Ladies and gentlemen, thank you for standing by. Welcome to the Chimera Investment Corporation Fourth Quarter and Full Year 2021 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star and the number one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, press the Pound key. We ask that while posing your question, you pick up your headset to allow optimal sound quality. It is now my pleasure to turn the floor over to Victor Falvo, Head of Capital Markets.
Thank you, Ashley, and thank you everyone for participating in Chimera's fourth quarter and full year 2021 earnings conference call. Before we begin, I'd like to review the Safe Harbor statements. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which are outlined in the Risk Factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We encourage you to read the forward-looking statement disclaimer in our earnings release in addition to our quarterly and annual filings. During the call today, we may also discuss non-GAAP financial measures. Please refer to our SEC filings and earnings supplement for reconciliation to the most comparable GAAP 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.
Thank you, Vic, and good morning and welcome to the fourth quarter and full year 2021 earnings call for Chimera Investment Corporation. Joining me on the call today are Choudhary Yarlagadda, our President and Chief Operating Officer, Subra Viswanathan, our Chief Financial Officer, and Vic Falvo, our Head of Capital Markets. After my remarks, Subra will review the financial results, and then we will open the call up for questions. Low interest rates throughout most of 2021, combined with strong investor demand for high quality fixed income assets, allowed Chimera to optimize its liability structure, which we believe will benefit our shareholders over the long term. Securitization of mortgage assets is at the core of our company's DNA and is paramount to Chimera's market differentiation amongst its peers.
Through innovative structuring techniques, we have consistently demonstrated our ability to efficiently manage our portfolio's asset and liability risk while maintaining low recourse leverage and attractive net interest spreads. The reperforming loans we purchased in the period from 2016 to 2018 have generated portfolio yields that have exceeded our original expectations. Our re-securitization activity in 2021 enabled us to refinance the debt on these loans with a lower interest expense as well as release equity from the original purchases. For the full year 2021, we refinanced 13 of our previously issued reperforming deals with eight new securitizations on $6 billion of mortgage loans. Higher advance rates achieved through Chimera's re-securitization activity in 2021 freed up more than $900 million of capital and helped us accomplish many objectives towards the strengthening of our balance sheet.
Lower interest expense and higher advance rates on our 2021 securitizations have provided a great benefit to our asset and liability structure. It positively impacted the returns on our newly retained investments and allowed us to further shift financing from recourse to non-recourse, a clear enhancement for the long term. The results of our work in 2021 helped reduce the amount of recourse financing on our credit assets by over $800 million, while significantly lowering the interest expense on our credit-related repo. In addition, we successfully paid off $400 million high-cost debt plus the associated warrants and extinguished the remaining $50 million of convertible debt. Overall, securitized debt represents 70% of our total financing, up from 65% in 2020. Our cost of securitized debt was 2.40% at year-end, a 120 basis point reduction from 2020.
98% of our securitized debt has a fixed rate coupon, which is important as interest rates have begun to rise. The fixed rates created on our deals help to lock in a wide net interest spread on our securitized assets for a long period of time. Most of our securitizations are structured with explicit call dates. We called 13 deals in 2021 and have 14 deals callable in 2022, and our entire stack of securitized debt has a weighted average time to call of three years. These call dates provide opportunities to frequently optimize our funding structure, which has proven to be immensely beneficial. Now, I would like to take you through our asset purchases and fourth quarter securitization activity. In the fourth quarter, we purchased $540 million of reperforming loans.
We closed on $100 million of the loans in December and expect $440 million of these loans to close in the first quarter of 2022. For the full year 2021, we purchased over $3.2 billion in loans, consisting of $1.3 billion in reperforming loans, $320 million of business purpose loans, $1.2 billion in prime jumbo loans, and $435 million of agency eligible investor loans. For securitization activity in October, we securitized $354 million CIM 2021-R6 with reperforming loans from our loan warehouse. We sold $336 million in notes, representing a 95% advance rate, the highest advance rate we have achieved on reperforming loans to date. The average cost of debt for the R6 deal is 1.53%.
Chimera retained an $18 million investment in subordinate notes and interest-only securities. The R6 deal was rated by Fitch and DBRS and will be callable beginning September 2026. In November, we completed our 14th and final securitization of the year, $168 million CIM 2021-NR4 with non-performing loans from our warehouse. We sold $126 million senior securities, representing 75% of the capital structure. We retained $42 million in subordinate notes for investment. 2021 was the most active year for securitization in Chimera's history. In total, Chimera sponsored $8 billion in 14 separate securitized deals. six reperforming loan securitizations, four non-performing loan securitizations, three prime jumbo securitizations, and one agency eligible investor loan securitization. The reperforming and non-performing deals have been consolidated on our balance sheet.
The prime jumbo and the agency-eligible loans are not consolidated on our balance sheet. As we begin 2022, we are well positioned for the current market environment with higher rates and wider spreads. Our balance sheet is strong, with 95% of the capital allocated to residential mortgage credit. 70% of our financing is securitized debt, which we believe provides optimal long-term, non-recourse financing for our loan portfolio. Our net interest spreads is strong, largely resulting from the reduction in financing costs this past year, and our leverage is at historically low levels. We have accomplished a lot this year. Our securitization business remains strong. We have ample cash on hand to grow the portfolio. As we embark on 2022, we are set to continue to deliver the best risk-adjusted dividend to our shareholders.
I will now turn the call over to Subra to review the financial results.
Thank you, Mohit. I will review Chimera's financial highlights for the fourth quarter and full year 2021. GAAP book value at the end of the quarter was $11.84 per share, and our economic return on book value was -1.2% based on quarterly change in book value and the fourth quarter dividend per common share. The full year was 6.2%. The dividend for the fourth quarter was $0.78. GAAP net income for the full year was $596 million or $2.44. On an Earnings available for distribution basis, net income for the fourth quarter was $111 million or $0.46 per share, and $4.00 per share for the full year.
For one-time non-recurring items, we had approximately $0.08 of income that was derived from securities called during the quarter and $0.26 of income that was derived from securities. While this may occur from time to time, we don't expect this level of income every quarter. In some quarters, we could have a loss related to interest-only securities that are called. We will provide details on this income whenever it becomes material to our Earnings available for distribution. Our Economic net interest income for the fourth quarter was $155 million and $613 million for the full year. For the fourth quarter, the yield on average interest earning assets was 2.3%, and our net interest spread was 4.1%. Total leverage was X to one and recourse leverage was Y to one .
Return on average equity was 18.1%. Lastly, our full year 2021 expenses, excluding servicing fees and transaction expenses, were $69.1 million, in line with previous year. That concludes the remarks. We will now open the call for questions.
Operator at this time. If you would like to ask a question, please press star one on your touch tone phone. You may withdraw your question at any time by pressing the pound key. Once again, that is star and one. We will take our first question from Bose George with KBW. Please go ahead.
Hey, everyone. This is actually Mike Smyth on for Bose. My first question, in your prepared remarks, you mentioned your most recent RPL deal with the 95% advance rate. Just wondering on that deal, and then would you ever hold any repo against that as well, or do you get a high enough unlevered ROE on the subordinate fees?
Hey, Mike, this is Mohit. How are you? The question as it relates to the 2021 R6 deal, as mentioned in the opening remarks, we did hold an $18 million investment
Plus the derivatives that were created and the returns on the sub stack and the IOs will produce very high single digits, low double-digit yields. Depending on the type of financing that we could get on the sub stack, we could potentially repo it. At the moment, you know, it's as well we've highlighted on previous calls, the composition of the financing on the retained pieces. You know, we would prefer non-mark-to-market and longer tenor, so perhaps we could potentially add that in the future.
Great. That's helpful color. We've heard that volatility has picked up, you know, a bit in the securitization markets over the last few weeks. Just curious to hear your thoughts on that and, you know, how long you expect any volatility to persist for.
Yeah. I mean, we have seen an uptick before. You know, and typically the GSE effect of bringing buyers in has, but the amount of deal flow has definitely been elevated. A lot of the volatility is on the prime jumbo and the non-QM side. The seasoned reperforming securitizations are few and far between, even in last year, outside of us and a handful of other issuers. Again, I think the rate volatility macro event has led to the large amount of deal volume in the first six weeks, has also put a lot of pressure on spreads in the near term. We think it'll stabilize, you know, with housing still remaining strong and yields on these assets, on these new deals that you couldn't get a year ago, still is an attractive place to park money, so we're still optimistic.
You know, as mentioned in the opening remarks, we have 14 deals that are callable over the year, and we will see how the market is, as we sort of take advantage of that, as we did last year.
Great. That's helpful. Then just as a follow-up, you know, have you seen any changes in loan prices to reflect the wider spreads in the securitization market?
Loan pricing has been more sticky than where execution is occurring on the new issue space. Again, the translation on the new issue side, whether it be prime jumbo, agency eligible investor or non-QM spread widening there on the loan front. Again, the RPL space, the main sellers there remain the GSEs. There are some funds that will liquidate. What we've seen so far this year, pricing is marginally wider, but not significantly wider, unlike the, prime jumbo and non-QM space.
That's helpful. Thank you for taking the questions.
Thank you, Mike.
We'll take our next question from Eric Hagen with BTIG. Please go ahead.
Hey, thanks. Good morning. Maybe a couple from me. For the $108 million in unrealized losses for the period, can you give some color on where those marks from? And then you obviously mentioned the callable securitized debt. Can you talk about how you guys think about the trade-off between potentially higher funding costs as those deals come up for call and the ability to get more leverage and restructure your advance rate and such? Thanks.
Sure. Eric, I'll start with the second part of the question and Subra can give some color on the first part as it relates to the unrealized losses due to fair value changes. You know, the balance between or the economics, I should say, at looking at calling a deal versus not calling a deal are twofold, and you highlighted the two things. One is if there's a reduction in the all-in financing cost. Two, if the structural leverage is not optimal, and we could optimize it via the call and take out some equity. You know, those are the two things we look at anytime we make a call.
For the calendar year 2021, we had the benefit of being able to do both, reduce financing costs quite significantly while also achieving a higher advance rate leading to an equity release of over $900 million. If you look at the deals that are in the supplement on the last page, the 14 deals have delivered quite substantially. No doubt, based on the strong securitization market, strong housing, we should be able to obtain a similar advance rate as we did on the securitizations we did in 2021. That's the first factor. Given the timeframe in which those deals were executed, if you go back to 2018, 2019, rates were obviously higher than they are today.
In some cases, you may still have a cost savings, but being able to take out equity in a rising rate environment with wider spreads should still give us the ability to take advantage of redeploying new capital into new assets. You know, hopefully that answers your question there. As far as the fair value, I'll let Subra touch upon that and the breakdown of that.
Thanks, Mo. On the securitized loans, we saw a reduction or unrealized losses. The Non-Agency senior securities positions and on the securitized debt, which was our liabilities, we saw a 114 basis point drop. That's the breakdown.
Yeah, a lot of our legacy assets are obviously rolled, and the move in rates in Q4 was more front-loaded, the 10-year. You know, that change in rates is what led to some of our legacy assets pricing going down further. That's helpful. On the securitized debt that is up for call this year, can you say what the fixed rate coupon is on the debt?
I don't have that number here in front of me, but we could get that number for you guys. I think it should be in the financial-
Yeah. All right. Thank you very much. Appreciate it.
We'll take our next question from Kenneth Lee with RBC Capital Markets. Please go ahead. Your line is open.
Hi. Thanks for taking my question. You touched upon this briefly, but just wondering if you can just further elaborate about your expected returns on the resi mortgage loans in the current environment. Thanks.
Sure. Hey, Ken. You know, as it relates to levered returns on what we created are, you know, low double digits on a loss-adjusted basis. Implying some leverage depending on the form it comes in, high double digits, you know, between 17%-18%, depending on, again, the leverage you embed on those. As we look forward, you know, obviously there's been some more volatility in the new issue market, I guess primarily on the prime jumbo and non-QM side. That should also put pressure on loan pricing, although it hasn't been reflected yet. We think, you know, those two things should move in tandem and your returns on retained pieces even this year should produce, you know, pretty attractive risk-adjusted returns in the same context as last year.
Gotcha. Very helpful. One follow-up, if I may. Just given the current environment and obviously, the macro backdrop, how would you characterize your current investment stance? In other words, do you expect levels or could you get a little bit more attractive potentially? Thanks.
Yeah. No, that's a good question, Ken. Thank you. You know, as we planned last year, we played defense just, you know, the uncertainty, you know, the pandemic and how long that'll go on for. We had still a very successful year in accomplishing and buying $3.2 billion portfolio. As we sit here with, you know, 0.9x recourse leverage and ample liquidity at our disposal, we actually want to take the offensive here, whether it be on the agency side, given the spread widening and more clarity from the Fed unwinding or paring down their, you know, activity. You know what's happening on the new issue market, which should lead to some widening on loan spreads. I think we are actually very well positioned to take advantage of all of those investment opportunities that may become available.
I think we will look to take leverage up from where we are at 0.9 higher here.
Great. Very helpful. Thanks.
Thank you, Ken.
We'll take our next question from Trevor Cranston with JMP Securities. Please go ahead. Your line is open.
Hey, thanks. Good morning. You guys mentioned the sort of change in pricing you've seen primarily in the prime jumbo and the non-QM spaces in Q4 and in the first quarter. Can you also talk about any changes you've seen in terms of you know the supply of loan products given volatility in the first quarter and how you expect that piece to
Sure, Trevor. I'll take this one. As far as the prime jumbo and non-QM stuff goes, I think from an originator standpoint, we are going to see them continue churning, if you will, their origination channels on this infrastructure they have built. I think we will have ample opportunity to buy as much as we want of that product. I don't think, you know, to the extent that we did a total of four securitizations on new issue on agency eligible investor. On the RPL side, you know, like I said, a lot of that flow is primarily coming from the GSEs. There are $12 billion-$18 billion of loan sales a year. We will see what their calendar looks like for 2022. We did get the first announcement from Fannie Mae.
We think again that supply will be more controlled by, you know, the GSEs. We'll keep that market at least from a spread perspective more controlled than us just bringing deals to the market too, you know, and how much the rates have moved in the first six weeks of this year.
Then, you know, given the magnitude of the move in rates, and some credit spread widening we've seen in the first quarter, do you guys have an estimate as to how your book values moved since the end of the year?
I think our approximate change in book value since the start of the year is.
Up 2.5%. I'm sorry. Down 2.5%. Okay. Gotcha.
Approximately down 2.5%.
Sure.
Doug Harter with Credit Suisse. Please go ahead. Your line is open.
Just, Mohit, as you're looking at the opportunity set, you know, can you just talk about the relative attractiveness of legacy versus agency and, you know, how, you know, as you look to get a little bit more offensive as you said allocate across those opportunity sets?
Sure. You know, I'm assuming when you say legacy securities.
Of course.
On the loan front, I think again, given the rate environment we're in, convexity is gonna play a bigger role this year than in prior years. Having 170-month seasoned loans and knowing how those loans are gonna prepay and behave is gonna be a lot more telling. That remains a big focus for us. You know, we were successful in adding $1.2 billion of those loans last year. We are hopeful from the GSEs this year that we'll have more success. As far as new originations go, I'd say opportunities for us to add loans there as well. But a lot of that will be subject to where the securitization exits are on those loan purchases and what the retained pieces look like. As we've always done, that'll drive our decisions.
Obviously some of the loan level adjustments that the GSEs have made at the start of this year lead to a larger private label exit for some of these originators. We just need the market to stabilize on the new issue side, on the securitization side for that, for us to be able to take advantage of that. You know, if you look at more broadly, you know, the agency space where we really haven't had any agencies since March of 2020. We've seen a 25-30 basis point widening of the basis so far since the Fed announcement. You know, we think those could widen out a little bit more.
Again, as we look at it, the all-in yields that are attainable today are probably at the levels last seen in 2019 to make relative value sense over the course of this year, and we'll take advantage of those opportunities.
Great. That's helpful. Thank you, Mohit.
Thanks, Doug.
There are no further questions at this time. I will now turn the call back over to Mohit for any closing remarks.
Thank you, Ashley. Thanks everyone for joining us today. We look forward to speaking to you on our Q1 call.
Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.