CHIMERA INVESTMENT CORP Q4 FY2024 earnings call

• 2024 saw market reversals with inflation reduction in the first half and Fed rate cuts in the second half, but long-term rates rose. Housing market faced challenges but home prices increased. Credit spreads for asset-backed securities tightened.
• In 2024, the company deployed proceeds from equity and debt raises, investing in floating rate agency CMOs, subordinate tranches, residential transition loans, and acquired Palisades.
• Plans for 2025 include diversifying the portfolio, growing fee-based income, expanding agency RMBS, looking for mortgage servicing rights, re-levering the strategy, re-securitizing loans, and raising capital.

GAAP net loss for the fourth quarter of 2024 was $168.3 million, or $2.07 per share. GAAP net income for the full year was $90.3 million, or $1.10 per share. Economic net interest income for the fourth quarter was $69.2 million. The yield on average interest earning assets was 6%, average cost of funds was 4.5%, and net interest spread was 1.5%. The investment portfolio at year end was $12.3 billion, consisting of $10.7 billion of residential loans, $1.1 billion of non-agency RMBS, and $519 million of agency MBS.

• Expect to continue diversifying the portfolio and growing fee-based income.
• Intend to re-securitize loans, call R securitizations, and look for capital raises.
• Increased the quarterly dividend by 12% in 2024.
• Entered a new financing facility with better terms and reduced interest expense.

• Market uncertainty and interest rate movements can impact book value.
• Securitization execution risk.
• Potential impact of GSE reform on the housing finance market.

Q: Can you talk about incremental ROEs and normalized ROE?

A: Target return on invested assets is mid-teens. ROE depends on market conditions and re-levering securitizations.

Q: You talked about adding MSR. Thoughts on hedging book value volatility?

A: Hedging focused on floating rate liabilities. MSR seen as a way to stabilize book value with cash flowing assets.

Q: During the quarter, did you receive a margin call?

A: Received immaterial margin calls.

Q: You mentioned adding MSR. Elaborate on type and capital deployment?

A: MSR allocation depends on market conditions. Focus on portfolio construction to stabilize book value, looking at current and lower coupons for relative value.