Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CHIMERA INVESTMENT CORP | a8kshellinvestorpresenatio.htm |
INVESTOR
PRESENTATION
NYSE: CIM
2nd Quarter 2016
Information is unaudited, estimated and subject to change.
DISCLAIMER This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the UnitedStates Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates andprojections and, consequently, readers should not rely on these forward-looking statements as predictions of future
events. Words such as “goal” “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,”
“may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify
such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that
could cause actual results to differ materially from expected results, including, among other things, those described in
our Annual Report on Form 10-K for the year ended December 31, 2015, and any subsequent Quarterly Reports on Form
10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: the
state of credit markets and general economic conditions; changes in interest rates and the market value of our assets;
the rates of default or decreased recovery on the mortgages underlying our target assets; the occurrence, extent and
timing of credit losses within our portfolio; the credit risk in our underlying assets; declines in home prices; our ability to
establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target
assets; our ability to borrow to finance our assets and the associated costs; changes in the competitive landscape within
our industry; our ability to manage various operational risks and costs associated with our business; interruptions in or
impairments to our communications and information technology systems; our ability to acquire residential mortgage
loans and successfully securitize the residential mortgage loans we acquire; our ability to oversee our third party sub-
servicers; the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the
foreclosure process; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our
business; the impact of new or modified government mortgage refinance or principal reduction programs; our ability to
maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status
under the Investment Company Act of 1940.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the
date made. Chimera does not undertake or accept any obligation to release publicly any updates or revisions to any
forward-looking statement to reflect any change in its expectations or any change in events, conditions or
circumstances on which any such statement is based. Additional information concerning these and other risk factors is
contained in Chimera’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written
and oral forward-looking statements concerning Chimera or matters attributable to Chimera or any person acting on its
behalf are expressly qualified in their entirety by the cautionary statements above.
This presentation may include industry and market data obtained through research, surveys, and studies conducted by
third parties and industry publications. We have not independently verified any such market and industry data from
third-party sources. This presentation is provided for discussion purposes only and may not be relied upon as legal or
investment advice, nor is it intended to be inclusive of all the risks and uncertainties that should be considered. This
presentation does not constitute an offer to purchase or sell any securities, nor shall it be construed to be indicative of
the terms of an offer that the parties or their respective affiliates would accept.
Readers are advised that the financial information in this presentation is based on company data available at the time of
this presentation and, in certain circumstances, may not have been audited by the company’s independent auditors.
Information is unaudited, estimated and subject to change. 2
CHIMERA INVESTMENT CORPORATION
We develop and manage a portfolio of leveraged mortgage investments to produce an
attractive quarterly dividend for shareholders
Business Description: Hybrid Mortgage REIT
Inception: 2007
Total Capital: $3.0 Billion
Total Portfolio: $17.2 Billion
Overall Leverage Ratio: 4.7:1 ( 2.0:1 recourse leverage)
Stock Price/Dividend Yield: $15.70 / 12.2%
Chimera Announces Internalization of
Management Structure
* Aligns shareholder and management interests
* Increase transparency
* Full Transition Completed by December 31, 2015
* Committed to expense management
Recent Corporate Developments
As of June 30, 2016
Chimera Completes Repurchase
$250 Million Common Stock
* Discount to book value
* Accretive to earnings
* Board of directors increases share repurchase
authorization by $100 Million
Chimera expects to pay $0.48 per quarter totaling $1.92 dividend for 2016
*2016 guidance excludes $0.50 special dividend paid 3/31/2016
Information is unaudited, estimated and subject to change. 3
PORTFOLIO COMPOSITION
All data as of June 30, 2016
(1) Financing excludes unsettled trades.
13
12
11
10
9
8
7
6
5
4
3
2
1
0
B
ill
io
ns
$2.4
$0.5
$2.5
$3.4
$8.0
Non-Recourse
(Securitization)
Recourse (Repo)
Recourse (Repo)
Equity
Equity
Agency MBS Portfolio
Total Assets: 4.5 billion(1)
Residential Mortgage Credit
Portfolio
Total Assets: 12.7 billion(1)
83%
of CIM's
equity capital
is allocated to
mortgage credit
Information is unaudited, estimated and subject to change. 4
Agency Securities – As of June 30, 2016
Repo Days to Maturity – As of June 30, 2016
All data as of June 30, 2016
(1) Coupon is a weighted average for Commercial and Agency IO
(2) Notional Agency IO was $3.1 billion as of 6/30/2016
(3) Includes the interest incurred on interest rate swaps
Security
Type Coupon
(1) Current
Face
Weighted
Average
Market Price
Weighted
Average CPR
Agency
Pass-
through
3.50% $1,137,343 105.6 7.6
4.00% 1,356,996 107.4 14.5
4.50% 339,473 109.3 17
Commercial 3.5% 1,226,725 106.8 —
Agency IO 0.9% N/M(2) 4.6 6.5
Total $4,060,537
Maturity PrincipalBalance
Weighted
Average Rate
Weighted
Average Days
Within 30 days $1,823,192 0.79%
30 to 59 days 287,077 0.81%
60 to 89 days 921,941 0.77%
90 to 360 days 361,042 0.97%
Over 360 days — —
Total $3,393,252 0.80% 41 Days
AGENCY MBS PORTFOLIO AND FUNDING
The majority of Chimera's Agency Portfolio consists of highly liquid pass-through securities
Gross Asset Yield: 2.4%
Financing Cost(3): 1.4%
Net Interest Spread: 1.0%
Net Interest Margin: 1.1%
Agency Portfolio Yields and Spreads
Information is unaudited, estimated and subject to change. 5
Description
($ in thousands)
- 100 Basis
Points
- 50 Basis
Points Unchanged
+50 Basis
Points
+100 Basis
Points
Agency
Securities
Market Value $ 4,688,441 $ 4,596,520 $ 4,481,503 $ 4,360,999 $ 4,233,588
Percentage Change 4.6 % 2.6 % - (2.7)% (5.5)%
Swap
Market Value (114,553) (61,292) - 60,266 120,069
Percentage Change (2.6)% (1.4)% - 1.3 % 2.7 %
Futures
Market Value (29,919) (17,485) - 17,050 33,685
Percentage Change (0.7)% (0.4)% - 0.4 % 0.8 %
Net Gain/(Loss) $ 62,466 $ 36,240 - $ (43,188) $ (94,161)
Percentage Change
in Portfolio Value(1) 1.4 % 0.8 % - (1.0)% (2.1)% Near Term 0-3
Short Term 3-5
Medium Term 5-10
Long Term 10-30
Hedge Book Maturities
2%
34%
54%
10%
INTEREST RATE SENSITIVITY
In the second quarter Chimera reduced the outstanding notional balance of its derivative
instruments by $2.3 billion
Total Notional Balance - Derivative Instruments
June 30, 2016 March 31, 2016
Interest Rate Swaps 1,430,900 3,583,900
Swaptions 749,000 749,000
Futures 619,700 814,700
(1) Based on instantaneous moves in interest rates.
Information is unaudited, estimated and subject to change. 6
Non-Agency RMBS
Consolidated RMBS Securitizations
Securitized Loan Portfolio
12%
16%
73%
RESIDENTIAL MORTGAGE CREDIT PORTFOLIO
Chimera's residential credit portfolio provides a high net interest spread
All data as of June 30, 2016
Gross Asset Yield: 8.1%
Financing Cost(4): 3.6%
Net Interest Spread: 4.5%
Net Interest Margin: 4.9%
Agency Portfolio Yields and Spreads(1)Credit Portfolio Composition
Information is unaudited, estimated and subject to change. 7
2016 Chimera Acquires
$5.0 Billion Seasoned
Loan Portfolio
• Performing loans with 10 years
of payment history
• 3 securitizations with all
senior securities placed
• $ 763 million subordinate
bonds created for portfolio
2014 Chimera Acquires
$4.8 Billion Seasoned
Loan Portfolio
• Originated by American General
• 7 Securitizations with embedded
call options
• 4 deals called and re-securitized
• 3 original deals become callable
over next 5 months
2009–2011 Chimera
Creates and Retains
$3.2 Billion High Yield
Subordinate Bonds
• $2.1 billion current remaining
face value of subordinate bonds
• Durable value over wide band of
prepayment rates
• Difficult to re-create in size and
price
UNIQUE MORTGAGE CREDIT PORTFOLIO
Key transactions distinguish Chimera from other Mortgage REITs
Re-Remic Subordinate Bond Portfolio
Springleaf Seasoned Loan Portfolio
Risk Retention Seasoned
Loan Portfolio
Information is unaudited, estimated and subject to change. 8
RE-REMIC SUBORDINATE BOND PORTFOLIO
Chimera created long, term-funding through securitization
The Securitization Process
$100mm
Non-Agency Mortgage
Bond
$100mm Trust
(Non-Agency RMBS
Collateral)
Deposit
$60mm Senior A Note
Sold to 3rd Party
$40mm
Subordinate B Note
Retained by CIM
CIM buys $100mm Non-
Agency mortgage bond from
dealer
CIM deposits the bond into a trust
The trust issues bonds backed by the
cashflow of the underlying bond
• CIM sells the Senior A note
◦ The A note receives P&I from the $100mm bond
until the $60mm is paid off
• CIM retains the Subordinate B note
◦ The B note receives interest, all losses from the
$100mm bond and starts to receive principal only
after the Senior A note is paid off in full
Principa
l
& Interes
t
Losses
&Interes
t
1 2 3
Information is unaudited, estimated and subject to change. 9
($ in thousands) At Issuance / Acquisition June 30, 2016
Vintage Deal Total OriginalFace
Total of
Tranches
Sold
Total of
Tranches
Retained
Total Remaining
Face
Remaining
Face of
Tranches
Sold
Remaining Face
of Tranches
Retained
2014 CSMC 2014-4R(1) 367,271 — 367,271 269,644 — 269,644
2010 CSMC 2010-1R 1,730,581 691,630 1,038,951 674,545 21,380 653,165
2010 CSMC 2010-11R 566,571 338,809 227,762 283,565 73,817 209,748
2009 CSMC 2009-12R 1,730,698 915,566 815,132 613,587 127,656 485,931
2009 JPMRR 2009-7 1,522,474 856,935 665,539 566,757 177,397 389,360
2009 JMAC 2009-R2 281,863 192,500 89,363 101,070 41,626 59,444
TOTAL 6,199,458 2,995,440 3,204,018 2,509,168 441,876 2,067,292
% of origination remaining 40% 15% 65%
CONSOLIDATED RMBS SECURITIZATIONS
▪ Re-Remic subordinate bonds have had slow prepayments considering the low interest rate environment
▪ Chimera expects the subordinate bond portfolio to have meaningful impact on earnings for the foreseeable future
All data as of June 31, 2016
(1) Contains collateral from CSMC 2010-12R Trust.
(2) Projected Balances are estimated based on future cash flows and changes in prepayment speeds
Significant outstanding
balances remain under a
number of prepayment
projections
Total Remaining Face - Projected Balances (2)
Change in CPR (%) June 30, 2017 June 30, 2018 June 30, 2019
-50% 2,212,831 1,964,873 1,767,396
Unchanged 2,133,808 1,833,173 1,597,579
+50% 2,055,776 1,706,964 1,441,336
Information is unaudited, estimated and subject to change. 10
SPRINGLEAF SEASONED LOAN PORTFOLIO
Chimera acquired $4.8 Billion Seasoned Loan Portfolio previously securitized by Springleaf Financial
Chimera consolidated the loans on its balance sheet and worked to re-securitize the
portfolio in order to reduce financing costs and lower equity commitment
Springleaf Acquisition
◦ $ 4.8 billion seasoned loans
◦ 7 original securitizations
◦ $775 million equity commitment
from Chimera
◦ Performing loans with 10 years
of payment history
◦ Loans originated for American
General portfolio
Springleaf Optimization
◦ Chimera calls 4 of the 7
Springleaf deals
◦ Chimera re-issues new debt
◦ Lowered financing costs by over
100 basis points
◦ Reduced equity commitment by
$155 million
Springleaf Pipeline
◦ Three original Springleaf deals
remain to be called
◦ All new Chimera securitizations
have 3-year call rights
2014 2015 2016
Information is unaudited, estimated and subject to change. 11
RISK RETENTION LOAN PORTFOLIO
Risk Retention Rule creates an opportunity for Mortgage REITs who have permanent capital
Risk Retention Rule
▪ All new mortgage securitizations
must have an equity sponsor
▪ Deal Sponsor to have meaningful
“skin in the game” investment
amount
▪ Deal Sponsor must have the
ability to hold the investment for
a minimum of 5 years
Chimera sponsors three securitizations
▪ $763 million new investments
▪ Performing seasoned loans with more
than 10 years of payment history
▪ Attractive risk-adjusted portfolio
returns
▪ Increased returns available with
recourse leverage
▪ Partially funded by reduction in
Agency MBS allocation
2016 Chimera
securitizes
$5.0 Billion
under the
new risk
retention rule
Chimera 2.0
Chimera has historically retained the equity interests in its securitizations
Information is unaudited, estimated and subject to change. 12
▪ $5.0 Billion loan portfolio and securitization
is consolidated on balance sheet
▪ Chimera retained $763 Million interests in
securities issued, including eligible horizontal
residual interests
▪ Chimera funded purchased interests through
combination of available cash, sale of
approximately $1.9 Billion Agency MBS, and
recourse financing
▪ Approximately $13 Million deal expenses to
be incurred Q2 2016
◦ Chimera expects high single digit yields on portfolio
without leverage
◦ Chimera expects to achieve mid-to-high teen yields
with added recourse leverage
◦ Deals are callable in 4 years
◦ GAAP leverage increased from 4.0:1 to 4.7:1
◦ Recourse leverage decreased from 2.6:1 to 2.0:1
RISK RETENTION PORTFOLIO
CIM 2016-1 CIM 2016-2 CIM 2016-3
Loan Portfolio $1.5 Billion $1.8 Billion $1.7 Billion
Weighted average coupon of mortgage 7.36% 7.40% 7.38%
Average loan age 128 Months 126 Months 126 Months
Average loan balance $108 Thousand $108 Thousand $107 Thousand
Senior class sold with initial coupon 70%, 2.95% 70%, 2.94% 70%, 2.94%
Retained Securities $226 Million $270 Million $267 Million
All data as of June 30, 2016
Information is unaudited, estimated and subject to change. 13
SMALL BALANCE RESIDENTIAL LOAN PORTFOLIO
Chimera has one of the largest seasoned, performing, small balance residential loan
portfolios in the Mortgage REIT Industry
$5.0 Billion 2016
Risk Retention
Seasoned Loan
Portfolio
$4.8 Billion
Springleaf Portfolio All data as of June 30, 2016
Total Current Unpaid Balance $8.8 Billion
Total Number or Loans 95,602
Weighted Average Loan Size $92,065
Weighted Average Coupon 7.23%
Average Loan Age 125 Months
Information is unaudited, estimated and subject to change. 14
SMALL BALANCE RESIDENTIAL LOAN PORTFOLIO
Positive pay history
Prepay experience
Relatively low
mortgage payment
• While loans were subprime at origination, average loan age shows
homeowners ability to pay
• Homeowner pay history is a good predictor of future behavior
• Borrowers with low loan balances and moderate FICO scores
generally have lower prepayment speeds
• Prepay experience has been moderate
• Average monthly mortgage payment is approximately $800
• Mortgage is cheaper than rent in most areas
Lower energy cost • Lower gasoline prices and heating bills benefit homeowner'spaying ability
Stable housing
market
• Home prices are stable to increasing nationally
• No supply issues
• More stringent lending standards
Information is unaudited, estimated and subject to change. 15
SUMMARY
Chimera has a unique portfolio of high yielding
assets, created through securitization, which would be
difficult to recreate in size and scale
Upward trending macro economic conditions for
energy prices and the housing market are positive for
the credit of Chimera's mortgage portfolio
New risk retention rules present an attractive
opportunity for companies like Chimera to sponsor
mortgage securitizations
Chimera has assembled a portfolio of unique mortgage
assets with a goal to provide high and durable income to
shareholders
Opportunity for
Permanent
Capital
Positive Macro
Economic
Environment
Franchise
Mortgage Assets
chimerareit.com