CHIMERA INVESTMENT CORP 10-Qquarter ended 2026-06-30
Negative
HomeXpress Non-QM production grew as Chimera built a securitization pipeline, but mortgage marks and debt-exit losses pushed H1 into the red.
Filed 2026-08-05 16:11 ET
Key figures · Q2 FY2026 · period ended 2026-06-30
- Net interest income$70.5M1YoY +6.8%QoQ −6.0%
- Net income$17.4MYoY −51.0%Previous quarter −$43.9M
- Total assets$16.0BYoY +8.0%QoQ +0.4%
- Total debt$13.5B2YoY +14.6%QoQ +5.6%
How total debt adds up Securitized debt, collateralized by Non-Agency RMBS ($195 million and $210 million pledged as collateral, respectively) $63.9M + Securitized debt at fair value, collateralized by Loans held for investment ($7.5 billion and $9.4 billion pledged as collateral, respectively) $5,408.3M + Long term debt $252.6M + Secured financing agreements ($8.6 billion and $7.4 billion pledged as collateral, respectively, and includes $284 million and $299 million at fair value, respectively) $7,725.5M Total debt $13,450.3M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$2.4BYoY −8.0%QoQ −2.0%
- Tangible book value$2.4B3YoY −8.0%QoQ −2.0%
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 $7.73B is the Secured financing agreements ($8.6 billion and $7.4 billion pledged as collateral, respectively, and includes $284 million and $299 million at fair value, respectively) line, one of the 4 lines that make up total debt (see ⓘ).
- Tangible book value: No goodwill is reported. No intangible assets are reported.
How this filing reads
- Health−0.5Recourse leverage rose to 3.3:1, with $4.45B maturing within 29 days versus $212M unencumbered assets.
- Momentum−0.6H1 earnings swung from $203M income to a $26.5M loss; operating cash flow was $(95.9)M.
- Outlook0.0Management targets an inaugural Non-QM securitization in Q3 or Q4, subject to market conditions.
Executive Summary
Chimera is shifting from a portfolio dominated by held-for-investment mortgages toward more liquid Agency securities and a mortgage-origination-to-securitization business built around HomeXpress. In Q2, net interest income rose Y/Y and HomeXpress contributed earnings, but valuation losses and transaction costs left common shareholders with a loss; the H1 reversal from profit to loss was much sharper. The opportunity is to turn growing Non-QM production into repeatable loan sales and securitizations. For investors, that opportunity must be weighed against rising recourse leverage, short-term funding needs and book-value sensitivity to mortgage marks.
Key Financial Highlights
| Metric | Q2 2026; H1 2026 or 6/30/2026 balance | Investor interpretation |
|---|---|---|
| Net interest income | Q2 $70.5M, +6.8% Y/Y; H1 $146M, +7.6% Y/Y | Interest spread income improved despite portfolio rotation. |
| GAAP net income or loss | Q2 $17.4M vs $35.5M a year earlier; H1 $(26.5)M vs $203M income | Investment marks and transaction losses overwhelmed spread income in H1. |
| Earnings or loss available to common shareholders | Q2 $(4.01)M, or $(0.05) per share, vs $14.0M income; H1 $(69.0)M, or $(0.82) per share, vs $160M income | Preferred dividends turned Q2 net income into a common-shareholder loss. |
| Operating cash flow (OCF) | H1 $(95.9)M vs $41.4M provided a year earlier | Cash use exceeded the GAAP loss; valuation marks and transaction activity complicate earnings-to-cash comparisons. |
| Total assets | $16.0B, broadly flat vs year-end | The change in asset mix matters more than balance-sheet growth. |
| Total stockholders’ equity | $2.42B, down from $2.57B at year-end | Losses and distributions reduced the equity cushion. |
| Tangible common equity | $1.29B, down from $1.43B at year-end | The decline is sharper after excluding goodwill and intangibles and accounting for preferred equity. |
| Secured financing agreements | $7.73B, up from $6.03B at year-end | Greater reliance on secured borrowing raises rollover and collateral demands. |
- Earnings drivers: H1 included $80.9M of net unrealized fair-value losses vs $136M of gains a year earlier, plus $50.1M of realized investment-sale losses and $41.6M of debt-extinguishment losses. Derivative gains of $49.8M partly offset those charges.
- Dividend coverage: Q2 GAAP loss available to common shareholders was $(4.01)M, while non-GAAP earnings available for distribution were $39.0M, or $0.46 per adjusted diluted share, against a $0.45 common dividend. Book value fell 3.2% Q/Q to $17.75 per share.
- Liquidity and capital return: Cash and cash equivalents reached $444M, but H1 common dividends declared were $77.1M. Common shares outstanding rose from 83.4M to 83.7M; CIM reported no common repurchases or at-the-market issuance.
- Cost and valuation: H1 operating expenses rose to $102M from $61.2M amid the expanded business. A $5M Q1 impairment of asset-management-contract intangibles was a valuation charge, not an operating improvement.
Business Developments
HomeXpress, acquired in October 2025, originated $1.09B of Non-QM loans in Q2, up 23.8% Q/Q. It sold 69% of production to institutional investors; CIM’s Investment Portfolio acquired the remaining 31% to help build a planned Non-QM securitization program. Residential Origination contributed $16.6M of H1 net income, partly diversifying results while the Investment Portfolio lost $43.2M. Management anticipates an inaugural Non-QM securitization in Q3 or Q4, subject to market conditions.
The investment mix also changed: Agency securities grew while loans held for investment fell. Separately, CIM sponsored two Q2 residential securitizations totaling $487M principal. It redeemed eight older securitizations, sold $1.2B of seasoned loans and incurred a $39M net extinguishment loss on related debt acquisitions. These actions free capacity for a different mortgage mix, but the near-term cost is visible in GAAP earnings.
Risk Assessment
- Funding and margin calls: $4.45B of secured-financing principal matures within 1–29 days, against $212M of unencumbered assets available for financing or sale; recourse leverage rose to 3.3:1 from 2.4:1 at year-end.
- Valuation and book value: Major mortgage assets use Level 3 models; CIM retained internal values for four loan pools despite third-party prices being $62M lower, making reported equity sensitive to assumptions and sale prices.
- Interest rates and prepayments: The three-month cumulative repricing gap is $(6.40)B; modeled −100 bp → net interest income −5.25%, while +100 bp → market value −2.50%. Hedges cannot eliminate mortgage-spread or prepayment mismatches.
- Mortgage credit: Distressed held-for-investment residential loans were $1.25B, or 15.5% of unpaid principal balance; deterioration could increase losses or impair securitization economics.
- Origination execution: Loans awaiting sale expose HomeXpress to pre-sale defaults, diligence findings and contractual repurchase obligations, particularly if investor demand weakens.
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
Management is pursuing Agency holdings, mortgage production and securitizations to diversify income and funding. The investor test is whether those activities produce repeatable common-shareholder earnings and stabilize tangible common equity without requiring more short-term leverage.
- Non-QM execution: Monitor the planned Q3 or Q4 securitization, loan-sale premiums and the share of HomeXpress production retained; successful placement would support the new growth model.
- Funding resilience: Track recourse leverage, near-term financing maturities and unencumbered assets; further leverage growth without added liquidity would weaken the thesis.
- Earnings quality: Compare GAAP common earnings, OCF and tangible common equity with the dividend; narrowing gaps would show whether origination profits are overcoming portfolio marks and transaction costs.
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