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Chimera Investment Corp (NYSE:CIM)
Q1 2020 Earnings Call
May 6, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Chimera Investment Corporation First Quarter 2020 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] It's now my pleasure to turn the floor over to Emily Mohr of Investor Relations. Please go ahead.

Emily Mohr -- Investor Relations

Thank you, Holly. And thank you everyone for participating in Chimera's first quarter 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 President and Chief Executive Officer, Matthew Lambiase. Please go ahead.

Matthew J. Lambiase -- President and Chief Executive Officer

Welcome to the first quarter earnings call for Chimera Investment Corp. Joining me on the call this morning is Mohit Marria, our CIO; Rob Colligan, our CFO; Choudhary Yarlagadda, our Chief Operating Officer; and Vic Falvo, the Head of our capital markets. We'll make some brief comments and open up the call for questions.

I'd like to start by saying that all the employees at Chimera are healthy and working remotely from home. We implemented our contingency work plan in early March, and have not experienced any significant technology issues. We all hope view and your family stay safe and healthy as well.

In the month of March, the COVID-19 pandemic created an environment of fear and extreme uncertainty resulting in near catastrophic conditions for the fixed income markets. Many investors felt that the government mandated lockdowns would likely bring an economic recession and they sold their credit investments while reinvesting into safer risk-off assets such as T-Bills, U.S. Treasury notes and cash. Credit-focused bond funds and ETFs saw record outflows forcing fund managers to sell their holdings into thin markets creating heightened volatility and market dislocations. All sectors of the fixed income market, apart from U.S. treasuries, experienced sharp downward price movements. So investors who use leverage as part of their strategies we're also forced to sell assets as they attempted to meet margin calls from their repo lenders.

Market conditions witnessed in March of 2020 were very similar to that experienced in the the 2008 crisis. Yet, price movements were swift and occurred over a much shorter timeframe. The Federal Reserve was quick to respond and on March 15, a Sunday night, they announced many initiatives to combat the worsening economic conditions. The Federal funds rate was cut to 0%, new purchase plans for treasuries and agency mortgage-backed securities were implemented and funding programs like the TELS and commercial paper facility were revived from the 2008 Federal Reserve playbook. The Fed's actions were largely helpful bringing order to many areas of fixed income market including agency mortgage-backed securities. Liquidity programs for residential credit securities were not offered by the Federal Reserve and they continue to trade in a challenged fashion in the secondary markets.

Like the Fed, Congress also did its part by passing the CARES Act with the intent to help individuals most directly impacted by the COVID-19 pandemic. The U.S. economy is vastly different today than where it was prior to the COVID-19 crisis. The abrupt shutdown in the U.S. economy has swiftly created some of the worst economic problems since the Great Depression. In these past six weeks, 30 million people have applied for unemployment benefits, a sharp contrast to the 3.5% unemployment rate that we had in February. Many U.S. homeowners have decided to take advantage of newly created mortgage forbearance programs. In the near term, the government initiatives, coupled with mortgage forbearance, will soften the immediate blow to the U.S. economy. But these may have lasting negative impact on the housing and mortgage market, should they persist for an extended period.

Over the past several years, Chimera has taken a number of balance sheet initiatives that helped it in this difficult period to protect our book value to meet all the margin calls from our repo lenders and to pay our dividends. Our agency mortgage-backed securities portfolio has always served dual purposes, primarily as a source of spread income, and secondarily as a source of liquidity rather than selling our higher yielding legacy assets. This quarter, we sold our agency pass-through securities to pay down debt and further deleverage our overall portfolio. We ended the first quarter at 2.2 times recourse leverage, down 35% from year-end.

Over the past decade, we've purchased or acquired approximately a $14 billion portfolio of legacy non-agency securities and season-low loan balance mortgages. This portfolio is funded through securitization as well as repo leverage, but it has not been immune to downward price movements. We've worked diligently to protect this portfolio, which has historically been a consistent driver of earnings for our company and makes Chimera's portfolio differentiated in the mortgage REIT industry. We remain hopeful that at some point in the future, the pricing of these assets reverts to it's fundamental value, rather than the illiquid pricing we're currently experiencing. A restarting of the economy should be a good first step in the process, which we believe could lead to an improvement in credit spreads and a recapturing of our lost book value experienced in the quarter.

In the last few months, we've been busy executing transactions on the liability side of our balance sheet. In March, Chimera executed two mortgage securitizations, totaling $883 million. We've arranged over $800 million of longer-term refocus over these for our credit assets and we executed $374 million of convertible debt, which further diversifies our liability and capital structure. While pricing is never ideal in a crisis, we are heartened to be able to access the capital markets.

Looking forward, it's hard to have a clear view on how the U.S. economy is going to perform as it starts back up. We are in uncharted waters with regard to the high unemployment and severe changes in social habits. We would love to believe that we'll be back to a V-shape recovery, but it's most likely going to take longer and be difficult to get back to where we were in February. The mortgage and housing market outlook will also be challenging in the very near term. Mortgage forbearance stays at a high degree of uncertainty to mortgage credit and we will be cautious until we have more clarity on the forbearance duration and the totals in our portfolio. Given all these complexities, earnings for the next few quarters will be difficult to predict until the economic conditions clarify. We remain focused on maintaining liquidity, extending our financing terms, and keeping our credit portfolio intact. We are navigating through a very turbulent period but we are very hopeful that the U.S. economy will recover and the mortgage market will return to more normal footing when the economy restarts and people get back to work. And with that, I'll turn it over to Mohit.

Mohit Marria -- Chief Investment Officer

Thank you, Matt. The first quarter of 2020 was an extremely volatile period in the U.S. fixed income market. The 10-year treasury note began the year at 1.92% and fell 125 basis points to end the first quarter with a yield of 0.67%. The Federal Reserve cut its overnight lending rate by 150 basis points over a two-week period as part of its response to the COVID-19 pandemic. The large drop in interest rates, sharp increase in rate volatility and investor flight to quality had a large imbalance of funds across most fixed income products. Investors that utilized leverage were forced to sell their securities at low prices to meet margin calls on existing repo transactions. Chimera was not immune. In the first quarter, we utilized the combination of cash balances, unpledged [Phonetic] securities and outright sales of our agency assets as part of our overall liquidity management strategy. Chimera has successfully met all margin calls to date.

Chimera's swift [Phonetic] funding strategy is multifaceted. The primary objective has been and continues to be utilizing securitization to create long term funding for our credit assets. At the end of the first quarter, we had nearly $8.5 billion of securitized debt outstanding. Secondarily, we use repo financing on our retained assets, legacy non-agency securities, and loans. We typically use longer repo maturity dates when financing these assets, which enables more effective counterparty and portfolio management. And post quarter end, we added two new long term credit financing facilities totaling $800 million. These facilities contain attractive features including a significant reduction of daily mark-to-market risk on our credit assets.

We successfully continued our loan securitization strategy this quarter and in March, we priced two deals with season reperforming loans from our warehouse. CIM 2020-R1 has $391 million underlying loans with a weighted average coupon of 5% and a weighted average loan age of 158 months. The average loan size in the R1 securitization was $123,000 and had an average FICO score of 613. We sold $312 million senior securities with a 2.35% cost of debt. Chimera retained a March 2023 calendar call option on the R1 securitization.

In addition, we securitized CIM 2020-R2, which had a $492 million underlying loans with a weighted average coupon of 3.79% and a weighted average loan age of 161 months. The average loan size in the R2 deal was $219,000 and had an average FICO of 690. We sold $352 million senior securities with a 2.55% cost of debt.

In response to the significant drop in interest rates, increased price volatility and repo margin calls, this quarter, we sold our entire portfolio of $5.7 billion residential agency pass-throughs. These pass-throughs were the most liquid and lowest yielding assets in our portfolio and have always been part of our strategy to meet our liquidity needs. We also terminated all our agency hedge positions comprised of U.S. Treasury note futures and $4.1 billion notional balance on interest rate swaps.

The agency CMBS portfolio, which has taken us many years to accumulate, was retained. As of the quarter end, this portfolio totaled $2.5 billion. We continue to like the spread income generated by this portfolio and the superior convexity profile of Ginnie Mae project loans relative to residential agency pass-throughs. These securities finance well in the repo markets and have some more rates and haircuts as traditional agency pass-throughs.

The unique [Indecipherable] explicit prepayment lockout and penalties are valuable security trades as interest rates fall. After quarter end, spreads on agency CMBS began to tighten when the Fed began purchasing these assets as part of their quantitative easing program. Portfolio activity this quarter has significantly reduced the company's risk exposure as measured by recourse leverage. We ended the quarter at 2.2 times recourse leverage down from 3.4 times at year-end and 3.8 times at the end of the third quarter of 2019. This represents a 35% reduction of recourse leverage over the last three months and 42% over the past six months. It is important to note, due to current market conditions, our high-yield credit assets, which is the largest component of our portfolio, have been marked down in book value -- have been marked down in value, which has contributed to Chimera's lower book value this quarter. Our ability to retain this portfolio enables the opportunity for security value increases over time as economy restarts and the country works its way through the current pandemic.

As we move forward to the current economic crisis, we remain cautiously optimistic. We will continue to space out the repo maturities and seek longer tenure for our credit repo. And as we get more visibility into the housing and mortgage economics resulting from the crisis, we will seek to deploy cash into new investment opportunities as we have for the past decade. I will now turn the call over to Rob to discuss our financial results.

Robert Colligan -- Chief Financial Officer

Thanks, Mohit. I'll review Chimera's financial highlights for the first quarter. GAAP book value at the end of the first quarter was $12.45 per share. Our GAAP net loss for the first quarter was $389 million or $2.08 per share. On a core basis, net income for the first quarter was $106 million or $0.57 per share. Economic net interest income for the first quarter was $151 million. For the first quarter, the yield on average interest earning assets was 5.3%. Our average cost of funds was 3% and our net interest spread was 2.3%.

Total leverage for the first quarter was 4.7 to 1, while recourse leverage ended the quarter at 2.2 to 1. Expenses for the first quarter, excluding servicing fees and transaction expenses were $18.6 million, consistent with last quarter. Given the current market environment, we wanted to provide additional information about liquidity. We currently have approximately $650 million in cash and unencumbered assets. This is after we paid both our preferred and common stock dividends totaling $111 million. Also, in April, we closed a public convertible bond offering that raised $374 million. We believe it's important to have ample liquidity in this market and we're happy that the capital markets were open for us to achieve this goal. We will continue to monitor our liquidity and assess opportunities to increase liquidity and balance, supporting our current portfolio and finding new opportunities in the market. That concludes our remarks and we'll now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question is going to come from the line of Doug Harter with Credit Suisse.

Doug Harter -- Credit Suisse -- Analyst

Thanks. Can you just talk about kind of, I guess, just how you're thinking about liquidity kind of as you mentioned the agency portfolio acted as a kind of liquidity buffer? Just how you think about kind of what the absence of the agency RMBS portfolio, what's the right level of liquidity you hold today is in the current environment and kind of balancing that with the opportunity to deploy capital?

Matthew J. Lambiase -- President and Chief Executive Officer

Well, yeah, thank you for the clubbed question. I think we are at a pretty good spot with liquidity at the moment with both cash and unleveraged securities. I think it's kind of a day by day thing with us right now at the moment. We are looking at opportunities in the loan space. We're looking at a lot of stuff in the market. The market is dislocated but it's about trying to make sure you have locked down financing and trying to make sure that you understand what, kind of, the price trajectories of the assets could be going forward. So I look at this as we've just come out of a very chaotic period and everything is starting to settle down now and I think we look at it, we feel pretty good about our cash positions and our liquidity at the moment. And I think it's a day by day process for us to really think about best opportunities in the market to start deploying capital.

I think the loan space is still dislocated. There's a lot of overhang there, we think there's a lot of opportunity. It's just now, for us, thinking about how we can start executing securitizations in this marketplace and that's where we spent a lot of time with investors in our securitizations a lot of time, talking to the different capital providers in that space to see if we can get that market up and going again. And I think it's going to happen. It's just a matter of when now and again we're coming out of this very chaotic market and everything is a day by day process.

Mohit Marria -- Chief Investment Officer

And just to add on to what Matt said, in addition to the cash and unencumbered assets we have currently as of the end of April, we still have a core agency CMBS portfolio that's over $2 billion and with the Fed also buying agency CMBS, it is a form of liquidity for us in the event there is further disruption to the market.

Doug Harter -- Credit Suisse -- Analyst

Great. And then just a follow-up on your comment about kind of locked down financing and securitization. Would that be looking to kind of securitize some of the assets that are -- credit assets that are currently funded by repo or would that be for kind of new assets? I guess, just how are you thinking about that?

Matthew J. Lambiase -- President and Chief Executive Officer

You know, I think it's a little bit of both. I think it's actually a couple of things. I think to get a deal done, you would probably want to do what you can get done. So I think, it's a very -- it's an interesting market from the sense that we don't have a lot of clarity on senior buyers and what they want to buy. I think maybe doing one of the deals that we have, a callable deal or something like that would make most sense -- lot of sense upfront. But yeah, we would -- we've been looking at packages of loans that are available for sale in the market right now and I think there's a lot of, I think, very attractive assets out there. It's just trying to figure out the exit securitization for them. So you know.

Doug Harter -- Credit Suisse -- Analyst

Yeah.

Mohit Marria -- Chief Investment Officer

Doug, again, sort of going back to our last earnings call, and the full fiscal 2020, we had over eight deals and $5 billion of UPB that becomes callable over the calendar year 2020 and our hopes were to sort of tap the capital markets and relever those structures. But to Matt's point, we are still evaluating that, obviously with what happened in March and the securitization new issue market sort of being on pause, we think once the market stabilizes, that window will open up again. But as I mentioned on the opening remarks, we did complete two securitizations of loans from our warehouse lines in the midst of the crisis, both deals closing in March, where we were able to successfully sell senior bonds at pretty attractive levels. I think in the near term, those may not be available, but we are evaluating how to, one, pair down the warehouse lines further by securitizing in terms of financing those assets in addition to the relever strategy that we've employed over the last several years.

Doug Harter -- Credit Suisse -- Analyst

Great, thank you guys for that answer.

Operator

Thank you. Our next question will come from the line of Eric Hagen with KBW.

Eric Hagen -- KBW -- Analyst

Hey, thanks, good morning, guys and I hope you're doing well. What's been the rate of borrowers in your portfolio asking for forbearance over the last, call it, six or six weeks or so? And how should we think about the impact of forbearance overall in the portfolio? Additionally, within those portfolio -- the loan portfolio, can you just give us a breakdown of what the profile is with Cincinnati at this point? I know that the majority of it is just probably seasoned low balance loans, but I know that there is some prime jumbo and there is some investor properties. Can you just give us a breakdown of what's in there? Thanks.

Mohit Marria -- Chief Investment Officer

Hey, Eric. This is Mohit. We just went through the April remaining cycle and nothing materially were different from what was experienced as of March from a forbearance end plan on our portfolio. But we do think that is going to uptick as sort of the COVID pandemic started in middle of March, let's say, in the stride and with the government announcing those programs, people probably took more advantage of that in April, and we probably expect May. So the next remaining cycles will be more telling. I think it will -- given the profile of the portfolio itself, it will track the way the GSE portfolios are performing, Fannie, Freddie, and Ginnie. So as I said, as we get more numbers, we could report those on the Q2 earnings call, but nothing materially different as it stands today. Again, the vast majority of the portfolio is fees and reperforming. It has over 150-plus months of seasoning, it's mid-600 FICO and the effective WAC on the portfolio is just under 7%. The investor at some of the newer origination stuff that we have done over the last several years is a much smaller portion of the footprint of the company and it is not even consolidated in our balance sheet. So it's not part of any of the numbers reported there.

As far as performance on the newly originated stuff goes, again, nothing materially different from the performance that we've seen through April and, like I said, I think we will see how May and June play out, but that's when we expect a larger uptick in people sort of choosing the forbearance and deferral path.

Eric Hagen -- KBW -- Analyst

Got it. Okay, great. Thank you very much for that. And then how should we think about the rate of just principal paydown and cash flow, generally in the portfolio and what the assets are able to throw off as far as cash flow without the agency portfolio now? In other words, there is sort of a natural cash flow and liquidity balance that you can strike, but having an agency portfolio -- and I know a lot of the assets in the portfolio at this point are subordinate in nature and structured. So how should we just think about the ability to reduce leverage, if you will, with -- naturally with cash flow based on what the portfolio looks like today? Thanks.

Matthew J. Lambiase -- President and Chief Executive Officer

I mean as far as the way the portfolio is structured, I mean, we, to your point, have limited principal reinvestment risk, given multiple of our securities are locked up. So from a performance standpoint and interest collections, again going through the April remaining cycle, we didn't notice anything different in our collection even on the retained portfolio as far as delevering goes, the structures themselves, I think we've mentioned, we have $8.5 billion of secured debt outstanding, which is entitled to receive all the principal paydowns coming in on our rerent mix as well as our loan portfolio and that's how we're going to get the delever, right, that number will go down as principal paydown on the retained position that we have that have delevered over time, any dollar or principal coming in will probably gradually decrease the portfolio leverage.

What we've also noticed post events that took place in mid late March is the leverage in the system is overall lower too, as haircuts from repo providers have also gone up. So I think that's also going to reduce the leverage, so you won't just have significant amount of recourse leverage available to you at least in the near term.

Eric Hagen -- KBW -- Analyst

Got it. And then just following up on some comments in the opening remarks. What percentage of the book value impact in the first quarter was realized versus unrealized losses [Indecipherable]? Thanks.

Robert Colligan -- Chief Financial Officer

Yeah, it's mostly unrealized. We didn't sell a lot of our non-agency portfolio or obviously, we didn't sell any loans that would have added an unrealized loss on those. We did sell some agencies and you'll see this when the financials come out tomorrow, but the agency that we did sell, we actually had realized gains on those because we had purchased them a few years ago at lower levels. And even, given the disruption in the market, all those were realized gains. So, we didn't sell anything material on unrealized loss. And if any, I don't think -- I don't remember any, but...

Matthew J. Lambiase -- President and Chief Executive Officer

And that really is our hope is that -- you know, we thought, and we still think that the end of March, early April was just a crazy period in the marketplace. And you don't want to sell your assets and realize losses, especially the assets that we took so much time to gather, securitize and we think are great assets to have. So we think at some point in the future that these asset prices are going to come back and we want to write the book value back up and I think that's why we didn't realize or why we didn't sell into those -- the liquidity void in at the end of March.

Eric Hagen -- KBW -- Analyst

Got it. Thank you very much and stay well. Appreciate it.

Matthew J. Lambiase -- President and Chief Executive Officer

Yeah.

Operator

And our next question is going to come from the line of Trevor Cranston with JMP Securities.

Trevor Cranston -- JMP Securities -- Analyst

Thanks. You touched on this a little bit, but I was wondering if you could provide some additional color on the terms you're able to get on the longer-term repo you're able to add in April. And maybe just some general commentary sort of on what haircuts and rates look like today versus maybe January and February and kind of what you're seeing in the landscape in terms of how many counterparties are out there, if there has been significant reduction in people who are willing to lend against loans or credit securities. Thanks.

Mohit Marria -- Chief Investment Officer

Hey, Trevor, I'll start backwards with the latter part of your question about financing counterparties. We had over 20-plus counterparties that were financing our assets as we came into 2020. The vast majority of those counterparties will still finance, but some of the guys that were financing us -- and the reason we have such a diverse group was because of the agency financing needs we have, as we've pared down the agency position, we reduced the overall number of counterparties that we are exposed to, just naturally, because we didn't need them for financing those assets. But those counterparties still exist and are available to lend in the event we were to go back into and add agencies.

On the credit side, same thing, anybody that was financing us continues to finance us. As Rob just mentioned, we haven't really sold any assets on the credit side to affect that. And we've had sort of rolls that have come up in March and post-March that have rolled without any issues. Like I said, people have adjusted the cost of that financing and the haircuts associated with it, but the financing is still there. As we mentioned in our opening remarks, we have taken [indecipherable] to add longer tenures on our repo to mitigate some of the mark-to-market risk.

We've entered into two different transactions currently totaling $800-plus million and the tenure of those assets range anywhere between 12 to 24 months. We've always sort of kept our credit assets focus on longer tenure. We've done, in the past, two-year, three-year trades and we're locking some of that up again, given the uncertainty that we see coming in the coming months, as it related to forbearances and deferrals. And the cost of that financing is subject to what type of assets are being financed and the tenure. But as I mentioned, generically, financing costs have gone up just for the cost of balance sheet.

Trevor Cranston -- JMP Securities -- Analyst

Okay. That helps. Thank you. And then you talked about some opportunities potentially in the loan space for investment. It sounds a little bit unclear exactly when you might be able to capitalize on some of that. Can you talk about how you're sort of balancing looking at opportunities such as those versus other things like just buying your own stock back? Thanks.

Mohit Marria -- Chief Investment Officer

Sure. So, as Matt mentioned, obviously the security side, which was in disarray in mid-late March has come back pretty significantly in some of the spread tightening that's happened in April. I think where there is still opportunity is in the loan space. And as you can recall from the Q4 earnings call, there has been a lot of talk about non-QM loans and having partnerships and having a full agreement. And as we have mentioned in the past, we never liked the convexity profile and the returns never really worked for us. Now with where pricing is, it looks a lot more attractive. There is an overhang of supply, the technical side is also favorable with all the different originators sort of halting originations on that product as a result of some of the codes that we're evaluating.

But until we sort of get a clearer picture on where forbearances and deferral shake out, we're going to just cautiously watch and also looking at where the new issue market is to be able to securitize these assets that have term financing or sort of finally lead to sort of deployment of capital. As we debate between buying stock versus assets, again, I mean we will evaluate those opportunities in relation to the returns available.

Trevor Cranston -- JMP Securities -- Analyst

Okay, thank you for the comments.

Operator

Thank you. Our next question will come from the line of Matthew Hallett, Nomura.

Matthew Hallett -- Nomura -- Analyst

Hey, guys. Thanks for taking my question. Just on that question, you bought back or are you looking at buying back any of the outstanding securitization debt? I'm assuming that's come down in price, and it's going to -- or it has come down.

Mohit Marria -- Chief Investment Officer

Yes. As far as the secured debt goes, obviously like other spread product, that did widen as well in March. Buying that asset, we didn't think it was a good use of capital for us because otherwise we'd -- the only way that we'd buy it is to extinguish debt to be able to relever at a more opportune time, but that would take capital way and that's, right now, it's sort of cash is king and with some of the uncertainty around forbearances we didn't think that was the best use of capital. But again, as the market stabilize and if that's still available, we will sort of evaluate, but we need a clearer picture on sort of the exit strategy and where that would be if we were to relever in the future.

Operator

Our next question will come from the line of Stephen Laws with Raymond James.

Stephen Laws -- Raymond James -- Analyst

Hey, good morning. Following up on some similar questions but you raised a little bit of money to the offering to improve liquidity position. You've had some recovery in the unrealized losses, which I imagine has resulted in plateau being unlocked to you guys that you pledged previously to meet margin calls. So as things stabilize, your liquidity is improving and completely understand the concerns on new loans when you've got limited options on the financing side. So how do you think about buying back debt maybe versus stock?

Additionally, are there other things you would look to do given where we are in the cycle? I mean, would you consider stepping in and buying securities maybe that are below AAA but still investment grade that don't really seem to have a market at the right return for newly originated loans? Can you maybe talk about what some alternative investments might be and how you look at debt repurchases versus equity?

Mohit Marria -- Chief Investment Officer

All right. I'll start on the security side and the focus from the investment team, you have to look at sort of the best investment option relative to the risk and return profile. Loans, as I just mentioned earlier, create the largest opportunity especially given the overhang that exist there and the need for capital to be deployed. But as you just mentioned, putting aside the AAA part of the capital structure, some of the AA's, A's, and BBB's in the investment grade stack has lagged and the credit curve overall is significantly steeper than it was at the start of the year given the reach for assets. So, but we think, again, if those opportunities on those assets exist, we would -- and leverage is available, you could potentially add those assets.

Our thought is that the Fed effectively buying all other spread product outside of non-agency credit from a relative value standpoint, those assets will look cheap and should create a good total return opportunity by some spread tightening as other investors sort of reach for yield as well. So, again, we will continue to evaluate that. Like I said, loans are then an opportunity, we're just waiting to have a clear picture around where the securitization exit would be. We have some ideas on what we think, we can exit that out and sort of backing into where that would equate to on the loan pricing. I think there's still a little bit of what to chop. They are based on where people want to sell versus where the the beat would be. So again, continue to evaluate that opportunity. And when you say buying back debt, I don't know if you mean debt off of the securitizations we've issued in the past or...

Stephen Laws -- Raymond James -- Analyst

For both, either, your corporate debt or I mean you're preferreds or debt off of your securitizations. I think we did see some of that [Speech Overlap]

Matthew J. Lambiase -- President and Chief Executive Officer

I think the way we are looking at things right now is that the number one priority here is we'd like to get a securitization model back up. I think we need to have securitization exits for assets whether the things that we have on our balance sheet that we can call and relever or new assets to put on. And that's what we've been spending quite a bit of time looking at that market and figuring out ways that we can figure to restart it. And I think that'd be very beneficial for liquidity on our balance sheet once we get that figured out.

I think the other thing that we've been working on and diligently on is trying to figure out longer term financing for the credit assets on our balance sheet. And I think that's -- again, another one of these ongoing discussions and getting those things locked down. I think once we get those two pieces of the puzzle in place, we can sit back and really look around the landscape and decide whether we want to start buying back the stock and the preferreds or -- and do those things. But we have -- we need to get a little bit farther away from the event and get things a little bit more settled with regard to financing and with regard to the securitization markets. And I think on a positive note, I think there -- things are starting to percolate, so we're getting traction. I think we're seeing some positive things happen. So we're cautiously optimistic.

Stephen Laws -- Raymond James -- Analyst

Great. Appreciate the comments. Thank you.

Operator

Thank you. Our last question for the day will come from the line of Lee Cooperman with Omega Family.

Lee Cooperman -- Omega Family Office -- Analyst

Thank you. Look, clearly you guys have been very surprised by developments, you've used the term twice on this call being cautiously optimistic. Could we assume that the $0.30 dividend, which you declared I guess in connection with this offering you did, was something you felt was sustainable, assuming no surprises and things unfolded as you anticipate?

Matthew J. Lambiase -- President and Chief Executive Officer

Lee, I think the market is very -- I still think it's a little difficult to really figure out. I've never seen a lot of the things that we're seeing in this marketplace. I've never seen the unemployment rate and the number of unemployed people going up as far as it has. I've never seen mortgage forbearance programs coming into play and that's just stuff that we have never ever seen before. I can tell you that when we started the first quarter and when we started the second quarter, we are in totally different worlds with regard to the economy and projections and thinking about the business. And I just don't think it's a prudent thing for any manager in this environment to say that they have a clear focus of what's going on in the future. And we look -- we want to pay the highest dividend possible, we're all shareholders. But I think with just the visibility, currently in the market with our business and I think a lot of other businesses, it's just not -- it's not what it was a month ago or two months ago. It's very complicated and I think we're being very cautious here, optimistic, but being very cautious.

Lee Cooperman -- Omega Family Office -- Analyst

Thank you. Good luck, and stay healthy.

Matthew J. Lambiase -- President and Chief Executive Officer

Thank you.

Mohit Marria -- Chief Investment Officer

Thanks, Lee.

Operator

Thank you. I would now like to turn the conference over to Matt Lambiase for closing comments.

Matthew J. Lambiase -- President and Chief Executive Officer

Listen, I want to thank everybody for joining the call today. We appreciate your support. I certainly want to say a shout out to all of our employees at Chimera. You've worked brilliantly from home and stayed safe. They've done a great job and we look forward to speaking to you again with the second quarter results later in the year.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Emily Mohr -- Investor Relations

Matthew J. Lambiase -- President and Chief Executive Officer

Mohit Marria -- Chief Investment Officer

Robert Colligan -- Chief Financial Officer

Doug Harter -- Credit Suisse -- Analyst

Eric Hagen -- KBW -- Analyst

Trevor Cranston -- JMP Securities -- Analyst

Matthew Hallett -- Nomura -- Analyst

Stephen Laws -- Raymond James -- Analyst

Lee Cooperman -- Omega Family Office -- Analyst

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