|
100.00%
|
June 30, 2011
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||
Weighted Average Life
|
||||||||||||||||
Less than one year
|
Greater than one year and less than five years
|
Greater than five years
|
Total
|
|||||||||||||
Fair value
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 8,805 | $ | 70,609 | $ | 268,486 | $ | 347,900 | ||||||||
Subordinated
|
10,212 | 246,751 | 1,916,042 | 2,173,005 | ||||||||||||
Senior, non-retained
|
285,136 | 1,440,039 | 451,517 | 2,176,692 | ||||||||||||
Agency RMBS
|
- | 646,783 | 4,366,977 | 5,013,760 | ||||||||||||
Total fair value
|
$ | 304,153 | $ | 2,404,182 | $ | 7,003,022 | $ | 9,711,357 | ||||||||
Amortized cost
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 9,038 | $ | 77,991 | $ | 325,493 | $ | 412,522 | ||||||||
Subordinated
|
10,456 | 278,189 | 2,145,339 | 2,433,984 | ||||||||||||
Senior, non-retained
|
182,440 | 1,289,279 | 437,357 | 1,909,076 | ||||||||||||
Agency RMBS
|
- | 617,306 | 4,319,848 | 4,937,154 | ||||||||||||
Total amortized cost
|
$ | 201,934 | $ | 2,262,765 | $ | 7,228,037 | $ | 9,692,736 | ||||||||
December 31, 2010
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||
Weighted Average Life
|
||||||||||||||||
Less than one year
|
Greater than one year and less than five years
|
Greater than five years
|
Total
|
|||||||||||||
Fair value
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 26,962 | $ | 587,075 | $ | 373,648 | $ | 987,685 | ||||||||
Subordinated
|
7,941 | 218,986 | 1,983,931 | 2,210,858 | ||||||||||||
Senior, non-retained
|
200,468 | 1,889,732 | 240,368 | 2,330,568 | ||||||||||||
Agency RMBS
|
- | 1,560,859 | 572,725 | 2,133,584 | ||||||||||||
Total fair value
|
$ | 235,371 | $ | 4,256,652 | $ | 3,170,672 | $ | 7,662,695 | ||||||||
Amortized cost
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 26,920 | $ | 584,859 | $ | 463,810 | $ | 1,075,589 | ||||||||
Subordinated
|
11,076 | 253,558 | 1,966,587 | 2,231,221 | ||||||||||||
Senior, non-retained
|
251,579 | 1,500,955 | 225,744 | 1,978,278 | ||||||||||||
Agency RMBS
|
- | 1,513,644 | 589,313 | 2,102,957 | ||||||||||||
Total amortized cost
|
$ | 289,575 | $ | 3,853,016 | $ | 3,245,454 | $ | 7,388,045 |
June 30, 2011
|
December 31, 2010
|
|||||||||
Number of securities in portfolio
|
523 | 581 | ||||||||
Weighted average maturity (years)
|
27.0 | 27.4 | ||||||||
Weighted average amortized loan to value
|
72.3 | % | 72.5 | % | ||||||
Weighted average FICO
|
717.2 | 717.3 | ||||||||
Weighted average loan balance (in thousands)
|
$ | 470.1 | $ | 447.6 | ||||||
Weighted average percentage owner occupied
|
84.3 | % | 83.3 | % | ||||||
Weighted average percentage single family residence
|
64.1 | % | 63.1 | % | ||||||
Weighted average current credit enhancement
|
12.7 | % | 16.0 | % | ||||||
Weighted average geographic concentration
|
CA
|
38.1 | % |
CA
|
57.8 | % | ||||
FL
|
8.7 | % |
FL
|
13.3 | % | |||||
NY
|
5.5 | % |
NY
|
7.3 | % | |||||
NJ
|
2.4 | % |
VA
|
3.9 | % | |||||
VA
|
2.3 | % |
NJ
|
3.3 | % |
Origination Year
|
June 30, 2011
|
December 31, 2010
|
2004
|
0.0%
|
0.1%
|
2005
|
13.2%
|
13.4%
|
2006
|
40.1%
|
27.0%
|
2007
|
40.8%
|
56.1%
|
2008
|
5.9%
|
3.3%
|
2009
|
0.0%
|
0.1%
|
Total
|
100.0%
|
100.0%
|
June 30, 2011
|
December 31, 2010
|
|||||||
Securitized loans, at amortized cost
|
$ | 310,363 | $ | 360,118 | ||||
Less: allowance for loan losses
|
7,484 | 6,586 | ||||||
Securitized loans held for investment
|
$ | 302,879 | $ | 353,532 |
June 30, 2011
|
December 31, 2010
|
|||||||||
Number of loans
|
446 | 513 | ||||||||
Weighted average maturity (years)
|
26.2 | 26.6 | ||||||||
Weighted average amortized loan to value
|
75.1 | % | 74.5 | % | ||||||
Weighted average FICO
|
754 | 755 | ||||||||
Weighted average loan balance (in thousands)
|
$ | 688.4 | $ | 694.3 | ||||||
Weighted average percentage owner occupied
|
91.1 | % | 90.5 | % | ||||||
Weighted average percentage single family residence
|
58.4 | % | 58.2 | % | ||||||
Weighted average geographic concentration
|
CA
|
34.2 | % |
CA
|
33.3 | % | ||||
FL
|
6.8 | % |
FL
|
6.7 | % | |||||
AZ
|
5.7 | % |
NJ
|
5.3 | % | |||||
NJ
|
5.2 | % |
IL
|
5.3 | % | |||||
IL
|
5.1 | % |
AZ
|
5.2 | % |
June 30, 2011
|
June 30, 2010
|
|||||||
Balance, beginning of period
|
$ | 8,018 | $ | 4,554 | ||||
Provision for loan losses
|
1,442 | 1,024 | ||||||
Charge-offs
|
(1,976 | ) | (9 | ) | ||||
Balance, end of period
|
$ | 7,484 | $ | 5,569 |
30 Days Delinquent
|
60 Days Delinquent
|
90+ Days Delinquent
|
Bankruptcy
|
Foreclosure
|
REO
|
Total
|
||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||
June 30, 2011
|
$ | 2,868 | $ | 0 | $ | 3,743 | $ | 0 | $ | 10,215 | $ | 1,115 | $ | 17,941 | ||||||||||||||
December 31, 2010
|
$ | 1,664 | $ | 1,554 | $ | 9,649 | $ | 937 | $ | 1,295 | $ | 1,120 | $ | 16,219 |
Number of Loans Modified During Period
|
Pre-Modification Recorded Investment
|
Post Modification Recorded Invesment
|
||||||||||
(dollars in thousands)
|
||||||||||||
June 30, 2011
|
5 | $ | 3,086 | $ | 3,198 | |||||||
December 31, 2010
|
14 | 11,385 | 11,975 |
June 30, 2011
|
||||||||||||
Level 1
|
Level 2
|
Level 3
|
||||||||||
(dollars in thousands)
|
||||||||||||
Assets:
|
||||||||||||
Non-Agency RMBS
|
||||||||||||
Senior
|
$ | - | $ | 347,900 | $ | - | ||||||
Subordinated
|
- | 2,173,005 | - | |||||||||
Senior, non-retained
|
- | 2,176,692 | - | |||||||||
Agency mortgage-backed securities
|
- | 5,013,760 | - | |||||||||
Liabilities:
|
||||||||||||
Interest rate swaps
|
- | 19,658 | - | |||||||||
December 31, 2010
|
||||||||||||
Level 1
|
Level 2
|
Level 3
|
||||||||||
(dollars in thousands)
|
||||||||||||
Assets:
|
||||||||||||
Non-Agency RMBS
|
||||||||||||
Senior
|
$ | - | $ | 987,685 | $ | - | ||||||
Subordinated
|
- | 2,210,858 | - | |||||||||
Senior, non-retained
|
- | 2,330,568 | - | |||||||||
Agency mortgage-backed securities
|
- | 2,133,584 | - | |||||||||
Liabilities:
|
||||||||||||
Interest rate swaps
|
- | 9,988 | - |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying Amount
|
Estimated Fair Value
|
Carrying Amount
|
Estimated Fair Value
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Non-Agency RMBS
|
$ | 4,697,597 | $ | 4,697,597 | $ | 5,529,111 | $ | 5,529,111 | ||||||||
Agency RMBS
|
5,013,760 | 5,013,760 | 2,133,584 | 2,133,584 | ||||||||||||
Securitized loans held for investment
|
302,879 | 297,057 | 353,532 | 345,410 | ||||||||||||
Repurchase agreements
|
(4,320,487 | ) | (4,324,517 | ) | (1,808,797 | ) | (1,811,575 | ) | ||||||||
Securitized debt
|
(245,984 | ) | (257,943 | ) | (289,236 | ) | (303,102 | ) | ||||||||
Securitized debt, non-retained
|
(1,904,936 | ) | (1,858,321 | ) | (1,956,079 | ) | (1,887,121 | ) | ||||||||
Interest rate swaps
|
(19,658 | ) | (19,658 | ) | (9,988 | ) | (9,988 | ) |
June 30, 2011
|
December 31, 2010
|
|||||||
(dollars in thousands) | ||||||||
Overnight
|
$ | 338,100 | $ | - | ||||
1-30 days
|
1,752,942 | 232,265 | ||||||
30 to 59 days
|
1,541,047 | 970,394 | ||||||
60 to 89 days
|
73,411 | 545,442 | ||||||
90 to 119 days
|
- | 60,696 | ||||||
Greater than or equal to 120 days
|
614,987 | - | ||||||
Total
|
$ | 4,320,487 | $ | 1,808,797 |
June 30, 2011
|
December 31, 2010
|
|||||||
(dollars in thousands) | ||||||||
Within One Year
|
$ | 569,620 | $ | 634,988 | ||||
One to Three Years
|
743,046 | 831,305 | ||||||
Three to Five Years
|
338,626 | 305,953 | ||||||
Greater Than or Equal to Five Years
|
464,972 | 417,977 | ||||||
Total
|
$ | 2,116,264 | $ | 2,190,223 |
Carrying Value (1)
|
||||
(dollars in thousands)
|
||||
Assets
|
||||
Non-Agency RMBS
|
||||
Senior, non-retained
|
$ | 1,114,034 | ||
Liabilities
|
||||
Securitized debt, non-retained
|
1,202,221 | |||
Net assets and liabilities of newly consolidated entities
|
(88,187 | ) | ||
Cumulative effect adjustment to retained earnings upon adoption
|
$ | (88,187 | ) | |
(1) Carrying value represents the amount the assets would have been recorded at in the consolidated financial statements at January 1, 2010 had they been recorded in the consolidated financial statements on the date the Company first met the conditions for consolidation.
|
June 30, 2011
|
December 31, 2010
|
|||||||
(dollars in thousands) | ||||||||
Assets
|
||||||||
Non-Agency RMBS
|
$ | 3,826,486 | $ | 4,357,631 | ||||
Securitized loans
|
302,879 | 353,532 | ||||||
Liabilities
|
||||||||
Securitized debt, non-retained
|
$ | 1,904,936 | $ | 1,956,079 | ||||
Securitized debt, loans held for investment
|
245,984 | 289,236 |
For the Quarter Ended
|
||||||||
June 30, 2011
|
June 30, 2010
|
|||||||
(dollars in thousands) | ||||||||
Interest income, non-retained
|
$ | 28,428 | $ | 49,829 | ||||
Interest income, securitized loans
|
4,203 | 4,421 | ||||||
Interest expense, non-retained
|
28,312 | 21,421 | ||||||
Interest expense, securized loans
|
4,522 | 4,758 | ||||||
Net interest income
|
$ | (203 | ) | $ | 28,071 |
For the Six Months Ended
|
||||||||
June 30, 2011
|
June 30, 2010
|
|||||||
(dollars in thousands) | ||||||||
Interest income, non-retained
|
$ | 49,587 | $ | 100,690 | ||||
Interest income, securitized loans
|
8,702 | 11,074 | ||||||
Interest expense, non-retained
|
55,887 | 55,251 | ||||||
Interest expense, securitized loans
|
9,472 | 9,563 | ||||||
Net interest income
|
$ | (7,070 | ) | $ | 46,950 |
For the Six Months Ended
|
||||||||
June 30, 2011
|
June 30, 2010
|
|||||||
(dollars in thousands)
|
||||||||
Proceeds from securitized debt borrowings, non-retained
|
$ | 311,012 | $ | 1,127,872 | ||||
Payments on securitized debt borrowings, non-retained
|
(362,155 | ) | (229,362 | ) | ||||
Payments on securitized debt borrowings, loans held for investment
|
(43,252 | ) | (48,417 | ) | ||||
Increase (decrease) in accrued interest receivable
|
(634 | ) | (9,345 | ) | ||||
Increase (decrease) in accrued interest payable
|
454 | 9,212 | ||||||
Net cash flows, non-retained
|
$ | (94,575 | ) | $ | 849,960 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Assets
|
||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||
Senior
|
$ | 338 | $ | 455 | $ | 400 | $ | 559 | ||||||||
Subordinated
|
6,617 | 6,087 | 7,664 | 6,485 | ||||||||||||
Agency RMBS
|
2,255 | 2,619 | 2,680 | 2,530 | ||||||||||||
Total
|
$ | 9,210 | $ | 9,161 | $ | 10,744 | $ | 9,574 |
Location on Consolidated
Statement of Financial Condition
|
Notional Amount
|
Net Estimated Fair Value/Carrying Value
|
Net Estimated Fair Value of RMBS Pledged as Collateral
|
||||||||||
(dollars in thousands)
|
|||||||||||||
June 30, 2011
|
Assets
|
$ | - | $ | - | $ | - | ||||||
June 30, 2011
|
Liabilities
|
$ | 950,000 | $ | (19,658 | ) | $ | 23,295 | |||||
December 31, 2010
|
Assets
|
$ | - | $ | - | $ | - | ||||||
December 31, 2010
|
Liabilities
|
$ | 450,000 | $ | (9,988 | ) | $ | 12,818 |
Location on Consolidated Statements of
Operations and Comprehensive Income (Loss)
|
||||||||
Realized Gains (Losses) on Interest Rate Swaps
|
Unrealized Gain (Losses) on Interest Rate Swaps
|
|||||||
(dollars in thousands)
|
||||||||
For the Quarter Ended:
|
||||||||
June 30, 2011
|
$ | (4,297 | ) | $ | (19,500 | ) | ||
June 30, 2010
|
$ | (699 | ) | $ | (11,237 | ) | ||
For the Six Months Ended:
|
||||||||
June 30, 2011
|
$ | (7,144 | ) | $ | (9,669 | ) | ||
June 30, 2010
|
$ | (699 | ) | $ | (11,237 | ) |
|
·
|
our business and investment strategy;
|
|
·
|
our projected financial and operating results;
|
|
·
|
our ability to maintain existing financing arrangements, obtain future financing arrangements and the terms of such arrangements;
|
|
·
|
general volatility of the securities markets in which we invest;
|
|
·
|
the impact of and changes to various government programs;
|
|
·
|
our expected investments;
|
|
·
|
changes in the value of our investments;
|
|
·
|
interest rate mismatches between our investments and our borrowings used to fund such purchases;
|
|
·
|
changes in interest rates and mortgage prepayment rates;
|
|
·
|
effects of interest rate caps on our adjustable-rate investments;
|
|
·
|
rates of default or decreased recovery rates on our investments;
|
|
·
|
prepayments of the mortgage and other loans underlying our mortgage-backed or other asset-backed securities;
|
|
·
|
the degree to which our hedging strategies may or may not protect us from interest rate volatility;
|
|
·
|
impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters;
|
|
·
|
availability of investment opportunities in real estate-related and other securities;
|
|
·
|
availability of qualified personnel;
|
|
·
|
estimates relating to our ability to make distributions to our stockholders in the future;
|
|
·
|
our understanding of our competition; and
|
|
·
|
market trends in our industry, interest rates, the debt securities markets or the general economy.
|
Asset Class
|
Principal Investments
|
RMBS | ● | Non-Agency RMBS, including investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes. |
● | Agency RMBS. | |
Residential Mortgage Loans | ● | Prime mortgage loans, which are mortgage loans that conform to the underwriting guidelines of Fannie Mae and Freddie Mac, which we refer to as Agency Guidelines; and jumbo prime mortgage loans, which are mortgage loans that conform to the Agency Guidelines except as to loan size. |
● | Alt-A mortgage loans, which are mortgage loans that may have been originated using documentation standards that are less stringent than the documentation standards applied by certain other first lien mortgage loan purchase programs, such as the Agency Guidelines, but have one or more compensating factors such as a borrower with a strong credit or mortgage history or significant assets. | |
● | FHA/VA insured loans, which are mortgage loans that comply to the underwriting guidelines of the Federal Housing Administration (FHA) or Department of Veteran Affairs (VA) and which are guaranteed by the FHA or VA, respectively. | |
Commercial Mortgage Loans | ● | 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. |
June 30, 2011
|
||||||||||||
GAAP Book
Value
|
Adjustments
|
Estimated
Economic Book
Value
|
||||||||||
(dollars in thousands)
|
||||||||||||
Assets:
|
||||||||||||
Non-Agency Mortgage-Backed Securities, at fair value
|
||||||||||||
Senior
|
$ | 347,900 | $ | - | $ | 347,900 | ||||||
Subordinated
|
2,173,005 | - | 2,173,005 | |||||||||
Senior, non-retained
|
2,176,692 | (2,176,692 | ) | - | ||||||||
Agency Mortgage-Backed Securities, at fair value
|
5,013,760 | - | 5,013,760 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
|
302,879 | - | 302,879 | |||||||||
Other current assets
|
74,873 | - | 74,873 | |||||||||
Total assets
|
$ | 10,089,109 | $ | (2,176,692 | ) | $ | 7,912,417 | |||||
Repurchase agreements
|
4,320,487 | - | 4,320,487 | |||||||||
Securitized debt
|
245,984 | - | 245,984 | |||||||||
Securitized debt, non-retained
|
1,904,936 | (1,904,936 | ) | - | ||||||||
Other liabilities
|
179,163 | - | 179,163 | |||||||||
Total liabilities
|
6,650,570 | (1,904,936 | ) | 4,745,634 | ||||||||
Total stockholders' equity
|
3,438,539 | (271,756 | ) | 3,166,783 | ||||||||
Total liabilities and stockholders' equity
|
$ | 10,089,109 | $ | (2,176,692 | ) | $ | 7,912,417 | |||||
Book Value Per Share
|
$ | 3.35 | $ | (0.27 | ) | $ | 3.08 | |||||
December 31, 2010
|
||||||||||||
GAAP Book
Value
|
Adjustments
|
Estimated
Economic Book
Value
|
||||||||||
Assets:
|
(dollars in thousands)
|
|||||||||||
Non-Agency Mortgage-Backed Securities, at fair value
|
||||||||||||
Senior
|
$ | 987,685 | $ | - | $ | 987,685 | ||||||
Subordinated
|
2,210,858 | - | 2,210,858 | |||||||||
Senior, non-retained
|
2,330,568 | (2,330,568 | ) | - | ||||||||
Agency Mortgage-Backed Securities, at fair value
|
2,133,584 | - | 2,133,584 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
|
353,532 | - | 353,532 | |||||||||
Other current assets
|
57,473 | - | 57,473 | |||||||||
Total assets
|
$ | 8,073,700 | $ | (2,330,568 | ) | $ | 5,743,132 | |||||
Repurchase agreements
|
1,808,797 | - | 1,808,797 | |||||||||
Securitized debt
|
289,236 | - | 289,236 | |||||||||
Securitized debt, non-retained
|
1,956,079 | (1,956,079 | ) | - | ||||||||
Other liabilities
|
336,582 | - | 336,582 | |||||||||
Total liabilities
|
4,390,694 | (1,956,079 | ) | 2,434,615 | ||||||||
Total stockholders' equity
|
3,683,006 | (374,489 | ) | 3,308,517 | ||||||||
Total liabilities and stockholders' equity
|
$ | 8,073,700 | $ | (2,330,568 | ) | $ | 5,743,132 | |||||
Book Value Per Share
|
$ | 3.59 | $ | (0.36 | ) | $ | 3.23 | |||||
June 30, 2011
|
June 30, 2010
|
December 31, 2010
|
|||||||||||
Interest earning assets at period-end *
|
$ | 10,014,236 | $ | 6,595,363 | $ | 8,016,227 | |||||||
Interest bearing liabilities at period-end
|
$ | 6,471,407 | $ | 3,801,485 | $ | 4,054,112 | |||||||
Leverage at period-end
|
1.9:1
|
1.3:1
|
1.1:1
|
||||||||||
Leverage at period-end (recourse)
|
1.3:1
|
0.5:1
|
0.5:1
|
||||||||||
Portfolio Composition, at principal value
|
|||||||||||||
Non-Agency RMBS | 71.5 | % | 80.5 | % | 83.4 | % | |||||||
Senior | 0.0 | % | 5.2 | % | 4.0 | % | |||||||
Senior, interest only | 33.6 | % | 25.9 | % | 35.7 | % | |||||||
Subordinated | 26.0 | % | 30.2 | % | 29.8 | % | |||||||
Subordinated, interest only | 1.6 | % | 2.2 | % | 1.8 | % | |||||||
Senior, non-retained | 10.3 | % | 17.0 | % | 12.1 | % | |||||||
Agency RMBS | 25.5 | % | 13.4 | % | 12.6 | % | |||||||
Securitized loans | 3.0 | % | 6.1 | % | 4.0 | % | |||||||
Fixed-rate percentage of portfolio | 80.4 | % | 72.4 | % | 51.7 | % | |||||||
Adjustable-rate percentage of portfolio | 19.6 | % | 27.6 | % | 48.3 | % | |||||||
Annualized yield on average interest earning assets for the quarter ended**
|
6.64 | % | 8.47 | % | 8.17 | % | |||||||
Annualized cost of funds on average borrowed funds for the quarter ended***
|
2.44 | % | 2.93 | % | 4.10 | % | |||||||
*
|
Excludes cash and cash equivalents.
|
||||||||||||
**
|
Includes the effect of realized loss on principal write-downs.
|
||||||||||||
***
|
Includes the effect of interest paid on interest rate hedges.
|
||||||||||||
June 30, 2011
|
||||||||||||||||||||||||||||
Principal or
Notional
Value at
Period-End
|
Weighted
Average
Amortized
Cost Basis at
Period-End
|
Weighted
Average Fair
Value at
Period-End
|
Weighted
Average
Coupon at
Period-End
|
Weighted
Average
Yield (Loss
Adjusted) at
Period-End
|
Annualized
Yield Over
Current
Quarter*
|
Weighted
Average 3
Month CPR
at Period-
End
|
||||||||||||||||||||||
Non-Agency Mortgage-Backed Securities
|
||||||||||||||||||||||||||||
Senior | $ | 6,967 | $ | 98.67 | $ | 97.03 | 1.15 | % | 2.59 | % | 1.95 | % | 16 | % | ||||||||||||||
Senior, interest only | $ | 6,387,919 | $ | 6.35 | $ | 5.34 | 1.91 | % | 14.07 | % | 4.12 | % | 17 | % | ||||||||||||||
Subordinated | $ | 4,938,497 | $ | 48.68 | $ | 43.32 | 4.05 | % | 13.61 | % | 18.40 | % | 17 | % | ||||||||||||||
Subordinated, interest only | $ | 301,619 | $ | 9.95 | $ | 11.15 | 2.93 | % | 23.96 | % | 28.36 | % | 14 | % | ||||||||||||||
Senior, non-retained | $ | 1,948,002 | $ | 98.00 | $ | 111.74 | 5.17 | % | 4.58 | % | 5.70 | % | 16 | % | ||||||||||||||
Agency Mortgage-Backed Securities
|
$ | 4,849,630 | $ | 102.81 | $ | 104.41 | 4.71 | % | 4.34 | % | 4.34 | % | 7 | % | ||||||||||||||
Securitized loans
|
||||||||||||||||||||||||||||
Senior | $ | 252,159 | $ | 101.19 | $ | 101.19 | 5.47 | % | 5.35 | % | 2.35 | % | 24 | % | ||||||||||||||
Senior, interest only | $ | 266,092 | $ | 0.01 | $ | 0.01 | 0.40 | % | 100.00 | % | 4428.57 | % | 24 | % | ||||||||||||||
Subordinated | $ | 54,880 | $ | 100.54 | $ | 100.54 | 5.16 | % | -5.04 | % | 16.49 | % | 26 | % | ||||||||||||||
* Includes the effect of realized loss on principal write-downs.
|
||||||||||||||||||||||||||||
June 30, 2011
|
December 31, 2010
|
|||||||||
Number of securities in portfolio
|
523 | 581 | ||||||||
Weighted average maturity (years)
|
27.0 | 27.4 | ||||||||
Weighted average amortized loan to value
|
72.3 | % | 72.5 | % | ||||||
Weighted average FICO
|
717.2 | 717.3 | ||||||||
Weighted average loan balance (in thousands)
|
$ | 470.1 | $ | 447.6 | ||||||
Weighted average percentage owner occupied
|
84.3 | % | 83.3 | % | ||||||
Weighted average percentage single family residence
|
64.1 | % | 63.1 | % | ||||||
Weighted average current credit enhancement
|
12.7 | % | 16.0 | % | ||||||
Weighted average geographic concentration
|
CA
|
38.1 | % |
CA
|
57.8 | % | ||||
FL
|
8.7 | % |
FL
|
13.3 | % | |||||
NY
|
5.5 | % |
NY
|
7.3 | % | |||||
NJ
|
2.4 | % |
VA
|
3.9 | % | |||||
VA
|
2.3 | % |
NJ
|
3.3 | % | |||||
June 30, 2011
|
December 31, 2010
|
|||||||||
AAA
|
14.03 | % | 14.67 | % | ||||||
AA
|
0.67 | % | 5.34 | % | ||||||
A | 0.48 | % | 0.92 | % | ||||||
BBB
|
0.53 | % | 0.61 | % | ||||||
BB
|
0.01 | % | 0.01 | % | ||||||
B | 0.00 | % | 0.00 | % | ||||||
Below B or not rated
|
84.28 | % | 78.45 | % | ||||||
Total
|
100.00 | % | 100.00 | % |
For the Quarter Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2011
|
June 30, 2010
|
June 30, 2011
|
June 30, 2010
|
|||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 194,235 | $ | 133,522 | $ | 400,809 | $ | 262,506 | ||||||||
Interest expense
|
7,481 | 6,499 | 15,483 | 13,873 | ||||||||||||
Interest income, non-retained
|
28,428 | 49,829 | 49,587 | 100,690 | ||||||||||||
Interest expense, non-retained
|
28,312 | 21,421 | 55,887 | 55,251 | ||||||||||||
Net interest income (expense)
|
186,870 | 155,431 | 379,026 | 294,072 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(1,926 | ) | (24,746 | ) | (6,131 | ) | (47,433 | ) | ||||||||
Non-credit portion of loss recognized in other comprehensive income (loss)
|
882 | 17,853 | 2,462 | 37,996 | ||||||||||||
Net other-than-temporary credit impairment losses
|
(1,044 | ) | (6,893 | ) | (3,669 | ) | (9,437 | ) | ||||||||
Other gains (losses):
|
||||||||||||||||
Unrealized gains (losses) on interest rate swaps
|
(19,500 | ) | (11,237 | ) | (9,669 | ) | (11,237 | ) | ||||||||
Realized gains (losses) on interest rate swaps
|
(4,297 | ) | (699 | ) | (7,144 | ) | (699 | ) | ||||||||
Gains (losses) on interest rate swaps
|
(23,797 | ) | (11,936 | ) | (16,813 | ) | (11,936 | ) | ||||||||
Net gains (losses) on interest-only RMBS
|
(4,442 | ) | - | (4,442 | ) | - | ||||||||||
Net gains (losses) on embedded derivatives in interest-only RMBS
|
(2,234 | ) | - | (2,234 | ) | - | ||||||||||
Realized gains (losses) on sales of investments, net
|
(380 | ) | - | 2,364 | 342 | |||||||||||
Realized losses on principal write-downs of non-Agency RMBS
|
(22,040 | ) | (326 | ) | (41,560 | ) | (1,275 | ) | ||||||||
Total other gains (losses)
|
(52,893 | ) | (12,262 | ) | (62,685 | ) | (12,869 | ) | ||||||||
Net investment income (loss)
|
132,933 | 136,276 | 312,672 | 271,766 | ||||||||||||
Other expenses:
|
||||||||||||||||
Management fee
|
13,152 | 9,263 | 25,902 | 17,377 | ||||||||||||
Provision for loan losses
|
- | 1,024 | 1,442 | 1,630 | ||||||||||||
General and administrative expenses
|
1,820 | 1,409 | 3,307 | 2,569 | ||||||||||||
Total other expenses
|
14,972 | 11,696 | 30,651 | 21,576 | ||||||||||||
Income (loss) before income taxes
|
117,961 | 124,580 | 282,021 | 250,190 | ||||||||||||
Income taxes
|
118 | 1 | 816 | 1 | ||||||||||||
Net income (loss)
|
$ | 117,843 | $ | 124,579 | $ | 281,205 | $ | 250,189 | ||||||||
Net income (loss) per share-basic and diluted
|
$ | 0.11 | $ | 0.16 | $ | 0.27 | $ | 0.35 | ||||||||
Weighted average number of shares outstanding-basic and diluted
|
1,027,130,496 | 765,475,340 | 1,027,096,962 | 718,185,900 | ||||||||||||
Comprehensive income (loss):
|
||||||||||||||||
Net income (loss)
|
$ | 117,843 | $ | 124,579 | $ | 281,205 | $ | 250,189 | ||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
(112,067 | ) | (151,524 | ) | (292,219 | ) | 90,057 | |||||||||
Reclassification adjustment for net losses included in net income (loss) for other-than-temporary credit impairment losses
|
1,044 | 6,893 | 3,669 | 9,437 | ||||||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
22,420 | 326 | 39,196 | 933 | ||||||||||||
Other comprehensive income (loss)
|
(88,603 | ) | (144,305 | ) | (249,354 | ) | 100,427 | |||||||||
Comprehensive income (loss)
|
$ | 29,240 | $ | (19,726 | ) | $ | 31,851 | $ | 350,616 | |||||||
|
Economic Net Interest Income
|
||||||||||||||||||||||||||||||||
Average
Earning Assets Held (1)
|
Interest
Earned on
Assets *
|
Yield on
Average
Interest
Earning
Assets
|
Average Debt Balance
|
Economic
Interest
Expense
(2)
|
Average Cost
of Funds
|
Economic Net Interest
Income (2)
|
Net Interest
Rate Spread
|
|||||||||||||||||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||||||||||||||||||||||
For the quarter ended
June 30, 2011
|
$ | 12,078,396 | $ | 222,661 | 6.64 | % | $ | 6,560,926 | $ | 40,090 | 2.44 | % | $ | 182,571 | 4.20 | % | ||||||||||||||||
For the quarter ended
March 31, 2011
|
$ | 11,235,639 | $ | 227,722 | 7.41 | % | $ | 5,688,313 | $ | 38,424 | 2.70 | % | $ | 189,298 | 4.71 | % | ||||||||||||||||
For the year ended
December 31, 2010
|
$ | 8,479,109 | $ | 755,398 | 8.91 | % | $ | 3,793,049 | $ | 152,236 | 4.01 | % | $ | 603,162 | 4.90 | % | ||||||||||||||||
For the quarter ended
December 31, 2010
|
$ | 9,311,588 | $ | 193,744 | 8.17 | % | $ | 3,871,908 | $ | 39,649 | 4.10 | % | $ | 154,095 | 4.07 | % | ||||||||||||||||
For the quarter ended
September 30, 2010
|
$ | 8,801,534 | $ | 198,461 | 9.02 | % | $ | 3,733,893 | $ | 42,764 | 4.58 | % | $ | 155,697 | 4.44 | % | ||||||||||||||||
For the quarter ended
June 30, 2010
|
$ | 8,640,373 | $ | 183,349 | 8.47 | % | $ | 3,906,061 | $ | 28,619 | 2.93 | % | $ | 154,730 | 5.54 | % | ||||||||||||||||
(1) Excludes cash and cash equivalents.
|
||||||||||||||||||||||||||||||||
(2) Includes effect of realized losses on interest rate swaps.
|
||||||||||||||||||||||||||||||||
Average Cost of Funds
|
||||||||||||||||||||||||||||||||
Average Borrowed Funds
|
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 quarter ended
June 30, 2011
|
$ | 6,560,926 | $ | 40,090 | 2.44 | % | 0.20 | % | 0.42 | % | (0.22 | %) | 2.24 | % | 2.02 | % | ||||||||||||||||
For the quarter ended
March 31, 2011
|
$ | 5,688,313 | $ | 38,424 | 2.70 | % | 0.26 | % | 0.46 | % | (0.20 | %) | 2.44 | % | 2.24 | % | ||||||||||||||||
For the year ended
December 31, 2010
|
$ | 3,793,049 | $ | 152,236 | 4.01 | % | 0.27 | % | 0.52 | % | (0.25 | %) | 3.74 | % | 3.49 | % | ||||||||||||||||
For the quarter ended
December 31, 2010
|
$ | 3,871,908 | $ | 39,649 | 4.10 | % | 0.26 | % | 0.45 | % | (0.19 | %) | 3.84 | % | 3.65 | % | ||||||||||||||||
For the quarter ended
September 30, 2010
|
$ | 3,733,893 | $ | 42,764 | 4.58 | % | 0.29 | % | 0.59 | % | (0.30 | %) | 4.29 | % | 3.99 | % | ||||||||||||||||
For the quarter ended
June 30, 2010
|
$ | 3,906,061 | $ | 28,619 | 2.93 | % | 0.32 | % | 0.63 | % | (0.31 | %) | 2.61 | % | 2.30 | % | ||||||||||||||||
(1) Includes effect of realized losses on interest rate swaps.
|
||||||||||||||||||||||||||||||||
Management Fees, Loan Loss Provision and G&A Expenses and Operating Expense Ratios
|
||||||||||||
Total Management
Fee, Loan Loss
Provision and G&A Expenses
|
Total Management
Fee, Loan Loss
Provision and G&A Expenses/Total Assets
|
Total Management
Fee, Loan Loss
Provision and G&A Expenses/Average
Equity
|
||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||
For the quarter ended June 30, 2011
|
$ | 14,972 | 0.59 | % | 1.72 | % | ||||||
For the quarter ended March 31, 2011
|
$ | 15,679 | 0.68 | % | 1.74 | % | ||||||
For the year ended December 31, 2010
|
$ | 49,628 | 0.78 | % | 1.71 | % | ||||||
For the quarter ended December 31, 2010
|
$ | 14,454 | 0.76 | % | 1.76 | % | ||||||
For the quarter ended September 30, 2010
|
$ | 13,598 | 0.77 | % | 1.87 | % | ||||||
For the quarter ended June 30, 2010
|
$ | 11,696 | 0.72 | % | 1.80 | % | ||||||
Components of Return on Average Equity
|
||||||||||||||||||||||||
Net Interest Income/Average Equity *
|
Realized Gains (Losses) on
Sales, Credit Losses and OTTI/Average Equity
|
Realized and unrealized
Gains (Losses)
on Interest
Rate Swaps/Average Equity
|
Total
Expenses/
Average
Equity
|
Income Tax/Average Equity
|
Return on
Average
Equity
|
|||||||||||||||||||
(Ratios have been annualized)
|
||||||||||||||||||||||||
For the quarter ended June 30, 2011
|
21.41 | % | (2.69 | %) | (3.49 | %) | (1.72 | %) | (0.01 | %) | 13.50 | % | ||||||||||||
For the quarter ended March 31, 2011
|
20.96 | % | (2.15 | %) | 1.10 | % | (1.74 | %) | (0.08 | %) | 18.09 | % | ||||||||||||
For the year ended December 31, 2010
|
20.77 | % | (0.34 | %) | (0.34 | %) | (1.71 | %) | (0.03 | %) | 18.35 | % | ||||||||||||
For the quarter ended December 31, 2010
|
18.72 | % | 0.22 | % | 1.80 | % | (1.76 | %) | 0.00 | % | 18.98 | % | ||||||||||||
For the quarter ended September 30, 2010
|
21.42 | % | (0.19 | %) | (1.87 | %) | (1.87 | %) | (0.10 | %) | 17.39 | % | ||||||||||||
For the quarter ended June 30, 2010
|
23.78 | % | (1.11 | %) | (1.73 | %) | (1.80 | %) | 0.00 | % | 19.14 | % | ||||||||||||
* Includes the effect of realized losses on interest rate swaps
|
||||||||||||||||||||||||
June 30, 2011
|
December 31, 2010
|
|||||||
(dollars in thousands) | ||||||||
Overnight
|
$ | 338,100 | $ | - | ||||
1-30 days
|
1,752,942 | 232,265 | ||||||
30 to 59 days
|
1,541,047 | 970,394 | ||||||
60 to 89 days
|
73,411 | 545,442 | ||||||
90 to 119 days
|
- | 60,696 | ||||||
Greater than or equal to 120 days
|
614,987 | - | ||||||
Total
|
$ | 4,320,487 | $ | 1,808,797 | ||||
Period
|
Average Repurchase
Balance
|
Repurchase Balance at Quarter End
|
||||||
(dollars in thousands)
|
||||||||
Quarter Ended June 30, 2011
|
$ | 4,308,787 | $ | 4,320,487 | ||||
Quarter Ended March 31, 2011
|
3,385,155 | 3,870,407 | ||||||
Year Ended December 31, 2010
|
1,525,280 | 1,808,797 | ||||||
Quarter Ended December 31, 2010
|
1,575,917 | 1,808,797 | ||||||
Quarter Ended September 30, 2010
|
1,272,017 | 1,568,223 | ||||||
Quarter Ended June 30, 2010
|
1,415,432 | 1,337,805 | ||||||
June 30, 2011
|
||||||||||||||||||||
Contractual Obligations
|
Within One
Year
|
One to Three
Years
|
Three to Five
Years
|
Greater Than
or Equal to
Five Years
|
Total
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Repurchase agreements for RMBS
|
$ | 4,320,487 | $ | - | $ | - | $ | - | $ | 4,320,487 | ||||||||||
Securitized debt
|
569,620 | 743,046 | 338,626 | 464,972 | 2,116,264 | |||||||||||||||
Interest expense on RMBS repurchase agreements (1)
|
2,335 | - | - | - | 2,335 | |||||||||||||||
Interest expense on securitized debt (1)
|
92,360 | 115,472 | 80,992 | 243,000 | 531,824 | |||||||||||||||
Total
|
$ | 4,984,802 | $ | 858,518 | $ | 419,618 | $ | 707,972 | $ | 6,970,910 | ||||||||||
(1) Interest is based on variable rates in effect as of June 30, 2011.
|
||||||||||||||||||||
December 31, 2010
|
||||||||||||||||||||
Contractual Obligations
|
Within One
Year
|
One to Three
Years
|
Three to Five
Years
|
Greater Than
or Equal to
Five Years
|
Total
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Repurchase agreements for RMBS
|
$ | 1,808,797 | $ | - | $ | - | $ | - | $ | 1,808,797 | ||||||||||
Securitized debt
|
634,988 | 831,305 | 305,953 | 417,976 | 2,190,222 | |||||||||||||||
Interest expense on RMBS repurchase agreements (1)
|
1,223 | - | - | - | 1,223 | |||||||||||||||
Interest expense on securitized debt (1)
|
86,453 | 113,635 | 68,335 | 171,042 | 439,465 | |||||||||||||||
Total
|
$ | 2,531,461 | $ | 944,940 | $ | 374,288 | $ | 589,018 | $ | 4,439,707 | ||||||||||
(1) Interest is based on variable rates in effect as of December 31, 2010.
|
June 30, 2011
|
||||||||
Change in Interest Rate
|
Projected Percentage Change in Net Interest Income
|
Projected Percentage Change in
Portfolio Value
|
||||||
-75 Basis Points
|
(9.10 | %) | 4.76 | % | ||||
-50 Basis Points
|
(7.08 | %) | 3.21 | % | ||||
-25 Basis Points
|
(5.09 | %) | 1.62 | % | ||||
Base Interest Rate
|
- | - | ||||||
+25 Basis Points
|
0.84 | % | (1.66 | %) | ||||
+50 Basis Points
|
1.07 | % | (3.35 | %) | ||||
+75 Basis Points
|
1.31 | % | (5.08 | %) | ||||
|
·
|
monitoring and adjusting, if necessary, the reset index and interest rate related to our RMBS and our financings;
|
|
·
|
attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;
|
|
·
|
using derivatives, financial futures, swaps, options, caps, floors and forward sales to adjust the interest rate sensitivity of our investments and our borrowings;
|
|
·
|
using securitization financing to lower average cost of funds relative to short-term financing vehicles further allowing us to receive the benefit of attractive terms for an extended period of time in contrast to short term financing and maturity dates of the investments included in the securitization; and
|
|
·
|
actively managing, on an aggregate basis, the interest rate indices, interest rate adjustment periods, and gross reset margins of our investments and the interest rate indices and adjustment periods of our financings.
|
|
June 30, 2011 | |||||||||||||||||||
Within 3
Months
|
3-12 Months
|
1 Year to 3
Years
|
Greater than 3 Years
|
Total
|
||||||||||||||||
Rate sensitive assets
|
$ | 13,260,421 | $ | 1,647,110 | $ | 2,282,715 | $ | 1,815,519 | $ | 19,005,765 | ||||||||||
Cash equivalents
|
16,080 | - | - | - | 16,080 | |||||||||||||||
Total rate sensitive assets
|
13,276,501 | 1,647,110 | 2,282,715 | 1,815,519 | 19,021,845 | |||||||||||||||
Rate sensitive liabilities
|
2,973,109 | 861,648 | 321,195 | 1,420,480 | 5,576,432 | |||||||||||||||
Interest rate sensitivity gap
|
$ | 10,303,392 | $ | 785,462 | $ | 1,961,520 | $ | 395,039 | $ | 13,445,413 | ||||||||||
Cumulative rate sensitivity gap
|
$ | 10,303,392 | $ | 11,088,854 | $ | 13,050,374 | $ | 13,445,413 | ||||||||||||
Cumulative interest rate sensitivity gap as a
|
||||||||||||||||||||
percentage of total rate sensitive assets
|
54 | % | 58 | % | 69 | % | 71 | % | ||||||||||||
CONTROLS AND PROCEDURES
|
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 Registration Statement on Amendment No. 2 to Form S-11 (File No. 333-145525) filed on November 5, 2007 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).
|
|
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 A. Alexandra Denahan, 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 A. Alexandra Denahan, 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*
|
CHIMERA INVESTMENT CORPORATION | |||
|
By:
|
/s/ Matthew Lambiase | |
Matthew Lambiase | |||
Chief Executive Officer and President | |||
August 4, 2011 |
|
By:
|
/s/ A. Alexandra Denahan | |
A. Alexandra Denahan | |||
Chief Financial Officer (Principal Financial Officer) | |||
August 4, 2011 |
|
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 financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
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 financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
|
By:
|
/s/ Matthew Lambiase | |
Matthew Lambiase | |||
Chief Executive Officer and President | |||
August 4, 2011 |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
|
By:
|
/s/ A. Alexandra Denahan | |
A. Alexandra Denahan | |||
Chief Financial Officer | |||
August 4, 2011 |
Securitized Debt - Maturities (Detail) (Secured Debt [Member], USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Secured Debt [Member]
|
||
Debt Instrument [Line Items] | ||
Within One Year | $ 569,620 | $ 634,988 |
One to Three Years | 743,046 | 831,305 |
Three to Five Years | 338,626 | 305,953 |
Greater Than or Equal to Five Years | 464,972 | 417,977 |
Total | $ 2,116,264 | $ 2,190,223 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $)
In Thousands, except Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Net Interest Income: | ||||
Interest income | $ 194,235 | $ 133,522 | $ 400,809 | $ 262,506 |
Interest expense | 7,481 | 6,499 | 15,483 | 13,873 |
Interest income, non-retained | 28,428 | 49,829 | 49,587 | 100,690 |
Interest expense, non-retained | 28,312 | 21,421 | 55,887 | 55,251 |
Net interest income (expense) | 186,870 | 155,431 | 379,026 | 294,072 |
Other-than-temporary impairments: | ||||
Total other-than-temporary impairment losses | (1,926) | (24,746) | (6,131) | (47,433) |
Non-credit portion of loss recognized in other comprehensive income (loss) | 882 | 17,853 | 2,462 | 37,996 |
Net other-than-temporary credit impairment losses | (1,044) | (6,893) | (3,669) | (9,437) |
Other gains (losses): | ||||
Unrealized gains (losses) on interest rate swaps | (19,500) | (11,237) | (9,669) | (11,237) |
Realized gains (losses) on interest rate swaps | (4,297) | (699) | (7,144) | (699) |
Gains (losses) on interest rate swaps | (23,797) | (11,936) | (16,813) | (11,936) |
Net gains (losses) on interest-only RMBS | (4,442) | (4,442) | ||
Net gains (losses) on embedded derivatives in interest-only RMBS | (2,234) | (2,234) | ||
Realized gains (losses) on sales of investments, net | (380) | 2,364 | 342 | |
Realized losses on principal write-downs of non-Agency RMBS | (22,040) | (326) | (41,560) | (1,275) |
Total other gains (losses) | (52,893) | (12,262) | (62,685) | (12,869) |
Net investment income (loss) | 132,933 | 136,276 | 312,672 | 271,766 |
Other expenses: | ||||
Management fee | 13,152 | 9,263 | 25,902 | 17,377 |
Provision for loan losses | 1,024 | 1,442 | 1,630 | |
General and administrative expenses | 1,820 | 1,409 | 3,307 | 2,569 |
Total other expenses | 14,972 | 11,696 | 30,651 | 21,576 |
Income (loss) before income taxes | 117,961 | 124,580 | 282,021 | 250,190 |
Income taxes | 118 | 1 | 816 | 1 |
Net income (loss) | 117,843 | 124,579 | 281,205 | 250,189 |
Net income (loss) per share-basic and diluted | $ 0.11 | $ 0.16 | $ 0.27 | $ 0.35 |
Weighted average number of shares outstanding-basic and diluted | 1,027,130,496 | 765,475,340 | 1,027,096,962 | 718,185,900 |
Comprehensive income (loss): | ||||
Net income (loss) | 117,843 | 124,579 | 281,205 | 250,189 |
Other comprehensive income (loss): | ||||
Unrealized gains (losses) on available-for-sale securities, net | (112,067) | (151,524) | (292,219) | 90,057 |
Reclassification adjustment for net losses included in net income (loss) for other-than-temporary credit impairment losses | 1,044 | 6,893 | 3,669 | 9,437 |
Reclassification adjustment for net realized losses (gains) included in net income (loss) | 22,420 | 326 | 39,196 | 933 |
Other comprehensive income (loss) | (88,603) | (144,305) | (249,354) | 100,427 |
Comprehensive income (loss) | $ 29,240 | $ (19,726) | $ 31,851 | $ 350,616 |
Interest Rate Swaps - Statement of Financial Condition (Detail) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
|||
---|---|---|---|---|---|
Derivatives, Fair Value [Line Items] | |||||
Derivative liabilities - Net estimated fair value/carrying value | $ 19,658 | $ 9,988 | [1] | ||
Assets [Member] | Interest Rate Swap [Member]
|
|||||
Derivatives, Fair Value [Line Items] | |||||
Derivative assets - Notional amount | 0 | 0 | |||
Derivative assets - Net estimated fair value/carrying value | 0 | 0 | |||
Net Estimated Fair Value of RMBS Pledged as Collateral | 0 | 0 | |||
Liabilities [Member] | Interest Rate Swap [Member]
|
|||||
Derivatives, Fair Value [Line Items] | |||||
Derivative liabilities - Notional amount | 950,000 | 450,000 | |||
Derivative liabilities - Net estimated fair value/carrying value | (19,658) | (9,988) | |||
Net Estimated Fair Value of RMBS Pledged as Collateral | $ 23,295 | $ 12,818 | |||
|
Subsequent Events
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Subsequent Events |
16. Subsequent Events
The
Company has reviewed subsequent events and determined that no
subsequent events occurred that would require accrual or additional
disclosure.
|
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 04, 2011
|
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | CIM | |
Entity Registrant Name | CHIMERA INVESTMENT CORP | |
Entity Central Index Key | 0001409493 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,027,125,679 |
Repurchase Agreements - Maturities (Detail) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | $ 4,320,487 | $ 1,808,797 |
Overnight [Member]
|
||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | 338,100 | |
1-30 days [Member]
|
||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | 1,752,942 | 232,265 |
30 to 59 days [Member]
|
||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | 1,541,047 | 970,394 |
60 to 89 days [Member]
|
||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | 73,411 | 545,442 |
90 to 119 days [Member]
|
||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | 60,696 | |
Greater than or equal to 120 days [Member]
|
||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements outstanding | $ 614,987 |
Securitized Loans Held for Investment (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Securitized Loans Held for Investment Amortized Cost | The
following table represents the Company’s securitized
residential mortgage loans classified as held for investment at
June 30, 2011 and December 31, 2010. At June 30, 2011
approximately 55% of the Company’s securitized loans are
adjustable rate mortgage loans and 45% are fixed rate mortgage
loans. All of the adjustable rate loans held for
investment are hybrid adjustable rate mortgages
(“ARMs”). Hybrid ARMs are mortgages that
have interest rates that are fixed for an initial period (typically
three, five, seven or ten years) and thereafter reset at regular
intervals subject to interest rate caps. The periodic
cap on all hybrid ARMs in the securitized loan portfolio range from
0.00% to 3.00% as of June 30, 2011 and December 31,
2010. The securitized loans held for investment are
carried at their principal balance outstanding, plus premiums or
discounts, less an allowance for loan losses.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Securitized Loans Held for Investment Key Characteristics of Underlying Collateral | A
summary of key characteristics of these loans follows.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Allowance for Losses [Table Text Block] | The
following table summarizes the changes in the allowance for loan
losses for the securitized mortgage loan portfolio during the
quarters ended June 30, 2011 and 2010.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Loans Greater Than 30 Days Delinquent [Table Text Block] | The
following table summarizes the status of loans greater than 30 days
delinquent.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Loans Modified [Table Text Block] |
In addition, the following table presents the loans that were
modified during the period. Loans are modified by the
servicer as a method of loss mitigation.
|
Repurchase Agreements - Narrative (Detail) (USD $)
|
3 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Dec. 31, 2010
|
|
Short-term Debt [Line Items] | ||
Repurchase agreements outstanding | $ 4,320,487,000 | $ 1,808,797,000 |
Weighted average borrowing rates | 0.28% | 0.45% |
Weighted average remaining maturities, in days | 59 | 49 |
RMBS pledged as collateral under repurchase agreements, at estimated fair value | 4,500,000,000 | 2,000,000,000 |
The average daily balances of the Company's repurchase agreements for the quarters | $ 4,300,000,000 | $ 1,600,000,000 |
The interest rates of these repurchase agreements are generally indexed to the one-month or the three-month LIBOR rate and re-price accordingly | The interest rates of these repurchase agreements are generally indexed to the one-month or the three-month LIBOR rate and re-price accordingly |
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Fair Value Measurements
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
5. Fair Value Measurements
GAAP
defines fair value, establishes a framework for measuring fair
value, establishes a three-level valuation hierarchy for disclosure
of fair value measurement and enhances disclosure requirements for
fair value measurements. The valuation hierarchy is
based upon the transparency of inputs to the valuation of an asset
or liability as of the measurement date. The three
levels are defined as follows:
Level
1 – inputs to the valuation methodology are quoted prices
(unadjusted) for identical assets and liabilities in active
markets.
Level
2 – inputs to the valuation methodology include quoted prices
for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial
instrument.
Level
3 – inputs to the valuation methodology are unobservable and
significant to fair value.
The
following discussion describes the methodologies utilized by the
Company to fair value its financial instruments by instrument
class.
Short-term Instruments
The
carrying value of cash and cash equivalents, accrued interest
receivable, dividends payable, accounts payable, and accrued
interest payable generally approximates estimated fair value due to
the short term nature of these financial instruments.
Non-Agency and Agency RMBS
Generally,
the Company determines the fair value of its investment securities
utilizing a pricing model that incorporates such factors as coupon,
prepayment speeds, weighted average life, collateral composition,
borrower characteristics, expected interest rates, life caps,
periodic caps, reset dates, collateral seasoning, expected losses,
expected default severity, credit enhancement, and other pertinent
factors. Certain very liquid asset classes, such as
Agency fixed-rate pass-throughs may be priced using independent
sources such as quoted prices for “To-Be-Announced”
securities. Management reviews the fair values
generated by the model to determine whether prices are reflective
of the current market. Management performs a validation
of the fair value calculated by the pricing model by comparing its
results to independent prices provided by dealers in the securities
and/or third party pricing services. The Company
believes the observable inputs used in its model in conjunction
with dealer and/or third party pricing services meets the criteria
for classification as Level 2.
Non-Agency, Non-Retained RMBS
The non-Agency, non-retained securities reflected in the
consolidated financial statements are securities consolidated
pursuant to the Company’s adoption of ASC 810 on January 1,
2010. These assets have been financed with third parties
without recourse to the Company in the normal course of the
Company’s portfolio optimization strategy. The Company
fair values these assets as described above in Non-Agency and Agency
RMBS. See Note 8 to these consolidated financial
statements for a detailed discussion of these
securities.
Interest Rate Swaps
The Company utilizes third party quotes to determine the fair
values of its interest rate swaps. The Company compares
the third party quotations received to its own estimate of fair
value to evaluate for reasonableness. The dealer quotes
incorporate common market pricing methods, including a spread
measurement to the Treasury yield curve or interest rate swap curve
as well as underlying characteristics of the particular contract.
Interest rate swaps are modeled by the Company by incorporating
such factors as the term to maturity, Treasury curve, LIBOR rates,
and the payment rates on the fixed portion of the interest rate
swaps.
Any
changes to the valuation methodology are reviewed by management to
ensure the changes are appropriate. As markets and products develop
and the pricing for certain products becomes more transparent, the
Company will continue to refine its valuation methodologies. The
methodology utilized by the Company for the periods presented is
materially unchanged. The methods used to produce a fair
value calculation may not be indicative of net realizable value or
reflective of future fair values. Furthermore, while the Company
believes its valuation methods are appropriate and consistent with
other market participants, the use of different methodologies, or
assumptions, to determine the fair value of certain financial
instruments could result in a different estimate of fair value at
the reporting date. The Company uses inputs that are
current as of the measurement date, which may include periods of
market dislocation, during which price transparency may be
reduced.
During
times of market dislocation, as has been experienced for some time
and continues to exist, the observability of prices and inputs can
be reduced for certain instruments. If dealers or
independent pricing services are unable to provide a price for an
asset, or if the price provided by them is deemed unreliable by the
Company, then the asset will be valued at its fair value as
determined in good faith by the Company. In addition,
validating third party pricing for the Company’s investments
may be more subjective as fewer participants may be willing to
provide this service to the Company. Illiquid
investments typically experience greater price volatility as a
ready market does not exist. As fair value is not an
entity-specific measure and is a market-based approach which
considers the value of an asset or liability from the perspective
of a market participant, observability of prices and inputs can
vary significantly from period to period. A condition
such as this can cause instruments to be reclassified from Level 1
to Level 2 or Level 2 to Level 3 when the Company is unable to
obtain third party pricing verification.
At
June 30, 2011 and December 31, 2010, the Company classified its
assets and liabilities as Level 2. The Company’s
financial assets and liabilities carried at fair value on a
recurring basis are valued at June 30, 2011 and December 31, 2010
as presented below.
In
the aggregate, the Company’s fair valuations of RMBS
investments were 0.40% higher than the aggregated dealer marks for
the quarter ended June 30, 2011 and 0.53% higher than the
aggregated dealer marks for the quarter ended June 30,
2010.
Securitized Loans Held for Investment
The
Company records securitized loans held for investment when it
securitizes loans and records the transaction as a
“financing.” The Company carries securitized
loans held for investment at principal value, plus premiums or
discounts paid, less an allowance for loan losses. The
Company estimates the fair value of its securitized loans held for
investment at the loss adjusted expected future cash flows of the
collateral. The Company models each underlying asset by
considering, among other items, the nature of the underlying
collateral, coupon, servicer, actual and expected defaults, actual
and expected default severities, reset indices, and prepayment
speeds in conjunction with market research for similar collateral
performance and management’s expectations of general economic
conditions in the sector and greater economy.
Repurchase Agreements
The
Company records repurchase agreements at their contractual amounts
including accrued interest payable. Repurchase
agreements are collateralized financing transactions utilized by
the Company to acquire investment securities. Due to the
short term nature of these financial instruments, the Company
estimated the fair value of these repurchase agreements to be the
contractual obligation plus accrued interest payable at
maturity.
Securitized Debt, loans held for investment and Securitized Debt,
Non-Retained
The
Company records securitized debt for certificates or notes financed
without recourse to the Company in securitization or
re-securitization transactions treated as “financings”
pursuant to ASC 860. The Company carries securitized
debt at the principal balance outstanding on non-retained notes
associated with its securitized loans held for investment plus
premiums or discounts recorded with the sale of the notes to third
parties. The premiums or discounts associated with the
sale of the notes or certificates are amortized over the life of
the instrument. The Company estimates the fair value of
securitized debt by estimating the future cash flows associated
with underlying assets collateralizing the secured debt
outstanding. The Company models each underlying asset by
considering, among other items, the structure of the underlying
security, coupon, servicer, actual and expected defaults, actual
and expected default severities, reset indices, and prepayment
speeds in conjunction with market research for similar collateral
performance and management’s expectations of general economic
conditions in the sector and greater economy.
The
following table presents the carrying value and estimated fair
value, as described above, of the Company’s financial
instruments at June 30, 2011 and December 31, 2010.
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Fair Value Measurements (Tables)
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Jun. 30, 2011
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Fair Value Measurement Inputs Disclosure [Table Text Block] | The
Company’s financial assets and liabilities carried at fair
value on a recurring basis are valued at June 30, 2011 and December
31, 2010 as presented below.
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Fair Value, by Balance Sheet Grouping [Table Text Block] | The
following table presents the carrying value and estimated fair
value, as described above, of the Company’s financial
instruments at June 30, 2011 and December 31, 2010.
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Securitized Loans Held For Investment (Detail) (USD $)
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6 Months Ended | 12 Months Ended | 3 Months Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
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Dec. 31, 2010
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Jun. 30, 2011
Residential Mortgage Backed Securities [Member]
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Jun. 30, 2010
Residential Mortgage Backed Securities [Member]
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Dec. 31, 2010
Residential Mortgage Backed Securities [Member]
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Jun. 30, 2011
Residential Mortgages [Member]
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Dec. 31, 2010
Residential Mortgages [Member]
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Jun. 30, 2011
Residential Mortgages [Member]
California [Member]
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Dec. 31, 2010
Residential Mortgages [Member]
California [Member]
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Jun. 30, 2011
Residential Mortgages [Member]
Florida [Member]
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Dec. 31, 2010
Residential Mortgages [Member]
Florida [Member]
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Jun. 30, 2011
Residential Mortgages [Member]
Arizona [Member]
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Dec. 31, 2010
Residential Mortgages [Member]
Arizona [Member]
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Jun. 30, 2011
Residential Mortgages [Member]
New Jersey [Member]
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Dec. 31, 2010
Residential Mortgages [Member]
New Jersey [Member]
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Jun. 30, 2011
Residential Mortgages [Member]
Illinois [Member]
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Dec. 31, 2010
Residential Mortgages [Member]
Illinois [Member]
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The following table summarizes the changes in the allowance for loan losses for the securitized mortgage loan portfolio: | ||||||||||||||||||||
Balance | $ 8,018,000 | $ 4,554,000 | $ 6,586,000 | |||||||||||||||||
Provision for loan losses | 1,442,000 | 1,024,000 | ||||||||||||||||||
Charge-offs | (1,976,000) | (9,000) | ||||||||||||||||||
Balance | 7,484,000 | 5,569,000 | 6,586,000 | |||||||||||||||||
Securitized loans, at amortized cost | 310,363,000 | 360,118,000 | ||||||||||||||||||
Less: allowance for loan losses | 7,484,000 | 5,569,000 | 6,586,000 | |||||||||||||||||
Securitized loans held for investment | 302,879,000 | 353,532,000 | [1] | 302,879,000 | 353,532,000 | |||||||||||||||
Additional information: | ||||||||||||||||||||
Number of loans securitized | 446 | 513 | ||||||||||||||||||
Weighted average maturity (years) | 26,200 | 26,600 | ||||||||||||||||||
Weighted average amortized loan to value | 75.10% | 74.50% | ||||||||||||||||||
Weighted average FICO | 754 | 755 | ||||||||||||||||||
Weighted average loan balance | 688,400 | 694,300 | ||||||||||||||||||
Weighted average percentage owner occupied | 91.10% | 90.50% | ||||||||||||||||||
Weighted average percentage single family residence | 58.40% | 58.20% | ||||||||||||||||||
Weighted average geographic concentration | 34.20% | 33.30% | 6.80% | 6.70% | 5.70% | 5.20% | 5.20% | 5.30% | 5.10% | 5.30% | ||||||||||
Residential mortgages 30 Days Delinquent | 2,868,000 | 1,664,000 | ||||||||||||||||||
Residential mortgages 60 Days Delinquent | 0 | 1,554,000 | ||||||||||||||||||
Residential mortgages 90+ Days Delinquent | 3,743,000 | 9,649,000 | ||||||||||||||||||
Residential mortgages in bankruptcy | 0 | 937,000 | ||||||||||||||||||
Residential mortgages in foreclosure | 10,215,000 | 1,295,000 | ||||||||||||||||||
REO | 1,115,000 | 1,120,000 | ||||||||||||||||||
Total delinquent loans and REO | 17,941,000 | 16,219,000 | ||||||||||||||||||
Pre-Modification Recorded Investment | 3,086,000 | 11,385,000 | ||||||||||||||||||
Post Modification Recorded Invesment | $ 3,198,000 | $ 11,975,000 | ||||||||||||||||||
Number of Loans Modified During Period | 5 | 14 | ||||||||||||||||||
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Residential Mortgage-Backed Securities - Credit Ratings (Detail)
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Jun. 30, 2011
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Dec. 31, 2010
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 100.00% | 100.00% |
AAA Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 14.03% | 14.67% |
AA Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 0.67% | 5.34% |
A Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 0.48% | 0.92% |
BBB Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 0.53% | 0.61% |
BB Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 0.01% | 0.01% |
B Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 0.00% | 0.00% |
Below B or Not Rated Credit Rating [Member]
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Credit Derivatives [Line Items] | ||
Percentage of RMBS portfolio at fair value, by credit rating | 84.28% | 78.45% |
Residential Mortgage-Backed Securities (Tables)
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Jun. 30, 2011
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Schedule of Available-for-sale Securities Reconciliation [Table Text Block] | The
following tables present the principal value, unamortized premium,
unamortized discount, gross unrealized gain, gross unrealized loss,
and fair value of the Company’s available-for-sale RMBS
portfolio as of June 30, 2011 and December 31, 2010, at fair value
by asset class. The RMBS portfolio is composed of Agency
and non-Agency RMBS collateralized by residential mortgage
loans. The Agency RMBS are mortgage pass-through
certificates, CMOs, and other RMBS representing interests in or
obligations backed by pools of mortgage loans issued or guaranteed
by Fannie Mae, Freddie Mac, or Ginnie Mae. The
non-Agency RMBS portfolio is not issued or guaranteed by Fannie
Mae, Freddie Mac, or Ginnie Mae and is therefore subject to credit
risk. The Company classifies its non-Agency RMBS into
senior, subordinated, and senior, non-retained
interests. Senior interests in non-Agency RMBS are
considered to be entitled to the first principal repayments in
their pro-rata ownership interests. Securities
identified as senior, non-retained represent the portion of the
Company’s non-Agency RMBS included on the Company’s
balance sheet that are economically owned by third
parties. The total fair value of the non-Agency RMBS
that are held by the re-securitization trusts that are consolidated
pursuant to ASC 810, Consolidation, was
$3.8 billion and $4.4 billion at June 30, 2011 and December 31,
2010 respectively. See Note 8 of these consolidated
financial statements for further discussion on
consolidation.
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Schedule of Temporary Impairment Losses, Investments [Table Text Block] | The
following tables present the gross unrealized losses and estimated
fair value of the Company’s RMBS by length of time that such
securities have been in a continuous unrealized loss position at
June 30, 2011 and December 31, 2010. The securities in
an unrealized loss position have been evaluated by the Company for
OTTI as discussed above. Three consolidated trusts have
been in a continuous unrealized loss position for greater than
twelve months although the assets are performing in line with the
Company’s expectations.
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Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block] | A
summary of the OTTI included in earnings for the quarter and six
months ended June 30, 2011 and 2010 is presented
below.
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Residential MBS Characteristics [Table Text Block] |
The following tables present details of each asset class in the
Company’s RMBS portfolio at June 30, 2011 and December 31,
2010. The weighted average coupon, yield, and CPR at
period-end are weighted by each investment’s respective
principal/notional value in the asset class. The figure
presenting the annualized yield over the current quarter is the
annualized interest income earned on the asset class during the
quarter, divided by the average of the beginning and ending
amortized cost of the asset class.
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Credit Ratings Of Residential MBS [Table Text Block] |
The
table above reflects the credit rating of the Company’s
consolidated non-Agency RMBS portfolio.
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Schedule Of Mortgage Backed Securities By Estimated Weighted Average Life Classification [Table Text Block] | The
following tables summarize the Company’s RMBS at June 30,
2011 and December 31, 2010 according to their estimated
weighted-average life classifications. The
weighted-average lives of the RMBS at June 30, 2011 and December
31, 2010 in the tables below are based on consensus constant
prepayment speeds. The prepayment model considers
current yield, forward yield, steepness of the interest rate curve,
current mortgage rates, mortgage rates of the outstanding loan,
loan age, margin, and volatility.
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Schedule Of Collateral Characteristics Of Underlying Mortgages Of Nonagency MBS Portfolio [Table Text Block] | The
non-Agency securities contained in this portion of the portfolio
have the following collateral characteristics at June 30, 2011 and
December 31, 2010.
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Schedule Of Percentage Of Non Agency Residential MBS By Year Originated [Table Text Block] | The
table below presents origination year for the Company’s
portfolio of non-Agency RMBS at June 30, 2011 and December 31,
2010.
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Common Stock
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Common Stock |
10. Common Stock
On
January 28, 2011 the Company entered into an equity distribution
agreement with FIDAC and UBS Securities LLC
(“UBS”). Through this agreement, the Company
may sell through UBS, as its sales agent, up to 125,000,000 shares
of its common stock in ordinary brokers’ transactions at
market prices or other transactions as agreed between the Company
and UBS. The Company did not sell any shares of its
common stock under the equity distribution agreement during the six
months ended June 30, 2011.
On
September 24, 2009, the Company implemented a dividend reinvestment
and share purchase plan (“DRSPP”). The DRSPP
provides holders of record of its common stock an opportunity to
automatically reinvest all or a portion of their cash distributions
received on common stock in additional shares of our common stock
as well as to make optional cash payments to purchase shares of our
common stock. Persons who are not already stockholders may also
purchase our common stock under the plan through optional cash
payments. The DRSPP is administered by the
Administrator, The Bank of New York Mellon. During the six months
ended June 30, 2011 the Company raised $542 thousand by issuing
134,538 shares through the DRSPP. During the six months ended June
30, 2010 the Company raised $123 thousand by issuing 32,138 shares
through the DRSPP.
During
the quarter ended June 30, 2011 the Company declared dividends to
common shareholders totaling $133.4 million or $0.13 per
share. During the quarter ended June 30, 2010, the
Company declared dividends to common shareholders totaling $130.4
million or $0.17 per share.
During
the six months ended June 30, 2011 the Company declared dividends
to common shareholders totaling $277.1 million or $0.27 per
share. During the six months ended June 30, 2010, the
Company declared dividends to common shareholders totaling $244.2
million or $0.34 per share.
On
March 31, 2010, the Company announced the sale of 85,000,000 shares
of common stock at a price of $3.61 per share in a public
offering. In addition, the underwriters exercised the
option to purchase an additional 12,750,000 shares of common stock
to cover overallotments. The aggregate net proceeds the
Company received before expenses in this sale were approximately
$352.7 million. This sale was completed on April 7,
2010.
On
June 22, 2010, the Company announced the sale of 100,000,000 shares
of common stock at a price of $3.61 per share in a public
offering. In addition, the underwriters exercised the
option to purchase an additional 15,000,000 shares of common stock
to cover overallotments. The aggregate net proceeds the
Company received before expenses in this sale were approximately
$415.0 million. This sale was completed on June 28,
2010.
There
was no preferred stock issued or outstanding as of June 30, 2011
and December 31, 2010.
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Organization
|
6 Months Ended |
---|---|
Jun. 30, 2011
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|
Organization |
1. Organization
Chimera
Investment Corporation (“Company”) was organized in
Maryland on June 1, 2007. The Company commenced
operations on November 21, 2007 when it completed its initial
public offering. The Company has elected to be taxed as
a real estate investment trust (“REIT”), under the
Internal Revenue Code of 1986, as amended. In July 2008,
the Company formed Chimera Securities Holdings, LLC, a wholly-owned
subsidiary. In June 2009, the Company formed Chimera
Asset Holding LLC and Chimera Holding LLC, both wholly-owned
subsidiaries. In January 2010, the Company formed
Chimera Special Holding LLC, which is a wholly-owned subsidiary of
Chimera Asset Holding LLC. In July 2010, the Company
formed CIM Trading Company LLC, a wholly-owned
subsidiary. Chimera Securities Holdings, LLC, Chimera
Asset Holding LLC, Chimera Holding LLC, and Chimera Special Holding
LLC are qualified REIT subsidiaries. CIM Trading Company
LLC is a taxable REIT subsidiary (“TRS”). Annaly
Capital Management, Inc. (“Annaly”) owns approximately
4.38% of the Company’s common shares. The Company
is managed by Fixed Income Discount Advisory Company
(“FIDAC”), an investment advisor registered with the
Securities and Exchange Commission
(“SEC”). FIDAC is a wholly-owned subsidiary
of Annaly.
|
Residential Mortgage-Backed Securities - Investment Holdings (Detail) (USD $)
|
3 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Dec. 31, 2010
|
|
Origination Year as a Percentage of Outstanding Principal Balance | ||
2004 | 0.00% | 0.10% |
2005 | 13.20% | 13.40% |
2006 | 40.10% | 27.00% |
2007 | 40.80% | 56.10% |
2008 | 5.90% | 3.30% |
2009 | 0.00% | 0.10% |
Total | 100.00% | 100.00% |
Non-Agency RMBS - Senior [Member]
|
||
Investment Holdings [Line Items] | ||
Principal Value | $ 6,967,000 | $ 664,251,000 |
Unamortized Premium | 405,648,000 | 420,657,000 |
Unamortized Discount | (93,000) | (9,320,000) |
Gross Unrealized Gain | 27,671,000 | 21,758,000 |
Gross Unrealized Loss | (92,293,000) | (109,661,000) |
Fair Value | 347,900,000 | 987,685,000 |
Estimated fair value of RMBS in continuous loss position for less than 12 consecutive months | 85,660,000 | 549,968,000 |
Unrealized loss on RMBS in continuous loss position for less than 12 consecutive months | (12,081,000) | (109,662,000) |
Estimated fair value of RMBS in continuous loss position for 12 or more consecutive months | 90,720,000 | |
Unrealized loss on RMBS in continuous loss position for 12 or more consecutive months | (80,212,000) | |
Estimated fair value of RMBS in continuous loss position | 176,380,000 | 549,968,000 |
Unrealized loss on RMBS in continuous loss position | (92,293,000) | (109,662,000) |
Weighted Average Coupon at Period-End | 1.91% | 2.01% |
Weighted Average Yield (Loss Adjusted) at Period-End | 14.06% | 13.70% |
Annualized Yield Over Current Quarter | 4.08% | 12.99% |
Weighted Average 3 Month CPR at Period-End | 17.00% | 16.00% |
Non-Agency RMBS - Subordinated [Member]
|
||
Investment Holdings [Line Items] | ||
Principal Value | 4,938,497,000 | 4,962,829,000 |
Unamortized Premium | 57,946,000 | 58,298,000 |
Unamortized Discount | (2,562,459,000) | (2,789,906,000) |
Gross Unrealized Gain | 151,460,000 | 206,189,000 |
Gross Unrealized Loss | (412,439,000) | (226,552,000) |
Fair Value | 2,173,005,000 | 2,210,858,000 |
Estimated fair value of RMBS in continuous loss position for less than 12 consecutive months | 502,025,000 | 1,178,493,000 |
Unrealized loss on RMBS in continuous loss position for less than 12 consecutive months | (79,822,000) | (217,224,000) |
Estimated fair value of RMBS in continuous loss position for 12 or more consecutive months | 920,078,000 | 12,826,000 |
Unrealized loss on RMBS in continuous loss position for 12 or more consecutive months | (332,617,000) | (9,328,000) |
Estimated fair value of RMBS in continuous loss position | 1,422,103,000 | 1,191,319,000 |
Unrealized loss on RMBS in continuous loss position | (412,439,000) | (226,552,000) |
Weighted Average Coupon at Period-End | 3.99% | 4.04% |
Weighted Average Yield (Loss Adjusted) at Period-End | 14.21% | 17.41% |
Annualized Yield Over Current Quarter | 18.53% | 25.16% |
Weighted Average 3 Month CPR at Period-End | 17.00% | 15.00% |
Non-Agency RMBS - Senior, Non-Retained [Member]
|
||
Investment Holdings [Line Items] | ||
Principal Value | 1,948,002,000 | 2,008,167,000 |
Unamortized Premium | 40,468,000 | 79,730,000 |
Unamortized Discount | (79,394,000) | (109,619,000) |
Gross Unrealized Gain | 292,459,000 | 428,213,000 |
Gross Unrealized Loss | (24,843,000) | (75,923,000) |
Fair Value | 2,176,692,000 | 2,330,568,000 |
Estimated fair value of RMBS in continuous loss position for less than 12 consecutive months | 764,724,000 | |
Unrealized loss on RMBS in continuous loss position for less than 12 consecutive months | (75,923,000) | |
Estimated fair value of RMBS in continuous loss position for 12 or more consecutive months | 523,988,000 | |
Unrealized loss on RMBS in continuous loss position for 12 or more consecutive months | (24,843,000) | |
Estimated fair value of RMBS in continuous loss position | 523,988,000 | 764,724,000 |
Unrealized loss on RMBS in continuous loss position | (24,843,000) | (75,923,000) |
Weighted Average Coupon at Period-End | 5.17% | 5.17% |
Weighted Average Yield (Loss Adjusted) at Period-End | 4.58% | 4.36% |
Annualized Yield Over Current Quarter | 5.70% | 6.85% |
Weighted Average 3 Month CPR at Period-End | 16.00% | 15.00% |
Agency RMBS [Member]
|
||
Investment Holdings [Line Items] | ||
Principal Value | 4,801,983,000 | 2,035,823,000 |
Unamortized Premium | 135,332,000 | 67,134,000 |
Unamortized Discount | (161,000) | |
Gross Unrealized Gain | 88,065,000 | 47,717,000 |
Gross Unrealized Loss | (11,459,000) | (17,090,000) |
Fair Value | 5,013,760,000 | 2,133,584,000 |
Estimated fair value of RMBS in continuous loss position for less than 12 consecutive months | 588,905,000 | 600,464,000 |
Unrealized loss on RMBS in continuous loss position for less than 12 consecutive months | (11,459,000) | (17,090,000) |
Estimated fair value of RMBS in continuous loss position | 588,905,000 | 600,464,000 |
Unrealized loss on RMBS in continuous loss position | (11,459,000) | (17,090,000) |
Weighted Average Coupon at Period-End | 4.71% | 5.05% |
Weighted Average Yield (Loss Adjusted) at Period-End | 4.34% | 4.51% |
Annualized Yield Over Current Quarter | 4.34% | 3.34% |
Weighted Average 3 Month CPR at Period-End | 7.00% | 24.00% |
Residential Mortgage Backed Securities [Member]
|
||
Investment Holdings [Line Items] | ||
Principal Value | 11,695,449,000 | 9,671,070,000 |
Unamortized Premium | 639,394,000 | 625,819,000 |
Unamortized Discount | (2,642,107,000) | (2,908,845,000) |
Gross Unrealized Gain | 559,655,000 | 703,877,000 |
Gross Unrealized Loss | (541,034,000) | (429,226,000) |
Fair Value | 9,711,357,000 | 7,662,695,000 |
Estimated fair value of RMBS in continuous loss position for less than 12 consecutive months | 1,176,590,000 | 3,093,649,000 |
Unrealized loss on RMBS in continuous loss position for less than 12 consecutive months | (103,362,000) | (419,899,000) |
Estimated fair value of RMBS in continuous loss position for 12 or more consecutive months | 1,534,786,000 | 12,826,000 |
Unrealized loss on RMBS in continuous loss position for 12 or more consecutive months | (437,672,000) | (9,328,000) |
Estimated fair value of RMBS in continuous loss position | 2,711,376,000 | 3,106,475,000 |
Unrealized loss on RMBS in continuous loss position | (541,034,000) | (429,227,000) |
Non Agency Residential MBS Deemed To Be Equivalent To Alt A Quality [Member]
|
||
Investment Holdings [Line Items] | ||
Number of securities in portfolio | 523 | 581 |
Weighted average maturity (years) | 27.0 | 27.4 |
Weighted average amortized loan to value | 72.30% | 72.50% |
Weighted average FICO | 717.2 | 717.3 |
Weighted average loan balance | $ 470,100 | $ 447,600 |
Weighted average percentage owner occupied | 84.30% | 83.30% |
Weighted average percentage single family residence | 64.10% | 63.10% |
Weighted average current credit enhancement | 12.70% | 16.00% |
California [Member] | Non Agency Residential MBS Deemed To Be Equivalent To Alt A Quality [Member]
|
||
Investment Holdings [Line Items] | ||
Weighted average geographic concentration | 38.10% | 57.80% |
Florida [Member] | Non Agency Residential MBS Deemed To Be Equivalent To Alt A Quality [Member]
|
||
Investment Holdings [Line Items] | ||
Weighted average geographic concentration | 8.70% | 13.30% |
New York [Member] | Non Agency Residential MBS Deemed To Be Equivalent To Alt A Quality [Member]
|
||
Investment Holdings [Line Items] | ||
Weighted average geographic concentration | 5.50% | 7.30% |
New Jersey [Member] | Non Agency Residential MBS Deemed To Be Equivalent To Alt A Quality [Member]
|
||
Investment Holdings [Line Items] | ||
Weighted average geographic concentration | 2.40% | 3.30% |
Virginia [Member] | Non Agency Residential MBS Deemed To Be Equivalent To Alt A Quality [Member]
|
||
Investment Holdings [Line Items] | ||
Weighted average geographic concentration | 2.30% | 3.90% |
Securitized Debt
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Securitized Debt |
7. Securitized Debt
All
of the Company’s securitized debt is collateralized by
residential mortgage loans or RMBS. For financial
reporting purposes, the Company’s securitized debt is
accounted for as a financing transaction. Thus, the
residential mortgage loans or RMBS held as collateral are recorded
in the assets of the Company as securitized loans held for
investment or RMBS and the securitized debt is recorded as a
liability in the consolidated statements of financial
condition.
At
June 30, 2011 the Company’s securitized debt collateralized
by residential mortgage loans had a principal balance of $257.9
million. The debt matures between the years 2023 and
2038. At June 30, 2011 the debt carried a weighted
average cost of financing equal to 5.49%. At December
31, 2010, the Company’s securitized debt collateralized by
residential mortgage loans had a principal balance of $303.1
million. The debt matures between the years 2023 and
2038. At December 31, 2010, the debt carried a weighted
average cost of financing equal to 5.52%.
At
June 30, 2011 the Company’s securitized debt, non-retained,
collateralized by RMBS had a principal balance of $1.9
billion. The debt matures between the years 2035 and
2047. At June 30, 2011 the debt carried a weighted
average cost of financing equal to 5.18%. At December
31, 2010, the Company’s securitized debt, non-retained,
collateralized by RMBS had a principal balance of $2.0
billion. The debt matures between the years 2035 and
2047. At December 31, 2010, the debt carried a weighted
average cost of financing equal to 5.17%.
The
following table presents the estimated principal repayment schedule
of the securitized debt and securitized debt, non-retained held by
the Company at June 30, 2011 and December 31, 2010, based on
expected cash flows of the residential mortgage loans or RMBS, as
adjusted for projected losses, collateralizing the
debt. All of the securitized debt recorded in the
Company’s consolidated statements of financial condition is
non-recourse to the Company.
Maturities
of the Company’s securitized debt are dependent upon cash
flows received from the underlying loans. The estimate of their
repayment is based on scheduled principal payments on the
underlying loans. This estimate will differ from actual amounts to
the extent prepayments and/or loan losses are
experienced. See Note 4 for a more detailed discussion
of the loans collateralizing the securitized debt.
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Income Taxes
|
6 Months Ended |
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Jun. 30, 2011
|
|
Income Taxes |
12. Income Taxes
As
long as the Company qualifies as a REIT, the Company is not subject
to Federal income tax to the extent that it makes qualifying
distributions to its stockholders, and provided it satisfies on a
continuing basis, through actual investment and operating results,
the REIT requirements including certain asset, income, distribution
and stock ownership tests. Most states recognize REIT
status as well. During the quarter ended June 30, 2011
the Company recorded $118 thousand in income tax expense related to
earnings of its TRS and state income taxes. During the
quarter ended June 30, 2010, the Company recorded $1,000 income tax
expense related to state and local minimum tax
liabilities.
In
general, common stock cash dividends declared by the Company will
be considered ordinary income to stockholders for income tax
purposes. From time to time, a portion of the
Company’s dividends may be characterized as capital gains or
return of capital. For the quarters ended June 30, 2011
and December 31, 2010, the Company estimates that all income
distributed in the form of dividends will be characterized as
ordinary income.
The
Company files tax returns in several U.S. jurisdictions, including
New York State and New York City. The 2007 through 2010
tax years remain open to U.S. federal, state and local tax
examinations.
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Consolidation
|
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Jun. 30, 2011
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Consolidation |
8. Consolidation
In June 2009, the FASB issued two new accounting standards that
amended guidance applicable to the accounting for transfers of
financial assets and the consolidation of Variable Interest
Entities (“VIEs”) (ASC 860 and ASC 810,
respectively). The primary effect of these standards was
to eliminate the concept of a QPSE when transferring assets and to
remove the exemption of a QSPE when applying the consolidation
standard. The Company adopted these new accounting
standards as of January 1, 2010.
The
Company uses securitization trusts or variable interest entities in
its securitization and re-securitization
transactions. Prior to January 1, 2010, these variable
interest entities met the definition of QSPE’s and, as such,
were not subject to consolidation. Effective January 1,
2010, all such variable interest entities were considered for
consolidation based on the criteria in ASC 810.
Per
ASC 810, an entity shall consolidate a VIE when that entity has a
variable interest that provides the reporting entity with a
controlling financial interest. The assessment of the
characteristics of the reporting entity’s VIE shall consider
the VIEs purpose and design. A controlling financial
interest is defined as (a) the power to direct the activities of a
VIE that most significantly impact the VIEs economic performance
and (b) the obligation to absorb losses of the VIE that could
potentially be significant to the VIE and/or the right to receive
benefits from the VIE that could potentially be significant to the
VIE.
Since
the Company’s inception, the Company has created VIEs for the
purpose of securitizing whole mortgage loans or re-securitizing
RMBS and obtaining permanent, non-recourse term financing. The
Company evaluated its interest in each securitization trust VIE to
determine the primary beneficiary status. The Company
determined that seven trusts, one of which had been consolidated
since its inception, met the requirements of
consolidation. The Company determined that in these
seven securitizations, based on holding all of the subordinate
interests, it maintains the obligation to absorb losses and/or the
right to receive benefits from the VIE that could be significant to
the VIE. In addition, the Company had the power to
direct activities of the trust or was determined to have the
ability to control the trust due to its contribution in the purpose
and design of the structure. The remaining two trusts
evaluated did not meet the requirements to consolidate due to the
inability to control one of the trusts and the lack of obligations
to absorb losses on the other trust.
VIEs for Which the Company is the Primary Beneficiary
Based
on the Company’s consolidation evaluation, the Company
consolidated three VIEs on January 1, 2010 that were not previously
consolidated and consolidated three VIEs that it created during
2010. The Company’s retained beneficial interest
is typically the subordinated tranches of these re-securitizations
and in some cases the Company may hold interests in additional
tranches. The effect is the inclusion of an additional $2.2
billion of non-Agency RMBS at fair value no longer retained by the
Company and the inclusion in its liabilities of $1.9 billion of
non-recourse securitized debt associated with these
re-securitizations.
On
an ongoing basis, the Company expects that the VIEs will be fair
valued as Level 2 assets. Line items pertaining to the
third-party owned interests are separately stated within the
Company’s consolidated financial statements and labeled as
“non-retained”.
The
trusts are structured as pass through entities that receive
principal and interest on the underlying collateral and distribute
those payments to the certificate holders. The assets
and other instruments held by the securitization entities are
restricted in that they can only be used to fulfill the obligations
of the securitization entity. Additionally, the
obligations of the securitization entities do not have any recourse
to the general credit of any other consolidated subsidiaries, nor
to the Company as the primary beneficiary. The
Company’s risks associated with its involvement with these
VIEs is limited to its risks and rights as a certificate holder of
the bonds it has retained. See Note 5 for a discussion
of the fair value measurement of the assets and
liabilities.
The
assets of the securitization entities consolidated by the Company
are similar in nature to the Company’s portfolio as a
whole. The securitization entities are all composed of
RMBS of the quality and characteristics of assets reflected in the
RMBS classifications found in the Company’s consolidated
financial statements. See Note 3 for a discussion of the
securities characteristics of the portfolio.
The
table below presents the assets and liabilities of consolidated
entities as of January 1, 2010. The cumulative effect
adjustment reflects the reversal of realized gains of $98.1 million
previously recorded on the sales of these newly consolidated trusts
net of the additional accretion of discounts due to consolidating
the trusts.
The cumulative effect of adopting ASC 810 on January 1, 2010 based
on the shares outstanding on that date was to reduce the beginning
book value of the Company by $0.13 per share.
The
table below reflects the assets and liabilities recorded in the
consolidated statements of financial condition related to the
consolidated securitization entities as of June 30, 2011 and
December 31, 2010.
The consolidation of these securitization entities increases both
the income and expense recorded in the consolidated statements of
operations for the Company as detailed in the table
below.
A discussion of the significant accounting policies of the Company
to record income and expense is included in Note 2 to these
consolidated financial statements. The effect of
adopting ASC 810 based on the weighted average shares outstanding
had no material effect on the net interest income of the Company
for the six months ended June 30, 2011.
The effect of the consolidation of these securitization entities on
the consolidated statements of cash flows for the Company is
presented in the table below for the periods
presented.
VIEs for Which the Company is Not the Primary
Beneficiary
The
table below represents the carrying amounts and classification of
assets recorded on the Company’s consolidated financial
statements related to its variable interests in non-consolidated
VIEs, as well as its maximum exposure to loss as a result of its
involvement with these VIEs.
The
Company’s involvement with VIEs for which it is not the
primary beneficiary generally are in the form of purchasing
securities issued by the trusts similar to its investments in other
RMBS that are not part of a trust it has evaluated for
consolidation. The Company’s maximum exposure to
loss in these entities is represented by the fair value of these
assets. This amount does not include OTTI or other
write-downs that the Company previously recognized through
earnings.
|
Organization - Narrative (Detail)
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items] | |
Percentage of the Company's common shares owned by Annaly Capital Management, Inc. | 4.38% |
Company manager | Fixed Income Discount Advisory Company |
FIDAC is a wholly-owned subsidiary of Annaly | FIDAC is a wholly-owned subsidiary of Annaly |
Repurchase Agreements
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Repurchase Agreements |
6. Repurchase Agreements
The
Company had outstanding $4.3 billion and $1.8 billion of repurchase
agreements with weighted average borrowing rates of 0.28% and 0.45%
and weighted average remaining maturities of 59 and 49 days as of
June 30, 2011 and December 31, 2010, respectively. At
June 30, 2011 and December 31, 2010, RMBS pledged as collateral
under these repurchase agreements had an estimated fair value of
$4.5 billion and $2.0 billion, respectively. The average
daily balances of the Company’s repurchase agreements for the
quarters ended June 30, 2011 and December 31, 2010 were $4.3
billion and $1.6 billion, respectively. The interest rates of these
repurchase agreements are generally indexed to the one-month or the
three-month LIBOR rate and re-price accordingly.
At
June 30, 2011 and December 31, 2010, the repurchase agreements
collateralized by RMBS had the following remaining
maturities.
At June 30, 2011 and December 31, 2010, the Company did not have an
amount at risk greater than 10% of its equity with any
counterparty.
|
Consolidation (Detail) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
Dec. 31, 2010
|
Jun. 30, 2011
Variable Interest Entity, Primary Beneficiary [Member]
|
Jun. 30, 2010
Variable Interest Entity, Primary Beneficiary [Member]
|
Jun. 30, 2011
Variable Interest Entity, Primary Beneficiary [Member]
|
Jun. 30, 2010
Variable Interest Entity, Primary Beneficiary [Member]
|
Dec. 31, 2009
Variable Interest Entity, Primary Beneficiary [Member]
|
Jun. 30, 2011
Variable Interest Securitization Entity Primary Beneficiary [Member]
|
Dec. 31, 2010
Variable Interest Securitization Entity Primary Beneficiary [Member]
|
Jun. 30, 2011
Variable Interest Entity, Not Primary Beneficiary, Aggregated Disclosure [Member]
|
Dec. 31, 2010
Variable Interest Entity, Not Primary Beneficiary, Aggregated Disclosure [Member]
|
||||
The effect of the consolidation of these securitization entities on the consolidated statements of financial condition for the Company is presented in the table below: | |||||||||||||||||
Assets - Non-agency RMBS - Senior, non-retained | $ 2,176,692 | $ 2,176,692 | $ 2,330,568 | [1] | $ 1,114,034 | ||||||||||||
Liabilities - Securitized debt, non-retained | 1,904,936 | 1,904,936 | 1,956,079 | [1] | 1,202,221 | 1,904,936 | 1,956,079 | ||||||||||
Net assets and liabilities of newly consolidated entities | (88,187) | ||||||||||||||||
Cumulative effect adjustment to retained earnings upon adoption | (88,187) | (88,187) | |||||||||||||||
Assets | |||||||||||||||||
Non-agency RMBS | 3,826,486 | 4,357,631 | |||||||||||||||
Assets - Securitized loans | 302,879 | 302,879 | 353,532 | [1] | 302,879 | 353,532 | |||||||||||
Liabilities | |||||||||||||||||
Securitized debt, non-retained | 1,904,936 | 1,904,936 | 1,956,079 | [1] | 1,202,221 | 1,904,936 | 1,956,079 | ||||||||||
Securitized debt, loans held for investment | 245,984 | 245,984 | 289,236 | [1] | 245,984 | 289,236 | |||||||||||
Interest income, non-retained | 28,428 | 49,829 | 49,587 | 100,690 | 28,428 | 49,829 | 49,587 | 100,690 | |||||||||
Interest income, securitized loans | 4,203 | 4,421 | 8,702 | 11,074 | |||||||||||||
Interest expense, non-retained | (28,312) | (21,421) | (55,887) | (55,251) | 28,312 | 21,421 | 55,887 | 55,251 | |||||||||
Interest expense, securitized loans | 4,522 | 4,758 | 9,472 | 9,563 | |||||||||||||
Net interest income | 186,870 | 155,431 | 379,026 | 294,072 | (203) | 28,071 | (7,070) | 46,950 | |||||||||
Proceeds from securitized debt borrowings, non-retained | 311,012 | 1,127,872 | 311,012 | 1,127,872 | |||||||||||||
Payments on securitized debt borrowings, non-retained | 362,155 | 229,362 | (362,155) | (229,362) | |||||||||||||
Payments on securitized debt borrowings, loans held for investment | 43,252 | 48,417 | (43,252) | (48,417) | |||||||||||||
Increase (decrease) in accrued interest receivable | 8,998 | 12,554 | (634) | (9,345) | |||||||||||||
Increase (decrease) in accrued interest payable | (112) | 8,910 | 454 | 9,212 | |||||||||||||
Net cash flows, non-retained | (94,575) | 849,960 | |||||||||||||||
RMBS, at fair value | |||||||||||||||||
Non-Agency RMBS - Senior, at fair value | 347,900 | 347,900 | 987,685 | [1] | 455 | 559 | |||||||||||
Non-Agency RMBS - Subordinated, at fair value | 2,173,005 | 2,173,005 | 2,210,858 | [1] | 6,087 | 6,485 | |||||||||||
Agency RMBS, at fair value | 5,013,760 | 5,013,760 | 2,133,584 | [1] | 2,619 | 2,530 | |||||||||||
Total, at fair value | 9,161 | 9,574 | |||||||||||||||
RMBS, at amortized cost | |||||||||||||||||
Non-Agency RMBS - Senior, at amortized cost | 338 | 400 | |||||||||||||||
Non-Agency RMBS - Subordinated, at amortized cost | 6,617 | 7,664 | |||||||||||||||
Agency RMBS, at amortized cost | 2,255 | 2,680 | |||||||||||||||
Total, at amortized cost | $ 9,210 | $ 10,744 | |||||||||||||||
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Common dividends declared, per share | $ 0.27 | $ 0.34 |
Summary of the Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Summary of the Significant Accounting Policies |
2. Summary of the Significant Accounting
Policies
(a) Basis of Presentation
The
consolidated financial statements include the accounts of the
Company and its direct and indirect wholly-owned
subsidiaries. All intercompany balances and transactions
have been eliminated.
Beginning
with the financial statements for the six month period ending June
30, 2011, the Company will reclassify previously presented
financial information so that amounts previously presented in the
Consolidated Statement of Operations and Comprehensive Income
(Loss) as interest expense on swaps will be presented in Other
gains (losses) as Realized gains (losses) on interest rate
swaps. Financial statements for periods prior to June 30,
2011 will be conformed to the restated presentation. Interest
expense for the quarter and six months ended June 30, 2010 will be
decreased by $699 thousand and $699 thousand, and Other gains
(losses) will be decreased by the same amounts,
respectively.
(b) Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand and cash deposited
overnight in money market funds.
(c) Non-Agency and Agency Residential Mortgage-Backed
Securities
The
Company invests in residential mortgage-backed securities
(“RMBS”) representing interests in obligations backed
by pools of mortgage loans. The Company delineates
between (1) Agency RMBS, (2) non-Agency RMBS, and (3) non-Agency
RMBS, non-retained as follows: The Agency RMBS are
mortgage pass-through certificates, collateralized mortgage
obligations (“CMOs”), and other RMBS representing
interests in or obligations backed by pools of mortgage loans
issued or guaranteed as to principal and/or interest repayment by
agencies of the U.S. Government or federally chartered corporations
such Ginnie Mae, Freddie Mac or Fannie Mae. The
non-Agency RMBS are not issued or guaranteed by Fannie Mae, Freddie
Mac, or Ginnie Mae and is therefore subject to credit
risk. Non-Agency RMBS, non-retained are detailed in Note
8 to these consolidated financial statements.
The
Company holds its RMBS as available-for-sale, records investments
at estimated fair value as described in Note 5 of these
consolidated financial statements, and includes unrealized gains
and losses in other comprehensive income (loss) in the Consolidated
Statements of Operations and Comprehensive Income
(Loss). From time to time, as part of the overall
management of its portfolio, the Company may sell any of its RMBS
investments and recognize a realized gain or loss as a component of
earnings in the Consolidated Statements of Operations and
Comprehensive Income (Loss) utilizing the specific identification
method.
Interest
income on RMBS is computed on the remaining principal balance of
the investment security. Premium or discount
amortization/accretion on Agency RMBS is recognized over the life
of the investment using the effective interest method. Premium
or discount amortization/accretion on non-Agency RMBS is recognized
in accordance with Accounting Standards Codification
(“ASC”) 325-40, Investment-Other: Beneficial
Interests in Securitized Financial Assets. For
non-Agency RMBS, the Company estimates at the time of purchase
expected future cash flows, prepayment speeds, credit losses, loss
severity, and loss timing based on the Company’s observation
of available market data, its experience, and the collective
judgment of its management team to determine the effective interest
rate on the RMBS. The Company periodically reevaluates,
and if necessary, makes adjustments to its analysis utilizing
internal models and external market research in conjunction with
management’s view on performance in the non-Agency RMBS
sector. Changes to the Company’s assumptions
subsequent to the purchase date may increase or decrease the
amortization/accretion of premiums or discounts which affects
interest income. Changes to assumptions that decrease
expected future cash flows may result in other-than-temporary
impairment (“OTTI”).
The
Company evaluates quarterly, or more often if market conditions
warrant, each investment in its RMBS portfolio for OTTI. The
amortized cost of each investment in an unrealized loss position is
compared to the present value of expected future cash flows of the
position. In estimating future cash flows, the Company
evaluated the non-Agency RMBS for OTTI by considering
delinquencies, credit losses, loss severities, prepayment speeds,
geographic data, borrower characteristics, loan to value ratios,
seasoning and credit support in conjunction with broader
macroeconomic expectations such as home price depreciation,
expectations of future delinquencies and loss severities and the
ability of the borrower to refinance or modify their
loans. If, after determining the expected future cash
flows of the position, the amortized cost of the security is more
than the present value of its expected future cash flows, an OTTI
has occurred. If the Company does not intend to sell and is
not more likely than not required to sell the debt security prior
to its anticipated recovery, the credit loss, if any, is recognized
in earnings, while the balance of impairment related to other
factors is recognized in other comprehensive income (loss).
If the Company intends to sell the debt security, or will be more
likely than not required to sell the security before its
anticipated recovery, the full unrealized loss is recognized in
earnings. The determination cannot be overcome by management
judgment of the probability of collecting all cash flows previously
projected.
(d) Interest-Only RMBS
The Company invests in interest-only Agency and non-Agency RMBS. On
April 1, 2011, the Company elected the fair value option for
interest-only RMBS acquired on or after such date. These
interest-only RMBS represent the Company’s right to receive a
specified proportion of the contractual interest flows of specific
RMBS. Interest-only strips acquired on or after April 1, 2011
are measured at fair value through earnings in the Company’s
Consolidated Statements of Operations and Comprehensive Income
(Loss). The interest-only strips are included in RMBS, at
fair value on the accompanying consolidated statements of financial
condition.
(e) Securitized Loans Held for Investment
The
Company’s securitized residential mortgage loans are
comprised of fixed-rate and variable-rate
loans. Mortgage loans are designated as held for
investment, and are carried at their principal balance outstanding,
plus any premiums or discounts, less allowances for loan
losses. Interest income on loans held for investment is
recognized over the life of the investment using the effective
interest method. Income recognition is suspended for
loans when, in the opinion of management, a full recovery of income
and principal becomes doubtful. Income recognition is
resumed when the loan becomes contractually current and performance
is demonstrated to be resumed. The Company estimates
fair value of securitized loans as described in Note 5 of these
consolidated financial statements.
(f) Allowance for Loan Losses
The
Company has established an allowance for loan losses on its
securitized loans held for investment portfolio at a level that
management believes is adequate based on an evaluation of known and
inherent risks related to the securitized loans. The
securitized loan portfolio is comprised primarily of
non-conforming, single family, owner occupied, jumbo, prime loans
that are not guaranteed as to repayment of principal or
interest. The allowance for loan losses is
established to provision for the credit risk associated with a
borrower’s default on its loan and the potential for recovery
at the liquidation of the property in an amount less than the
unpaid principal balance of the loan. The estimate is
based on the aggregation of factors including current economic
conditions, industry loss experience, the loan originator’s
loss experience, credit quality trends, loan portfolio composition,
delinquency trends, national and local economic trends, national
unemployment data, changes in housing appreciation or depreciation
and whether specific geographic areas where the Company has
significant loan concentrations are experiencing adverse economic
conditions and events such as natural disasters that may affect the
local economy or property values. Upon purchase of a pool of loans,
the Company obtains written representations and warranties from the
sellers that the Company will be reimbursed for the value of the
loan if the loan fails to meet the agreed upon origination
standards. While the Company has little history of its
own to establish loan trends, delinquency trends of the originators
and the current market conditions aid in determining the allowance
for loan losses. The Company has created an unallocated
provision for probable loan losses estimated as a percentage of the
remaining unpaid principal balance on the
loans. Management’s estimate is based on
historical experience of similarly underwritten pools in
conjunction with current and expected market trends.
When
the Company determines it is probable that specific contractually
due amounts are uncollectible, the amount is considered
impaired. Where impairment is indicated, a valuation
write-off is measured based upon the excess of the recorded
investment over the net fair value of the collateral, reduced by
selling costs. Any deficiency between the carrying
amount of an asset and the net sales price of repossessed
collateral is charged to the allowance for loan
losses.
(g) Repurchase Agreements
The
Company may finance the acquisition of its investment securities
through the use of repurchase agreements. Repurchase agreements are
treated as collateralized financing transactions and are carried at
their contractual amounts, including accrued interest, as specified
in the respective agreements.
(h) Securitized Debt, loans held for investment and
Securitized Debt, Non-Retained
The
Company has issued securitized debt to finance its residential
mortgage loan portfolio and has re-securitized RMBS to finance a
portion of its RMBS portfolio. Certain transactions
involving residential mortgage loans are accounted for as
financings, and are recorded as an asset called “Securitized
loans held for investment” and the corresponding debt as
“Securitized debt, loans held for investment” in the
consolidated statements of financial condition. These
securitizations are collateralized by residential adjustable or
fixed rate mortgage loans that have been placed in a trust and pay
interest and principal payments to the debt holders of that
securitization. Re-securitization transactions
classified as “Securitized debt, non-retained” reflect
the transfer to a trust of fixed or adjustable rate RMBS which are
classified as “Non-Agency RMBS Senior, non-retained (held in
consolidated VIEs)” that pay interest and principal payments
to the debt holders of that
re-securitization. Re-securitization transactions
completed by the Company are accounted for as financings pursuant
to ASC 810, Consolidation. The
holders of Securitized debt and Securitized debt, non-retained have
no recourse to the Company, and the Company does not receive any
interest or principal paid on such debt. The Company
estimates fair value of securitized debt and securitized debt,
non-retained as described in Note 5 to these consolidated financial
statements. The associated liabilities are carried at
amortized cost.
(i) Fair Value Disclosure
A
complete discussion of the methodology utilized by the Company to
fair value its financial instruments is included in Note 5 to these
consolidated financial statements.
(j) Derivative Financial Instruments and Hedging
Activity
The
Company’s policies permit it to enter into derivative
contracts, including interest rate swaps and interest rate caps, as
a means of mitigating its interest rate risk. The Company intends
to use interest rate derivative instruments to mitigate interest
rate risk rather than to enhance returns. Interest rate
swaps are recorded as either assets or liabilities in the
consolidated statement of financial condition, and measured at fair
value with realized and unrealized gains and losses recognized in
earnings. Net payments on interest rate swaps are
included in the consolidated statement of cash flows as a component
of net income (loss). Unrealized gains (losses) on
interest rate swaps are removed from net income (loss) as an
adjustment to cash flows from operating activities. The Company
estimates fair value of interest rate swaps as described in Note 5
of these consolidated financial statements.
The
Company elects to net by counterparty the fair value of interest
rate swap contracts. These contracts contain legally
enforceable provisions that allow for netting or setting off of all
individual swap receivables and payables with each counterparty
and, therefore, the fair value of those swap contracts are netted
by counterparty. The credit support annex provisions of the
Company’s interest rate swap contracts allow the parties to
mitigate their credit risk by requiring the party which is out of
the money to post collateral. As the Company elects to net by
counterparty the fair value of interest rate swap contracts, it
also nets by counterparty any cash or other collateral exchanged as
part of the interest rate swap contracts.
(k) Sales, Securitizations, and Re-Securitizations
The
Company periodically enters into transactions in which it sells
financial assets, such as RMBS, mortgage loans and other
assets. Gains and losses on sales of assets are computed
on the specific identification method whereby the Company records a
gain or loss on the difference between the carrying value of the
asset and the proceeds from the sale. In addition, the
Company from time to time securitizes or re-securitizes assets and
sells tranches in the newly securitized assets. These
transactions may be recorded as either a sale and the assets
contributed to the securitization are removed from the consolidated
statements of financial condition and a gain or loss is recognized,
or as a financing whereby the assets contributed to the
securitization are not derecognized but rather the liabilities
issued by the securitization are recorded to reflect the term
financing of the assets. In these securitizations and
re-securitizations, the Company may retain senior or subordinated
interests in the securitized and/or re-securitized
assets.
(l)
Income Taxes
The
Company elected to be taxed as a REIT, and therefore it generally
will not be subject to corporate, federal, or state income tax to
the extent that qualifying distributions are made to stockholders
and the REIT requirements, including certain asset, income,
distribution and stock ownership tests are met. If the
Company failed to qualify as a REIT and did not qualify for certain
statutory relief provisions, the Company would be subject to
federal, state and local income taxes and may be precluded from
qualifying as a REIT for the subsequent four taxable years
following the year in which the REIT qualification was
lost. The Company and its subsidiary CIM Trading Company
LLC made a joint election to treat the subsidiary as a taxable REIT
subsidiary. As such, CIM Trading Company LLC is taxable
as a domestic C corporation and subject to federal, state, and
local income taxes based upon its taxable income.
The
provisions of FASB ASC 740, Income Taxes, clarify
the accounting for uncertainty in income taxes recognized in
financial statements and prescribe a recognition threshold and
measurement attribute for tax positions taken or expected to be
taken on a tax return. FASB ASC 740 also requires that
interest and penalties related to unrecognized tax benefits be
recognized in financial statements. The Company does not
have any unrecognized tax benefits that would affect its financial
position. Thus, no accruals for penalties and interest
were necessary as of June 30, 2011.
(m) Net Income per Share
The
Company calculates basic net income per share by dividing net
income for the period by the weighted-average shares of its common
stock outstanding for that period. Diluted net income
per share takes into account the effect of dilutive instruments,
such as stock options, but uses the average share price for the
period in determining the number of incremental shares that are to
be added to the weighted average number of shares
outstanding. The Company had no potentially dilutive
securities outstanding during the periods presented.
(n) Stock-Based Compensation
The
Company accounts for stock based compensation awards granted to the
employees of FIDAC and its affiliates in accordance with ASC
505-50, Equity-Based Payments to
Non-Employees. Pursuant to ASC 505-50 the Company
measures the fair value of the equity instrument using the stock
prices and other measurement assumptions as of the earlier of
either the date at which a performance commitment by the
counterparty is reached or the date at which the
counterparty’s performance is complete. Compensation
expense related to the grants of stock and stock options is
recognized over the vesting period of such grants based on the fair
value of the stock on the vesting date.
(o) Use of Estimates
The
preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”) requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. The most significant estimates are related to the
following: all investment securities classified as
available-for-sale and interest rate swaps are reported at their
estimated fair value; all investment securities are
amortized/accreted based on yields that incorporate
management’s assumptions as to the expected performance of
the investment over time; and the loan loss provision reflects
management estimates with regard to expected losses of the
securitized loan portfolio. Actual results could differ
from those estimates.
(p) Recent Accounting Pronouncements
Presentation
Comprehensive Income (ASC 220)
In June 2011, FASB released ASU 2011-05, which attempts to improve
the comparability, consistency, and transparency of financial
reporting and increase the prominence of items reported in other
comprehensive income (OCI). The amendment requires that
all non-owner changes in stockholders’ equity be presented
either in a single continuous statement of net income and
comprehensive income or two separate consecutive
statements. Either presentation requires the
presentation on the face of the financial statements any
reclassification adjustments for items that are reclassified from
OCI to net income in the statements. There is no change
in what must be reported in OCI or when an item of OCI must be
reclassified to net income. This update is effective for
fiscal years, and interim periods within those years, beginning
after December 15, 2011. This update will result in
additional disclosure, but is expected to have no material effect
on the Company’s consolidated financial
statements.
Broad
Transactions
Fair Value Measurements and Disclosures (ASC
820)
In
January 2010, FASB issued ASU 2010-06 which increases disclosures
regarding the fair value of assets. A
majority of this update was effective for the Company on January 1,
2010. However, the guidance also required
that the disclosures on any Level 3 assets present separately
information about purchases, sales, issuances and
settlements. In other words, Level 3 assets are
presented on a gross basis rather than as one net
number. This portion of the guidance is effective for
the Company on January 1, 2011. Adoption of this portion
of the guidance results in increased footnote disclosure in the
Company’s consolidated financial statements to the extent
that Level 3 assets are held.
In
May 2011, FASB release ASU 2011-04 further converging US GAAP and
IFRS by providing common fair value measurement and disclosure
requirements. The amendments in this update change the
wording used to describe the requirements in US GAAP for measuring
fair value and for disclosing information about fair value
measurements. These include those that clarify the
FASB’s intent about the application of existing fair value
measurement and disclosure requirements and those that change a
particular principle or requirement for measuring fair value or for
disclosing information about fair value
measurements. This guidance is effective for interim and
annual reporting periods beginning after December 15,
2011. This update may result in additional disclosure,
however has no effect on the Company’s consolidated financial
statements.
Transfers and Servicing (ASC 860)
In
April 2011, FASB issued ASU 2011-03 regarding repurchase
agreements. In a typical repurchase agreement
transaction, an entity transfers financial assets to a counterparty
in exchange for cash with an agreement for the counterparty to
return the same or equivalent financial assets for a fixed price in
the future. Prior to this update one of the factors in
determining whether sale treatment could be used was whether the
transferor maintained effective control of the transferred assets
and in order to do so, the transferor must have the ability to
repurchase such assets. Based on this update, FASB concluded that
the assessment of effective control should focus on a
transferor’s contractual rights and obligations with respect
to transferred financial assets, rather than on whether the
transferor has the practical ability to perform in accordance with
those rights or obligations. Therefore, this update
removes the transferor’s ability criterion from consideration
of effective control. This update is effective for the
first interim or annual period beginning on or after December 15,
2011. As the Company records repurchase agreements as
secured borrowings and not sales, this update will have no effect
on the Company’s consolidated financial
statements.
|
Residential Mortgage-Backed Securities - Maturities (Detail) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year, at amortized cost | $ 201,934 | $ 289,575 |
Greater than one year and less than five years, at amortized cost | 2,262,765 | 3,853,016 |
Greater than five years, at amortized cost | 7,228,037 | 3,245,454 |
Total maturities, at fair value, at amortized cost | 9,692,736 | 7,388,045 |
Less than one year, at fair value | 304,153 | 235,371 |
Greater than one year and less than five years, at fair value | 2,404,182 | 4,256,652 |
Greater than five years, at fair value | 7,003,022 | 3,170,672 |
Total maturities, at fair value | 9,711,357 | 7,662,695 |
Non-Agency RMBS - Senior [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year, at amortized cost | 9,038 | 26,920 |
Greater than one year and less than five years, at amortized cost | 77,991 | 584,859 |
Greater than five years, at amortized cost | 325,493 | 463,810 |
Total maturities, at fair value, at amortized cost | 412,522 | 1,075,589 |
Less than one year, at fair value | 8,805 | 26,962 |
Greater than one year and less than five years, at fair value | 70,609 | 587,075 |
Greater than five years, at fair value | 268,486 | 373,648 |
Total maturities, at fair value | 347,900 | 987,685 |
Non-Agency RMBS - Subordinated [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year, at amortized cost | 10,456 | 11,076 |
Greater than one year and less than five years, at amortized cost | 278,189 | 253,558 |
Greater than five years, at amortized cost | 2,145,339 | 1,966,587 |
Total maturities, at fair value, at amortized cost | 2,433,984 | 2,231,221 |
Less than one year, at fair value | 10,212 | 7,941 |
Greater than one year and less than five years, at fair value | 246,751 | 218,986 |
Greater than five years, at fair value | 1,916,042 | 1,983,931 |
Total maturities, at fair value | 2,173,005 | 2,210,858 |
Non-Agency RMBS - Senior, Non-Retained [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year, at amortized cost | 182,440 | 251,579 |
Greater than one year and less than five years, at amortized cost | 1,289,279 | 1,500,955 |
Greater than five years, at amortized cost | 437,357 | 225,744 |
Total maturities, at fair value, at amortized cost | 1,909,076 | 1,978,278 |
Less than one year, at fair value | 285,136 | 200,468 |
Greater than one year and less than five years, at fair value | 1,440,039 | 1,889,732 |
Greater than five years, at fair value | 451,517 | 240,368 |
Total maturities, at fair value | 2,176,692 | 2,330,568 |
Agency RMBS [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Greater than one year and less than five years, at amortized cost | 617,306 | 1,513,644 |
Greater than five years, at amortized cost | 4,319,848 | 589,313 |
Total maturities, at fair value, at amortized cost | 4,937,154 | 2,102,957 |
Greater than one year and less than five years, at fair value | 646,783 | 1,560,859 |
Greater than five years, at fair value | 4,366,977 | 572,725 |
Total maturities, at fair value | $ 5,013,760 | $ 2,133,584 |
Interest Rate Swaps (Tables)
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Jun. 30, 2011
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Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location [Table Text Block] | The
table below summarizes the location and fair value of interest rate
swaps reported in the Consolidated Statements of Financial
Condition as of June 30, 2011 and December 31, 2010.
The
effect of the Company’s interest rate swaps on the
Consolidated Statements of Operations and Comprehensive Income
(Loss) is presented below.
|
Income Taxes - Narrative (Detail) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
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Jun. 30, 2010
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Income Taxes [Line Items] | ||||
Income tax expense | $ 118 | $ 1 | $ 816 | $ 1 |
U.S. federal, state and local tax authorities [Member]
|
||||
Income Taxes [Line Items] | ||||
Years open to tax examination | 2007 through 2010 tax years |
Consolidation - Narrative (Detail) (USD $)
In Millions, except Per Share data |
3 Months Ended | |
---|---|---|
Dec. 31, 2009
Variable Interest Entity, Primary Beneficiary [Member]
|
Mar. 31, 2011
Variable Interest Entity, Not Primary Beneficiary, Aggregated Disclosure [Member]
|
|
Variable Interest Entity [Line Items] | ||
The cumulative effect adjustment reflects the reversal of realized gains of $98.1 million previously recorded on the sales of these newly consolidated trusts net of the additional accretion of discounts due to consolidating the trusts | $ (98.1) | |
The cumulative effect of adopting ASC 810 on January 1, 2010 based on the shares outstanding on that date was to reduce the beginning book value of the Company by $0.13 per share | $ (0.13) | |
Variable interest entity, reporting entity involvement, maximum loss exposure determination methodology | The Company’s involvement with VIEs for which it is not the primary beneficiary generally are in the form of purchasing securities issued by the trusts similar to its investments in other RMBS that are not part of a trust it has evaluated for consolidation. The Company’s maximum exposure to loss in these entities is represented by the fair value of these assets. This amount does not include OTTI or other write-downs that the Company previously recognized through earnings. |
Residential Mortgage-Backed Securities
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Jun. 30, 2011
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Residential Mortgage-Backed Securities |
3. Residential Mortgage-Backed Securities
The
following tables present the principal value, unamortized premium,
unamortized discount, gross unrealized gain, gross unrealized loss,
and fair value of the Company’s available-for-sale RMBS
portfolio as of June 30, 2011 and December 31, 2010, at fair value
by asset class. The RMBS portfolio is composed of Agency
and non-Agency RMBS collateralized by residential mortgage
loans. The Agency RMBS are mortgage pass-through
certificates, CMOs, and other RMBS representing interests in or
obligations backed by pools of mortgage loans issued or guaranteed
by Fannie Mae, Freddie Mac, or Ginnie Mae. The
non-Agency RMBS portfolio is not issued or guaranteed by Fannie
Mae, Freddie Mac, or Ginnie Mae and is therefore subject to credit
risk. The Company classifies its non-Agency RMBS into
senior, subordinated, and senior, non-retained
interests. Senior interests in non-Agency RMBS are
considered to be entitled to the first principal repayments in
their pro-rata ownership interests. Securities
identified as senior, non-retained represent the portion of the
Company’s non-Agency RMBS included on the Company’s
balance sheet that are economically owned by third
parties. The total fair value of the non-Agency RMBS
that are held by the re-securitization trusts that are consolidated
pursuant to ASC 810, Consolidation, was
$3.8 billion and $4.4 billion at June 30, 2011 and December 31,
2010 respectively. See Note 8 of these consolidated
financial statements for further discussion on
consolidation.
Interest-only
RMBS included in the table above, represent the right to receive a
specified portion of the contractual interest cash flows of the
underlying unamortized principal balance of specific
securities. As of June 30, 2011, interest-only RMBS accounted
for under the fair value option had unrealized losses of $4.4
million and an amortized cost of $21.0 million.
The
following tables present the gross unrealized losses and estimated
fair value of the Company’s RMBS by length of time that such
securities have been in a continuous unrealized loss position at
June 30, 2011 and December 31, 2010. The securities in
an unrealized loss position have been evaluated by the Company for
OTTI as discussed above. Three consolidated trusts have
been in a continuous unrealized loss position for greater than
twelve months although the assets are performing in line with the
Company’s expectations.
The
Company recorded a $1.0 million OTTI during the quarter ended June
30, 2011 on investments where the expected future cash flows of
certain non-Agency RMBS were less than their amortized cost
basis. The impairment recorded during the quarter ended June
30, 2011 was related to seven securities. The impaired
investments were certain non-Agency RMBS. As of June 30,
2011 the impaired securities had cumulative losses ranging from 0%
up to 15%, three-month prepayments speeds between 9 and 38 Constant
Prepayment Rate (“CPR”), 60+ day delinquencies between
3% and 38% of the pool balance, and weighted average FICO scores on
the pools between 698 and 744.
A
summary of the OTTI included in earnings for the quarter and six
months ended June 30, 2011 and 2010 is presented
below.
The following tables present details of each asset class in the
Company’s RMBS portfolio at June 30, 2011 and December 31,
2010. The weighted average coupon, yield, and CPR at
period-end are weighted by each investment’s respective
principal/notional value in the asset class. The figure
presenting the annualized yield over the current quarter is the
annualized interest income earned on the asset class during the
quarter, divided by the average of the beginning and ending
amortized cost of the asset class.
The
Company’s investment guidelines place no restrictions on the
credit rating of the assets the Company is able to hold in its
portfolio. The portfolio is most heavily weighted to
contain RMBS with credit risk. The Company chooses
assets for the portfolio after carefully evaluating each
investment’s risk profile.
The
table above reflects the credit rating of the Company’s
consolidated non-Agency RMBS portfolio. At June 30, 2011
approximately 14% of the AAA, AA, and A securities balance
reflected in the table above include senior, non-retained,
non-Agency RMBS.
The
AAA rated assets in the non-Agency RMBS portfolio are predominantly
senior non-retained non-Agency RMBS. As the Company
securitizes or re-securitizes assets, it expects the Below B or not
rated percentages in the portfolio to increase as the Company
typically retains the subordinated tranches of these types of
transactions.
Actual
maturities of RMBS are generally shorter than stated contractual
maturities. Actual maturities of the Company’s
RMBS are affected by the contractual lives of the underlying
mortgages, periodic payments of principal and prepayments of
principal. The following tables summarize the
Company’s RMBS at June 30, 2011 and December 31, 2010
according to their estimated weighted-average life
classifications. The weighted-average lives of the RMBS
at June 30, 2011 and December 31, 2010 in the tables below are
based on consensus constant prepayment speeds. The
prepayment model considers current yield, forward yield, steepness
of the interest rate curve, current mortgage rates, mortgage rates
of the outstanding loan, loan age, margin, and
volatility.
The
non-Agency RMBS portfolio is subject to credit risk. The
Company seeks to mitigate credit risk through its asset selection
process. The non-Agency RMBS portfolio is primarily
collateralized by what the Company classifies as Alt-A first lien
mortgages. The Company categorizes collateral as Alt-A
regardless of whether the loans were originally described as
“prime” if the behavior of the collateral when the
Company purchased the security more typically resembles
Alt-A. The Company defines Alt-A collateral
characteristics to be when the 60+ day delinquency bucket of the
pool is greater than 5% and weighted average FICO scores are
greater than 650 at origination. At June 30, 2011, 99%
of the non-Agency RMBS were Alt-A collateral. At
December 31, 2010, 99% of the non-Agency RMBS were Alt-A
collateral. The non-Agency securities contained in this
portion of the portfolio have the following collateral
characteristics at June 30, 2011 and December 31,
2010.
The
information presented in the table above includes senior,
non-retained, non-Agency RMBS consolidated pursuant to the adoption
of ASC 810 on January 1, 2010 by the Company.
The
table below presents origination year for the Company’s
portfolio of non-Agency RMBS at June 30, 2011 and December 31,
2010.
During
the quarter ended June 30, 2011, the Company sold RMBS with a
carrying value of $16.4 million for realized losses of $380
thousand. During the quarter ended June 30, 2010, the
Company had no sales of RMBS.
The
Company sold all of the AAA-rated bonds created in its
re-securitizations prior to the quarter ended June 30, 2011, and
therefore did not record non-recourse financing with third party
investors related to re-securitizations executed in prior
periods. During the six months ended June 30, 2011, the
Company financed through these transactions $306.6 million of
AAA-rated fixed rate bonds by selling the bonds to third party
investors for net proceeds of $311.0 million.
On
April 30, 2010, the Company transferred $566.6 million in principal
value of its RMBS to the CSMC 2010-11R Trust in a re-securitization
transaction. This transaction was recorded as a
“secured borrowing” pursuant to ASC Topics 860 and
810. In this transaction, the Company financed $138.8
million of AAA-rated fixed rate bonds by selling the bonds to third
party investors for net proceeds of $137.4 million. The
Company has retained $427.7 million in subordinated bonds and the
owner trust certificate. The subordinated bonds and the
owner trust certificate provide credit support to the AAA-rated
bonds. The bonds issued by the trust are collateralized
by RMBS that were transferred to the CSMC 2010-11R
Trust.
On
May 27, 2010, the Company transferred $1.2 billion in principal
value of its RMBS to the CSMC 2010-12R Trust in a re-securitization
transaction. This transaction was recorded as a
“secured borrowing” pursuant to ASC Topics 860 and
810. In this transaction, the Company financed $294.0
million of AAA-rated fixed rate bonds by selling the bonds to third
party investors for net proceeds of $294.3 million. The
Company has retained $136.3 million of AAA-rated bonds, $788.2
million in subordinated bonds and the owner trust
certificate. The subordinated bonds and the owner trust
certificate provide credit support to the AAA-rated
bonds. The bonds issued by the trust are collateralized
by RMBS that were transferred to the CSMC 2010-12R
Trust.
In
addition, during the quarter ended June 30, 2010, the Company
financed through these transactions $195.0 million of AAA-rated
fixed rate bonds with third party investors for net proceeds of
$197.4 million. In total, the Company financed through these
transactions, including the newly re-securitized assets, $627.9
million of AAA-rated fixed rate bonds for net proceeds of $629.2
million during the quarter ended June 30, 2010.
|
Securitized Loans Held For Investment - Narrative (Detail)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Securitized Loans Held For Investment By Consolidated Variable Interest Entities [Line Items] | ||
2008 | 5.90% | 3.30% |
2007 | 40.80% | 56.10% |
The Company's allowance for loan losses presented as basis points of the principal balance of the Company's securitized mortgage loan portfolio | 244 | 185 |
Hybrid Adjustable Rate Residential Mortgage [Member]
|
||
Securitized Loans Held For Investment By Consolidated Variable Interest Entities [Line Items] | ||
As of the current reporting date, the percentage of the Company's securitized loans in adjustable rate and fixed rate mortgage loans | 55.00% | |
The minimum rate in the range of periodic caps on all hybrid ARMs in the securitized loan portfolio range as of the reporting date | 0.00% | 0.00% |
The maximum rate in the range of periodic caps on all hybrid ARMs in the securitized loan portfolio range as of the reporting date | 3.00% | 3.00% |
Fixed Rate Residential Mortgage [Member]
|
||
Securitized Loans Held For Investment By Consolidated Variable Interest Entities [Line Items] | ||
As of the current reporting date, the percentage of the Company's securitized loans in adjustable rate and fixed rate mortgage loans | 45.00% | |
Residential Mortgages [Member]
|
||
Securitized Loans Held For Investment By Consolidated Variable Interest Entities [Line Items] | ||
2008 | 55.00% | |
2007 | 43.00% | |
Prior to 2007 | 2.00% |
Repurchase Agreements (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Schedule of Repurchase Agreements [Table Text Block] | At
June 30, 2011 and December 31, 2010, the repurchase agreements
collateralized by RMBS had the following remaining
maturities.
|
Summary of the Significant Accounting Policies - Narrative (Detail) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2011
|
Jun. 30, 2011
|
|
Report Recassifications [Line Items] | ||
Description of report reclassification | Interest expense on swaps has been reclassified from Interest expense to Other gains (losses) as Realized gains (losses) on interest rate swaps | |
Other Gain Loss [Member]
|
||
Report Recassifications [Line Items] | ||
Effect of a report reclassification, decrease | $ (699) | $ (699) |
Interest Expense [Member]
|
||
Report Recassifications [Line Items] | ||
Effect of a report reclassification, decrease | $ (699) | $ (699) |
Residential Mortgage-Backed Securities - Resecuritizations - Narrative (Detail) (USD $)
|
3 Months Ended | 6 Months Ended | 3 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
Residential Mortgage Backed Securities [Member]
|
Apr. 30, 2010
Residential Mortgage Backed Securities [Member]
CSMC 2010-11R Trust [Member]
|
May 27, 2010
Residential Mortgage Backed Securities [Member]
CSMC 2010-12R Trust [Member]
|
Jun. 30, 2010
AAA Credit Rating [Member]
Fixed Rate Bonds [Member]
|
Jun. 30, 2011
AAA Credit Rating [Member]
Fixed Rate Bonds [Member]
|
Apr. 30, 2010
AAA Credit Rating [Member]
Fixed Rate Bonds [Member]
CSMC 2010-11R Trust [Member]
Resecuritized Residential Mortgage-backed Securities [Member]
|
May 27, 2010
AAA Credit Rating [Member]
Fixed Rate Bonds [Member]
CSMC 2010-12R Trust [Member]
Resecuritized Residential Mortgage-backed Securities [Member]
|
May 27, 2010
AAA Credit Rating [Member]
Bonds [Member]
Resecuritized Residential Mortgage-backed Securities [Member]
|
May 27, 2010
Subordinated Bonds and Owner Trust Certificate [Member]
Resecuritized Residential Mortgage-backed Securities [Member]
|
Apr. 30, 2010
Subordinated Bonds and Owner Trust Certificate [Member]
Resecuritized Residential Mortgage-backed Securities [Member]
|
|
Investment Holdings [Line Items] | |||||||||||||
Carrying value of RMBS sold | $ 16,400,000 | ||||||||||||
Realized gains (losses) from sale of RMBS | (380,000) | 2,364,000 | 342,000 | (380,000) | |||||||||
AAA-rated fixed rate bonds financed with third party investors | 195,000,000 | 138,800,000 | 294,000,000 | ||||||||||
Net proceeds from financing of AAA-rated fixed bonds | 311,012,000 | 1,127,872,000 | 197,400,000 | 137,400,000 | 294,300,000 | ||||||||
AAA-rated fixed rate bonds financed with third party investors, total | 627,900,000 | 306,600,000 | |||||||||||
Net proceeds from financing of AAA-rated fixed rate bonds, total | 629,200,000 | 311,000,000 | |||||||||||
RMBS principal value transferred | 566,600,000 | 1,200,000,000 | |||||||||||
Securitized debt retained | $ 136,300,000 | $ 788,200,000 | $ 427,700,000 |
Consolidation (Tables)
|
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Jun. 30, 2011
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Schedule of Consolidated Variable Interest Entities Effects on Financial Condition [Table Text Block] | The
table below presents the assets and liabilities of consolidated
entities as of January 1, 2010. The cumulative effect
adjustment reflects the reversal of realized gains of $98.1 million
previously recorded on the sales of these newly consolidated trusts
net of the additional accretion of discounts due to consolidating
the trusts.
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Schedule of Consolidated Securitization Entities on Financial Condition [Table Text Block] | The
table below reflects the assets and liabilities recorded in the
consolidated statements of financial condition related to the
consolidated securitization entities as of June 30, 2011 and
December 31, 2010.
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Schedule of Consolidated Variable Interest Entities Effects on Operating Results [Table Text Block] |
The consolidation of these securitization entities increases both
the income and expense recorded in the consolidated statements of
operations for the Company as detailed in the table
below.
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Schedule Of Consolidated Variable Interest Entities Effects On Cash Flows [Table Text Block] |
The effect of the consolidation of these securitization entities on
the consolidated statements of cash flows for the Company is
presented in the table below for the periods
presented.
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Schedule of Non Consolidated Variable Interest Entities Effects on Financial Condition | The
table below represents the carrying amounts and classification of
assets recorded on the Company’s consolidated financial
statements related to its variable interests in non-consolidated
VIEs, as well as its maximum exposure to loss as a result of its
involvement with these VIEs.
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Long Term Incentive Plan
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
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Long Term Incentive Plan |
11. Long Term Incentive Plan
The
Company has adopted a long term stock incentive plan to provide
incentives to its independent directors and employees of FIDAC and
its affiliates, to stimulate their efforts towards the
Company’s continued success, long-term growth and
profitability and to attract, reward and retain personnel and other
service providers. The incentive plan authorizes the
Compensation Committee of the board of directors to grant awards,
including incentive stock options, non-qualified stock options,
restricted shares and other types of incentive
awards. The specific award granted to an individual is
based upon, in part, the individual’s position within FIDAC,
the individual’s position within the Company, his or her
contribution to the Company’s performance, market practices,
as well as the recommendations of FIDAC. The incentive
plan authorizes the granting of options or other awards for an
aggregate of the greater of 8.0% of the outstanding shares of the
Company’s common stock up to a ceiling of 40,000,000
shares.
On
January 2, 2008, the Company granted restricted stock awards in the
amount of 1,301,000 shares to FIDAC’s employees and the
Company’s independent directors. The awards to the
independent directors vested on the date of grant and the awards to
FIDAC’s employees vest quarterly over a period of 10
years. Of these shares, as of June 30, 2011, 479,400
shares have vested and 44,525 shares were forfeited or
cancelled.
As
of June 30, 2011 there was $14.6 million of total unrecognized
compensation costs related to non-vested share-based compensation
arrangements granted under the long term incentive plan, based on
the closing price of the shares on the grant date. That cost is
expected to be recognized over a weighted-average period of 6.5
years. The total fair value of shares vested, less those forfeited,
during the quarter ended June 30, 2011 was $121 thousand, based on
the closing price of the stock on the vesting date.
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Common Stock - Narrative (Detail) (USD $)
In Thousands, except Share data |
0 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 28, 2010
|
Apr. 07, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
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Common Stock [Line Items] | ||||||
Proceeds from direct purchase and dividend reinvestment | $ 542 | $ 123 | ||||
Dividends to common shareholders declared | (277,101) | (244,213) | ||||
Declared dividends per common share | $ 0.27 | $ 0.34 | ||||
Net proceeds from common stock offerings | (8) | 767,712 | ||||
Common Stock Par Value
|
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Common Stock [Line Items] | ||||||
Description of common stock equity distribution agreement | On January 28, 2011 the Company entered into an equity distribution agreement with FIDAC and UBS Securities LLC ("UBS") | |||||
Date of equity distribution agreement with FIDAC and UBS | 2011-01-28 | |||||
Number of common shares authorized for issuance under the equity distribution agreement with FIDAC and UBS | 125,000,000 | 125,000,000 | ||||
Number of common shares sold during the period under the equity distribution agreement with FIDAC and UBS | 0 | |||||
Proceeds from direct purchase and dividend reinvestment | 542 | 123 | ||||
Shares issued during the period under the dividend reinvestment and share purchase plan | 134,538 | 32,138 | ||||
Dividends to common shareholders declared | (133,400) | (130,400) | (277,101) | (244,213) | ||
Declared dividends per common share | $ 0.13 | $ 0.17 | $ 0.27 | $ 0.34 | ||
Shares sold in a public offering | 100,000,000 | 85,000,000 | ||||
Price per share of new shares sold | $ 3.61 | $ 3.61 | ||||
Overallotment shares sold in a public offering | 15,000,000 | 12,750,000 | ||||
Net proceeds from common stock offerings | $ 415,000 | $ 352,700 |
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