Chimera Investment Corporation (CIM) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial metrics, optimistic guidance, and strategic growth plans, particularly with HomeXpress. Despite some concerns on liquidity and unclear guidance on dividends, the overall sentiment is positive, with expected growth in non-QM markets, increased origination volumes, and strong demand in the secondary market. The dividend increase and accretive acquisition of HomeXpress further support a positive outlook, suggesting a likely stock price increase in the short term.
Key Financial Performance
GAAP net income (Q4 2025) $7 million or $0.08 per share, with a year-over-year change not explicitly mentioned.
GAAP net income (Full Year 2025) $144 million or $1.72 per share, with a year-over-year change not explicitly mentioned.
GAAP book value (End of Q4 2025) $19.70 per share, with a quarterly economic return on GAAP book value of negative 0.9%.
Economic return on GAAP book value (Full Year 2025) Positive 7.4%, including $1.48 of dividends declared in 2025.
Earnings available for distribution (Q4 2025) $45 million or $0.53 per share, with a year-over-year change not explicitly mentioned.
Earnings available for distribution (Full Year 2025) $141 million or $1.68 per share, with a year-over-year change not explicitly mentioned.
Economic net interest income (Q4 2025) $65 million, with a yield on average interest-earning assets of 5.9%, average cost of funds of 4.5%, and net interest spread of 1.4%.
HomeXpress funded production (Q4 2025) $1 billion, with a gain on sale premium of 358 basis points on loans sold and settled.
HomeXpress EBITDA (Q4 2025) $11 million, with an annualized EBITDA ROE of 16.2%.
Total leverage (Q4 2025) 5.1:1, with recourse leverage at 2.4:1, reflecting increased capital allocation to Agency RMBS securities and Residential Origination segment.
Liquidity (End of Q4 2025) $528 million in total cash and unencumbered assets, down from $752 million at the end of Q3 2025, primarily due to the HomeXpress acquisition for $244 million in cash consideration.
Agency RMBS added (Q4 2025) $606 million net of sales.
HomeXpress loan origination (Full Year 2025) $3.4 billion, with a record low GAAP cost to originate of 201 basis points in Q4 2025.
Compensation, general and administrative expenses (2025) Increased by $22 million year-over-year, primarily due to staffing costs and G&A expenses related to acquisitions.
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Operating Highlights
Acquisition of HomeXpress Mortgage: Chimera acquired HomeXpress Mortgage, a major non-QM originator, for $244 million in cash and $272 million in total consideration. This acquisition expands Chimera's capabilities and reach in the residential mortgage market.
Launch of MSR Strategy: Chimera initiated a Mortgage Servicing Rights (MSR) strategy, adding a new dimension to its portfolio.
Expansion of Fee-Based Income: Chimera increased third-party AUM from $22 billion to $26 billion and added advisory services to three securitizations.
Growth in Non-QM Loan Origination: HomeXpress originated $3.4 billion in loans in 2025, with a record $1.04 billion in Q4, marking an 18% increase over Q3.
Portfolio Rebalancing: Chimera shifted its portfolio allocation from 97% residential credit to 72%, with increased allocations to Agency MBS (16%), MSRs (1%), and HomeXpress lending platform (11%).
Capital Generation: Generated $600 million through asset sales, securitization collapses, and refinancing, redeploying funds into higher-value activities.
Transformation into a Hybrid REIT: Chimera is transitioning into a long-term hybrid REIT, focusing on diversified residential assets and fee-based income to ensure resilience and longevity.
Focus on Long-Term Value Creation: The company aims to build a diversified residential platform capable of generating sustainable value across economic cycles.
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Risk or Challenges
Economic Return on GAAP Book Value: The economic return on GAAP book value for the fourth quarter was negative 0.9%, indicating a decline in book value and potential challenges in maintaining profitability.
Liquidity Position: The company ended the year with $528 million in total cash and unencumbered assets, a decrease from $752 million at the end of the third quarter, partly due to the HomeXpress acquisition. This reduction in liquidity could limit flexibility in addressing unforeseen challenges.
Compensation and Administrative Expenses: Compensation, general, and administrative expenses increased by $22 million year-over-year, driven by acquisitions and staffing costs. This rise in expenses could pressure margins if not offset by revenue growth.
Book Value Sensitivity: The company's book value is sensitive to yield curve dynamics, with recent steepening leading to lower reported book value. This sensitivity could pose risks in volatile interest rate environments.
Leverage Levels: Total leverage for the fourth quarter was 5.1:1, with recourse leverage at 2.4:1. Increased leverage, particularly in a rising interest rate environment, could heighten financial risk.
HomeXpress Acquisition Costs: The acquisition of HomeXpress for $244 million in cash and $272 million in total consideration has reduced cash reserves and increased transaction expenses, which may impact short-term financial stability.
Non-Recurring Compensation Benefits: Non-recurring compensation-related benefits contributed $0.05 to EAD in the fourth quarter. The absence of these benefits in future periods could reduce earnings available for distribution.
Market Volatility: The company operates in a dynamic market environment with tightening spreads and fluctuating treasury yields, which could impact asset valuations and earnings.
Operational Integration: The integration of HomeXpress and other acquisitions requires effective management to realize synergies and avoid operational disruptions.
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Guidance & Outlook
Dividend Guidance: The company announced a first quarter 2026 dividend of $0.45 per share, a 22% increase from prior quarterly dividends. The Board expects to maintain this dividend level for the remaining three quarters of 2026.
Portfolio Repositioning: The company plans to continue unlocking capital and redeploying it into earnings-accretive investments, including Agency MBS, MSRs, and sponsored securitizations backed by HomeXpress production. Additional securitization redemption rights and asset divestitures are expected to align with portfolio objectives.
Market Trends and Demand: Strong demand for non-QM loans and related securitized products is anticipated to continue into 2026, with non-QM AAA spreads tightening by 20-25 basis points year-to-date.
Residential Origination Growth: HomeXpress originated $1.04 billion in loans during Q4 2025, an 18% increase over Q3. The company expects continued growth in origination volume, supported by expanded sales and operations teams and technology enhancements.
Non-Delegated Correspondent Program: The program, launched in 2025, is expected to represent a growing share of origination volume going forward, with 55 mortgage bankers approved to deliver closed loans to HomeXpress.
Warehouse Funding Capacity: HomeXpress increased its total warehouse funding capacity to $1.35 billion in Q4 2025, which is expected to support anticipated near-term growth.
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Shareholder Return Plan
Dividend Increase: The company raised its dividend by 22% quarter-over-quarter to $0.45 in the first quarter of 2026. The Board expects to maintain this dividend level for the remainder of the year.
Dividend Sustainability: The company emphasized its focus on delivering consistent, reliable dividends across market environments while growing enterprise value over time.
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Key Q&A
Q:Can you give an update on HomeXpress production volume and gain on sale for the first quarter?
A:Kyle Walker mentioned a typical seasonal reduction in volume after the holidays but expressed optimism for 2026. He stated that the first quarter is expected to be good compared to last year, with gain on sale premiums remaining strong.
Q:Where do you see the best relative value between adding more agencies versus securitizing non-agency assets?
A:Jack Macdowell emphasized portfolio construction, aiming for balance between liquid agency components and credit pieces like HomeXpress production. He noted agency spreads have tightened but remain attractive, and they are evaluating selling loans in the secondary market versus retaining them.
Q:How did you decide on the dividend increase and its balance with retaining capital for growth?
A:Phillip Kardis explained that the dividend decision was based on expected EAD coverage over the year, balancing allocations for business growth and providing market guidance. He noted the approach may not be repeated annually.
Q:Are you originating second liens, and what is the outlook for non-QM volume in 2026?
A:Kyle Walker stated they are not originating second mortgages due to profitability challenges. He projected 20%-25% growth in non-QM and business purpose loans for 2026. Jack Macdowell added that non-QM origination volume could reach $110-$130 billion, supported by market growth and increased wallet share.
Q:What caused the reduction in book value related to securitized debt this quarter?
A:Jack Macdowell explained that the reduction was due to the faster increase in securitized debt value compared to loan values, driven by yield curve steepening. He emphasized that this accounting outcome does not affect their economic risk or capital at risk.
Q:Is there room for credit enhancement levels to come down in securitization trusts, and how would that affect leverage appetite?
A:Jack Macdowell noted minimal losses in the non-QM sector but rising delinquencies in recent cohorts. He does not expect a material decline in credit enhancement levels. He explained that securitization provides fixed-rate term financing, making them comfortable with leverage.
Q:Could GSEs sell more of their loan portfolio to create room for MBS purchases?
A:Jack Macdowell acknowledged that GSEs have sold loans in the past and could do so again if economically viable.
Q:What is the potential for fee revenue growth from third-party assets under management?
A:Jack Macdowell highlighted efforts to grow fee-earning capabilities through managing third-party loans and leveraging synergies with HomeXpress production. He also mentioned focusing on discretionary credit funds and separately managed accounts.
Q:What is the demand for loans in the secondary market?
A:Jack Macdowell reported strong demand for non-QM loans from insurance companies, dealers, and asset managers. He noted tightening spreads and highlighted their ability to provide a one-stop shop for investors lacking loan management infrastructure.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer on whether they would provide annual guidance for dividends in the future, stating it was hard to say and dependent on future circumstances.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Agency MSRs
Agency RMBS
Chimera
EAD
HomeXpress acquisition
HomeXpress production
Investment Portfolio
Origination segment
Residential Origination
acquisition HomeXpress
banker loan
basis point
book value
capability
capital allocation
combination
consideration
enterprise
exposure
fee
gain sale
interest rate
investor
lending
leverage
loan HomeXpress
mortgage
origination
portfolio HomeXpress
portfolio asset
purpose
return
spread
warehouse
CIM Transcript
Chimera Investment Corporation (CIM) Q4 2025 Earnings Call Transcript
Positive2-11
The earnings call summary and Q&A indicate strong financial metrics, optimistic guidance, and strategic growth plans, particularly with HomeXpress. Despite some concerns on liquidity and unclear guidance on dividends, the overall sentiment is positive, with expected growth in non-QM markets, increased origination volumes, and strong demand in the secondary market. The dividend increase and accretive acquisition of HomeXpress further support a positive outlook, suggesting a likely stock price increase in the short term.
Knight Therapeutics Inc. (GUD:CA) Q3 2025 Earnings Call Transcript
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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.
Chimera Investment Corporation (CIM) Q3 2025 Earnings Call Transcript
Unknown11-6
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%.
Chimera Investment Corporation (CIM) Q2 2025 Earnings Call Transcript
Unknown8-6
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.
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