Discussion of Differences between GAAP and Economic Book Value

Transcription

1 Discussion of Differences between GAAP and Economic Book Value CONFERENCE NAME GOES HERE Information is unaudited, estimated and subject to change. 1

2 Disclaimer This material is not intended to be exhaustive, is preliminary in nature and may be subject to change. In addition, much of the information contained herein is based on various assumptions (some of which are beyond the control of Chimera Investment Corporation, the Company ) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as believe, expect, anticipate, estimate, plan, continue, intend, should, may, would, projected, will or similar expressions, or variations on those terms or the negative of those terms. The Company s forward-looking statements are subject to numerous risks, uncertainties and other factors. Furthermore, none of the financial information contained in this material has been audited or approved by the Company s independent registered public accounting firm. 2

3 RMBS Securitizations ($ in thousands) At Issuance / Acquisition As of September 30, 2014 Vintage Deal Type Total Original Face Total of Total of Total Face Face of Face of 2014 RMBS Securitization CSMC R $336,408 - $336,408 $319,618 - $319, RMBS Securitization CSMC R 1,730, ,630 1,038, ,364 88, , RMBS Securitization CSMC R 566, , , , , , RMBS Securitization CSMC R 1,730, , , , , , RMBS Securitization JPMRR ,522, , , , , , RMBS Securitization JMAC R2 281, ,500 89, ,681 62,090 64,591 $6,168,595 $2,988,930 $3,179,665 $3,151,093 $768,659 $2,382,433 % of origination remaining 51% 26% 75% Note: These deals drive the majority of the difference between GAAP and Economic Book Value. The estimated economic book value should not be viewed in isolation and is not a substitute for book value computed in accordance with GAAP. Please read Chimera s annual report on Form10-K or quarterly reports on Form 10-Q for further discussion. 3

4 The Difference Between GAAP and Economic Book Value Re-Securitization Process Reporting 1 CIM buys Non-Agency mortgage bond from dealer $100mm Non-Agency Mortgage Bond GAAP Reporting Economic Reporting 2 CIM deposits the bonds into a trust. The trust issues bonds backed by the cashflow of the underlying bond Deposit $100mm Trust (Non-Agency RMBS Collateral) Assets $100mm Trust $30mm Subordinate B Note 3 4 The $70mm Senior A note receives principal and interest from the $100mm bond until the $70mm is paid off The $30mm Subordinate B note receives interest, all losses from the $100mm bond and starts to receive principal only after the Senior A note is paid off in full CIM sells the Senior A note. The sale is treated as a secured financing and the underlying bond remains on CIM s balance sheet for GAAP reporting Principal& $70mm Senior A Note No Economic Losses & $30mm Subordinate B Note CIM Economic Liabilities $70mm Senior A Note Equity $30mm $30mm - 4

5 Potential Scenarios Causing Differences Between GAAP and Economic Book Value Changes in Consolidated Trust Value and Economic Asset Value will cause differences between GAAP and Economic Book Value Consolidated Trust Value Economic Asset Value Accounting Elimination GAAP Reporting (a) (b) (c) (a) + (b) + (c) Neutral: GAAP = Economic Assets (1) (30) 100 At Inception GAAP and Economic Book Value are generally equal Equity Future Periods Scenario 1: GAAP > Economic Assets (1) (30) 110 Consolidated Trust Asset Value Increases, Economic Asset Value is Unchanged Equity Scenario 2: GAAP > Economic Assets (1) (20) 100 Economic Asset Value Decreases, Consolidated Trust Value is Unchanged Equity (2) Scenario 3: GAAP < Economic Assets (1) (30) 90 Consolidated Trust Asset Value Decreases, Economic Asset Value is Unchanged Equity (2) (10) Scenario 4: GAAP < Economic Assets (1) (40) 100 Economic Asset Value Increases, Consolidated Trust Value is Unchanged Equity - 40 (10) 30 (1) Fair Value. (2) Amortized Cost. 5