Chimera Investment Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Chimera Investment Corporation third quarter 2020 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. If you would like to ask a question at that time, simply press star and the number one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, press the pound key. We ask that while posing your question, you pick up your handset to provide optimal sound quality. It is now my pleasure to turn the floor over to Emily Moore of Investor Relations. Please go ahead.

Thank you, Lori, and thank you, everyone, for participating in Chimera's third quarter earnings conference call. Before we begin, I'd like to review the Safe Harbor Statement. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risk and uncertainties, which are outlined in the Risk Factor section and our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. I encourage you to read the forward-looking statement disclaimer in our earnings release in addition to our quarterly and annual filings. During the call today, we may also discuss non-GAAP financial measures. Please refer to our SEC filings and earnings supplement for reconciliation to the most comparable GAAP measures. Additionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call. We do not undertake and specifically disclaim any obligation to update or revise this information. I will now turn the conference over to our President and Chief Executive Officer, Matthew Lambiazzi.

Good morning and welcome to the third quarter 2020 earnings call for Chimera Investment Corporation. Joining me on the call this morning are Mohit Marya, our chief investment officer, Rob Colligan, our chief financial officer, Chaudhry Yarladiga, our COO, and Vic Falvo, the head of our capital markets. I'll make some brief comments, then Mohit will discuss the changes in the portfolio, and Rob will review our financial results. Afterward, we'll open up the call for questions. Camara continues to work remotely, and I'm happy to report that the team is safe and our remote work environments have been successful. Over the past six months, we've taken many steps to strengthen our balance sheet, protect our desirable credit assets, and stabilize the earnings stream of our portfolio. These steps included selling agency mortgage-backed securities, selectively selling agency CMBS, negotiating new non-mark-to-market financing arrangements, and lowering the company's overall recourse leverage. The actions taken over the period enabled us to participate in the market recovery of asset prices from the depressed levels that we experienced in March. For the quarter, Chimera's book value appreciated 12% to $11.91 per share. We generated 33 cents of core earnings, and we paid 30 cents in common dividends, resulting in nearly 15% economic return for the period. The rebound in residential mortgage prices this quarter can be attributed to a very strong housing market which has been boosted by a generational low in U.S. interest rates. The COVID-19 pandemic has had a dramatic effect on the housing in the United States. The market for single-family homes is thriving as many families are fleeing cities for more spacious quarters in the suburban and rural areas of the country. Families across America are seeking additional living space for home offices, home classrooms, and safe outdoor environments. Accordingly, the Stanford Institute for Economic Policy Research, 42% of the US labor force is currently working full-time from home. Demand for single-family homes is booming. The rate of existing home sales rose in September to 6.5 billion homes, the highest level since 2006. And the available inventory of existing home sales has decreased nearly 20% from the previous year to 1.5 million homes. At the current pace of home sales, all inventory currently on the market could be sold in less than three months. Much of this housing demand is driven by record low borrowing rates orchestrated by the Federal Reserve. Since March, the Federal Reserve has increased its balance sheet by 75% to over $7 trillion, helping to provide low interest rates and ample liquidity to the mortgage market. The average rate for 30-year mortgages was recently reported at 2.8%, the lowest rate on record, which dates back to 1971. Additionally, fiscal stimulus from the federal government for COVID-19 relief has added over $3 trillion into the economy and has helped many mortgage borrowers through this difficult economic period. Both political parties in Washington are currently discussing additional fiscal stimulus packages, which, if enacted, we believe will help continue to support troubled borrowers and be constructive for both the housing and the mortgage market. A robust housing market paired with low mortgage rates and a government support provide a very strong case for owning residential mortgage credit. As of quarter end, nearly 90% of Chimera's investment portfolio was allocated to mortgage credit. The mortgage securitization market has also returned to near pre-pandemic levels, and in some cases better, as a result of lower interest rates and comparable advance rates. This quarter, Chimera completed three securitizations while committing to purchase $640 million of mortgage loans. Due to the improving housing fundamentals and better credit conditions, investor demand for highly rated senior mortgage securities is very strong. Chimera is a frequent issuer of these securities, which enables us to secure long-term, non-mark-to-market financing for our credit portfolio assets. Our investment team continues to find opportunities and is successful adding to our portfolio for future securitizations. The housing market is one of the few bright spots in the U.S. economy, and higher housing prices can contribute to better mortgage credit fundamentals. In a world of low investment returns, having a high-yielding portfolio with a favorable credit profile is an enviable position to be in. We believe that Chimera's portfolio is well positioned to take advantage of these positive trends and to continue to produce strong dividend income for our shareholders in the quarters ahead. And I'll now turn the call over to Mohith to discuss the portfolio.