Chimera Investment(US:CIM)2026-02-18 22:24Investment Portfolio - As of December 31, 2025, approximately 65% of the investment portfolio was allocated to residential mortgage loans, 23% to Agency MBS, and 5% to Non-Agency RMBS, a significant shift from 88%, 4%, and 8% respectively in 2024[333]. - The company gained exposure to a $6.5 billion pool of Fannie Mae MSRs, acquiring it for $38 million, which serves as a natural book value hedge against interest rate fluctuations[352]. - The company plans to grow its Agency RMBS and MSR portfolios to enhance portfolio diversity and stability of dividends[396]. - The fixed-rate percentage of the portfolio was 86.5% as of December 31, 2025, slightly down from 87.9% in 2024[495]. - Loans held for investment constituted 69.8% of the portfolio as of December 31, 2025, compared to 88.0% in 2024[495]. HomeXpress Acquisition - The company completed the HomeXpress Acquisition on October 1, 2025, which is expected to enhance diversification of earnings sources and provide direct exposure to the growing residential consumer Non-QM and investor business purpose mortgage loan origination market[336][337]. - The acquisition of HomeXpress was completed for a total consideration of $272 million, including cash and stock issuance[376]. - HomeXpress originated 2,516 mortgage loans totaling approximately $1.0 billion in principal balance during Q4 2025, with an average loan balance of $412,000[379]. - HomeXpress reported net income of $8 million for Q4 2025, with operating income of approximately $11 million, representing 111 basis points of loan origination volume[383]. - The HomeXpress acquisition is expected to enhance loan origination volumes and overall returns to shareholders[397]. Financial Performance - Net income available to common shareholders for the year ended December 31, 2025, was $144 million, or $1.76 per share, up from $90 million, or $1.12 per share in 2024[409]. - Interest income increased by $60 million, or 7.9%, to $821 million for the year ended December 31, 2025, driven by Agency RMBS purchases[410]. - Interest expense rose by $59 million, or 11.8%, to $555 million for the year ended December 31, 2025, primarily due to higher borrowings for Agency RMBS financing[411]. - The company reported a return on average equity of 8.91% for the year ended December 31, 2025, up from 6.72% in 2024 and 4.87% in 2023[488]. - The company recorded net unrealized gains on financial instruments at fair value of $82 million in 2025, compared to $11 million in 2024[457]. Capital and Financing - The company raised over $187 million in capital for new investments through the redemption of securities in seven outstanding securitizations and sponsoring two new securitizations[360]. - In September 2025, the company issued $120 million of 8.875% unsecured senior notes, receiving approximately $116 million in proceeds after fees[374]. - The weighted average cost of debt on securities sold in the new securitizations was 5.8%, with a reduction in financing costs by 17 basis points from previous securitizations[360]. - The company incurred transaction expenses of $17 million related to the HomeXpress acquisition in 2025, compared to $7 million for the Palisades acquisition in 2024[466]. - The company had $7.4 billion of securities or cash pledged against secured financing agreements obligations as of December 31, 2025, compared to $4.1 billion in 2024[525]. Economic Indicators - The average 30-year fixed mortgage rate declined from 6.85% at the beginning of 2025 to 6.15% at year-end, a decrease of approximately 70 basis points[347]. - The unemployment rate increased to 4.4% at year-end 2025, while real GDP increased at an annualized rate of 3.8% in Q2 and 4.4% in Q3[343]. - The year-over-year national home price appreciation ended below consumer wage growth, indicating a step toward easing affordability challenges in the housing market[349]. Risk Management - The company entered into an interest rate cap with a notional amount of $1.0 billion, paying $7 million for a strike rate of 3.95%[438]. - The ratio of interest-earning assets to interest-bearing liabilities was 1.14 for the year ended December 31, 2025, down from 1.18 in 2024[424]. - The company actively manages 20 counterparties for secured financing agreements, with a total exposure of $6,038,336 thousand as of December 31, 2025[527]. - The haircut for secured financing agreements at fair value was 7.5% as of December 31, 2025[521]. - The company expects to enter into new secured financing agreements at maturity, but faces risks related to market conditions and interest rates[526].