Chimera Investment (CIM) 14 Feb 242023 Q4 Earnings call transcript

Hello, and welcome to the Chimera Investment Corporation's Fourth Quarter and Full Year 2023 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Victor Falvo, Head of Capital Markets and Investor Relations. Please go ahead, Victor.

Thank you, operator, and thank you, everyone, for participating in Chimera's Fourth Quarter and Full Year 2023 Earnings Conference Call.

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

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

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

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

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

to and Quarter Good and welcome XXXX Earnings morning, Corporation's Call. Investment Full Chimera Year Fourth

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

He be some involved all I'm operations business, managing his unique has here and he's our These known, our technology to begin by transition been seamless. been C.Y.'s assistance, from retirement. who fill, confident and recognizing in structuring beginning. will to groups. shoes our C.Y., the our and big information with me securitizations Choudhary as of financings announced are Let Yarlagadda, aspects since affectionally has

journey. begins we're of the are saddened C.Y. nothing but he the as best. for happy his next And we While we departure, stage him by wish his

song, of get from. ended as X.XX%. year, think of back to yield where had last route. XX-year started yield I as started circuitous to volatile, As XXXX, the back back about very had we we But right of XXXX, Nightingale's got from, XX-year a a Treasury And again, X.XX%. we where Maxine ended we took we I'm right we reminded a When

During Treasury yield X.XX%. year, interest drop XXXX. X.X% the times the in XXX a nearly continue as saw reach a as conflict rates basis Ukraine other the several raised Valley we before mortgages at crisis. rate of regional and the Middle peak October and its the saw on Federal XX-year a year points, Geopolitically, for April banks failed of for banking nearly early Bank developed in total in seen path, high in to XX-year not since X year large finishing X%, and sparked we new and Sisyphean war the a X% Reserve Silicon East. The level a reached and full-fledged the

debt we accomplishments significant financing providing savings. facility unchanged our throughout year. of $XXX at better credit in XXXX volatile to We portfolio by evidenced from refinanced well high-cost income the adverse performed than recourse our metrics the reduced million and or during with interest conditions, be total $X continue $XXX new approximately a expected some acquisition. line essentially as originally and at billion, considerable XXXX market believe these by achieved for million, We Despite we our environment

loans and $XXX loans, DSCR XX% remainder million were XX% and loans. of reperforming We business continued securitizing business were $X.X million seasoned of loans investor of We In billion for purpose purchased $XXX DSCR the total, loans. of loans. reperforming our acquiring were XXXX, securitized mortgage loans. and strategy we mortgage of the the the loans,

We billion, called million. enabling $X.X to us X deals recapture existing $XXX deals X and new totaling issued

ATM begun discount, $XX of capital generating approximately committed mid-teen have unlevered purchase raised low purpose And to approximately business levered from a securities, we deploying we returns with which issuance million non-Agency and and at mid-teen returns. the $XXX to purchased high-coupon million loans into

recent all support we continue numbers longer. the what view in Chairman longer, do January of So our employment blowout of higher as see follow the mantra evidenced Powell, and for core We especially CPI of recent of XXXX? Fed to which of higher X.X%, by for by yesterday's statements

after to in assets for hopeful expected is later the election, begin are in by planning opportunity and cuts year, the with in front We cuts likely the more in Fed high-yielding cuts. rate now to XXXX. summer, to the come this for acquire of cuts We scale but we're feel

I begun As adding assets. already have mentioned, we

In and forward purchases entered arrangements to we've had contracts, expect forward our addition, flow and XXXX. loans, we to into acquire expand in

loans now securitization and until and facilities Additionally, the for more on we them year, portfolio. with cuts the expected long-term economics rate hold acquire end by stable provide may better warehouse returns of are our

in from that nuances Finally, our X outstanding call our these that factors past. to of had of on are December present option as securitizations we I most more non-REMIC as The become note a securitization. different that exercising and slightly XXXX, variety timing some of callable callable, our we deals have XX the of in are securitizations XXXX. discussed depends

as economics generally percentage securitizations, exercising of improves. call instance, of REMIC-eligible loans increases a those the For in

not-too-distant the in about optimistic I'm cuts our future, future. rate With

business. and talented clear a team a have assets and We outstanding

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

full fourth financial Chimera's I Thank highlights you, the Phil. and will for year XXXX. quarter review

fourth or the share. net end was GAAP or million the for was $XX $X.XX for income $XX GAAP GAAP $X.XX $X.XX net full per And million at value was per share. year fourth the quarter per share. quarter income book the of

from facilities issuance. was in reduction by sales separate mostly ATM dilution higher quarter X realized small on and asset quarter, The during a driven on loss this value the marks liability

points, economic points quarterly change GAAP the For was was XX year, our in the fourth return $X.XX in basis and negative value on XXXX. net share. share, or XX common for for return earnings book quarter distribution dividend for income $XX the full which available was economic of $XXX $X.XX declared and fourth quarter basis our included on was quarter, income net negative year million fourth the based or per per the On the And for full book or share. value basis, dividends $X.XX million an

and income interest $XXX was fourth net $XX year. for economic Our million million the full the for quarter

the quarter X.X%, recourse was spread leverage X.X%. ended was while For X.X%, the was on assets of our cost leverage average quarter for X:X our X:X. the fourth net the fourth and was interest quarter, interest-earning funds at yield average Total

liquidity, expense a For financing basis million this more will and which the $XXX interest high-cost quarter, points. debt facility, XXX than reduce by we into refinanced new

We $XXX our position liabilities. XXXX The rate of liabilities. These the $X.X of weighted for billion outstanding of rate And floating position quarter repo of X.XX% a X.XX% cash hedge swaps rate pay-fixed exposure swap a in X billion second $X as had company quarter pay-fixed of interest and total unencumbered second in as million $X.X rate the mature our swaptions rate at on for at billion at had assets liabilities. We for had hedge year-end. a floating beginning average a XXXX. strike to year we had

funding. repo or our on our recourse agreements, either representing billion of mark-to-market $X.X have features XX% of total limited outstanding non- We

our For return interest the was income full year, XX.X%. economic equity net on

and on Our expenses, year-over-year excluding a year average million year were return expenses, GAAP was return lastly, XXXX X.X%, for full transaction XXXX, was our of full and fees X.X%. servicing on equity EAD million, average And $XX.X $XX.X XX%. down reduction equity the from

concludes remarks. That our

We the call for will now questions. open

Instructions] Our George Bose from first KBW. coming [Operator is question today from

holdings? change the Was on the there corresponding mark on book the asset made side -- mark value for First on just any and side. the you question of was some the no on comment liability those

portfolio is mark-to-market -- Subra. the experienced No, a Thanks book I were mark-to-market What question. there for gain. This overall, some that actually value where residential the reasons the the items cost experienced of quarter. actually portfolio during down. significant highlighted portfolio the go the But the credit to the was a benefit overall

Okay.

So loss you the and the drivers that that really one, issuance mentioned? were just ATM then the realized

like had book a jumbo swaps it of which loss. liability prime was it, facility, mark had bunch a a realized a there's us. higher a embedded -- is lower but X liability, which our because honestly, higher quite was there's Well, facilities. in One a mark, on value And a it for

securities And we them other the from our previously, had X was facilities. past our financed which then sold unsold repo X securitizations, in prior quarter. out were -- also, this We we had reason

So now became debt. sec they

increase the we in end the value. the it time So and it experienced a which it debt, further period became our from sold reduced the mark, of to book where sec value, sec debt

Okay.

the actually the price ATM helpful. issuance, what of That's in Okay. then And that? was average terms for

Give me X sec.

confirm. just me Let

confirm low exact. a the X, X. It's Low

today question coming next from Securities. JMP Trevor Our is Cranston from

Actually, valuation potentially current goes you back sort a what issuance versus the decision? think question how the issuing Can at talk about on and buying just you this of ATM quarter. process the thought follow-up into on guys about through stock that

Sure.

rates in see we coming a Fed as discount, assets where acquire to at and later kind think mentioned, we were cuts the I higher-coupon opportunities thought associated looking stock than rate of now to we cover we at year and potential basis We that do that. upside more -- as these have on coming begin down. the time assets for is a dividend current the with

So kinds time we a and go thought acquire ahead of these this assets. good to was

how have add assets that capital available potentially terms the in XXXX cash you on And versus more assets, about hand deploying feel using of talk term? to to sort Okay. new near you rate of buy issuance capital continuing of free ahead do you in cuts, by to can much

sure. Yes,

come we new we market use Clearly, of we -- cash that And into some we function kind those of down, amount be liquidity can rates. we of have couple volatility So be a and willing is sources. and hand, to going could at of there that as of the deploying and would be assets. where on see see would to cash look other a

do on of for we factors, depending I those particular, -- example, mentioned, I are also, those high in securitizations debt. As securitizations. non-REMIC variety mentioned, those callable sec have as very a

those, higher of percentage non-REMIC. can performing opportunities And have collapse another call a and they REMIC and loans, and into convert those so and to we there's

on rate a those the blended on so could sec lower. be debt And

be another could that source capital. of So

of So constantly in we that at look we we have potential are we opportunities. capital markets. the sources those addition And use could capital -- several to

Instructions] from [Operator next Our Laws Stephen is James. question coming from Raymond

one or question on last follow-up. the Just ATM

let's returns. the $X.X yield I ] versus in shoot now. the Stock's You mid-teen low what's sensitivity? Like your you Xs. said valuation at think mentioned [ the

guys yield? around the the strict do dividend valuation issuance your ATM? how is Or sensitivity with it So you continued think on about

those. of stock we'd could is is be cover -- think I a combination a dividend the we dilution there yield. And handle much though of even Yes. where in it's think I willing we're mean limit to now, terms I the how

look do we at so those factors. And

So it's of amount to upside want need make a combo. that there, from much dividend We cover we yield, the the how have and dilution. on upside we and need we depends sure to

so look trade-off. make at we'll the X have where it. Obviously, the kind lower In we to that how of is that's calculation. calculation. in And a And different Xs were mid-Xs was we

does XXX of you don't long Great. expectation spread all know basis But or it's or current of end and change as kind it. how mid-teens the if as end follow-up, -- drop or new potential investments? on think the And then short I versus points, outlook about the upside the return these tightening return rates, a your that say, if

So do you want to add?

Yes. Yes.

the not Phil are subs, in we as especially, it, I non-Agency think comments primarily it's financed talk purchasing his about mentioned right now. which -- when about

go So extent funding the are finance down the to boosted to further. would returns be we able the costs them, and

primarily in the ] rates more markets And it's how which comments, priced mentioned of long end. loans accumulate end Phil become and of we To January. hiccup. [ the in that too, got not securitize benefiting function necessarily and Obviously, funding kind them So we of they we the as in deals securitization stable, a in down the his rates, a will like going are that's stable sector saw able the stable yesterday, extent environment, macro curve. and from to a be become long

Right.

the far So go? new to potential declining would end short tied investments as as upside the be

Yes, I think kind that's fair. of

Hagen from question coming BTIG. is Eric Next today from

maybe the especially pipeline already? calling guys more How your conditions the some debt, appetite market to have demand about policy think in interest short securitization debt even that from at do and the How you yield equation see debt as you securitization about are thinking that changing you for you investors related of of in end themselves rate securitized their curve? the

would we markets said, again. So just more as I before stable a like get little the into markets we see securitization the to Eric,

-- saw space, in we So a of going We in loans. the like to loans January, this range the get especially be XXX the that in first is we as to are if the a more to said, would securitizing. little I AAA loans And be XXX that year, in half clarity are the accumulating priced accumulated going have we the basis non-QM we're of points.

Okay. calling that capital? is that And you can are issue some the conditions right we have, just and But with how callable you of to thinking maybe which about debt some pipeline extract just of debt now? respect where

is time. in it Currently, debt at of Maybe lock the longer rates, current in sec we if a for period [indiscernible]. it locked the

looking general so get come for a like can better rates to the we funding rates in market rates the term. longer So we to be for are front-end down

available depends also the on it But what in is market.

might it expense little very are take marketplace. sometimes accretive the to on funding lucrative So if getting in on be a assets we

Right. floating legs like to redeem call reset into it going think preferred? fixed this make to rate mean Do thinking that's or situations sense. them about ]? How where you are as to year. conditions does No, there's turn might [ we they or the those that you their floating look also looks I

Yes.

see that's looking retiring a probably looking buying year in through point, analysis all evaluate next right the future constantly end now, that and to down and we think deploy the higher, as that and And that to we that cuts that. at. we rather with case-by-case of assets coming time rate think at the while expect options. at coming I reset year over we we mentioned and we're capital fact-based think new I floating those this But the than,

more things it. reducing come and a to how part sense new investments change, start in mix could the could versus make So actually deploying about we view think repurchasing that expense. that's of to of we it would But capital that

is question Trevor Securities. coming Cranston today from Next from JMP

first where an you follow-up. in Just have one estimate updated so the quarter? value far Do book stands guys on

Yes, sure.

traded X So we pretty while and the most the recent sale or end accelerated, in so. say like yesterday, are Fannie well, especially down would with quarter since RPL which roughly point rates selloff I

Percent.

X%.

floor or session. end closing like the reached We've I'd question-and-answer to over of management our comments. further for the to any turn back

to This our on year I'd participating quarter is for thank Phil like to first And XXXX. Kardis. call for call. our look everyone earnings in full you to forward fourth quarter earnings we speaking the and

That teleconference today's conclude and does webcast. you. Thank

We You at today. may a disconnect thank and you time, lines wonderful day. participation your have this your for