Chimera Investment (CIM) 4 May 232023 Q1 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Chimera Investment Corporation First Quarter 2023 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Victor Falvo, Head of Capital Markets. Sir, the floor is yours.

Thank you, operator. for Chimera's everyone, earnings quarter you, call. conference thank participating first in XXXX And

I'd review like statements. begin, we Before to the harbor safe

During and to statements Risk these be predictions, section will current in may expectations statements quarterly this statements. most in the statements, annual SEC results that to on from recent events uncertainties, call, earnings release, are are which assumptions you which statement outlined subject are differ Actual making based projections and future Factors about forward-looking encourage other our and events. in materially forward-looking addition filings. disclaimer forward-looking risks annual our These or filings. We and we the to our read and quarterly in are

today, non-GAAP the During to presentation we Please refer and discuss SEC to for reconciliation may measures. measures. also our GAAP financial filings investor comparable the most call

may date revise this the earnings specifically that the of undertake or obligation not call content disclaim is information. of as and any contain to Additionally, of We time-sensitive do update only information this conference call. this accurate

now over turn the Chief our Officer, Kardis. will to Phil I Executive conference

Corporation's Thank welcome and Good Chimera quarter to Vic. earnings XXXX call. Investment morning, first

review Head and our the of Choudhary on and our Capital financial Viswanathan, call call Co-Chief After and Joining the me for Investment Subra results, open Falvo, the Officer; Yarlagadda, Markets. Co-Chief remarks, our are Dan President Investment Officer; our then Officer; will questions. Subra Thakkar, Chief Vic we’ll my Financial

quite ride. took on quarter us a first The

million like loans, further securitizations, by the challenging a total billion generated to Island. lot. at reduced loan to roller securitizations since of reducing our close coaster, accomplished We $XXX recourse $X.XX I committed today, Some and reduced leverage $XXX a leverage say re-performing Despite diversified we economic quite would was all four and later we return. the Coney warehouse would a ride our expect by recourse three very including mortgage in completed say environment. X% more a we it the completed slingshot million, purchase And the a including volatility, ended, have quarter securitization exposure to a zero, like

The the the increasing Xrd, inflation were the happened opposite core direction data. expecting on rate Let's do jobs during hikes to a with January. securitization data. quarter. both begin recession pace continued quick growth market of started X, based The on economic as showing to with review February we by last to of January on expected what in increased market and the the and value the We book moderate, Fed responded by news rates direction quarter The whipped and increase midyear, when upward in a slowing open employment XX up. December report our headline February coupled as the basis year spending Then points. job with revisions consumer same extraordinary in saw

the at than In Fed and raising response before rate Xth to that Powell’s would Congress the hawkish, March the previously Chairman be was quite and cycle revert larger peak rate statement this the thought. on higher would to data, possibility hikes,

his expected after market throughout that the rates Funds the X.XX% to futures year. and the Soon contract yield July increased testimony, remain Fed

in off shifted failed need by XX a was day by future Suisse Credit The Signature by to of was deep it basis assistance. responded next contract X% Market Then, They two government Fed put set the other year-end. over Bank the points. the rallying the The below July, fail expected immediate XXX dipped would in volatility concern next markets was Bank Fed the was And and the days overhanging Funds Funds July over and rate in it the later, clear that banks regional the weekend. rates FDIC, with period the significant expectations Valley would was receivership days market. in the trouble. market. Silicon Fed easing also The into by of or

the the dot funds the of a expected rate new later peak and liquidity March, banks, to Fed majority cuts the providing market remained points continued facilities basis be FDIC for remained data disagree released the high. in and labor The rate to and to rate in officials began calm, the and the hike year. usual so both, business a had projections on With inflation still that strong other of Fed Fed in with responded market The hand, things XX X.XXX%. as priced show the

Yesterday, the Fed at for hint and raised possible, their that that support the next to longer. a do said higher language also is the changed rates meeting projections pause points again by rate but XX inflation not basis a

of The of in the had we The of the rate slingshot rate securitizations early a and volatility derivatives purchase loans in million occurred instruments, heightened to negative changes dated the also on the losses created approximately the unforeseen quarter quarter. execution volatility the for of we impacted and widening longer experienced our some realized The on $XX challenges. the timing impact during spread committed resulting extreme hedge period. that

in quarter assets or increased of volatility quarter, by decreased book in loan strength net book in about our share the $X.XX the the and resiliency the X% demonstrates $X.XX the X%. believe resulted dividend value only We result change return value net this The of first portfolio. is The during plus paid of that total for the this per value while our period. our a economic

issued In securitizations, existing rights million activities and exercised its CIM Now, let and million trust CIM XXXX-RX call through for me $XXX or quarter. terminated business you four Chimera trust take and rights $XXX issued then the its call January, XXXX-NRX. our

receiving shift recourse into $XX This re-securitization $XXX million in while to enabled cash. about us from borrowings securitized debt, million

should future. the rates debt of was within to the debt, interest gives cost in Both ability X.XX%. are securitized callable the which two average re-securitization the securitizations Our on years, improve us refinance

our We financing engaged reasons, in for to Suisse. Credit several these exposure re-lever including transactions

began business. bonds new included the of the the which equity $XXX explore time had million deployed. we us to facilities We fully from knew financed cash there were successful Credit is the re-levers. for had efforts with the quarter, lag raise, proceeds previously Suisse of re-lever on and we we reinvest replace funds we and to us CS. any The net recourse financing enabled form with new our were exiting credit effect and the provided CS that they As in opportunities to Like are a earnings until other the

the re-performing non-qualified loans, during XX% approximately were $X.XX purpose business loans, investor commitments, and seasoned XX% approximately to As committed the the loans. we've discussed billion were mortgage prior in were earnings purchase quarter, call, mortgages. our Of of remainder total

with With were the loans, through which the to the currently the and consistent exception long portfolio. loans term exist characteristics were the intention all purpose The of purchased finance over in with RPLs loan our BPLs characteristics securitization. the business seasoned of

an represented senior We in investors. interest we the million. rated having in with issued were In aggregate approximately securities CIM interest loans, of Securities securitization approximately aggregate investment. private with balance a million capital for retained in a approximately $XXX placements residential of million balance XX% certain of CIM of a March, $XX subordinate sponsored institutional sold structure. re-performing XXXX-RX only securities $XXX XXXX-RX, principal of seasoned These to mortgage an balance

retained any mortgage cost option an Our of X.XX%. is debt at loans the beginning XXXX. in securitization this average We call to securitized time on March

continued In principal sponsored rated $XXX trust a of we of million. mortgage post loans, CIM securitization a activities We non-QM our quarter. balance XXXX-IX, April investor securitization having

a terminated debt $XX two XXXX-NRX. rights million call exercise and us about issued million from shift existing cash. and re-securitization approximately CIM also securitized million $XXX million $XX then receiving trust in $XXX a We XXXX-RX securitization to while trust This borrowing and enabled trusts, recourse to CIM

we The RPLs second into to XXXX-RX, Finally, had currently quarter. later the securitization be mortgage residential to our we transaction, we of mortgage loans that upon to will zero. And seasoned loans trust warehouse. reduced purchase a January, non-QM re-performing the expect as expect loans included well warehouse close transaction priced investor loans. in on CIM a rated We as committed will securitization we remaining And close during the exposure RPL closing today.

We remain of execute franchise securitizations, our to strength turbulence Chimera's market quarter, future. ability continued this overall our the loan the highlights and Despite we value. purchases believe on optimistic about

Our to seasoned from a loan perspective. perform continues well portfolio re-performing credit

the Our down is recent financing, quality EAD of income challenges not portfolio, are the credit which our generated and past of not the primarily related our to portfolio, cost the marginally by year. over

positioned well once our begin is moderate their to portfolio that note benefit. We rates and decline,

year. available, will these over Currently, time. expect have decrease callable securitizations increasing steadily XX that are on repo resulting NIM The financing our when a timing in fall the securitizations We we calling depends and impact this rates of balance income factors, equity of number sheet to extracted, senior be new opportunities our of securitized the the on amount a investment statements. new including overall on and debt, cost

this equity to redeployment. differentiator view We ability capital extract key be investments as source for for amongst a can peers its continue significant and Chimera a from to of our

moderate. strong, positioned the well Company assets and We our begin are rates is very believe when to

see accretive as jumbo prime We and RPLs, loans, continue interesting well RMBS. to in agency non-QM, opportunities as BPLs

expect years to few investments focus we diversify on over has time. While the RPLs, continue for our to been past our

the investment look optimistic We future. road remain new and but is ahead our about understand not attractive, we smooth, opportunities

clear vision. a great and have We assets a team, outstanding

more of I our to would detailed results. a now like Subra to financial turn to give overview

review financial will for highlights of first I Thank XXXX. you, the Chimera's Phil. quarter

and $X.XX value $XX the return distribution X% common book of an million at income for quarterly value $XX book income per for earnings and quarter book was $X.XX economic common or net approximately share; of the $X.XX change value GAAP quarter net diluted quarter per the share. in million on based GAAP quarter first available per on share first was GAAP our end share. dividends on basis, was in per or first the first

interest quarter net first the Our $XX income economic for million. was

assets X.X%. For on average yield quarter, the the interest earning was first

to spread ended average X. quarter was the X.X% to X.X interest and recourse Total first of for while funds our net at quarter was leverage was Our X.X cost X.X%. the X leverage

total For on our had market billion unencumbered on had either exposure repo billion of had floating non assets $X.X financing outstanding We $X.X agreement. We quarter $XXX and mark repo at Company features We hedge liquidity, a outstanding had to million swap or rate on position had the liabilities. and our end. an for limited cash pay March X.XX% $X X.XX% as at a for rate billion liabilities, as of we a liabilities. XXXX year billion of $X swaptions beginning fixed one position fixed rate for interest average hedge to in pay rate our at

million for $XXX future outstanding had securitizations. short to futures also contracts Company hedge The loans

million, XX.X% And lastly, X.X%. on was quarter modestly average servicing For lower economic and quarter, year. in expenses, equity the a GAAP net same income $XX fees the our our expenses the excluding prior return quarter from equity interest and return transaction first were on was XXXX

concludes That remarks. our

We open will for call now the questions.

Operator, we're questions. our ready for

comes that. apologize Suisse. Instructions] Credit of Harter Thank go you. I for first [Operator from the question Please Doug ahead. And

could you hoping given all of talk current earnings I'm is kind of of kind about thinking freed capital how outlook Thanks. kind dividend about you're redeployed? for the earnings up of power once and your the

recognize strong Hi as is Phil. Doug, positively our But, We we rates that EAD. when portfolio is exceeds this we said to dividend positioned our and decline. earlier, it's begin our current believe

in that great We future. creating sector, the market. subsequent banking uncertainty also we a is possibly a the that dislocations the note the banking to volatility deal investments around see other and of rate we'll But come accretive believe crisis hand, on the

going And so, eyes remain keeping to positive, these we're on developments. be while of we kind our

as And, or kind of of of given of how far the guess, thinking when kind investment kind preserving rates to of you you kind uncertain kind into look earnings for versus how I about, power some [Technical the decline, are opportunities? Difficulty] on it’s long that of capital that how maybe future

think about I said we're actually thinking exactly Yes, you how it.

-- with portfolio, staying still top our strong, As I revenues it's line strong. a still stay mentioned,

a hurting. is, and view. Our financing market and juggling our are, how be costs come long where to obviously, investment be at those we'll are, things we'll that And actual opportunities what's to constantly the what looking lasts,

fair said, of amount right there's now, you uncertainty. As a

come balance right the think And all so, looking in be that we best interest we'll of and will the shareholders. to be at which

go Please Our next JMP question from is Securities. Trevor Cranston of ahead.

like loan Thanks. you the portfolios that, you bit the you talk feel opportunities to significant little much opportunities bank potentially have whole to capital might you're how willing available a a advantage to of opportunity And out take the increase you coming potential about be comes near Can in the if on free term, market? of if side? leverage seeing or any

securitizations XX could sources facts and mentioned, we other that as just look circumstances, with -- We and start of we the are of are opportunities. some callable, at look that capital. at them have we'll I'll leverage look, and and

to Investment I'm over that think things Thakkar, this As Dan and Officer. to we the we're to turn of kinds going seeing, our Co-Chief

If have RMBS taken of agency here technicals that’s regarding we market, FDIC is spreads are liquidations, the we catalyst can the agency stance though the wide, imminent an your RMBS. see in that stay think question spreads think given this point, in pretty and At this is, tightening. we majority the for don't negative the even

So, deploy extent in as that answer said, your question? the trying as right become we're as to Phil non-QM that is now, available what the capital RPL. to well do Does

seen market, just impact And the last any months? warehouse Thanks. issues that over some Yes. you That’s color warehouse in banking the the terms you've can or light and couple changes volatility of, in of guys general side, give we've if the market helpful. of to then on seen financing

not. have We

We have as -- not of any seen impact currently.

is Bose go Our George KBW. of next ahead. question Please from

for do one have an update -- Just date? book quarter What's to you me. value per

think it's relatively We unchanged.

is from of Hagen question next BTIG. Eric Our

You've on got for Ethan Eric.

I couple late. a minutes joined Just for me, couple a and

that apologies there your estimate would But does basis? these. you So a yield compare answered for portfolio? And the on market already yield if loan cost to is the you how

cost in obviously That's have yield X.X%. of for we is yield our we is the loans. basis Well, on have then that portfolio have the we overall sorry, is And cost basis. the the this -- gross. it a most is on -- The

market asset yield, mean, market I the Choudhary really trading recently. it's It about just depends Dan been on is -- we've loans, investor and the or what can maybe talk RPL yields. the really On class, non-QM which

the the close Yes. unlevered coupon around to the If X%. is around non-QM, the yields in current see question we

the in you expect kind More until debt what could of trust for your you pipeline? Last defaulted liquidity of idea support investors or loans have in is trust me. Should buy deals, a the to resolution? out your one to securitization the loans to need generally, delinquent

Phil. speaking, repren certain time our is buy for and on you the back breaches Okay. Generally need of only This to would securitizations warranties.

becomes loss to mitigation loan the in expect a we delinquent, if servicer engage techniques. then So

the within the have just actually goes And who then over it’s certain For manager, them. provide asset the the to loan of into and our foreclosure that we securitizations, an top to support in sits REO, extent liquidated trust.

questions at There are time. no further this

you is All forward on us right. XXXX this call. Thank this Phil quarter year. joining Kardis. earnings you we for first This And look later to speaking to

you Thank thank you. for conference. This today's participation. your concludes We

lines You great may time disconnect this and have your a at day.