Chimera Investment Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Chimera Investment Corporation fourth quarter and full year 2021 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 headset to allow optimal sound quality. It is now my pleasure to turn the floor over to Victor Falvo, head of capital markets.

Thank you, Ashley, and thank you, everyone, for participating in Chimera's fourth quarter and full year 2021 earnings conference call. Before we begin, I'd like to review the safe harbor statements. 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 risks and uncertainties, which are outlined in the risk factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We 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 CEO and Chief Investment Officer, Mohit Marya.

Thank you, Vic. And good morning and welcome to the fourth quarter and full year 2021 earnings call for Chimera Investment Corporation. Joining me on the call today are Chodri Yarlagada, our President and Chief Operating Officer, Subra Viswanathan, our Chief Financial Officer, and Vic Falvo, our Head of Capital Markets. After my remarks, Subra will review the financial results, and then we will open the call up for questions. Low interest rates throughout most of 2021, combined with strong investor demand for high-quality fixed-income assets, allowed Comeric to optimize its liability structure, which we believe will benefit our shareholders over the long term. Securitization of mortgage assets is at the core of our company's DNA and is paramount to Chimera's market differentiation amongst its peers. Through innovative structuring techniques, we have consistently demonstrated our ability to efficiently manage our portfolio's assets and liability risk while maintaining low recourse leverage and attractive net interest spreads. The re-performing loans we purchased in the period from 2016 to 2018 have generated portfolio yields that have exceeded our original expectations. Our re-securitization activity in 2021 enabled us to refinance the debt on these loans with a lower interest expense, as well as release equity from the original purchases. For the full year 2021, we refinanced 13 of our previously issued re-performing deals with eight new securitizations on $6 billion of mortgage loans. Higher advance rates achieved through Chimera's re-securitization activity in 2021 freed up more than $900 million of capital and helped us accomplish many objectives towards the strengthening of our balance sheet. Lower interest expense and higher advance rates on our 2021 securitizations have provided a great benefit to our asset and liability structure. It positively impacted the returns on our newly retained investments, and allowed us to further shift financing from recourse to non-recourse, a clear enhancement for the long term. The results of our work in 2021 helped reduce the amount of recourse financing on our credit assets by over $800 million, while significantly lowering the interest expense on our credit-related repo. In addition, we successfully paid off $400 million high-cost debt plus the associated warrants and extinguished the remaining $50 million of convertible debt. Overall, securitized debt represents 70% of our total financing, up from 65% in 2020. Our cost of securitized debt was 2.40% at year end, 120 basis point reduction from 2020. 98% of our securitized debt has a fixed rate coupon, which is important as interest rates have begun to rise. The fixed rates created on our deals help to lock in a wide net interest spread and our securitized assets for a long period of time. Most of our securitizations are structured with explicit call dates. We called 13 deals in 2021 and have 14 deals callable in 2022. And our entire stack of securitized debt has a weighted average time to call of three years. These call dates provide opportunities to frequently optimize our funding structure, which has proven to be immensely beneficial. Now, I would like to take you through our asset purchases and fourth quarter securitization activity. In the fourth quarter, we purchased 540 million of re-performing loans. We closed on 100 million of the loans in December and expect 440 million of these loans to close in the first quarter of 2022. For the full year, 2021, we purchased over 3.2 billion in loans. consisting of $1.3 billion in re-performing loans, $320 million of business purpose loans, $1.2 billion in prime jumbo loans, and $435 million of agency eligible investor loans. For securitization activity in October, we securitized $354 million CIM 2021-R6 with re-performing loans from our loan warehouse. We sold $336 million in notes, representing a 95% advance rate, the highest advance rate we have achieved on re-performing loans to date. The average cost of debt for the R6 deal is 1.53%. Chimera retained an $18 million investment in subordinate notes and interest-only securities. The R6 deal was rated by Fitch and DBRS and will be callable beginning September of 2026. In November, we completed our 14th and final securitization of the year. 168 million CIM 2021-NR4 with non-performing loans from our warehouse. We sold 126 million senior securities representing 75% of the capital structure. We retained 42 million in subordinate notes for investment. 2021 was the most active year for securitization in Chimera's history. In total, Chimera sponsored $8 billion in 14 separate securitized deals, six re-performing loan securitizations, four non-performing loan securitizations, three prime jumbo securitizations, and one agency-eligible investor loan securitization. The re-performing and non-performing deals have been consolidated on our balance sheet. The prime jumbo and the agency-eligible loans are not consolidated on our balance sheet. As we begin 2022, we are well positioned for the current market environment with higher rates and wider spreads. Our balance sheet is strong with 95% of the capital allocated to residential mortgage credit. 70% of our financing is securitized debt, which we believe provides optimal long-term non-recourse financing for our loan portfolio. Our net interest spreads is strong, largely resulting from the reduction in financing costs this past year, and our leverage is at historically low levels. We have accomplished a lot this year. Our securitization business remains strong. We have ample cash on hand to grow the portfolio. And as we embark on 2022, we are set to continue to deliver the best risk-adjusted dividends to our shareholders. I will now turn the call over to Subra to review the financial results.