Chimera Investment(US:CIM)2021-02-10 18:39Financial Data and Key Metrics Changes - The company's GAAP book value at the end of Q4 was $12.36 per share, with a 6% economic return based on the quarterly change in book value and the dividend per common share [28] - GAAP net income for Q4 was $129 million or $0.49 per share, while for the full year it was $15 million or $0.07 per share [29] - Economic net interest income for Q4 was $117 million, and for the full year, it was $513 million [29] - The yield on average interest-earning assets for Q4 was 5.9%, with an average cost of funds at 3.6%, resulting in a net interest spread of 2.3% [29] Business Line Data and Key Metrics Changes - The company sponsored $4.2 billion in 11 separate securitized deals for the calendar year 2020, retaining $655 million in subordinate notes [14] - The average loan size in the R6 transaction was $102,000 with an average LTV of 71% and an average FICO score of 638 [20] - The average loan size in the R7 transaction was $81,000 with an average LTV of 60% and an average FICO score of 662 [22] Market Data and Key Metrics Changes - The housing market is robust, with December contract closings for existing homes at an annualized pace of 6.76 million units, the strongest since late 2006 [9] - The Federal Reserve's support for agency mortgage-backed securities has helped maintain low mortgage rates, benefiting home purchases and refinancing [9] Company Strategy and Development Direction - The company aims to enhance liquidity and strengthen its cash position, which has allowed it to retain a high-yielding credit portfolio [7] - The company believes its seasoned mortgage portfolio is strategically positioned to perform well amid strong housing fundamentals and a post-pandemic economic recovery [11] Management's Comments on Operating Environment and Future Outlook - Management noted that the securitization market has shown depth and resiliency, with spreads on securitized mortgage loans tightening to historically low levels [12] - The company plans to continue seeking ways to improve or lower liability costs for securitized debt and back-end financing of retained securities [25] Other Important Information - The board of directors increased the common stock repurchase authorization to $250 million, providing a tool for evaluating new investment opportunities [18] - The company has a low leverage ratio, allowing for potential increases in leverage as market conditions improve [27] Q&A Session Summary Question: Best opportunities to deploy capital - Management indicated that seasoned re-performing loans remain the core strategy, offering value due to strong housing fundamentals and a robust securitization market [32] Question: Cash yield on RPLs - Management acknowledged that yields have come in, with most loan packages trading at or above par, but with leverage, double-digit returns can still be achieved [34] Question: Economics of business purpose loans - The gross coupon on originations is just under 6%, with leveraged returns expected to be well into double digits [38] Question: Buyback authorization increase - The previous authorization was $150 million, with $228 million currently available [39] Question: Cost of financing on securitizations - The cost of funding for the recent securitizations was around 2.19%, with significant savings achieved through re-leveraging [41] Question: Appetite to lever retained pieces - Management expressed comfort in financing retained pieces, focusing on limited mark-to-market strategies [58]