CHIMERA INVESTMENT CORP 10-Qquarter ended 2026-03-31
NegativeImpairment / charge
Seasoned-loan sales and securitization redemptions eroded book value as CIM shifted toward Agency RMBS; HomeXpress origination profit partly offset portfolio losses.
Filed 2026-05-07 16:25 ET
Key figures · Q1 FY2026 · period ended 2026-03-31
- Net interest income$75.0M1YoY +8.4%QoQ +13.3%
- Net income−$43.9MYear ago $167.3MPrevious quarter $28.3M
- Total assets$16.0BYoY +21.0%QoQ +1.1%
- Total debt$12.7B2YoY +22.5%QoQ −2.6%
How total debt adds up Securitized debt, collateralized by Non-Agency RMBS ($203 million and $210 million pledged as collateral, respectively) $65M + Securitized debt at fair value, collateralized by Loans held for investment ($7.6 billion and $9.4 billion pledged as collateral, respectively) $5,430M + Long term debt $252M + Secured financing agreements ($8.2 billion and $7.4 billion pledged as collateral, respectively, and includes $292 million and $299 million at fair value, respectively) $6,987M Total debt $12,734M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$2.5BYoY −6.8%QoQ −4.2%
- Tangible book value$2.5B3YoY −6.8%QoQ −4.2%
Notes (3)
- Net interest income: Interest income minus interest expense; excludes fair-value gains and losses and other income.
- Total debt: Includes the securitized debt collateralized by residential mortgage-backed securities and by loans held for investment, at fair value -- this filer's own balance-sheet lines, not a standard concept. About the summary: The summary's $7.00B is principal for secured financing agreements; total debt of $12.73B also includes other debt balances and carrying-value amounts.
- Tangible book value: No goodwill is reported. No intangible assets are reported.
How this filing reads
- Health−0.4Recourse leverage rose to 2.9:1, with $4.69B of secured financing maturing within 59 days.
- Momentum−0.7Net interest income rose 8.4%, while GAAP income swung from $167M profit to a $43.9M loss.
- Outlook0.0Management expects a first HomeXpress securitization later in 2026, subject to market conditions.
Executive Summary
CIM’s Q1 2026 results show a company reshaping its mortgage portfolio while building an origination business. Net interest income improved and newly acquired HomeXpress contributed profit, but loan sales, securitization redemptions and market-value losses produced a GAAP loss and a 6.9% decline in book value per share. The shift toward more liquid Agency securities may improve flexibility, while HomeXpress offers a second earnings source; neither has yet offset the cost of repositioning and exposure to rising rates. For investors, the question is whether recurring spread and origination income can support dividends without further erosion of tangible common equity.
Key Financial Highlights
| Metric | Q1 2026 or 03/31/2026 position | Investor interpretation |
|---|---|---|
| Net interest income | $75.0M, +8.4% Y/Y | Higher asset income outweighed rising funding expense. |
| GAAP net income | $(43.9)M vs $167M income Y/Y | Portfolio and financing losses reversed the prior-year profit. |
| GAAP income available to common shareholders | $(65.0)M, or $(0.78) per share, vs $146M income Y/Y | Preferred dividends widened the loss borne by common shareholders. |
| Operating cash flow | $243M vs GAAP net loss of $(43.9)M | Cash flow and earnings diverged amid noncash valuation losses and portfolio activity. |
| Total assets | $16.0B, broadly flat from year-end | The portfolio changed more than its overall size. |
| Total stockholders’ equity | $2.46B, down from $2.57B | Losses and repositioning reduced the equity cushion. |
| Tangible common equity | $1.33B; common equity before goodwill and intangible deductions: $1.53B | The more relevant cushion for common shareholders is below total equity. |
- Earnings drivers: Other losses totaled $64.0M, including $37.5M of unrealized financial-instrument losses, $40.4M of realized investment-sale losses and $38.9M of debt-extinguishment losses, partly offset by $22.9M of derivative gains. Prior-year earnings benefited from $129M of net unrealized gains.
- Book value and distributions: Book value per share fell to $18.34 from $19.70; management attributed ≈$72M of the decline to loan sales and securitization redemptions. The declared common dividend was $0.45 per share. Management’s non-GAAP earnings available for distribution were $45.8M, or $0.54 per adjusted diluted share, alongside the GAAP common-shareholder loss; that measure excludes significant transaction and valuation effects.
- Capital and expenses: Common shares outstanding increased to 83.646M from 83.402M with no Q1 repurchases. Compensation, general, administrative and transaction expenses rose to $39.0M from $25.7M, reflecting the acquired business, staffing, bonuses and accelerated stock compensation. A $5M impairment of Palisades management contracts added to expense.
Business Developments
CIM is reallocating capital from seasoned loans toward Agency residential mortgage-backed securities. It purchased $1.9B of Agency securities during Q1, with $608M scheduled to settle in Q2, while selling $1.2B of seasoned loans and calling eight securitizations. Agency securities rose to 36.4% of portfolio amortized cost from 24.1% at year-end; loans held for investment fell to 57.9% from 69.8%. Management describes the moves as seeking liquidity and better risk-adjusted returns, although realizing losses now raises the hurdle for future returns.
HomeXpress, acquired in 2025, adds non-qualified mortgage origination and loan-sale income to the investment portfolio. It originated $884M of loans in Q1 and generated $21.4M of gain on origination and sale and $8.0M of net income, partially offsetting the investment segment’s loss. Management is evaluating whether to retain or sell more production and expects a first securitization of HomeXpress-originated loans later in 2026, subject to market conditions. The separate Palisades advisory business generated $7.17M of fees, though its contract impairment tempers the diversification story.
Risk Assessment
- Interest rates and spread compression: A modeled 100 bp rate increase would reduce net interest income 23.66% and market value 2.82%; the three-month repricing gap is $(5.10)B because funding resets faster than many assets.
- Funding and liquidity: Secured financing agreements carried $7.00B of principal, including $4.69B maturing within 59 days; recourse leverage rose to 2.9:1 from 2.4:1, making refinancing terms and collateral calls consequential.
- Mortgage credit: Delinquent, bankrupt, in-foreclosure or real-estate-owned loans were 15.9% of residential mortgage unpaid principal balance, and 60.5% of originations were from 2004–2007; weaker recoveries could impair values.
- Valuation uncertainty: Three loan pools with $941M of internal fair value were marked $45M above third-party prices, so changes in model assumptions could further affect equity.
- Origination execution: Mortgage rates influence HomeXpress volumes and loan-sale margins; early payoffs and loan defects can trigger premium recapture or repurchase obligations.
- Counterparty concentration: Collateral-related exposure to Nomura was $418M, equal to 17% of equity, increasing the potential impact of a counterparty or margin dispute.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: FY2025 10-K.
Strategic Outlook and Investor Actionables
The near-term opportunity is to turn a more liquid Agency portfolio and HomeXpress production into repeatable earnings. The threat is that rate sensitivity, short-term funding and additional transaction losses consume that income before common shareholders benefit. Monitor:
- Book value per share and realized sale or redemption losses: stabilization would support the repositioning thesis; further declines would challenge it.
- Net interest income and recourse leverage: sustained spread income without rising leverage would signal healthier portfolio economics.
- HomeXpress origination volume, gain on loan sales and any securitization: durable contributions would demonstrate diversification beyond the investment portfolio.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 005 · prompt 9e47f58d3c