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Text: Before we begin, I'd like to review the safe harbor statements.
During the call today, we may also discuss non-GAAP financial 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 Marria.
Joining me on the call today are Choudhary Yarlagadda, our president and chief operating officer; Rob Colligan, our chief financial officer; and Vic Falvo, our head of capital markets.
Before we begin, in November, we announced the retirement of Matt Lambiase.
Matt founded and led Chimera since 2007.
Under his leadership, Chimera grew to a $3.8 billion mortgage REIT and paid more than $5.2 billion in dividends to shareholders.
Matt was a great leader, friend and mentor for everyone in our company.
This quarter, Chimera continued its path of book value reappreciation.
Throughout the year, we worked diligently on the liability side of our balance sheet to enhance liquidity and strengthen our cash position.
These actions enabled us to retain our high-yielding credit portfolio and benefit from the improvements in asset prices that started in the second half of 2020.
Chimera's book value improved nearly 4% in the fourth quarter and over 16% at the middle of the year.
This improved book value, combined with the company's dividend policy, has generated a 6% economic return for the fourth quarter and a 22% economic return since June 30, 2020.
The housing market is robust across America.
The Federal Reserve has been very supportive of agency mortgage-backed securities with open market purchases for its own portfolio.
The Fed's purchases have helped lenders offer low mortgage rates to homeowners for new home purchases as well as lowering the cost of homeownership for those that desire to refinance.
The National Association of Realtors recently reported that in December, contract closing for existing homes increased with annualized pace of 6.76 million units.
This is the strongest pace we have seen since late 2006.
Housing inventories are low, demand is strong and mortgage rates are at all-time historic lows.
These are all indicators for continued performance in the housing and residential mortgage credit.
Chimera has a unique and differentiated residential credit portfolio among mortgage REITs.
At year-end, our GAAP investment portfolio included $12.6 billion of mortgage loans and $2.5 billion of non-agency RMBS.
Over 90% of the loans in non-agency securities on our balance sheet were originated prior to 2010.
With strong underlying housing fundamentals and the prospects of a post-pandemic economic recovery, we believe our seasoned mortgage portfolio of loans in non-agency RMBS is uniquely positioned to perform well.
The securitization market has demonstrated depth and resiliency in the past year and is a key component of our company's liability management.
Spreads on securitized mortgage loans widened as the pandemic began in the spring of 2020.
Subsequently, these spreads have grown tighter and closed the year at historically low levels.
Securitization enables us to finance our mortgage loans for longer term by transferring them from our loan warehouse into mortgage trust as we sell senior notes in each deal.
This process helps the company to accomplish a desired asset liability mix, while providing long-term nonrecourse financing.
For the full year, we sponsored seven reperforming loan securitizations, two prime jumbo securitizations, one agency eligible investor loan securitization and one non-performing loan securitization.
In total, Chimera sponsored $4.2 billion and 11 separate securitized deals for the calendar year 2020, and we retained $655 million in subordinate notes.
Securitization is Chimera's primary source of financing for our loan portfolio, and as of year-end, securitized debt represented more than 60% of Chimera's liabilities.
We firmly believe that retention of subordinate notes from Chimera-sponsored deals provides the best levered returns available in the market.
Secondarily, we utilized repo and other forms of secured financing for warehouse loans and subordinate notes as we seek to enhance our portfolio returns.
Since the onset of the pandemic, we have taken aggressive actions to reduce Chimera's financing risk by lengthening and strengthening our secured credit facilities.
At year-end, we have $3.2 billion of credit-related secured financings, which is 37% less than we were financing at the year-end 2019.
The average maturity of our credit-related financing is 15 months and $2 billion, or roughly two-thirds are either nonmark-to-market or limited mark-to-market.
In April, we issued convertible debt.
Concurrent with our offering, the company entered into a capped call transaction.
During the fourth quarter of 2020, we exercised a capped call option, and the company elected to receive a settlement of approximately 4.7 million shares for our common stock, which were then retired.
The retirement of these shares reduces the company's share count, benefiting the book value and future returns of our company.
Last night, our board of directors increased the size of our outstanding common stock repurchase authorization to 250 million.
This provides a valuable tool for our team as we evaluate the merits of new leverage investment opportunities related to the potential benefit of stock -- common stock repurchase.
Our balance sheet is strong, and we remain focused on delivering long-term value for shareholders.
Now, I would like to go through the fourth-quarter portfolio activity.
In October, we issued CIM 2020-R6, with $418 million of reperforming loans purchased in September.
The underlying loan from the deal had a weighted average coupon of 5.25% and a weighted average loan age of 164 months.
The average loan size in the R6 transaction was $102,000 and had an average LTV of 71%.
The average FICO score of the borrower was 638.
We sold 334 million senior securities from the deal and retained 84 million in subordinate notes, plus interest-only securities.
Our cost of debt for the CIM 2020-R6 was 2.19%, with an 80% advance rate.
In November, we issued CIM 2020-R7 and CIM 2020-NR1.
The R7 deal consisted of $653 million reperforming loans from the called CIM 2017-8 securitization.
The underlying loans in the deal had a weighted average coupon of 6.38% and a weighted average loan age of 172 months.
The average loan size in the R7 transaction was $81,000 and had an average LTV of 60%.
The average FICO score of the borrowers was 662.
We sold $552 million senior securities from the deal and retained $91 million in subordinated notes, plus interest-only securities.
Our cost of debt for the R7 deal was 2.22%, with an 86% advance rate.
The collateral for the NR1 securitization was $132 million of non-performing loans called from CIM 2017-8 deal.
The underlying loans had a weighted average coupon of 5.76% and a weighted average loan age of 170 months.
The average loan size was $100,000, had an 86 LTV and a 589 average FICO.
We sold $84 million notes, with a 4.49% cost of debt and a 64% advance rate.
Chimera retained $48 million of subordinate notes.
The R6, R7 and the NR1 deal were not rated by any of the rating agencies.
In December, we issued CIM 2020-J2, our second prime jumbo securitization for 2020.
The deal was rated by Moody's, Fitch and DBRS and had $327 million loans, with a weighted average coupon of 3.09% and a weighted average loan age of two months.
The average loan size was $912,000 and at an average FICO of 782 and an average LTV of 64%.
As we begin 2021, the housing market is booming, our mortgage portfolio continues to perform well, and we have ample cash position to make new investments.
Interest rates are at historic lows, and the securitization market is strong, with spreads on some classes near all-time tights.
This year, we will continue to seek ways to improve upon or lower our liability cost for securitized debt as well as the back-end financing of our retained securities from Chimera securitizations.
As of year-end, Chimera owns call rights from 7 billion in 16 previously issued same deals that are either currently callable or will become callable in 2021.
This provides a source of product to meet strong investor demand.
And lastly, our company's leverage is low.
As market conditions improve, we can increase our leverage either by growing assets, repurchasing equity or both.
Chimera is well positioned as we begin 2021.
We will use all the tools available to deliver the best risk-adjusted dividend to our shareholders.
I'll review Chimera's financial highlights for the fourth-quarter and full-year 2020.
GAAP book value at the end of the fourth quarter was $12.36 per share, and our economic return on GAAP book value was 6% based on the quarterly change in book value and the fourth-quarter dividend per common share.
GAAP net income for the fourth quarter was $129 million or $0.49 per share and $15 million or $0.07 for the full year.
On a core basis, net income for the fourth quarter was $72 million or $0.29 per share, and it was $334 million or $1.46 per share for the full year.
Economic net interest income for the fourth quarter was $117 million, and it was $513 million for the full year.
For the fourth quarter, the yield on average interest earning assets was 5.9%, our average cost of funds was 3.6% and our net interest spread was 2.3%.
Total leverage for the fourth quarter was 3.6 to 1, while recourse leverage ended the quarter at 1.2 to 1.
For the fourth quarter, our economic net interest return on equity was 12.5%, and our GAAP return on average equity was 15.8%.
Expenses for the fourth quarter, excluding servicing fees and transaction expenses, were $18 million, up slightly from last quarter.

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compname posts q4 core earnings per share $0.29.
q4 core earnings per share $0.29.
q4 gaap earnings per share $0.49.
board of directors increases existing share repurchase authorization for up to $250 million.

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