Chimera Investment (CIM) 3 Aug 232023 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Chimera Investment Second Quarter 2023 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for 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 earnings for conference and second in operator XXXX quarter call. you, you, participating everyone, Chimera's Thank

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

filings. are and to are Risk our based During forward-looking current in expectations statements will the we that on quarterly uncertainties, future predictions, are most which assumptions which outlined subject about statements this in other and projections recent Factors These be events. SEC section and annual or risks call, statements, making are

and differ read statements. forward-looking earnings may events We encourage our statement our forward-looking Actual from these filings. to results materially in and addition you the release, annual quarterly to in disclaimer

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

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

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

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

Joining Co-Chief Chief Co-Chief Markets. Officer; Thakkar, the Dan Investment Viswanathan, President our Head me our Vic and Officer; call are Choudhary our Falvo, and Financial on Capital Officer Subra our Investment Yarlagadda, of

my Subra the the will for financial review call results After questions. remarks, open and then we'll

during billion. quarter five securitization, to second stock active liability nearly the the securitizations during completed be management. second and to We continue quarter, We repurchase totaling $X.X

securities. Investor approximately aggregate interest million. with private the the level. We institutional a investors. securitization structure sponsored XXXX-IX, only of and approximately describe our retained an rated totaling a In of at sold in quarterly $XXX & subordinate capital balance April, non-QM interest me million $XX to certain was securitization we placement securities principle in XX% high Let activity Approximately of CIM Loans,

any to loan to average to We securitized retain cost option X.X%. at this time April of debt is XXXX. beginning an call Our of in mortgage securitization

loans we institutional million. structure securitization sold In securities approximately XX% XXXX-RX, balance mortgage subordinate approximately investors. totaling $XXX a principal million to reperforming certain residential private aggregate $XX interest capital and retained an only securities. Chimera May, rated in We interest placement the CIM with sponsored of and a of seasoned, of

Our loans an securitization average at of to cost of this X.X% in is XXXX. we debt beginning April time securitized the and of mortgage any retained call option

June, in capital we investors. and million. securities. totaling securitization In this balance with $XX a at & aggregate sold interest principal year, of interest certain $XXX sponsored Investor in of structure approximately placement rated approximately was private to second an the million securities of XX% XXXX-IX, Loans CIM retained institutional our non-QM only Approximately We

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

returns securitizations. expect securities We double-digit the on retained for these three

re-securitization, And terminated regarding CMLTI CIM existing two trusts, and we now XXXX-X XXXX-E.

us of three, We to: XXXX-RX and allowed debt the a from rate from fixed $XXX million terminated Trust in to rate recapture on long-term Trust $XX into these to of approximately one, loans cash two senior the added Chimera avoid issued from deals, addition funding two, non-recourse one trusts. up, repo short-term financing; trust; increase approximately convert terminated the In CIM These XXXX-NRX. CIM our facility. warehouse and these loans then million step re-securitizations

half year, of reduced a reduced our warehouse as the our loan financing, quarter, the million. recourse million. financing first total, And this primarily than by more securitization we by activity we in through of recourse Primarily our result approximately facilities $XXX $XXX

fixed We billion, a swaption, added prepared by NIM $XXX hedge interest rate mid-XXXX. and swaptions total through X.X give remain bringing elevated average position X.XX%, to a environment. for rate As optionality longer for our short-term of continue swaption one our at pay rates million this us to increase into we to additional rates an XXXX These quarter, higher, with one an

In middle of addition, reauthorized our and June. increased $XXX the Board in our plan it million to stock buyback

were X.X $X.XX. approximately for than accretive million able shares average price our repurchase at million an share to repurchase The we Thereafter, shareholders. to more of was $XX

common economic the per or for XX book half decreased in plus value economic of Our first return point X.X% XXXX. paid share quarter-over-quarter. The change on an the value and $X.XX dividends a in basis return by net X.X% for total book total resulted our quarter, shares

Looking staff end. cycle Fed no the we hike strong. The believe it ahead, recession is a own raise longer Fed job XXXX economy a year, may nearing more Fed's while down this engineer likely, while is the believe coming the and predicts market well landing. and time an Inflation in is we rate the will rates slowly, one soft remains

-- credit, buoyed during housing also the in affordability are of the well We quarter by strongly performed which by despite strength of by residential spite residential as issues. market as

us? our mean we've that discussed portfolio As does the continues for in well. perform to past, What

positive refinance primarily our Our rates and positioned financings, not our which the earnings. will are We would benefit. rate to moderate portfolio of quality Once expensive that EAD our is challenges more of stability credit begin this to financing, will and expect our costs of us related some moderation portfolio. be allow to their our to decline,

have extent can XXXX. into the stay for that billion X.X support hand, interest which to elevated to exercise we margins longer, other swaptions, the in our On we rates

regulations and to opportunities capital arise of investment with we half think continue bank investment see interesting proposed over the second We the will that additional opportunities XXXX.

our price continued repurchases. along to opportunities, to We stock with will respect stock continue to evaluate with our book value relative those

from about number toolkit shareholder stock drive our to making tools investments in accretive optimistic have to our repurchasing our to a We reducing future. financing value. remain We of costs our

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

the points per per quarterly was review dividend share and book economic the half GAAP value basis $X.XX book I was X.X%. and second the was of value value our quarter for second on year, share. in on you, change at XXXX. second economic highlights the return Chimera's common first Phil. for of end And return our XX Thank financial quarter quarter based the will book GAAP

income quarter On per common GAAP income in the net second of share. second $XX net million share. or million earnings $X.XX the basis, approximately an $X.XX for diluted quarter was for distribution available per or $XX

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

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

X.X%. was of cost X.X% net spread Our average interest was our and funds

was recourse for at leverage quarter ended second the Total X.X:X, leverage X.X:X. the quarter while

and or assets For $X company agreements. the our repo $X.X outstanding features end. our unencumbered We total and quarter cash outstanding exposure repo mark-to-market liabilities. had liquidity, floating at financing rate on billion had $XXX had billion We either non limited million on of

X.XX% We liabilities. beginning second swap we of as hedge had XXXX our one in $X liabilities. rate position a And as at quarter rate a pay a of at rate $X.X billion of position for an X.XX% the for billion average year swaptions had pay-fixed interest for fixed to hedge

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

open now the remarks. call for That concludes We our questions. would

comes George Your session. first We of Instructions] question KBW. will Boss conduct now [Operator from a question-and-answer

Your line is open.

guys. Actually, of is had Bose. Hey, This I couple questions. a

talk down quarter. the about forward? come did Can it of expenses, just expenses sort the this you going outlook for on First,

expenses we Obviously, remain to variable as expenses expenses some some if as these the would the happens, of increase expect pretty to down. variable benign pretty otherwise, the fees vary expected G&A But number have. servicing on, expenses, We of of go and paydown will or But we consistent be such constant. our as expenses depending transaction we to loans. continue

of currently? returns, How you're you economic Okay. does on ROE, that I that it Thanks. securitizing was getting the ROEs showed Great. that that the then, think in stuff And just loans XX.X%. to buying compare and you're so incremental current terms

Okay.

So sure. to make I want just

what offset now, it we an point interest basis have. consistent we income, that'll, really consistent our we income right return being that. so project quarters. economic across expense, the be So XX.X%, But to to If of top is. projecting interest where stay XX the in with is income now some additional or scenarios a Expenses, increase consistent on expect interest depends our based what we net line expect somewhat we our rate our right to have focus what on

or of double-digit so more that or ROE? sort double-digit number here as scale And rate of equity, that the does and to how come a kind like, run kind guys expenses, percentage of I for like reach mean, get from net do to get of you it when ROE on a net expenses run rate you take of to scenarios, I what sort either to basis, a require

and increase both. come we look as we That's is rates we'll need we'll correct. to to some to accretive This mean, size -- well, as need have I Phil. for investments, our down

Thank you. Okay. Great.

of comes question from Suisse. next Your Harter Doug Credit

Your open. line is

Thanks. on are you the of talk the where and kind Can in about earnings light and dividend of the expectations? kind decision of

up Sorry, you little bit. broke a

the asking dividend? I Hello? about were think you

Yes.

Sorry.

cut there second. think out I for a

back can you around, So of the about your current to board's sorry, in around dividend? dividend the expectations talk and getting light the where just just repeat, kind are earnings decision covering new of

Yeah.

is. earnings. look dividend exact the refinance It's will what we'll We moderating, at board at what said believe the is financings in a mentioned guide. our look one looking a future, in at. and on EAD into which we the of forward able So capacity useful, capacity as as to that be some paying of past, our we an of we as rates of looks expensive more isn't the our kind metrics we've is It terms us are help the do

token. opportunities feels we're by And what Right at the so board think paying comfortable that there the same we grow into to dividend. continue that now, to portfolios generating, are

you. Thank

Your [Operator with comes Instructions] Cranston Trevor question next JMP. from

Your is open. line

a the you emerging little morning. the requirement second a that Good of you Can emerge out result Thanks. elaborate timing could opportunities the coming type the of Thanks. of you year? as could what there opportunities the capital Okay. of the changes think on think be half banks and of bit over

Sure. Dan, that. address over to We'll can who turn this

Yeah.

So, will so as you against likelihood banks have there pools. capital more that Trevor, mortgage strong mortgage a residential earn said, to is

residential in securitization. result originators private and more mortgage push non-backward should to this origination more So label

will those future. in We see opportunities the

are we underwater one this low in opportunity discounted kind that seeing even going being banking we of space. the thing will jumbo, given is prime shown that As you primarily are said, without the mortgages of the paper. the that on point, in inventories consolidation large say At I LTV

it. Thank Got that. you. Appreciate Okay.

there any turn questions. the further I call time, for no over remarks. back are this like closing to At would management to

you. Thank is we our earnings November. quarter to third Phil second Thank Investment Corporation's earnings and This Chimera participating discussing call in forward Kardis. call Hi. quarter you for look in

for That you call. the call. rest of a Have Thank attending Chimera day. conclude everyone wonderful earnings your today's does