Chimera Investment Corporation (CIM)

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Chimera Investment Corporation (CIM)

Q2 2009 Earnings Call

July 30, 2009 11:30 am ET


Matthew Lambiase - President, Chief Executive Officer, Director

A. Alexandra Denahan - Chief Financial Officer, Secretary

Christian J. Woschenko - Head - Investments

William B. Dyer - Head - Underwriting

Wellington Denahan-Norris - Chief Investment Officer & Managing Director - FIDAC, Director - Chimera


Douglas Harter - Credit Suisse

Steven C. DeLaney - JMP Securities

Stephen Laws - Deutsche Bank

Joe Stieven - Stieven Capital

Henry J. Coffey, Jr. - Sterne Agee

Bose George - Keefe, Bruyette & Woods, Inc.

Andrew Wessel - JPMorgan

Neil Shyer (ph) - Private Investor

Jonathan Vyorst - Paradigm Capital Management

Papa Kasta (ph) - Locust Wood Capital

Jordan Hymowitz - Philadelphia Financial

Patrick Donnelly - Blackrock

Peter Holman (ph) - Parkmen (ph)

John Sights (ph) - Sterne Agee



Good morning and welcome, ladies and gentlemen, to the second quarter earnings call for Chimera Investment Corporation. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation.

This earnings call may contain certain forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933 and Section 21-E of the Securities Exchange Act of 1934. Forward-looking statements which are based on various assumptions, some of which are beyond our control, may be identified by reference to a future period or periods or by the use of forward looking terminology such as may, will, believe, expect, anticipate, continue, or similar terms or variations on those terms, or the negative of those terms.

Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors including, but not limited to, our business and investment strategy, our projected financial and operating results, our ability to maintain existing financing arrangements, obtain future financing arrangements, and the terms of such arrangements, general volatility of the securities markets in which we invest, the implementation, timing, and impact of, and changes to, various government programs including the US Department of the Treasury's plan to buy agency RMBF, the term asset, backed securities loan facility, and the public-private investment programs, our expected investment, changes in the value of our investment, interest rate mismatches between our mortgage-backed securities and our borrowings used to fund such purchases, changes in interest rates and mortgage prepayment rates, effects of interest rate caps on our adjustable-rate mortgage backed securities, rates of default or decreased recovered rates on our investments, prepayments of the mortgage and other loans underlying our mortgage backed or other asset-backed securities, degree to which our hedging strategies may or may not protect us from interest-rate volatility, impact of and changes in governmental regulations, tax law, and rates, accounting guidance and similar matters, availability of investment opportunities in real estate related and other securities, availability of qualified personnel, estimates related to our ability to make distributions to our stockholders in the future, our understanding of our competition, and market trends in our industry interest rate, the debt securities market, or the general economy.

For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see risk factors in our most recent annual report on Form 10-K and all subsequent quarterly reports on Form 10-Q. We do not undertake and specifically disclaim any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

I would now like to turn the conference over to Mr. Matthew Lambiase, Chief Executive Officer of Chimera Investment Corporation. Please go ahead, sir.

Matthew Lambiase

Thank you, Diana. Good morning and welcome to the second quarter earnings call for Chimera Investment Corporation. I'm Matt Lambiase, the CEO and President of Chimera. Joining me on the call today are members of the senior management team, our CFO, Alex Denahan, our Head of Investments, Chris Woschenko, our Head of Underwriting, Bill Dyer, and also joining me on the call, Wellington Denahan-Norris, the Chief Investment Officer for FIDAC and J Diamond, and Managing Director at FIDAC and a Director of Chimera.

We're all here today to review the results of the second quarter of 2009 and answer any questions that you may have. But before we take your questions, I'd like to make a few general comments and then have Alex review the quarter.

The second quarter of 2009 was a period of impressive growth for Chimera. We started the quarter with a market capital of roughly $500 million and after the company successfully launched and priced two secondary equity offerings, we ended the period with a market capitalization of greater than $2 billion.

We explained to investors in April that there were significant opportunities for the company to raise new capital to acquire non agency residential mortgage-backed securities at deeply distressed prices and that the previously announced government plans to increase liquidity in the mortgage market could potentially have a very positive impact on pricing in the future. Many investors agreed with us that the timing was right, and on April 21st we completed the first secondary of the quarter, raising $850 million.

The company went to work with the intent to prudently and carefully invest the new capital before the government's efforts became more clearly defined and while the market for residential mortgage-backed securities remained illiquid. Fortunately, after raising the capital we were able to take advantage of a wave of selling of RMBS from overseas banks and in short order, we were able to invest the capital into a higher-yielding portfolio. The income from this new portfolio allowed us to declare a higher divided for the quarter, an impressive fact when you consider that we more than doubled the share count and started investing later in the quarter.

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