[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section details Chimera Investment Corporation's financial position, operational results, and cash flows, highlighting asset growth and net income changes [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) This statement presents the company's assets, liabilities, and equity at specific points in time Consolidated Financial Condition Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$14,863,229** | **$13,116,490** | | Agency MBS, at fair value | $2,675,280 | $519,218 | | Loans held for investment, at fair value | $10,640,298 | $11,196,678 | | **Total Liabilities** | **$12,238,698** | **$10,590,301** | | Secured financing agreements | $4,563,063 | $2,824,371 | | Securitized debt at fair value | $6,970,800 | $6,984,495 | | **Total Stockholders' Equity** | **$2,624,531** | **$2,526,189** | - The company's consolidated statements include assets of consolidated variable interest entities (VIEs) totaling **$9.9 billion** as of June 30, 2025, which can only be used to settle obligations of the VIEs[17](index=17&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This statement outlines the company's revenues, expenses, and net income over specific periods Quarterly and Six-Month Operational Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $66,010 | $67,295 | $135,230 | $132,402 | | Total Other Income (Losses) | $1,378 | $13,841 | $138,660 | $102,207 | | **Net Income** | **$35,450** | **$56,664** | **$202,747** | **$186,118** | | Net Income Available to Common Shareholders | $14,024 | $33,913 | $159,964 | $144,930 | | **Basic EPS** | **$0.17** | **$0.42** | **$1.97** | **$1.78** | | **Diluted EPS** | **$0.17** | **$0.41** | **$1.94** | **$1.76** | - **Net income for Q2 2025 decreased to $35.5 million** from $56.7 million in Q2 2024, primarily due to lower other income, including a net loss on derivatives compared to a gain in the prior-year quarter, however, for the six-month period, **net income increased year-over-year**, driven by significant unrealized gains on financial instruments[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement details the sources and uses of cash from operating, investing, and financing activities Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,370 | $126,306 | | Net cash provided by (used in) investing activities | $(1,378,159) | $134,792 | | Net cash provided by (used in) financing activities | $1,503,014 | $(320,478) | | **Net increase (decrease) in cash** | **$166,225** | **$(59,380)** | | Cash and cash equivalents at end of period | $250,223 | $162,304 | - The significant use of cash in investing activities in the first six months of 2025 (**$1.4 billion outflow**) was driven by **$1.9 billion in Agency MBS purchases**, which was funded by a **$1.5 billion net inflow** from financing activities, primarily from increased secured financing agreements[36](index=36&type=chunk)[37](index=37&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the consolidated financial statements - The company is an **internally managed REIT** investing in mortgage assets, recently **acquired The Palisades Group, LLC** in December 2024, adding investment management and advisory services, and also entered an agreement to **acquire HomeXpress Mortgage Corp** in June 2025, an originator of non-QM and other mortgage products[40](index=40&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - The company classifies its Non-Agency RMBS as available-for-sale and recorded an **allowance for credit losses of $36.2 million** as of June 30, 2025, an **increase from $28.4 million** at year-end 2024, primarily due to deterioration in cash flows on certain investments[67](index=67&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - All Loans held for investment, with a fair value of **$10.6 billion** as of June 30, 2025, are carried at fair value, and the total unpaid principal balance was **$10.9 billion**[91](index=91&type=chunk) - The company uses a **three-level hierarchy** for fair value measurements, with Non-Agency RMBS and most Loans held for investment classified as **Level 3**, indicating reliance on unobservable inputs, while Agency MBS are classified as **Level 2**[97](index=97&type=chunk)[106](index=106&type=chunk)[113](index=113&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's financial performance, strategic actions, and portfolio shifts in a volatile market environment [Executive Summary and Business Highlights](index=57&type=section&id=Executive%20Summary%20and%20Business%20Highlights) This section provides an overview of key business developments and strategic initiatives during the period - As of June 30, 2025, the investment portfolio composition **shifted significantly towards Agency RMBS**, which comprised **19%** of the portfolio by fair value, **up from 4%** at year-end 2024, while **Residential mortgage loans decreased to 74% from 88%**[257](index=257&type=chunk) - Key strategic actions during Q2 2025 include entering a definitive agreement to **acquire HomeXpress Mortgage Corp**, investing **$2.3 billion in Agency RMBS** Pass-throughs, adding **$1.9 billion in interest rate swaps** to hedge the Agency RMBS portfolio, generating **$9 million in revenue** from investment management and advisory services, and subsequent to quarter end, **acquired $6.5 billion of Fannie Mae mortgage servicing rights (MSRs)**[261](index=261&type=chunk) [Results of Operations](index=61&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net interest income and other gains or losses Quarterly Income Statement Summary (in thousands, except per share data) | Metric | Q2 2025 | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $66,010 | $69,219 | $(3,209) | | Net Unrealized Gains on Financial Instruments | $6,971 | $128,895 | $(121,924) | | Net Gains (Losses) on Derivatives | $(15,441) | $(2,252) | $(13,189) | | **Net Income** | **$35,450** | **$167,297** | **$(131,847)** | | Net Income Available to Common Shareholders | $14,024 | $145,940 | $(131,916) | | **Basic EPS** | **$0.17** | **$1.79** | **$(1.62)** | - The **significant decrease in net income** from Q1 to Q2 2025 was primarily driven by a **$122 million reduction** in unrealized gains on financial instruments and a **$13 million increase in net losses** on derivatives[295](index=295&type=chunk) Earnings Available for Distribution (Non-GAAP) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Earnings available for distribution (in thousands) | $32,111 | $33,526 | | Earnings available for distribution per adjusted diluted common share | $0.39 | $0.41 | [Financial Condition, Liquidity and Capital Resources](index=78&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) This section discusses the company's financial position, cash availability, and capital management strategies Leverage Ratios | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | GAAP Leverage at period-end | 4.5:1 | 4.0:1 | | GAAP Leverage at period-end (recourse) | 1.8:1 | 1.2:1 | - **Recourse leverage increased to 1.8:1 from 1.2:1** at year-end, primarily due to higher borrowings under secured financing agreements to fund Agency RMBS purchases[379](index=379&type=chunk) - As of June 30, 2025, the company had **$250 million in cash and cash equivalents** and **$311 million in unencumbered assets** available for liquidity needs[375](index=375&type=chunk)[381](index=381&type=chunk) - To mitigate margin call risk, the company utilizes **non-mark-to-market (non-MTM) and limited-MTM financing facilities**, with **$924 million in non-MTM facilities** and **$498 million in limited-MTM facilities** as of June 30, 2025[385](index=385&type=chunk)[386](index=386&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=90&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details the company's exposure to market risks, including interest rate and credit risks, and its mitigation strategies Interest Rate Sensitivity Analysis (as of June 30, 2025) | Change in Interest Rate | Projected Percentage Change in Net Interest Income | Projected Percentage Change in Market Value | | :--- | :--- | :--- | | -100 Basis Points | 8.75 % | 4.11 % | | -50 Basis Points | 4.59 % | 2.08 % | | **Base Interest Rate** | **—** | **—** | | +50 Basis Points | (4.62)% | (2.07)% | | +100 Basis Points | (9.34)% | (4.03)% | - The company is subject to **credit risk** on its **Non-Agency RMBS and residential mortgage loans**, managing this risk through independent reviews of mortgage files, obtaining representations and warranties from sellers, and closely monitoring credit loss expectations[431](index=431&type=chunk)[432](index=432&type=chunk) - The company's **interest rate risk management strategy** includes monitoring the reset indices of assets and financings, structuring financing with varied maturities, and using **derivatives** to adjust interest rate sensitivity[458](index=458&type=chunk) [Item 4. Controls and Procedures](index=100&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[466](index=466&type=chunk) - There were **no changes in internal control over financial reporting** during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, these controls[467](index=467&type=chunk) [PART II. OTHER INFORMATION](index=100&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures on legal proceedings, risk factors, equity sales, and other relevant information [Item 1. Legal Proceedings](index=100&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings during the period - There are **no legal proceedings** to report for the period[469](index=469&type=chunk) [Item 1A. Risk Factors](index=100&type=section&id=Item%201A.%20Risk%20Factors) New risk factors related to the pending HomeXpress acquisition are disclosed, including integration challenges and closing conditions - **New risk factors** have been added related to the **acquisition of HomeXpress**, highlighting that the completion is **subject to closing conditions** and there is no assurance they will be satisfied[471](index=471&type=chunk) - The company may face **challenges** and devote significant resources to **integrating HomeXpress's operations**, and failure to do so effectively could limit the anticipated benefits and **adversely affect results**[472](index=472&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=100&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no common stock repurchases during the quarter, with $250 million remaining under its repurchase program - The company **did not repurchase any of its common stock** during the quarters and six months ended June 30, 2025[477](index=477&type=chunk) - The authorized amount remaining under the Share Repurchase Program is **$250 million** as of June 30, 2025[398](index=398&type=chunk) [Item 5. Other Information](index=102&type=section&id=Item%205.%20Other%20Information) The company amended the HomeXpress acquisition agreement, shifting stock issuance to a private placement with a new Registration Rights Agreement - On August 5, 2025, the company **amended its stock purchase agreement** for the **HomeXpress acquisition**, where the shares to be issued as part of the consideration will now be issued in a **private placement** rather than through a registered offering on Form S-4[481](index=481&type=chunk) - In connection with the amendment, the company entered into a **Registration Rights Agreement**, obligating it to file a **resale shelf registration statement** for the shares issued to the sellers shortly after the closing of the acquisition[482](index=482&type=chunk)[483](index=483&type=chunk)

Financial Data and Key Metrics Changes - GAAP net income for Q2 2025 was $14 million or $0.17 per share, with a GAAP book value of $20.91 per share at the end of the quarter [12] - Economic return on GAAP book value for Q2 was 0.5%, while year-to-date return was 9.8% [12] - Economic net interest income for Q2 was $69 million, with a yield on average interest-earning assets of 6% and a net interest spread of 1.5% [13] - Total leverage for Q2 was 4.5:1, with recourse leverage at 1.8:1 [13] Business Line Data and Key Metrics Changes - The company has focused on residential mortgage credit, enhancing expertise through acquisitions like the Palisades Group and Home Express [7][10] - The acquisition of Home Express is expected to be accretive, contributing to earnings growth in 2026 and 2027 [11] - The company has started selling some assets and acquiring Agency RMBS to support REIT compliance and liquidity [8] Market Data and Key Metrics Changes - Economic data showed resilience despite trade concerns, with employment statistics meeting or exceeding expectations [18] - Existing home sales were at their weakest year-to-date activity in nearly 27 years, with home price forecasts moderating [20] - The non-QM market continues to grow, with originations expected to reach the highest post-crisis levels [20] Company Strategy and Development Direction - The company aims to diversify its portfolio and income streams while focusing on residential mortgage credit as its core competency [10] - Future growth will involve both organic growth and strategic acquisitions, maintaining a focus on complementary capabilities [10] - The company is committed to disciplined risk management and evaluating liquidity-generating opportunities within its portfolio [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the trajectory of growth may not be linear, with potential short-term earnings decreases due to capital redeployment for acquisitions [11] - The company is optimistic about the future, expecting strong earnings contributions from the Home Express acquisition and ongoing portfolio repositioning [11][28] - Management emphasized the importance of balancing dividend growth with reinvestment in the business for long-term returns [46] Other Important Information - The company ended Q2 with $561 million in total cash and unencumbered assets [14] - The company has a stable funding structure, with 61% of portfolio liabilities comprised of non-recourse term financing [21] - The company is actively analyzing callable securitization deals to enhance earnings power while considering book value impacts [26] Q&A Session Summary Question: Future acquisition opportunities - Management indicated openness to further acquisitions that align with their core competency in residential credit [30] Question: Potential for double-digit ROE post Home Express acquisition - Management expressed confidence in achieving double-digit ROE, citing Home Express as a critical component for earnings power [32] Question: Long-term capital allocation mix - Management discussed the need for a diversified portfolio across sectors, with MSRs expected to represent 15% to 25% of capital allocation in the future [40] Question: Dividend strategy post Home Express acquisition - Management highlighted the importance of balancing immediate dividend payouts with reinvestment for future growth [45] Question: Changes in book value and market conditions - Management noted a slight decline in book value due to flat loan portfolio performance and tightening spreads on securitized debt [49] Question: Impact of potential Fed rate cuts - Management acknowledged that rate cuts could improve net interest margins and make some callable securitizations more actionable [52]

Company Strategy & Performance - Chimera Investment Corp is a hybrid mortgage REIT focused on diversified investment solutions across the mortgage credit product spectrum[10, 13] - The company reported earnings available for distribution of $039 per share[19] - Book value per share was $2091, a 12% decrease from the previous quarter[22] - Economic return for the quarter was 05%[19, 22] HomeXpress Acquisition - Chimera entered into a definitive agreement to acquire HomeXpress Mortgage Corp, expected to close in Q4 2025[11, 21, 22] - The acquisition consideration includes cash equal to HomeXpress's book value plus a $120 million premium and 2,077,151 shares of CIM common stock[22] - HomeXpress has originated over $107 billion in loans since 2016[25, 27] - HomeXpress generated $47 million in pre-tax earnings in 2024[27] Portfolio Composition & Activity - The company purchased $19 billion in notional Agency pass-throughs, with an additional $402 million settling in Q3[22] - Recourse leverage increased to 18x from 12x in Q1 due to growth in Agency RMBS allocation[22] - Loans under third-party asset management grew 43% year-over-year to $254 billion[57, 58]

[Financial Highlights & Management Commentary](index=1&type=section&id=Financial%20Highlights%20%26%20Management%20Commentary) Chimera Investment Corporation reported a GAAP Net Income of **$0.17** per diluted common share and Earnings Available for Distribution (EAD) of **$0.39** per share for Q2 2025, while announcing the acquisition of HomeXpress Mortgage Corporation to become a diversified hybrid residential mortgage REIT Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | GAAP Net Income per Diluted Common Share | $0.17 | | Earnings Available for Distribution per Adjusted Diluted Common Share | $0.39 | | GAAP Book Value per Common Share (as of June 30, 2025) | $20.91 | | Economic Return for the Quarter | 0.5% | | Economic Return for Six Months Ended June 30, 2025 | 9.8% | - Announced a definitive agreement to acquire **HomeXpress Mortgage Corporation**, a leading non-QM mortgage originator[1](index=1&type=chunk)[3](index=3&type=chunk) - Management is executing a strategy to become a diversified and resilient hybrid residential mortgage REIT through acquisitions (**Palisades**, **HomeXpress**) and portfolio diversification into **Agency RMBS** and **MSRs**[3](index=3&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) Total assets increased to **$14.86 billion** from **$13.12 billion** at year-end 2024, driven by Agency MBS, while Q2 2025 net income decreased to **$35.5 million** from **$56.7 million** year-over-year [Consolidated Statements of Financial Condition (Balance Sheet)](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20%28Balance%20Sheet%29) Total assets reached **$14.86 billion** as of June 30, 2025, up from **$13.12 billion** at year-end 2024, primarily due to a significant increase in Agency MBS holdings Balance Sheet Summary (in thousands) | Account | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$14,863,229** | **$13,116,490** | | Agency MBS, at fair value | $2,675,280 | $519,218 | | Loans held for investment, at fair value | $10,640,298 | $11,196,678 | | **Total Liabilities** | **$12,238,698** | **$10,590,301** | | Secured financing agreements | $4,563,063 | $2,824,371 | | **Total Stockholders' Equity** | **$2,624,531** | **$2,526,189** | [Consolidated Statements of Operations (Income Statement)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20%28Income%20Statement%29) Net income available to common shareholders for Q2 2025 decreased to **$14.0 million** (**$0.17**/share) from **$33.9 million** (**$0.41**/share) in Q2 2024, primarily due to lower other income and higher expenses Q2 2025 vs Q2 2024 Income Statement (in thousands, except per share data) | Account | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Net Interest Income | $66,010 | $67,295 | | Total Other Income (Losses) | $1,378 | $13,841 | | Total Other Expenses | $27,120 | $20,757 | | **Net Income** | **$35,450** | **$56,664** | | Net Income Available to Common Shareholders | $14,024 | $33,913 | | **Diluted EPS** | **$0.17** | **$0.41** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income available to common shareholders for Q2 2025 was **$8.7 million**, a decrease from **$22.6 million** in Q2 2024, impacted by unrealized losses on available-for-sale securities Q2 Comprehensive Income (in thousands) | Account | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Net Income | $35,450 | $56,664 | | Other Comprehensive Loss | $(5,335) | $(11,345) | | Comprehensive Income Available to Common Shareholders | $8,689 | $22,568 | [Non-GAAP Financial Measures](index=8&type=section&id=Non-GAAP%20Financial%20Measures) The company reported Earnings Available for Distribution (EAD) of **$0.39** per share and Economic Net Interest Income of **$69.1 million** for Q2 2025, providing alternative performance insights [Earnings Available for Distribution (EAD)](index=8&type=section&id=Earnings%20Available%20for%20Distribution%20%28EAD%29) EAD for Q2 2025 was **$32.1 million**, or **$0.39** per adjusted diluted common share, reflecting adjustments to GAAP net income for non-cash items and transaction expenses - EAD is a non-GAAP measure defined as GAAP net income excluding items such as **unrealized gains/losses**, **realized gains/losses on sales**, **transaction expenses**, and **amortization of intangibles**[18](index=18&type=chunk) Reconciliation of GAAP Net Income to EAD (Q2 2025, in thousands) | Description | Amount (in thousands) | | :--- | :--- | | GAAP Net income available to common stockholders | $14,024 | | Adjustments: | | | Net unrealized (gains) losses on financial instruments | $(6,971) | | Realized (gains) losses on derivatives | $17,954 | | Transaction expenses | $390 | | Increase in provision for credit losses | $4,409 | | Other Adjustments | $2,305 | | **Earnings available for distribution** | **$32,111** | EAD per Share vs. GAAP EPS (Q2 2025) | Metric | Per Share | | :--- | :--- | | GAAP net income per diluted common share | $0.17 | | Earnings available for distribution per adjusted diluted common share | $0.39 | [Economic Net Interest Income](index=12&type=section&id=Economic%20Net%20Interest%20Income) Economic Net Interest Income, adjusted for derivative costs, was **$69.1 million** in Q2 2025, exceeding GAAP Net Interest Income of **$66.0 million** for the same period - Economic Net Interest Income is a non-GAAP measure that equals GAAP net interest income adjusted for the **net periodic interest cost of derivatives** and excludes **interest earned on cash**[34](index=34&type=chunk) Reconciliation of GAAP NII to Economic NII (Q2 2025, in thousands) | Account | Amount (in thousands) | | :--- | :--- | | GAAP Net Interest Income | $66,010 | | Periodic Interest on derivatives, net | $5,067 | | Other (Interest income on cash) | $(2,002) | | **Economic Net Interest Income** | **$69,075** | [Portfolio Analysis](index=9&type=section&id=Portfolio%20Analysis) The portfolio shifted towards Agency RMBS, now **18.3%** of fair value, with GAAP leverage increasing to **4.5:1** and a net interest rate spread of **1.5%** for the quarter [MBS Portfolio Summary](index=9&type=section&id=MBS%20Portfolio%20Summary) The MBS portfolio at Q2 2025 included **$1.01 billion** in Non-Agency RMBS and **$2.68 billion** in Agency RMBS, with significant growth in Agency pass-through securities MBS Portfolio Details (June 30, 2025) | Security Type | Principal/Notional (in thousands) | Weighted Average Fair Value | | :--- | :--- | :--- | | **Non-Agency RMBS** | | | | Senior | $968,383 | $59.30 | | Subordinated | $613,051 | $57.79 | | **Agency RMBS** | | | | Pass-through | $2,334,802 | $96.65 | | CMO | $362,333 | $99.69 | [Secured Financing Agreements](index=10&type=section&id=Secured%20Financing%20Agreements) Secured financing agreements totaled **$4.57 billion** as of June 30, 2025, with a weighted average borrowing rate of **5.60%**, a notable increase from **$2.84 billion** at year-end 2024 Secured Financing Maturities (June 30, 2025) | Remaining Maturity | Principal (in thousands) | Weighted Average Borrowing Rate | | :--- | :--- | :--- | | 1 to 29 days | $2,334,912 | 4.68% | | 30 to 59 days | $376,179 | 6.21% | | 1 to 2 years | $601,662 | 8.28% | | **Total** | **$4,571,393** | **5.60%** | [Portfolio Characteristics & Leverage](index=11&type=section&id=Portfolio%20Characteristics%20%26%20Leverage) Portfolio composition shifted with Agency RMBS increasing to **18.3%** and Loans held for investment decreasing to **74.3%**, while GAAP leverage rose to **4.5:1** at June 30, 2025 Leverage Ratios | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | GAAP Leverage at period-end | 4.5:1 | 4.0:1 | | GAAP Leverage at period-end (recourse) | 1.8:1 | 1.2:1 | Portfolio Composition by Fair Value | Asset Class | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-Agency RMBS | 7.1% | 8.3% | | Agency RMBS | 18.3% | 3.7% | | Agency CMBS | 0.3% | 0.4% | | Loans held for investment | 74.3% | 87.6% | [Portfolio Performance Metrics](index=13&type=section&id=Portfolio%20Performance%20Metrics) For Q2 2025, the average yield on interest-earning assets was **6.0%**, with a net interest rate spread of **1.5%**, and an annualized EAD return on average common equity of **7.54%** Q2 2025 Average Yields and Costs | Metric | Value | | :--- | :--- | | Average Yield on Interest-Earning Assets | 6.0% | | Economic Average Cost of Funds | 4.5% | | Net Interest Rate Spread | 1.5% | | Net Interest Margin | 2.1% | Q2 2025 Annualized Returns on Equity | Metric | Value | | :--- | :--- | | Return on Average Equity (GAAP Net Income) | 5.38% | | Economic Net Interest Income / Average Equity | 10.49% | | Earnings available for distribution / Average Common Equity | 7.54% | [Other Information](index=3&type=section&id=Other%20Information) This section provides details for the upcoming Q2 2025 earnings conference call and includes a standard disclaimer regarding forward-looking statements and associated risks [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) Chimera Investment Corporation will host a conference call and live audio webcast to discuss Q2 2025 results on Wednesday, August 6, 2025, at 8:30 a.m. EDT - The earnings conference call is scheduled for **Wednesday, August 6, 2025**, at **8:30 a.m. EDT**[6](index=6&type=chunk) [Disclaimer and Forward-Looking Statements](index=15&type=section&id=Disclaimer%20and%20Forward-Looking%20Statements) The press release contains forward-looking statements subject to significant risks and uncertainties, advising readers to consult SEC filings for detailed risk factors - The report includes forward-looking statements subject to **risks and uncertainties**, and actual results may differ materially; readers should refer to **SEC filings** like Form 10-K for a full list of risk factors[44](index=44&type=chunk)[45](index=45&type=chunk)

Group 1 - The focus is on income-producing asset classes such as REITs, ETFs, Preferreds, and 'Dividend Champions' that target premium dividend yields up to 10% [1] - iREIT®+HOYA Capital is highlighted as a premier income-focused investing service that emphasizes sustainable portfolio income, diversification, and inflation hedging [2] - The review of preferred stocks issued by Chimera Investment Corporation (CIM) indicates a continued Hold rating, reflecting the company's long-term investment strategy [3]

Group 1 - David A. Johnson is the founder and principal of Endurance Capital Management, a New Jersey Limited Liability Company, with over 30 years of investment experience [1] - Johnson's investment strategy includes a diverse range of assets such as stocks, bonds, options, ETFs, REITs, real estate, closed-end funds, hedge funds, and private credit [1] - He holds a Master of Science (MS) Degree in Finance with a concentration in Investment Analysis from Boston University, a Certificate in Financial Planning, and an MBA from Fordham University [1]

Group 1 - The preferred stock of Chimera (NYSE: CIM.PR.A) was recommended for purchase due to its 10.2% dividend yield and a wide margin of safety for the dividend [1] - Since the recommendation, the stock has provided significant returns [1] Group 2 - The author has a background in chemical engineering and economics, and has written multiple books on investing and mathematics [1] - The author emphasizes the importance of fundamental and technical analysis in investment decisions [1]

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The unaudited consolidated financial statements for the quarter ended March 31, 2025 show a net income of $167.3 million and total assets of $13.2 billion **Financial Metric (in thousands)** | Financial Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $13,205,326 | $13,116,490 | | **Total Liabilities** | $10,561,262 | $10,590,301 | | **Total Stockholders' Equity** | $2,644,064 | $2,526,189 | **Income Statement Item (in thousands)** | Income Statement Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Interest Income** | $69,219 | $65,106 | | **Total Other Income (Losses)** | $137,284 | $88,366 | | **Total Other Expenses** | $34,062 | $22,663 | | **Net Income** | $167,297 | $129,454 | | **Net Income Available to Common Shareholders** | $145,940 | $111,016 | | **Diluted EPS** | $1.77 | $1.36 | **Cash Flow Activity (in thousands)** | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $48,799 | $57,274 | | **Net Cash from Investing Activities** | ($175,325) | $248,336 | | **Net Cash from Financing Activities** | $295,876 | ($358,336) | | **Net Change in Cash** | $169,350 | ($52,726) | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, VIE consolidation, and valuation methods for the company's mortgage assets and related financing - The company is an internally managed REIT primarily investing in a diversified portfolio of mortgage assets, including residential mortgage loans, Non-Agency RMBS, and Agency RMBS[30](index=30&type=chunk) - The company consolidates Variable Interest Entities (VIEs) from its securitization transactions where it is determined to be the primary beneficiary; as of March 31, 2025, total assets of consolidated VIEs were **$10.1 billion** and total liabilities were **$7.0 billion**[13](index=13&type=chunk)[36](index=36&type=chunk)[188](index=188&type=chunk) **Portfolio Summary (Fair Value, in thousands)** | Portfolio Summary (Fair Value) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-Agency RMBS | $1,059,840 | $1,064,169 | | Agency MBS | $656,335 | $519,218 | | Loans held for investment | $10,983,840 | $11,196,678 | - The allowance for credit losses on Non-Agency RMBS increased to **$31.8 million** as of March 31, 2025, from **$28.4 million** at year-end 2024, primarily due to deterioration in cash flows on certain investments[65](index=65&type=chunk)[67](index=67&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=67&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance, highlighting net income of $146 million, strategic securitizations, and a disciplined portfolio approach - The company's investment portfolio at fair value as of March 31, 2025, was composed of approximately **87%** residential mortgage loans, **8%** Non-Agency RMBS, and **5%** Agency MBS[249](index=249&type=chunk) - Key business highlights for Q1 2025 include organically generating over **$187 million** in capital, investing **$149 million** in Agency Pass-through securities, and generating **$9 million** in new revenue from investment management services[253](index=253&type=chunk)[265](index=265&type=chunk)[278](index=278&type=chunk) **Key Metrics** | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | **GAAP Net Income (Loss) to Common** | $145.9M | ($168.3M) | $111.0M | | **GAAP Diluted EPS** | $1.77 | ($2.07) | $1.36 | | **Earnings Available for Distribution** | $33.5M | $30.4M | $30.6M | | **EAD per Adjusted Diluted Share** | $0.41 | $0.37 | $0.37 | | **Dividend Declared per Common Share** | $0.37 | $0.37 | $0.33 | - The company's GAAP recourse leverage ratio remained stable at **1.2:1** at the end of Q1 2025, consistent with year-end 2024[353](index=353&type=chunk)[370](index=370&type=chunk) [Results of Operations](index=78&type=section&id=Results%20of%20Operations) Net income available to common shareholders reached $146 million in Q1 2025, driven by significant unrealized gains on financial instruments - The QoQ increase in net income was primarily driven by a **$310 million** positive swing in unrealized gains on financial instruments at fair value[290](index=290&type=chunk) - The YoY increase in net income was mainly due to a **$52 million** increase in net unrealized gains on financial instruments and **$9 million** in new investment management fees, partially offset by a **$13 million** decrease in net gains on derivatives[291](index=291&type=chunk) **Net Interest Income (in thousands)** | (in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | **GAAP Net Interest Income** | $69,219 | $65,824 | $65,106 | | **Economic Net Interest Income (Non-GAAP)** | $72,304 | $69,197 | $68,001 | [Liquidity and Capital Resources](index=97&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved with cash increasing by $169 million to $253 million, supported by strong financing activities - Cash and cash equivalents increased from **$84 million** at Dec 31, 2024 to **$253 million** at March 31, 2025[366](index=366&type=chunk) - Financing activities provided **$296 million** in cash, primarily from **$164 million** in net proceeds from secured financing agreements and **$780 million** in proceeds from securitized debt borrowings, offset by **$597 million** in repayments[369](index=369&type=chunk) - The company has entered into non-MTM (mark-to-market) and limited-MTM financing facilities totaling **$915 million** and **$504 million**, respectively, to reduce the risk of margin calls from price volatility[375](index=375&type=chunk) - The company has an authorized share repurchase program of **$250 million**, under which no shares were repurchased in Q1 2025, and an at-the-market (ATM) sales program with **$426 million** remaining capacity[386](index=386&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=108&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include credit, interest rate, and prepayment risk, managed through hedging and diligent underwriting - The company's primary market risks are identified as credit risk, interest rate risk, prepayment risk, extension risk, basis risk, and market risk[417](index=417&type=chunk) - Credit risk is managed through independent reviews of mortgage files, obtaining representations and warranties from sellers, and closely monitoring credit loss expectations[422](index=422&type=chunk) **Interest Rate Sensitivity Analysis** | Change in Interest Rate | Projected % Change in Net Interest Income | Projected % Change in Market Value | | :--- | :--- | :--- | | +100 Basis Points | (9.23)% | (5.47)% | | +50 Basis Points | (4.56)% | (2.82)% | | -50 Basis Points | 4.78% | 3.00% | | -100 Basis Points | 9.77% | 6.23% | - The company employs a "Three Layers of Defense Approach" to Enterprise Risk Management, involving business units, an independent risk management unit, and third-party internal auditors[451](index=451&type=chunk) [Item 4. Controls and Procedures](index=119&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[456](index=456&type=chunk) - There were no material changes to the company's internal control over financial reporting during the first quarter of 2025[457](index=457&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=119&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings for the period - The company reported no legal proceedings[459](index=459&type=chunk) [Item 1A. Risk Factors](index=119&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2024 Form 10-K were reported - There have been no material changes to the risk factors set forth in the company's Form 10-K for the year ended December 31, 2024[460](index=460&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=119&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any common stock during the quarter under its authorized $250 million share repurchase program - The company has a **$250 million** share repurchase program authorized by the Board of Directors, which includes both common and preferred stock[461](index=461&type=chunk) - No common stock was repurchased during the quarter ended March 31, 2025[463](index=463&type=chunk) [Item 5. Other Information](index=121&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None reported[466](index=466&type=chunk) [Item 6. Exhibits](index=121&type=section&id=Item%206.%20Exhibits) This section indexes all exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications

Financial Data and Key Metrics Changes - Earnings available for distribution improved by 11% and book value increased by 7.4% with an economic return of 9.2% for the quarter [6][13] - GAAP net income for the first quarter was $145.9 million or $1.77 per share, while economic net interest income was $72.3 million [13][14] - The yield on average interest-earning assets was 5.9% and the average cost of funds was 4.4%, resulting in a net interest spread of 1.5% [14] Business Line Data and Key Metrics Changes - Third-party loans under management by Palisades Advisory Services increased by 43% year over year, reaching nearly $24 billion [7] - The company managed a total of nearly $37 billion in assets, including on-balance sheet assets and those managed for others [7] - The company executed impactful balance sheet moves, including cash-out refinancing that unlocked $187 million [8][27] Market Data and Key Metrics Changes - National home price growth was 3.9% year over year, with varying performance across regions [21] - Existing home sales declined to a 4 million unit annualized pace, marking the slowest first quarter since 2009 [21] - Delinquency rates remained stable at 8.9%, with prepayments decreasing to 5.5% [23] Company Strategy and Development Direction - The company aims to build a hybrid mortgage REIT that is resilient and diversified, focusing on diversifying the portfolio and growing recurring fee income [11][30] - The strategy includes adding Agency RMBS assets and evaluating MSR opportunities to generate attractive returns [29][30] - The company is focused on disciplined risk management and thoughtful portfolio construction [30] Management's Comments on Operating Environment and Future Outlook - Management noted that despite market volatility, the company is holding steady and expects to continue growing third-party loans under management [10] - The outlook for the third-party business remains positive, with expectations for growth depending on the mortgage market [42] - Management expressed caution regarding capital deployment due to ongoing macroeconomic uncertainty [29] Other Important Information - The company ended the quarter with $697 million in total cash and unencumbered assets [14] - The company refinanced two structured repo lines, extending maturities and lowering costs, which released an additional $100 million in cash [26][55] Q&A Session Summary Question: Clarification on book value performance - Management indicated that book value was down about 40 basis points as of the beginning of the second quarter [33] Question: Timing for deploying freed-up investment capital - Approximately 33% to 40% of the $187 million has been deployed, with a focus on building liquidity [35][36] Question: Outlook for third-party business growth - Management is bullish on growth potential, depending on the mortgage market and new client acquisitions [42] Question: Sensitivity to higher delinquency rates - Management noted that delinquencies in the RPL portfolio are stable and not a major concern, while monitoring trends in non-QM portfolios [60][63] Question: Details on new loan facilities and advance rates - Management did not disclose specific advance rates but confirmed that the facilities are structured repo facilities with banking relationships [64][66]

Financial Data and Key Metrics Changes - Earnings available for distribution improved by 11% and book value increased by 7.4% with an economic return of 9.2% for the quarter [6] - GAAP net income for the first quarter was $145.9 million or $1.77 per share, while GAAP book value at the end of the quarter was $21.17 per share [13] - Economic net interest income for the first quarter was $72.3 million with a yield on average interest-earning assets of 5.9% and an average cost of funds of 4.4%, resulting in a net interest spread of 1.5% [14] Business Line Data and Key Metrics Changes - Third-party loans under management by Palisades Advisory Services increased by 43% year over year, reaching nearly $24 billion [7] - The company executed impactful balance sheet moves, including cash-out refinancing that unlocked $187 million [8] - The company settled $100 million in residential transition loans during the quarter, expecting mid-teen levered returns [9] Market Data and Key Metrics Changes - National home price growth was 3.9% year over year, with varying performance across regions [22] - Existing home sales declined to a 4 million unit annualized pace, marking the slowest first quarter since 2009 [22] - Delinquency rates remained stable at 8.9% for the re-performing loan portfolio, with prepayments at 5.5% [24] Company Strategy and Development Direction - The company aims to build a hybrid mortgage REIT that is resilient and diversified, focusing on diversifying the portfolio and growing recurring fee income [11][32] - The strategy includes adding Agency RMBS assets and evaluating MSR opportunities to generate attractive returns [31] - The company is focused on disciplined risk management and thoughtful portfolio construction to support attractive risk-adjusted returns [32] Management's Comments on Operating Environment and Future Outlook - Management noted that despite market volatility, the company is holding steady and expects to continue growing third-party loans under management [10] - The current book value is estimated to be flat to slightly down, with a focus on building liquidity [10][36] - Management expressed cautious optimism regarding the growth potential of the third-party business, depending on the mortgage market [42] Other Important Information - The company ended the quarter with $697 million in total cash and unencumbered assets, enhancing liquidity [14] - The company refinanced two structured repo lines, extending maturities and lowering costs, which unlocked additional cash for investment [27] Q&A Session Summary Question: Clarification on book value performance - Management indicated that book value was down about 40 basis points as of the latest update [35] Question: Timing for deploying freed-up investment capital - Approximately 33% to 40% of the $187 million has been deployed, with a focus on building liquidity [36][37] Question: Outlook for third-party business growth - Management is bullish on growth potential, depending on the mortgage market and client acquisition [42] Question: Sensitivity to higher delinquency rates - Management noted that delinquencies in the re-performing loan portfolio are stable and not considered high for that product type [58][62] Question: Details on new loan facilities and advance rates - Management did not disclose specific advance rates but confirmed that the facilities are structured repo facilities with limited mark-to-market features [63][65]