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    CIM
    Earnings call· Jun 2026(Q2 FY26)

    CHIMERA INVESTMENT Q2 FY26 earnings call CIM

    Aug 5, 2026 Source

    Executive summary

    Chimera Investment Corporation Q2 FY26 — Strategic Pivot to Residential Credit

    Chimera Investment Corporation reported Q2 FY26 EAD of $0.46 per share, covering its dividend, and reaffirmed full-year EAD guidance. The company is strategically pivoting towards residential credit, leveraging its Home Express origination platform and targeting securitizations of both Home Express and third-party loans. Despite a decline in book value primarily due to GAAP securitization accounting and market volatility, management emphasized building resiliency through diversified income streams and liquidity, while maintaining flexibility in its investment approach.

    Highlights

    5

    • Home Express loan production grew by 30% year-over-year and 24% quarter-over-quarter, reaching a record $1.1 billion in Q2 FY26.

    • Earnings Available for Distribution (EAD) was $0.46 per share in Q2 FY26, covering the $0.45 dividend.

    • Net origination margin for Home Express expanded to 124 basis points in Q2 FY26, up 10 basis points from Q1 FY26.

    • Full-year EAD is projected to be at least $1.80.

    • Home Express warehouse capacity was increased to $1.65 billion in July from $1.5 billion.

    Concerns

    5

    • Book value per share declined 3.2% to $17.75 in Q2 FY26.

    • Economic return on GAAP book value was negative 0.8% for the quarter.

    • Home Express earnings grew only modestly quarter-over-quarter due to margin compression from increased competition.

    • Palisades Advisory Services experienced some dilution in third-party fee revenue due to competition and reduced transaction activity.

    • Quarter-to-date book value is down approximately 1.5% due to a sell-off in rates.

    Guidance & targets

    3
    CategoryTargetConfidence
    Earnings Available for Distribution (EAD) per share
    at least $1.80
    high materiality
    High
    Securitization activity
    two securitization of Home Express loans and one of third-party loans
    medium materiality
    Medium
    Home Express loan origination volume
    exceed the $4 billion loan origination volume target
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Investment Portfolio
    The segment generated positive economic net interest income and a healthy return on average equity, with a net interest spread of 1.6%.
    Annualized economic net interest income return on average equity: 12.35%Yield on average interest earning assets: 5.9%Average cost of funds: 4.3%Net interest spread: 1.6%
    		———Economic net interest income: $66.3 million
    Residential Origination (Home Express)
    Home Express achieved record loan funding volume and strong EBITDA, demonstrating significant growth year-over-year and quarter-over-quarter.
    Loans funded: $1.1 billionAnnualized EBITDA ROE: 17.3%
    		—30%24%EBITDA: $11.8 million

    Operational metrics

    39
    Net loss
    $4 million
    Q2 FY26

    Total consolidated net loss for the quarter.

    Net loss from Investment Portfolio segment
    $13 million
    Q2 FY26

    Offset by net income from residential origination.

    Net income from Residential Origination segment
    $9 million
    Q2 FY26

    Offset net loss from investment portfolio.

    Earnings Available for Distribution (EAD) per share
    $0.46
    Q2 FY26

    Covered the quarterly dividend of $0.45.

    Earnings Available for Distribution (EAD) per share
    $0.54
    Q1 FY26

    Included one-time benefits from securitization unwind and MSR related investments.

    Earnings Available for Distribution (EAD) per share (excluding one-time benefits)
    $0.47
    Q1 FY26

    Underlying run rate for EAD.

    Dividend per share
    $0.45
    Q2 FY26

    Covered by EAD of $0.46.

    Economic return on GAAP book value
    -0.8%
    Q2 FY26

    Based on quarterly change in book value and dividend.

    Annualized EAD return on average common equity
    10.35%
    Q2 FY26

    Reflects EAD generation relative to equity.

    Total leverage
    5.6 to 1
    Q2 FY26

    Increased due to resecuritization activity and increasing agency RMBS allocation.

    Recourse leverage
    3.3 to 1
    Q2 FY26

    Increased due to growing agency allocation.

    Total cash and unencumbered assets
    $656 millionvs $675 million last quarter
    Q2 FY26 end

    Maintained strong liquidity position.

    Total consolidated Secured Financing outstanding
    $7.7 billion
    Q2 FY26

    Comprised of residential origination warehouse loans and investment portfolio financing.

    Secured Financing for residential origination warehouse loans
    $727 million
    Q2 FY26

    Part of total consolidated secured financing.

    Secured Financing for investment portfolio
    $7 billion
    Q2 FY26

    Part of total consolidated secured financing.

    Secured Financing for agency positions
    $5.1 billion
    Q2 FY26

    Supported by $4.9 billion in swaps, interest rate caps, and other hedges.

    Secured Financing for residential credit assets
    $1.9 billion
    Q2 FY26

    Of which $1.2 billion carried non- or limited mark-to-market features.

    Residential credit assets with non- or limited mark-to-market features
    $1.2 billion61% of $1.9 billion
    Q2 FY26

    Part of secured financing for residential credit assets.

    Residential credit assets with floating rate facilities
    $1.1 billion55% of $1.9 billion
    Q2 FY26

    Part of secured financing for residential credit assets.

    Short TBA positions closed out
    $966 million
    Q2 FY26

    Part of investment portfolio activities.

    Capital generated from sales of non-core assets
    $19 million
    Q2 FY26

    Capital generated for redeployment.

    Pass-throughs purchased and settled
    $967 million
    Q2 FY26

    Part of agency portfolio investment.

    TBA-adjusted average coupon
    5.28%up 14 basis points
    Q2 FY26

    Increased due to focus on higher coupons.

    Resecuritizations completed
    2
    Q2 FY26

    Improved overall financing efficiency and released capital.

    Capital released from resecuritizations
    $13 million
    Q2 FY26

    For reinvestment.

    Agency MBS allocation
    26%up 5 percentage points
    Q2 FY26

    Shift in capital allocation mix.

    Legacy residential credit allocation
    61%down 4 percentage points
    Q2 FY26

    Shift in capital allocation mix.

    MSRs and Home Express allocation
    up 6%
    Q2 FY26

    Shift in capital allocation mix.

    Residential credit repo facility with limited/non-mark-to-market features
    $1.2 billion61% of total
    Q2 FY26

    Managed conservatively.

    Capital generated and redeployed from portfolio management activities
    nearly $700 million
    2025-Q2 2026

    From multiple refinancings, divestitures, and loan sales.

    Delinquencies in legacy re-performing book
    8.8%down from 9.1% in Q1
    Q2 FY26 end

    Credit performance tracking expectations.

    Delinquencies in investor DSCR loan portfolio
    4.7%down from 6.1%
    Q2 FY26 end

    Driven by early stage delinquent loans becoming current.

    Legacy RTL portfolio loans resolved
    16
    Q2 FY26

    Continued wind down of the portfolio.

    Non-delegated correspondent channel production
    13%
    Q2 FY26

    Comprises a growing portion of Home Express production.

    Monthly loan volume
    $420 million
    June FY26

    Reached a monthly record for Home Express.

    Net origination margin
    124 basis pointsup 10 basis points from Q1 FY26
    Q2 FY26

    Expanded due to higher loan volume and cost effectiveness.

    Average loan size
    $455,000compared with $410,000 in Q1 FY26
    Q2 FY26

    Increased due to expanding share of consumer loans production mix.

    Warehouse capacity
    $1.65 billionincreased from $1.5 billion last quarter
    July FY26

    Ample funding to support expected growth, distributed across seven facilities.

    Broker network
    6,350+
    Q2 FY26

    Serviced by 145 account executives and sales staff.

    Industry KPIs

    4
    MetricValueDetails
    Revenue growth30%%
    Leasing bookings volume signed$1.1 billionUSD
    Ffo core ffo normalized ffo per share$0.46USD
    Third party strategic capital fund jv platformsome dilution

    Orderbook & backlog

    3
    Loans retained for first Home Express securitization$301 millionQ2 FY26

    On track for Q3 FY26 securitization.

    Additional loans retained for second Home Express securitizationnot quantifiedsince Q2 FY26 end

    Part of the target of two Home Express securitizations by year-end.

    Loans committed to purchase from third-party sellers for non-QM transactionnot quantifiedsince Q2 FY26 end

    Part of the target of one third-party securitization by year-end.

    Deals & partnerships

    1
    Palisades Advisory ServicesNamed Asset Manager on two resecuritizations

    Palisades Advisory Services was named Asset Manager on both resecuritization deals completed in Q2 FY26, backed by $487 million of loans.

    Risks & headwinds

    5
    Market Volatility and UncertaintyQ2 FY26, expected to continue

    Volatility and uncertainty persisted

    Mitigation: Building resiliency through diversified income streams and liquidity; remaining flexible and open to change.

    Margin Compression in OriginationQ2 FY26

    margin compression from increased competition

    Mitigation: Focus on scaling production, maintaining strong credit discipline, reducing cost to originate, optimizing loan products, and driving process efficiency.

    Book Value Decline due to GAAP Securitization AccountingQ2 FY26

    Book value per share declined 3.2% to $17.75; Economic return on GAAP book value was negative 0.8%

    Mitigation: Management notes that this book value volatility does not impact earnings power or dividend-paying ability; hedging strategy adjusted to include interest rate caps.

    Impact of Rising Rates on Book ValueQuarter-to-date (post Q2 FY26)

    QTD book value down about 1.5%

    Mitigation: Hedging strategy adjusted by replacing payer swaps with in-the-money interest rate caps to improve convexity in a sustained rally.

    Dilution in Third-Party Fee Revenue for Advisory ServicesQ2 FY26

    some dilution with respect to third party fee revenue

    Mitigation: Actively redeploying resources to help focus on whole loan needs at the REIT level.

    What to watch in Q3 FY26

    5

    Home Express Securitization Residual Equity Decision

    Q3 FY26
    CurrentDecision pending
    TargetDecision on retaining residual equity piece for first Home Express securitization

    Why it matters

    This decision will impact whether the company realizes long-term earnings from retained credit or gain on sale from distribution, affecting future EAD and capital allocation.

    And based on those factors, we make a determination as to whether or not we would retain the credit portion of the capital stack, which would essentially be investing for long-term earnings over the next several years, or distribute the entire structure and booking the gain on sale, which would go through EAD and earnings, and then turning over that capital and, you know, rinse and repeating it. So right now, I mean, we're still working through those dynamics. We're looking to get that first deal done probably in the latter part of the third quarter. And as we approach the date of that deal, we'll start honing in on the decision to what we're going to retain.

    Q&A highlights

    6

    What were the drivers of the book value change in Q2, and what is the quarter-to-date mark-to-market book value?

    The book value decline was primarily due to the consolidated GAAP securitization, where securitized loans moved more than the SEC debt. This volatility does not impact earnings or dividend ability. Quarter-to-date, book value is down about 1.5% due to a sell-off in rates.

    “The one reason that we're not looking to hedge that is as the gyrations in interest rates change on both the liability side there. It really doesn't have any impact on our earnings power dividend paying ability.”

    asked by Bose George · answered by Jack Macdowell

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Pivot to Residential Credit

    Chimera is strategically pivoting to acquire and securitize mortgage loans from both its Home Express platform and third parties. The company is targeting two Home Express securitizations and one third-party securitization by year-end, leveraging its fully integrated residential credit platform. This move aims to create optionality, allowing Chimera to either retain the credit portion for long-term earnings or distribute the entire structure for gain on sale, targeting mid-teens returns for retained credit.

    02

    Portfolio Repositioning and Capital Redeployment

    The company made significant progress in repositioning its investment portfolio, exiting lower-yielding legacy positions and redeploying nearly $700 million of capital generated from portfolio management activities since 2025. This capital was primarily redeployed into liquid agency MBS, increasing its allocation by 5 percentage points to 26% of invested capital. Management views agencies as both a relative value bucket and a source of liquidity for other accretive opportunities.

    03

    Home Express Record Origination Volume

    Home Express delivered a strong quarter with record loan origination volume of $1.1 billion, representing a 30% increase from Q2 2025 and a 24% increase from Q1 2026. The growth was broad-based across core products and driven by increased production through the non-delegated correspondent channel, which now comprises 13% of production. June saw a monthly record of $420 million in loan volume, despite market competitiveness.

    04

    EAD and Dividend Coverage

    Chimera generated $0.46 per share in Earnings Available for Distribution (EAD) in Q2 FY26, which covered its quarterly dividend of $0.45 per share. This EAD was in line with the projected underlying run rate of $0.47 per share, excluding one-time📎 benefits from Q1. The company reiterated its expectation to generate at least $1.80 of EAD for the full year, demonstrating continued dividend support.

    05

    Book Value Dynamics and Hedging Strategy

    GAAP book value per share declined 3.2% to $17.75, resulting in a negative 0.8% economic return. This decline was primarily attributed to the consolidated GAAP securitization accounting, where securitized loans moved more than the related SEC debt. Management noted that this book value volatility does not impact earnings power or dividend-paying ability. The company also adjusted its hedging strategy by replacing payer swaps with interest rate caps to improve convexity and protect against higher rates.

    06

    Operational Efficiencies and Margin Management

    Home Express EBITDA climbed to $11.8 million, with net origination margin expanding to 124 basis points, up 10 basis points from Q1 FY26. Despite margin compression from increased competition, the platform is focused on maintaining credit discipline, optimizing loan products, and driving process efficiency. Technology tools like direct appraisal ordering and Smart Fees are being implemented to shorten processing times and support higher volumes more efficiently.

    AI-generated summary of the company’s earnings call. Not investment advice.