CIM CHIMERA INVESTMENT CORP 10-Q 2026-09-30 section summaries

Chimera Investment Corporation (CIM) — Q3 and nine months ended September 30, 2026

CIM’s mortgage portfolio and origination business generated positive net interest income, but substantial fair-value losses—particularly on Agency RMBS and loans held for investment—drove a consolidated loss. The company also expanded Agency MBS and loans held for sale while reducing its held-for-investment loan portfolio and increasing secured financing.

Consolidated results

Revenue is net interest income plus total other income (loss). Dollar amounts in millions, except per-share data.

Segments — Q3

CIM reports Investment Portfolio and Residential Origination. Segment revenue is net interest income plus total other income (loss); the 2025 comparison for Residential Origination is unavailable because HomeXpress was acquired October 1, 2025.

Investment Portfolio results were dominated by $391.000M of net unrealized losses on financial instruments at fair value, partly offset by $207.764M of net derivative gains. In 9M 2026, the segment recorded $471.922M of such unrealized losses and $41.605M of debt-extinguishment losses, partly offset by $257.604M of net derivative gains. Residential Origination generated $10.952M of net loan-origination and sale gains in Q3 and $54.615M in 9M.

Balance sheet and cash flow

Goodwill arose from the Palisades and HomeXpress acquisitions. A Q1 2026 triggering event resulted in a $5M impairment of Palisades asset-management-contract intangibles; CIM also shortened the remaining life of an asset-management contract to December 31, 2027.

Common shares outstanding increased from 83,402,145 at December 31, 2025 to 83,711,818 at September 30, 2026. Common dividends were $0.45 per share in Q3 versus $0.37, and $1.35 per share for 9M versus $1.11. Stock-based compensation expense was $11M for 9M, versus $8M.

Portfolio, valuation and funding

At September 30, Agency MBS fair value was $5.545B, up from $3.463B at year-end; loans held for investment (HFI) declined to $7.405B from $9.804B, while loans held for sale rose to $1.987B from $896.1M. Total MBS fair value was $6.219B against $6.502B amortized cost, compared with $4.281B and $4.197B, respectively, at year-end. Gross unrealized MBS losses increased to $366.733M from $108.649M across 421 positions versus 208. The available-for-sale credit-loss allowance reached $60.107M; management attributed its increase to weaker expected cash flows and higher unrealized losses on certain Non-Agency RMBS.

HFI fair value fell amid $1.672B of sales and settlements, $842.034M of principal paydowns and a $322.732M fair-value decline in 9M. Non-Agency RMBS collateral delinquency, bankruptcy, foreclosure and REO were 11.0% of UPB, down from 12.2%, but 78.4% of underlying loans were originated in 2006–2007 and weighted-average current credit enhancement was 0.5%. Level 3 valuations depend on assumptions about defaults, prepayments, loss severity and discount rates; management’s HFI values exceeded third-party prices by $184M on $3.5B of internally modeled pools at quarter-end.

Secured financing agreements were $8.620B, up from $6.031B; loans-backed securitized debt fair value declined to $5.078B from $6.721B. Secured financing principal outstanding increased to $8.636B from $6.038B, while its weighted-average borrowing rate declined to 4.69% from 5.02%. Short maturities, collateral haircuts and margin calls expose CIM to refinancing and liquidity risk; margin cash collateral posted rose to $153M from $17M. The company reported covenant compliance, but certain agreements can require immediate repayment following a 50% decline in stockholders’ equity from year-end. It had $1.9B of unused uncommitted warehouse facilities.

CIM acquired securitized debt with $1.1B amortized cost for $1.2B in 9M, contributing to a $42M net loss on extinguishment. It also redeemed eight securitizations backed by $1.5B of reperforming loans, sold $1.2B of those loans and retained $287M. The HomeXpress origination channel recorded $2.717B of 9M originations and $2.449B of sales and transfers; loan-sale gains reflected $74.809M of premiums, offset in part by fair-value changes, origination costs and repurchase reserves. CIM’s $5.711M loan-repurchase reserve reflects potential obligations under customary loan-sale representations and warranties.

Derivative gains helped cushion, but did not offset, portfolio losses. Derivative notional totaled $9.059B, versus $5.327B at year-end; net derivative assets after netting and collateral were $121.209M versus $25.187M. Related risks include valuation changes, counterparty nonperformance and termination rights. Consolidated securitization VIE assets and liabilities were $7.046B and $4.981B; their assets are restricted to their obligations and liabilities are non-recourse to CIM.

Chimera Investment Corporation (CIM) — Q3 2026

Business and market context

Chimera is an internally managed residential mortgage REIT with two segments: Investment Portfolio, which holds mortgage investments and provides advisory and asset-management services, and Residential Origination, consisting of HomeXpress. At September 30, 2026, interest-earning assets by fair value were 50.3% residential mortgage loans held for investment, 37.5% Agency MBS, 4.6% Non-Agency RMBS, 7.4% loans held for sale (LHFS), and less than 1% MSR financing receivables.

Rising rates and wider mortgage spreads drove substantial fair-value losses and reduced book value. During Q3, the 2-year and 10-year Treasury yields rose 74 and 85 bps, respectively; Agency MBS spreads widened about 18 bps versus Treasuries. The 30-year conforming mortgage rate increased from approximately 6.45% to 7.39%, weighing on affordability and refinancing. Non-QM securitization issuance reached about $8.4B through September, up approximately 54% year over year, although higher funding and hedging costs and weaker whole-loan execution pressured origination profitability.

Consolidated results

$ in millions, except per-share figures and shares. Q3 and Q2 are quarterly; 9M figures are year to date.

The quarterly swing to a GAAP loss primarily reflected $391.000M of net unrealized losses on financial instruments at fair value, compared with $43.386M of losses in Q2. For 9M, fair-value losses were $471.922M versus gains of $98.872M in 9M 2025. Derivative gains partly offset the market impact: $207.764M in Q3 and $257.604M in 9M, including Q3 realized gains of $74.901M and unrealized gains of $127.224M. Realized investment-sale losses were $26.889M in Q3 and $76.941M for 9M. The 9M results also included a $41.605M debt-extinguishment loss.

EAD was $0.38 per adjusted diluted share, down from $0.46 in Q2 but up from $0.37 in Q3 2025. Its sequential decline reflected lower loan-origination and sale gains amid rate volatility and difficult secondary-market pricing. EAD excludes specified fair-value, realized, credit-loss and acquisition-related items; it is not GAAP income or a dividend guarantee.

Segment results

Segment revenue is net interest income plus other income/(loss); segment profit is pretax income/(loss). $ in millions.

The Investment Portfolio’s quarterly revenue and results were hit by market-driven valuation losses. Over 9M, CIM redeemed eight securitizations backed by $1.5B of reperforming loans, sold $1.2B of those loans and retained $287M as loans held for investment. It also acquired securitized debt backed by loans held for investment with $1.1B amortized cost for $1.2B, producing the extinguishment loss noted above.

HomeXpress produced 2,578 loans totaling $1.115835B UPB in Q3: $467.834M Consumer Non-QM, $609.909M Investor Loans, and $38.092M FHA/VA/conventional/jumbo. Wholesale represented 83.1% of volume and non-delegated correspondent 16.9%. About 68% of originated loans were sold servicing-released to third parties; the remaining 32% were purchased by the Investment Portfolio for its securitization strategy. HomeXpress had approximately 6,300 approved wholesale brokers and correspondent bankers. Its Q3 net loss was approximately $2M; near-term origination profitability remains pressured by market volatility and secondary-market execution.

Cash flows, capital and funding

$ in millions; nine months ended September 30.

Operating cash flow included $199M of interest received in excess of interest paid and $767M of net LHFS sale proceeds after origination cash uses. Investing activity included $4.2B of Agency MBS purchases and $469M of loans-held-for-investment purchases, offset by sales and principal repayments. Financing included $2.6B of net secured-financing proceeds and $379M of secured-debt borrowings, partly offset by $1.9B of securitized-debt principal repayments and $172M of dividends.

Total stockholders’ equity included a $930M preferred-stock liquidation preference. Book value per share fell 16.5% to $14.82 from $17.75 at the prior quarter-end. Q3 economic return on book value including dividends was (13.98)%; EAD return on average common equity was 9.48%.

Secured financing agreements were $8.636029B of principal, net of deferred financing costs, versus $6.038336B at year-end; weighted-average borrowing rates were 4.69% and 5.02%, respectively. Short-term refinancing needs are significant: $4.930B matured within 1–29 days and $1.622B within 30–59 days. Chimera had 24 financing counterparties across six countries and $9.7B of securities or cash pledged. Excess collateral exposure was $990.570M; Nomura was the largest identified exposure at $321M, or 15% of equity. Non-MTM and limited-MTM facilities of $835M and $402M, respectively, help reduce margin-call exposure, though non-MTM financing generally costs more.

Portfolio actions, hedging and risks

CIM traded and settled approximately $1.9B notional of Agency RMBS in Q3. It sold $1.0B of Agency pass-throughs and $226M of Agency CMOs, raising $33M net of secured-financing principal repayments and realizing a $26.889M loss. A $2.4B net short TBA position reduced Agency pass-through exposure. At quarter-end, interest-rate caps totaled $3.1B notional at a 3.00% weighted-average SOFR strike. CIM purchased $800M notional of caps for $16M, sold $1.1B for $16M proceeds and recognized a $3M realized gain. Swap terminations generated a $72M Q3 gain.

The company is developing a Non-QM/Investor Loan securitization program using HomeXpress and third-party production; after quarter-end it completed its inaugural $291M Prism securitization. Q3 commitments to purchase loans were approximately $797M, of which $461M settled; net equity deployed was about $52M. CIM also refinanced $355M of structured repo facilities with non-MTM provisions, reducing haircuts and financing spreads; it reported average financing maturity of approximately 24 months across completed or anticipated refinancing and renewals.

Management prioritizes liquidity, capital preservation, financing and rate-risk management, disciplined investment and growth in origination and fee income. Key risks include further rate and spread volatility, higher funding costs and haircuts, collateral calls, short-term refinancing, loan-sale execution and credit performance, as well as counterparty, hedge-effectiveness and regulatory risks.

Item 3 — Market Risk

CIM’s principal credit exposures are in Non-Agency RMBS and residential mortgage loans, particularly assets rated below AAA or unrated. Credit outcomes depend on borrower payment and credit profiles, loan and property characteristics, and, for certain renovation-transition and investor loans, borrowers’ ability to renovate, lease, and collect rent. Residential Origination also faces pre-sale defaults, negotiated post-sale repurchase obligations, and potential losses when adverse diligence findings prevent a loan’s sale at or above origination cost. Acquisition reviews may rely on adverse sampling rather than a review of every loan; seller representations and warranties may provide recourse for breaches.

Expected credit losses are estimated using historical experience, market trends and forecasts, delinquencies, and expected recoveries. Changes flow through investment yield and earnings over the remaining life of investments, and estimates may change significantly as information develops.

During Q3 2026, the reported increase/(decrease) in expected credit losses was -$6.864M for Non-Agency RMBS, a favorable change, and +$0.448M for loans held for investment, an unfavorable change.

Interest-rate exposure and repricing profile

Interest-rate changes and yield-curve movements affect investment income, floating-rate funding costs, refinancing, hedges, and asset values. Most warehouse and secured financing uses floating rates based on SOFR plus a fixed spread. Funding costs may rise faster than asset yields, compressing net interest spreads or causing losses; credit losses generally are not hedged.

At September 30, 2026, modeled parallel rate shocks produced the following changes versus the base scenario:

These are model estimates, not forecasts. Net-interest-income sensitivity includes preferred-stock dividend expense, and the analysis covers securities retained from securitization VIEs rather than all consolidated VIE assets and liabilities. Market-value sensitivities assume instantaneous rate moves.

The repricing schedule shows a positive total interest-rate sensitivity gap but a material short-term negative gap, indicating a near-term mismatch that may pressure net interest income if rates rise. Interest-rate-sensitive assets were $14.7485B, plus $303.00M of cash equivalents; total rate-sensitive assets were $15.0515B. Rate-sensitive liabilities were $12.9541B.

The longer-dated positive gap may benefit income as assets reprice, but actual effects depend on instruments’ differing repricing behavior and prepayments. The analysis includes interest-rate derivatives, classifies securities by when rates first adjust rather than contractual maturity, and uses contractual terms; actual prepayments could materially alter the profile.

Risk management and other exposures

CIM uses swaps, swaptions, caps, and futures to mitigate rate exposure, but hedges may not offset changes in funding costs or asset values. Mortgage and credit spreads, liquidity, and prepayment expectations create basis risk; asset-value declines can exceed hedge gains and harm book value. Convexity can magnify fair-value movements, and model estimates may differ materially from actual results. Adjustable-rate asset and payment caps may constrain or defer asset income while funding costs rise, and shorter-reset funding can reprice faster than assets. Changes in rates also affect mortgage demand, originations, loan pull-through, early payoffs, premium amortization and discount accretion, hedge effectiveness, and MSR financing-receivable income. Slower prepayments as rates rise can extend asset duration; volatility may force asset sales at a loss.

To reduce margin-call and forced-sale risk, CIM uses longer-term, non-mark-to-market financing, primarily secured by less-liquid Non-Agency RMBS, as well as securitizations and diversified financing maturities and terms. This longer-term financing costs more than short-term secured funding and can leave CIM locked into higher rates if short-term rates decline. Available-for-sale securities are measured at estimated fair value, with unrealized gains and losses reported in OCI; rates, prepayments, liquidity, credit quality, and spreads affect values. Declining residential property values can reduce collateral and potential loan recoveries.

CIM’s Enterprise Risk Management framework assigns risk identification and monitoring to business units, with a separate risk-management unit supporting them and escalating risks; internal controls are independently evaluated by third-party internal audit. Financial reporting operates under Sarbanes-Oxley requirements, with periodic risk reporting to executive management and the Audit Committee. The Board, Audit Committee, and Risk Committee oversee cybersecurity risk through ERM. Business continuity plans address employee safety, system and process recovery, asset protection, and stakeholder communications, and are reviewed and updated at least annually.

Q3 2026 — Controls and procedures

Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of period-end. No changes to internal control over financial reporting during Q3 2026 materially affected, or were reasonably likely to materially affect, those controls. This section reports no financial results or business developments.

CIM reported no material changes to the risk factors disclosed in its Form 10-K for the year ended December 31, 2025.

For the three months ended September 30, 2026, none of the company’s officers or directors adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement. This section reports no financial results or other material business developments.