CIM - Earnings call transcript Q1 2018 | Chimera Investment Corporation

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Chimera Investment Corporation First Quarter 2018 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session [Operator Instructions]. It is now my pleasure to turn the floor over to Emily Mohr of Investor Relations. ahead. go Please

Emily Mohr

and first Dory, everyone participating for Thank earnings thank conference Chimera’s quarter call. in you you

Before we begin, Harbor I would like to statements. review the Safe

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

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

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

Matthew Lambiase

the call quarter earnings Good Corp. morning, and welcome to Chimera for first Investment of XXXX

reviewing Falvo, will for Colligan, Rob followed Victor on comments, and the and brief Financial Chief our portfolio Officer; will discuss the Rob Head our the Marria, financial Operating quarter. make the activity Choudhary Markets. Officer; Officer; I me Joining our few Investment call this Mohit of morning Mohit results by Chief a Yarlagadda, Chief Capital are Chimera's

afterwards. call will questions for the We open

are from to nation's announce the moment of has the some finance her the call, will been nearly the best After She the of end during and mortgage upon an which total and the knowledge the first quarter, regarding stronger on stated Chief to class. quarter. employment retire wish Keenan lending, market. includes while is value. Executive take on of homebuilders. income of At to Directors. increase the call President have We the increased prices of Pulte to in loan and from the have is had mortgage-background happy the XX Directors to credit are a the of bode him quarter. Board of Deborah excited mortgage entered book one Before on has it had the add I Deborah dynamics. XXXX non-traditional who of changes Still X.X% I'd our that Deborah home Chimera $X.XX the credit Financial the I'm prices Paul best value a well residential In Association market quarter, with Board in on performance the and that Officer the Pulte strong extensive the mortgages. in Chimera’s earnings first operations is residential month. book of Both the of higher period. management Insurance options most association's the title we the our was assets of chairman of joined fixed product a asset benefited in Deborah That one was investment as should years for the Paul like outstanding in her loan On advantage the that Group, the forward. was Services, our occurred start remain of service thankful our completion and review U.S. Residential other Directors that organization. the Mortgage-Bankers lost of of take and future. four income brings fixed in wealth the prices that has product going his our to entire and $X.XX Board very a Director mortgage Board economic currently which Board of we also of real-estate all term we've and the in him decades at bullish buyers value, largest and case return experience and member a previous we've and undervalued dividend in was residential opinion Board certainly

well residential mortgage Even value. which as our credit spreads good widen other remain very was bid loan quarter, book this prices for

which see a to continue key our and is within purchase core differentiator We to component opportunities investment loans portfolio market a our strategy. for securitize and

rates season had month we worth volatility and quarter, separate securitized materially market increased was which rising securitized and of In This and position. helped mitigate of loans swap This in of quarter. of was debt. portfolios portfolio rates of rate faster one than our the our two this three LIBOR both residential a in period million refinancing U.S. the management of through the $XXX size Interest duration with transactions, loan in the book value volatile funds some the overnight XX a existing Treasury. federal first interest million rate stabilized quarter high increase $XXX year

the some in funding swap a which interest position of form Our costs the rate of higher helps is risk future. reduce insurance, us of

we've our below keenly important back is shares We of aware buy more bought total worth authorization. million prices amount stand costs of the an return conditions ready to and materially credit to to for and to assets add the in I produce to great low which portfolio reducing dividend when market strides repurchase the discuss the $XX situations we to we of risk portfolio. our well to has like higher are improving should have Management the risk Board quarters remaining continue our value position back $XXX well-positioned when We've affords believe executed portfolio the the reauthorized value. at the million believe in Directors repurchase. relatively we balance XXXX are of that activity. hedges retaining perform unique perfectly is This us action ahead. investors the million ever portfolio book mortgage and produce rates, large a require. economy. of our been And of we residential Chimera more strong mitigate has since continue dollars of operating part to Mohit the funding to In February, our present themselves. hedged, of call over portfolio in should our an ability turn stock. investor reward leverage made in ability while hundred solid $XX We at While be opportunistic rate not this share the is and and on a increased higher and first interest swap that stream the December hard team million our income book the to to which risk recourse help I'll approximately quarter XXst work and We we

Mohit Marria

the perform remain single-digits trend our better and portfolio The severities performing credit defaults credit you spreads of and QX well in expectations. in prices than within higher loans residential Matt. markets. mortgage and continues and while Prepayments expected range. the Thank the purchase our high tighter to is our continues underlying on

to To interest the hike interest cycle two to to keep in this the pronounced help Reserve balanced bear deals book quarter X.XX% market with This interest value this and backdrop, marginal position XXXX. expecting was as market. this the spreads basis rate yielded with The our rate U.S. agency hedge points liability quarter, in by likely the an while raised sixth streams initiated prices Federal comparable lower and moved benefits expense Treasury moving quarter, are of XX is by to more and swaps in rate more mortgage we Fed billion wider Over book Chimera's will the March. this cost MBS rates funding $X hikes moved swaps. the as [indiscernible] additional duration which interest forward. continue rate With our increased our agency and add assets Funds increase our Federal expected even will rate - the

quarters in are and with good pretty hedge when adjust positions a in spot will come. our mentioned, Matt necessary our to As balances and if we we

active In the we've in addition an to the added quarter portfolio. hedges,

was which of out XXX average million transaction, quarter XX million of million XXXX-RX. separate CIM (Ph). XXX quarter relever XXXX-RX for in was purchased XXXX-XDC fourth while securitized financing million XXX season retaining of mortgage XXXX-RX XXXX XXX The XXXX-JX with the CIM and with In average characteristic CIM CIM with in and X.XX%. prior season million combined this This close included million a some of weighted average retain XXXX-RX The Chimera XXX In had a the CIM time size this and loan loans XXX% years. loan we Chimera loans XXX purchased securitized transactions. million securitized debt purchase an jumbles deal investment. issued $XXX,XXX costs since loans in purchased weighted quarter on this million we X.XX%, CIM first loans which [VPL in loans an to is two this we on worked was of of is Chimera XXXX million This end securitization also XXX XXXX-XAG effective XXX for LTV] second relever added the mortgage relever months CIM and similar our securitization, quarter Chimera’s very more which we quarter. XXX season sold were senior loans deal an XXX notes XXX in residential average have Separately, sold deal. million coupon of this cost average XX% and million initially two XXXX. investment. a weighted

agency bringing the this to and earnings discuss XXX XX% more XXXX-RX in agencies, or call. will on total our and agency commitment, second total mortgage of roughly We billion we exposure of acquisitions million our new In exposure. the deals XXXX-JX X.X quarter's quarter CMBS detail

of million of As stock. XXX our common our Directors we February discussed Board Chimera reauthorized the call, on earnings repurchase

below shares quarter million total at a value average XX of repurchased price for This our of XXX,XXX we XX, December XXXX. GAAP book an

existing help is additional to portfolio as off and We complementary tools investment authority a to start. capacity a good maximize returns that risk available constantly shareholders. the XX million have for we monitor XXXX which our under us

portfolio X.X% on portfolio liabilities assets and and structure. return the was for strong quarter total our economic Our managing generated on performance discipline approach by capital our

additional year. deals have relevered later two potential For month of have for cause securitizations the this first the and year, four called added we to

Our credit are perform we agency continues pass-through portfolio widening have well been as expecting. to spreads and

conditions to quarter. returns with results continue repurchases review now the will for We turn call to and shareholders. I adjust management will the tool, over including portfolio financial portfolio utilize market the share maximize adjusted our our all to Rob to for

Robert Colligan

Thanks Mohit.

last a last $X.XX quarter. higher The income per quarter. is first resulting for interest was borrowing decrease basis, was our the quarter. quarterly X.X% based of million On the income share first a XXX end net quarter of the in value are the XXX last expense quarter XXX to share. in quarter economic of was Here the first compared relates value higher first results income to XXX and or quarter GAAP the compared core share quarter return GAAP value first interest on million for the book was at per interest million during GAAP compared the quarter for primarily incurred or book $X.XX $XX in to on the quarter the common XXX dividend Net book income from million increase XXXX. rates. million net to $XX.XX per net

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

was excluding and experienced fees Expenses equity and for average on first return GAAP XX deal were investment quarter, XX.X% the on net quarter return mark-to-market during interest net for the XX% expenses million. the portfolio equity gains our the was Our as quarter. servicing

That during and related of quarter as warehouse earnings discussed fourth remarks. incurred result expenses As expenses to the facilities. our concludes compensation also a are loan legal up expenses. equity call, Company The

We the will open for questions. now call

Operator

Sam of Our first Instructions] Credit from question line comes of Choe Suisse. the [Operator

Sam Choe

XXXX? just wondering yields about for it asset was I I it a off mean could bit and like if how trending dropped are the little you Hi, seeing you talk seems that

Mohit Marria

Hey sure Sam, is this Mohit.

are acquisitions tighter obviously our opening asset states. as New always remarks

in interest You remains the net a into the and our assets yield of the yield of the up expense for in as higher yielding more the reducing strong our assets. a earning those the demand result know result investor downs some on decrease pay is of of going existing credit on just margin compression reflow interest

Robert Colligan

Rob. is This

are saying and just as Mohit like would assets have a I new big So on yes, purchased asset less side. driver than yielding previously the was we the add what that's

Sam Choe

from it me. it. Got you. Thank That’s

Operator

KBW. the next line Bose comes with of George Your question from

Unidentified Analyst

good clear a is I'm that on guess question think you what on (Ph) of that your for can buyback. Thanks that you were maybe bullish My I but little were I on can first morning for comments for hoping market. asset said I yields just what implies that commentary have your the returns you the commentary in [Eric] and come its from square just back stock. Bose. down, says the I just provide just opening you just remarks Matt heard buying mean kind

Matthew Lambiase

up book when I down bullish going bond of our mean down and Well in mean would the therefore are residential yes. yields think yields credit. general coming for coming value I the our market book go the and I say and is that's in are I we down, go are rates I'm asset return that market. value prices on up pattern

should think still going difficult by like and the I - the paying conservative us, is marketplace they are investment buy strategy and we've shareholders. pretty book and been very a full investment well I my the option in they fixed able had it's off and A quarter market, it happy. amount return in shareholders in opportunity a going And that's a be should in And we and that below been forward. stand be When a think way our assets market return managing I going happen. to on certainly bullish for shares paying if economic there value this is long to know shareholders all for market at back forward. has other and investment bid to I the think you at bullish we options the a we're rate very [indiscernible] markets great to credit ready go, Company we you and got opinion of going to that residential difficult hard to tremendous I on come and think the X.X% best are stop. think in and it's I to the is very know I’m off look think I very win for are mean that things shareholders have our I that's that produce out first of us for going a income a gives think be our credit I mortgage look mortgage I'm to the our for

Unidentified Analyst

that's hit the I'm Okay, little you but commentary give share but yields I bit next securitization. it’s of on Jumbo you can just guess bit quarter, that yes fair. quarter, a that the will color deal. that just maybe little certainly hoping provide loss this know adjusted you I a more on

Robert Colligan

are don't about this know prime XXXX, so prime $XXX origination. This retention done we say have you these just make was it that And investment the balance deal deal small. on our the know Jumbo they small us, not that a its the deal have mortgages, I was consolidate risk the on other million, first that securitization we've would sheet. specifically requirements did qualified our is you and in deal deal very that since very Well it for was that Jumbo

different Mohit. at really look that it, too sure will areas. and haven't look a wouldn't for getting ready we this this I wouldn’t in but for I opportunities make so in we know, new people looking look market and you a opportunity are just to much at that time that aware So are into long and read been us I is

Mohit Marria

Yes.

portfolio On we faster accretive sponsorship remains our the but the in deal as see we and point base yields investor and to the front on will currently. the on the strong. generate We the is what saw muted, to deal continue returns be favorable the stack strong equity we to economic on Matt's investment have sub to

Unidentified Analyst

Thanks. that's helpful. great Okay,

Operator

question line from [Operator next Instructions] of Lee Cooperman the Your Omega of comes Advisors.

Lee Cooperman

is the to that capital that employ you chance dividend, are given fine How raise I I recurring job clear below think but below on I a our to quality and your your say, and congratulate much. earnings. I excellent. market critical prefer book understated dividend then continue of quarter - way think it's is guys your have is one whenever you a Because you you it probably have? much liquidity excess you book to very you the value your your have assets, value, back nothing question. doing to though the we buy even Thank your gives from and actions every stock almost do transparency

persistently question my into of have, of value is, equity you buyback liquidity bear a prudently? in buyback too stock book a other the In question that's much good how we X% employed. gotten could you have how market is we Company the much not excess we've So and do words we much liquidity how cap sold excess is only the never market thing, the below much could

Mohit Marria

Yes. I we more. have discussions XX we think authorize board obviously the million I and so here, authorized, will would could start with have

we share. investments, also capital our But into do that then an reduce is to additional back think but we a little we as flow. liquidity, focused think very that use are are capitals managing will open dislocated if that. I or wanted get have source the speak markets to sure that adjust us buyback to raise to back a capital for there preferred from making take more convertible a the we market The We could we banks capital especially weekly, new portfolio bit from, adequate to I we that if in and form downs could to pay we in a and you on equity the know

So, at see is are maybe we there room, to probably summarize, rest bit the the of a how we things XX little year. authorized through will go more

Lee Cooperman

magnitude about you could talking of you XX% you opportunity XX% of order that could. the saying or are or market you When that gave buy company, if back the possibly

Matthew Lambiase

discount. if know vote don’t I at No have too million but big for we XXXX opportunity if that I the was what I I you bought back think, Personally, market XXX we a would number think that say in and back for stock you, would there. I get a could the

yes. So

there going have We so do the we that forward. think it past, done would in that to no was reason

Lee Cooperman

Well guys done and job, excellent you I Thank good. an congratulate have you Good, [indiscernible]. you.

Matthew Lambiase

Thank I much. you it. very appreciate

Operator

no At call this the is for Lambiase there time, I further turn to additional now Matthew question. or closing will any remarks.

Matthew Lambiase

for you thank earnings Chimera participating quarter. in XXXX quarter forward to call first the the on look speaking and next we to Investment Corporation’s you Well

Operator

on today's participating for you Thank conference all.

now disconnect wonderful and have a your may lines day. You

Emily Mohr	Investor Relations
Matthew Lambiase	President and Chief Executive Officer
Mohit Marria	Chief Investment Officer
Robert Colligan	Chief Financial Officer
Choudhary Yarlagadda	Chief Operating Officer
Victor Falvo	Head of Capital Markets
Sam Choe	Credit Suisse.
Lee Cooperman	Omega Advisors

Chimera Investment (CIM) 3 May 182018 Q1 Earnings call transcript