Chimera Investment (CIM) 9 May 242024 Q1 Earnings call transcript

Greetings, and welcome to the Chimera Investment's 2024 Earnings Conference. I have here with me today Victor Falvo. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Victor Falvo.

begin. may You

and First operator, everyone, participating for Thank XXXX thank Earnings Chimera's Quarter Conference in you, you, Call.

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

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

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

call only We date time-sensitive of Phil update Additionally, contain conference Officer, information, information. I may or content undertake revise not President do this accurate is any of turn our Chief specifically this and and this obligation the over the now Kardis. disclaim Executive to the of earnings conference will as to call.

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

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

XXX interest a expectations rates. and triggering long-term their which and employment Reserve number rate rate increased April, than interest are rates plot. expectations for Federal that to had its the volatility a the Today, X basis The the or quarter capital reduce several increasing cut X cuts dot strong inflation during Federal driven the the economic indicated closed Reserve data strong by note, backup interest caused times XXXX, year-end. twice would of rate through Throughout was market to reflecting on during an in points occasions expectations quarterly on and market XXXX more markets cuts, X investor before

main X quarter that may rate; interest higher increased strong to rates we Federal rates indicate still and inflation the than economic second begin are: economy; desired is long-term the experience Reserve's data themes peaked; have as not The continues emerged will volatility. a have interest

collateral of Despite included investments acquired the balance XX.X%, average loans reperforming we the rates higher volatility, return mortgage of backed year, issue new and of since tranches million securitizations earning reduced anticipate weighted interest of approximately small low-teen rate of unlevered have returns. expectations, the residential and by we that mortgage purchase $XX subordinated and commercial have cut the These inclusive discount in coupon loans. beginning a

million on securities addition, and leverage XX.X%, In of to transition residential coupon unlevered of enable average increase have The loans. receive significant a compared preserving generate also for returns investments for investments future liquidity these We providing reinvestment. cash other accretive believe loans transition provide residential as deployment. to settled and over expect levered we returns. of amount short-duration the These weighted mid-teen while superior to time while portfolio loans returns $XX us will free the to flow a we will

cost of portfolio basis. protect higher liability go-forward pay-fixed our protect of this of sides interest repo reduce actions interest borrowings. the X.XX% taken of We help at on rates quarter added the additional this And cost quarter, an the both income. we on the to balance will borrowing sheet our to we believe swaption XxX interest continue $XXX the side rate higher some million sheet, On our against of further in -- liability a balance benefit the to net cost a

facilities. opportunities retained have seek recourse limited about notes with to XX% of or We these our facilities. our to continue financings currently with from non-mark-to-market We securitizations financing long-term finance

risk, To interest swaps compression. further hedge rate manage swaptions interest financial against derivatives to as and such margin we our to intend continue net use interest rate to

any for business. securitize Cash Timing and our to time, evaluate management reducing our and of the of on daily We investments the Over funds, company's is performance, strategy many monitor we to rates. further as to as them continue they our impacted With critical cost is factors, repo resecuritizations optimization available of ongoing loans well mature. to to requirements, margin call credit we implement these time, new over compare including continue by acquire and -- needs the investments. new securitizations. as maturities, plan speeds merits interest higher we liquidity merits and with liabilities expect mortgage prepayment

the are see term, beginning In near green some to we shoots.

several As I on NR call, are outstanding last our of mentioned we closely securitizations our for potential monitoring resecuritization. non-REMIC-eligible or

we second improved. these our the to believe in With resecuritize third have we year, this quarter or the ability loans spread tightening has experienced

Our be future expect to to ability that earnings. to will free will accretive new we this up execute cash opportunities in additional strategy invest

on default better As our investment and and recoveries. be expectations our leverage assets. performance credit both current with within managing original continues rates low conditions, we The or market delinquencies, than liquidity navigate mortgage a portfolio unencumbered and proper our of of cash we maintaining are focused on balance recourse to

loan for accretive the continue quarter, we to from believe of this were deployed the enable our successful we our accomplishing objectives look increased remainder new We purchase in the to fully capital to raise will year. rate last investments and the continue investment have packages. add and to We volatility proceeds us year

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

driven I mostly quarter by was on first share. The appreciation $XXX spreads at this $X.XX Chimera's financial XXXX. the highlights the end GAAP GAAP the income loans. per first value a Phil. was first review of net for will value book million you, for per Thank $X.XX quarter was of tightening reperforming or in quarter our quarter share.

value economic quarterly our the book common quarter, the GAAP was first first on per on based dividend in X% the quarter change value and book share. return For

$XX net share. for fourth the million basis, earnings was per quarter income an available $X.XX for On or distribution

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

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

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

in and the quarter company liquidity, financing For ended million with $XXX the unencumbered cash assets. and total

exercised repo billion funding. XX% swaps average total pay-fixed non We and for swaption X rate fixed of billion pay-fixed at had fixed beginning first billion hedging, the liabilities. of our average features into of to $X weighted for notional X.XX% contracts X.XX% January interest outstanding rate. with new billion added swaps quarter, of in rate. for billion pay liabilities. and pay with agreements We of X billion as outstanding XXXX. year swaps billion either a $X $X for had pay a swaps For for $X position hedge company floating a weighted contract during a recourse exposure X.XX% We million its our weighted had at separate rate fixed or in these entered X X-year $X.X $XXX a repo our We pay-fixed notional representing the on swaption $X.X remain rate $X notional X.XX% option average at rate total May mark-to-market matured floating on our limited

servicing same return equity average first and of our XX.X%, return return transaction GAAP fees quarter interest equity first the XXXX, average our X%. excluding economic was reduction a net on was EAD period our XXXX lastly, income expenses, from on million, was X.X%. down quarter the million of XX.X%, year, were For $XX And on and $X.X expenses, last equity for

That remarks. our concludes

call questions. We will now open the for

Instructions]. [Operator

question with first Doug Our comes from UBS. Harter

coming Can just what getting talk type think of calling? of about that would you're your view the calling able capital And you relative quarters? on to how deals. you free you're might capital that you of versus -- how mentioned on in return You up be kind what redeploying you some closer you the

Phil. is this Doug,

We're down So the like Partly, are to there we're at think going believe actually much a issues think I We're variety how getting we get. yes, not closer. factors. We mean, comes that to I of yet. we looking willing again, look of -- seriously. kind look are the factors, significant the like. we and rates to enough at be But what will amount hurdle on that we're depend and it's really actual will this at

the mentioned fair currently next are And say a that so now, we of that need possible. that I some or was But we're amount we it. out I there. get so. mentioned We beat reinvestment. we opportunities given more further why But the before I improvement there where like for on hurdle looks low spreads there's it thought call that think in for kind of can and we possible. gone, the we done think that can something mid-teen That's returns, hopeful prior have it's it's period we to the

you hoping an was has us I And value could how to far quarter? the trended in Great. second so book update give as

Yes.

the quarter Investment Dan Chief Officer. far to our So Thakkar, second this over so I'm -- in going turn to

Yes. Yes.

post soft rates this more, tightened the So the had the and quarter payroll so have a Doug, XX especially points. XX FOMC range to bit we week. have a in last in sell-up of basis Spreads

that So by to at X.X% are is our we this to lower X%. estimate point close

Our KBW. from from next comes Bose George question

you terms of through just question. just quarter, follow-up book in the a this Just value to The drivers? -- can improvement walk the the

Yes.

billion tightening think early I quarter. we out expected as well. portfolio. the another had bit million than $X is changes last in investment the that. was saw That to loan tightened a Mae trade positive the look, Subra There pretty traded in with early We fair the tightening in primarily the in Bose, said, sold in non-Agency -- $X trading that's Fannie So today portfolio, spreads roughly by to $XXX driven list billion better February. so subs mark-to-market which commensurate even loans. the in Look,

in a amount securitization market, billion. close of fair there the $X to So issuance in addition, was

far supply. So as markets we as and tightening in the the in saw saw the we that trading is what spread concerned

that's our we loan portfolio. So tighten how

for And sense. just EAD? the double-digit to the outlook talk right curve a for if forward Makes we're if about then can the Okay. for you just longer. we're path is And talk in the and higher higher remaining about longer, ROE

where this be have hedges the is have on along based we we EAD reported. Subra. rate expecting projections, are to the consistent EAD, this at forward point, we Bose, and

and our change we we're bit, you is trend actually more trend very far add could so X last assets if the the maintaining continue. more quarters, EAD. that X that expect more little a assets, capital Obviously, have scenario you that the raise E&D to add stable, and remained we at but you look and if or If consistent

second part, yes... the And

part. your again, second that say Sorry,

part path was to in second if double-digit remain really The the we what's longer, a for ROE. higher

Okay.

ROE today, I said XX.X%. my equity the about the was So think in prepared -- return on you if that average statement,

that's before expenses. Now the

So ROEs we are we of investments top we double-digit manage make and further contribute capital generating obviously, would how on that our on today. raise that. additional hedges And

Our comes Citizens Trevor next question with JMP. from Cranston

shares you loan of Can types new how book you evaluating talk to investments given trading stock to guys the versus is about relative making other potential value? the buy are back where

I think past, I now, Sure. acquiring shareholders. at we in mean, this Right in look the said all think our as long-term as investment assets I we a we for better view environment those factors.

floor This for concludes comments. our closing back I the turn would to Kardis Phillip over question-and-answer to session. like

the everyone end I forward first participating call, in would look thank and we to at quarter. our quarter like earnings to speaking of next to you for

teleconference. today's concludes This

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