Chimera Investment ((CIM)) has held its Q4 earnings call. Read on for the main highlights of the call.
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During the latest earnings call, Chimera Investment Corporation presented a mixed outlook. Despite reporting a GAAP net loss in Q4 and grappling with housing market challenges, the company showcased notable achievements. The acquisition of Palisades and the strong demand for new homes were highlighted as positive developments. Overall, the sentiment was slightly positive, driven by strategic acquisitions and plans for diversified growth.
Home Price Appreciation
US home prices experienced a 4.3% increase between Q3 2023 and Q3 2024. This rise significantly boosted homeowners’ equity, reflecting a positive trend in the real estate market.
Strong Demand for New Homes
The company reported that completed new homes are estimated to sell in just 2.8 months. This indicates a robust demand for newly built homes, showcasing a healthy market appetite.
Increase in Credit Spreads and Investor Demand
Credit spreads tightened, and non-agency RMBS gross issuance nearly doubled, from $71 billion in 2023 to $137 billion in 2024. This reflects strong investor demand and confidence in the market.
Palisades Acquisition
Chimera’s acquisition of the Palisades Group enhances its ability to provide third-party investment management and advisory services. This strategic move aims to boost the company’s service offerings and expand its market footprint.
Quarterly Dividend Increase
The company increased its quarterly dividend by 12% in 2024, signaling confidence in its financial stability and commitment to returning value to shareholders.
Positive Full Year Economic Return
Despite challenges, Chimera achieved a positive full-year economic return of 4.4% for 2024. This highlights the company’s resilience and effective management strategies.
Successful Securitization
Chimera successfully closed its first securitization of 2025, financing $287 million of investor loans. The strong demand for this securitization reflects market confidence in Chimera’s financial products.
GAAP Net Loss in Q4 2024
The company reported a GAAP net loss of $168.3 million, or $2.07 per share, for Q4 2024. This was a significant challenge faced during the quarter.
Negative Economic Return on GAAP Book Value in Q4
Chimera experienced a negative economic return on its GAAP book value of 10.1% in Q4, pointing to some financial difficulties during the period.
Housing Market Challenges
Sales of previously owned homes declined for the third consecutive year, hitting the lowest level since 1995. This trend presents a significant challenge for the housing market.
Interest Rate and Yield Curve Impact
Despite Federal Reserve rate cuts, the 10-year treasury rates rose, and agency MBS spreads widened. These factors negatively impacted Chimera’s GAAP book value.
Increased Transaction Expenses
Transaction expenses rose by $4.7 million in Q4 2024, primarily due to the Palisades acquisition. This increase in expenses was a financial consideration for the company.
Forward-Looking Guidance
Looking ahead, Chimera plans to diversify its portfolio and enhance liquidity. The company aims to increase agency RMBS holdings and explore opportunities in mortgage servicing rights. With a positive full-year economic return and strategic acquisitions, Chimera is positioning itself for sustainable growth in 2025.
In conclusion, Chimera Investment Corporation’s earnings call revealed a slightly positive sentiment, with strategic moves like the Palisades acquisition and a strong demand for new homes standing out. While challenges like a GAAP net loss in Q4 and housing market difficulties were acknowledged, the company’s forward-looking plans reflect a commitment to growth and diversification.
