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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several concerns: increased transaction expenses, interest rate sensitivity, portfolio repositioning dragging earnings, and a rise in loan delinquencies. While there are positive elements like dividend growth expectations and increased liquidity, the overall sentiment is weighed down by negative financial performance, including a GAAP net loss, negative economic return, and unclear management responses in the Q&A. The market cap suggests a moderate reaction, but the negative aspects are likely to dominate, predicting a stock price decline in the range of -2% to -8%.
HomeXpress Originations $2.4 billion by UPB, up 36% year-over-year. Reasons for change: Growth in consumer and business purpose loans.
GAAP Net Loss $22 million or $0.27 per share. Reasons for change: Not explicitly mentioned.
GAAP Book Value $20.24 per share. Reasons for change: Decline of 3.2% due to tighter non-Agency RMBS spreads and rally in short-term rates.
Economic Return on GAAP Book Value (Quarterly) Negative 1.4%. Reasons for change: Quarterly change in book value and $0.37 dividend per common share.
Year-to-Date Economic Return on GAAP Book Value 8.3%. Reasons for change: Not explicitly mentioned.
Earnings Available for Distribution (Net Income) $30 million or $0.37 per share. Reasons for change: Not explicitly mentioned.
Economic Net Interest Income $69 million. Reasons for change: Not explicitly mentioned.
Yield on Average Interest-Earning Assets 5.9%. Reasons for change: Not explicitly mentioned.
Average Cost of Funds 4.5%. Reasons for change: Not explicitly mentioned.
Net Interest Spread 1.4%. Reasons for change: Not explicitly mentioned.
Total Leverage 4.8:1. Reasons for change: Not explicitly mentioned.
Recourse Leverage 2:1. Reasons for change: Increased due to higher capital allocation to Agency RMBS securities.
Liquidity (Total Cash and Unencumbered Assets) $752 million, up from $561 million in the second quarter. Reasons for change: Raised liquidity through asset sales and issuance of senior unsecured notes.
Transaction Expenses Higher by $10 million. Reasons for change: Costs associated with HomeXpress acquisition.
Acquisition of HomeXpress: Chimera acquired HomeXpress for $267 million, including $240 million in cash and $28 million in stock. The acquisition is expected to be accretive to earnings, providing a new revenue stream, greater diversification, and recurring income. HomeXpress originated $2.4 billion in loans through September 30, 2025, and is projected to originate $4 billion to $4.4 billion in 2026.
Non-QM Market Growth: The non-QM market has grown from 1.1% of total residential mortgage originations in 2021 to an expected 5.1% in 2025, representing over $100 billion. Forecasts for 2026 range between $110 billion and $150 billion.
HomeXpress Expansion: HomeXpress currently operates in 46 states for business loans and 42 states for consumer loans. Plans include expanding to additional states, including New York, and accelerating growth in the correspondent channel.
Portfolio Repositioning: Chimera reduced its residential credit allocation to below 70% and increased Agency MBS to 17%. The company also deployed $267 million into HomeXpress and raised $116 million through asset sales.
Interest Rate Hedging: Chimera added $600 million in 1.5x 2-year swaptions to hedge floating rate liability exposure.
Synergies with Palisades: The acquisition of HomeXpress creates synergies with Palisades, enabling Chimera to connect origination and asset management, securitize loans, and grow its MSR book.
Long-term Strategy: Chimera aims to diversify its portfolio, enhance earnings durability, and increase dividend-paying ability through strategic acquisitions and portfolio adjustments.
Economic Return on GAAP Book Value: The company reported a negative 1.4% economic return on GAAP book value for the third quarter, indicating a decline in shareholder value.
Liquidity Management: The company raised liquidity through asset sales and issued $120 million in senior unsecured notes, but this increased debt obligations and interest expenses.
Acquisition Costs: The HomeXpress acquisition incurred significant costs, including a $267 million purchase price and $10 million in transaction expenses, which could strain financial resources.
Interest Rate Sensitivity: The company has significant exposure to interest rate fluctuations, with 53% of residential credit repo liabilities having floating rate sensitivity.
Portfolio Repositioning: The company is transitioning its portfolio, which includes selling assets and increasing cash reserves, but this has temporarily dragged on earnings.
Delinquencies in Reperforming Loans: A modest increase in delinquencies of 20 basis points was reported in the reperforming loan portfolio, which could signal potential credit risks.
Regulatory and Policy Risks: The Federal Reserve's policy shifts and regulatory developments could impact the company's financial performance and market conditions.
Market Volatility: Tighter non-Agency RMBS spreads and short-term rate rallies have negatively impacted book value, reflecting market volatility risks.
Non-QM Market Growth: The non-QM market is expected to grow from $100 billion in 2025 to between $110 billion and $150 billion in 2026, representing a significant increase in market share.
HomeXpress Origination Projections: For Q4 2025, HomeXpress is expected to originate around $1 billion, yielding pretax earnings of $15 million to $18 million and after-tax earnings of $13 million to $15 million. For 2026, originations are projected at $4 billion to $4.4 billion, with pretax earnings of $62 million to $80 million and after-tax earnings of $53 million to $68 million.
Return on Equity (ROE) Projections: HomeXpress is projected to deliver a return on equity of 19% to 23% in Q4 2025 and 20% to 25% in 2026.
Expansion Plans for HomeXpress: Plans include adding new states such as New York, accelerating correspondent channel growth, and obtaining a servicing license to grow the MSR book, which will create recurring income and hedge the loan portfolio.
Dividend and Earnings Growth: The acquisition of HomeXpress is expected to be accretive to earnings, diversify revenue streams, and increase dividend-paying ability and total economic return over the long term.
Dividend per common share: $0.37 for the third quarter
Economic return on GAAP book value: Negative 1.4% for the third quarter, but year-to-date 2025, it was 8.3%.
Dividend paying ability: Expected to increase due to the HomeXpress acquisition and strategy to grow assets and fee generation.
Share repurchase program: No specific share repurchase program was mentioned in the transcript.
The earnings call reveals mixed signals: a 62% YoY increase in share price and positive product growth, but a net loss and restructuring efforts raise concerns. The Q&A highlights uncertainties with regulatory approvals and contract renewals, while SG&A expenses are expected to rise. The market cap suggests a moderate reaction, balancing positive growth with operational and financial uncertainties.
The earnings call reveals several concerns: increased transaction expenses, interest rate sensitivity, portfolio repositioning dragging earnings, and a rise in loan delinquencies. While there are positive elements like dividend growth expectations and increased liquidity, the overall sentiment is weighed down by negative financial performance, including a GAAP net loss, negative economic return, and unclear management responses in the Q&A. The market cap suggests a moderate reaction, but the negative aspects are likely to dominate, predicting a stock price decline in the range of -2% to -8%.
The earnings call reveals mixed signals: strong growth in third-party loans and strategic acquisitions are positive, but the lack of specific year-over-year changes and a decline in book value are concerning. The Q&A section shows management's optimism about future earnings and strategic diversification, but also highlights uncertainties in dividend strategy and market conditions. The market cap suggests moderate sensitivity to these factors. Overall, the sentiment leans towards neutral, with potential positive catalysts offset by financial and strategic uncertainties.
The earnings call highlights strong financial performance, with EPS and net income growth, increased book value, and a dividend hike. The Palisades acquisition and investment in technology suggest positive future growth. Despite some concerns about interest expense and market volatility, the company's strategic measures, like hedging interest rate risk and managing liquidity, are reassuring. The Q&A indicates analysts' cautious optimism, with no major negative trends disclosed. Considering the company's small-cap status, the positive financial indicators and strategic initiatives suggest a likely positive stock price movement over the next two weeks.
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