Chimera Investment Corporation Q4 2025 Earnings Call - Hybrid REIT pivot accelerates with HomeXpress buy and agency MBS buildout driving dividend lift

Speaker 7: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Miyun Sung. Thank you. You may begin.

Miyun Sung, Conference Moderator, Chimera Investment Corporation: Thank you, operator, and thank you everyone for participating in Chimera’s fourth quarter 2025 earnings call. Before we begin, I’d like to review the Safe Harbor Statement. During this call, we will be making forward-looking statements which are predictions, projections, or other statements about future events. These events are based on current expectations and assumptions that are subject to risks and uncertainties, which are outlined in the Risk Factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We encourage you to read the forward-looking statement disclaimers in our earnings release and our quarterly and annual filings. During the call today, we may also discuss non-GAAP financial measures. Please refer to our SEC filings and earnings supplement for reconciliations to the most comparable GAAP measures.

Additionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call. We do not undertake and specifically disclaim any obligation to update or revise this information. I will now turn the conference over to our President and Chief Executive Officer, Phil Kardis.

Phil Kardis, President and Chief Executive Officer, Chimera Investment Corporation: Thanks, Miyun, and good morning, and welcome to the Chimera Investment Corporation’s fourth quarter 2025 earnings call. Joining me on the call are Subra Viswanathan, our Chief Financial Officer; Jack Macdowell, our Chief Investment Officer; and Kyle Walker, the president and CEO of HomeXpress Mortgage. After my remarks, Subra will review the financial results, Jack will review our portfolio, and then Kyle will review HomeXpress’s results. Last year, we provided a consistent message. We said we weren’t playing defense. We were building a hybrid REIT designed to endure. Durable companies are built on clear thinking, long-term orientation, and discipline. Early last year, we laid out a simple, actionable plan: diversify our portfolio, strengthen liquidity, and expand our fee-based income.

We were explicit about how: grow Agency RMBS, acquire MSRs, expand nondiscretionary investment management and advisory services, and pursue growth, both organic and through acquisitions, all funded primarily by our own portfolio. We repeated these same commitments throughout the year: consistency of strategies on a slogan. It’s the operating system of any company that wants to outlast cycles. Now let’s look at what we delivered. We began the year with a GAAP portfolio composed of 81% loans, 3% Agency securities, and 16% non-agency securities. We ended the year at 61% loans, 16% Agency securities, and 10% non-agency securities, 11% lending activities, and 1% MSRs. We aren’t yet where we intend to be, but the direction is unmistakable and the progress significant.

We also increased third-party AUM from $22 billion-$26 billion, added advisory services to three of our securitizations, and successfully integrated our loan data into the Palisades systems, which is already improving the performance of the legacy portfolio. We closed on Home Express Mortgage, one of the largest non-QM originators, an acquisition that expands both our capabilities and our reach. Although we raised approximately $120 million in unsecured debt, the majority of the funding for this transformation came directly from our own portfolio, exactly as planned. Through asset sales and collapsing select securitizations, we generated approximately $485 million for an aggregate total of more than $600 million to redeploy into higher-value activities. While our orientation is always long-term, we’re beginning to see near-term results.

Our earnings power has begun to increase, enabling us to raise our dividend by 22% quarter-over-quarter to $0.45 in the first quarter, and our board expects to maintain that dividend level for the remainder of the year. That combination - earnings momentum coupled with disciplined capital allocation - is how sustainable value is built. As we transform Chimera into a long-term hybrid REIT, we’ve been clear that we’re not changing who we are, we’re expanding how we apply our capabilities. We remain, at our core, focused on a set of competencies we know well: our hedgehog nature. But as every durable enterprise learns, evolution requires clarity of purpose. Simon Sinek phrases it: "It starts with why." And we know our why. We’re here to give investors broad exposure to the entire residential real estate ecosystem through a diversified set of assets, operations, and income streams.

That exposure shows up not only as dividends but as enterprise growth. Our how is straightforward: manufacture and acquire a diversified portfolio of residential assets that generates net interest income, gains on sales, and fees from operations. Our what is equally clear: consistent, reliable dividends across market environments while growing enterprise value over time. Many REITs, including us, are viewed as a quasi-bond, where book value is treated as principal and dividends as coupons. That’s not who we’re becoming. We’re building an operating company with capacities to compound value while delivering a tax-advantaged dividend. As such, neither book value alone nor dividends alone tells the whole story. What matters is long-term intrinsic value per share supported by a consistent dividend. As we look towards 2026, our priorities remain unchanged.

We’re focused on the long game: on building a diversified residential platform capable of generating long-term value for both our customers and our investors across a wide range of economic environments. We will continue to diversify the portfolio, expand liquidity, and grow our fee-based income, both organically and through thoughtful acquisitions. As we’ve said before, we’re not merely building a bigger company. We’re building a better one, one engineered for resiliency and longevity. Now I’ll turn it over to Subra to walk you through the financials.

Subra Viswanathan, Chief Financial Officer, Chimera Investment Corporation: Thank you, Phil. With the acquisition of Home Express, a material portion of our business is now operations in addition to our investment portfolio. As a result, we have reevaluated our financial reporting, and beginning with the fourth quarter, we now have two reportable segments: our investment portfolio and our residential origination platform. The investment portfolio segment consists of our investments and third-party advisory business, for which Jack will provide more detail. Our residential origination segment consists of the standalone mortgage origination business, for which both Jack and Kyle will provide more details. Now I will review Chimera’s financial highlights for the fourth quarter and full year of 2025. GAAP net income for the fourth quarter was $7 million or $0.08 per share, and GAAP net income for the full year was $144 million or $1.72 per share.

GAAP book value at the end of fourth quarter was $19.70 per share. For the fourth quarter, our economic return on GAAP book value was -0.9% based on the quarterly change in book value and the $0.37 fourth quarter dividend per common share. For the full year, our economic return was +7.4%, which includes $1.48 of dividends declared in 2025. As Phil noted this morning, the company announced first quarter 2026 dividends of $0.45 per share, an increase of 22% from prior quarterly dividends, and our board expects to continue that dividend for remaining three quarters of 2026. Our earnings available for distribution for the fourth quarter was $45 million or $0.53 per share, and our EAD for the full year was $141 million or $1.68 per share. Turning now to our reportable segments.

For the investment portfolio segment during the fourth quarter, our economic net interest income was $65 million. The yield on average interest-earning assets was 5.9%, our average cost of funds was 4.5%, and our net interest spread was 1.4%. For the residential origination segment during the fourth quarter, Home Express funded $1 billion in production with a gain-on-sale premium of 358 basis points on loans sold and settled. Home Express EBITDA, defined as earnings before taxes, depreciation, and amortization, was $11 million for the quarter, and Home Express annualized EBITDA ROE was 16.2%. With respect to leverage, our total leverage for the fourth quarter was 5.1-to-1, while REITs’ leverage ended the quarter at 2.4-to-1. REITs’ leverage increased this quarter as we continue to increase our capital allocation to agency RMBS securities and the addition of warehouse lines from residential origination segments.

For liquidity and strategic developments, the company ended the year with $528 million in total cash and unencumbered assets, compared to $752 million at the end of third quarter. Cash decreased as we completed the acquisition of HomeXpress for cash consideration of $244 million and total consideration of $272 million. On the investment portfolio side for the fourth quarter, we added $606 million of agency RMBS during the quarter net of sales. We continued to rebalance our portfolio as we redeemed $70 million of securities from SIM 2022 I-1 securitization and sold the underlying loans with a principal balance of $166 million, releasing approximately $28 million of equity. We also sold $33 million of non-agency RMBS subordinate securities. At year-end, we had $6 billion of total consolidated secured financing outstanding, $802 million related to our residential origination warehouse loans, and $5.2 billion for our investment portfolio.

Of this $5.2 billion relating to our investment portfolio, $3.3 billion was secured financing for Agency RMBS positions. We maintained $2.9 billion of hedges against this exposure with a combination of swaps and swaptions across varying maturities. $1.9 billion of secured financing was for residential credit exposure. Of that, $1.3 billion or 66% of that included either non- or limited mark-to-market features. $1 billion or 51% of this were floating-rate facilities. We also maintained $2.15 billion with a combination of swaps, swaptions, interest-rate caps across varying maturities to hedge our interest-rate risk related to residential credit exposure. For the fourth quarter of 2025, our economic net interest income return on average equity assigned to the investment portfolio was 10.8%. Our GAAP return on average equity was 4.4%. Our EAD return on average equity was 11%, and our EAD return on average tangible equity was 11.9%.

Lastly, compensation, general, and administrative expenses increased by $22 million year-over-year, which was primarily driven by the inclusion of staffing costs and G&A expenses related to Palisades acquisition in December 2024 and Home Express acquisition in Q4 of 2025. Compensation expense for our investment portfolio was lower during the fourth quarter due to the absence of severance costs that were recorded in the third quarter and a lower incentive compensation accrual in Q4. Together, these items contributed approximately $0.05 to EAD for the fourth quarter. We consider both these items to be non-recurring and do not expect these compensation-related benefits to continue to EAD in future periods. Servicing expense decreased by $2 million year-over-year due to lower loan balances and loan counts related to our portfolio reallocation strategy.

Our transaction expenses were higher by $10 million this year, reflecting the costs associated with Home Express acquisition. To close, as Phil noted and our financials are beginning to show, we’re building a diversified residential platform that is generating income from assets, gain-on-sale, and fees from operations. I will now turn the call over to Jack to review the portfolio and investment activity.

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Thanks, Subra, and good morning, everyone. 2025 was a pivotal year for the business and our capital allocation strategy. As Phil mentioned in his remarks, we began the year with a clear objective to reposition the investment portfolio to be more balanced and liquid while strengthening our earnings power. That plan included increasing our allocation to liquid Agency MBS, adding MSRs to help offset interest rate and prepayment risk in other parts of the portfolio, and applying our asset-level credit risk management capabilities to enhance performance across the loan book. Over the course of the year, we generated more than $600 million of capital through portfolio and capital markets activity, including $291 million from refinancing select investments, approximately $195 million from divesting assets that no longer met our return thresholds, and $116 million from our senior unsecured notes offering.

These actions supported our portfolio allocation realignment and, importantly, positioned us to pursue a broader business transformation through the acquisition of Home Express. During 2025, we purchased over $3 billion of agency MBS net of sales and launched our MSR strategy. As a result, our capital allocation shifted from approximately 97% residential credit at the start of the year to 72% at year-end, with the balance now allocated across agency MBS at 16%, MSRs at 1%, and 11% to our Home Express lending platform. This was all carried out alongside a relatively dynamic market backdrop. Following the volatility spike in April, agency and non-agency spreads tightened throughout the remainder of the year. In the fourth quarter, agency swap OAS continued tightening by approximately 22 basis points, while generic non-QM AAAs were firmer by 5 basis points.

Treasury yields had a tightening bias during the year as the front end was driven primarily by expectations for Federal Reserve easing, while longer-term yields reflected inflation and fiscal considerations. The two-year, 10-year Treasury spread ended the year at 69 basis points, approximately 37 wider than where it began, with roughly 15 basis points of that occurring in the fourth quarter alongside the Fed rate cuts. Lower Treasury yields helped guide mortgage rates down approximately 70 basis points for the year, with 15 basis points coming in the fourth quarter to end at 6.15%. Our book value is sensitive to yield curve dynamics, both because both our securitized loans and the related liabilities are recorded at fair value. As the curve steepened in recent quarters, loan values increased.

However, those gains were more than offset by increases in the fair value of our securitized debt, resulting in lower reported book value. In the fourth quarter, our agency MBS portfolio contributed positively to book value as spreads tightened, while our aggregate loan portfolio was roughly flat. However, as Subra noted earlier, overall book value declined 2.7%, attributable in large part to the increase in value of our consolidated securitized debt and activities related to the Home Express acquisition. Our earnings power increased during 2025, reflecting deliberate portfolio repositioning, improvements in capital allocation, and contributions derived from the Home Express acquisition. The Federal Reserve’s easing provided some benefit through the asymmetry in our liability hedge structure related to the residential credit portfolio. In the first full quarter with Home Express contributions, the business generated a distributable ROE as measured by EAD over average common equity of 11% annualized.

This compares to 7.16 in the fourth quarter of 2024, representing an increase of nearly 400 basis points. During the fourth quarter, we exited approximately $33 million of legacy non-agency RMBS, releasing roughly $6.7 million of capital at a break-even ROE of 7%. We also exercised our redemption rights on the CIM 2022-I1 investor loan securitization, sold the $166 million of underlying loans, and generated $28 million of net capital after satisfying debt obligations with a break-even ROE of 3%. We added approximately $606 million of agency MBS in the fourth quarter and ended the year with over $3 billion, consisting primarily of specified pools selected for call protection characteristics. Performance in our seasoned reperforming loan portfolio remained stable. Prepayments were primarily driven by housing turnover, and we saw a seasonal 50 basis point increase in delinquencies during the fourth quarter. Otherwise, no other notable trends.

Looking ahead, we expect the first half of 2026 to focus on continuing to unlock capital and redeploy into investments that are earnings accretive and align with our portfolio repositioning objectives. This may include exercising additional securitization redemption rights and divesting of assets that no longer meet portfolio objectives or return thresholds. We expect our capital deployment efforts will remain focused on agency MBS, MSRs, sponsored securitizations backed by Home Express production, and other select credit investments while positioning ourselves to capitalize on potential platform acquisitions as they emerge. Agency MBS continues to serve as the most liquid component of our portfolio, enabling efficient deployment following capital markets activity, asset sales, or portfolio runoff while preserving liquidity for future investments and other strategic initiatives. At approximately 7.5 times leverage, the agency portfolio continues to generate run-rate ROEs in the low to mid double digits.

We are seeing strong demand for non-QM loans and related securitized products to start the year. Generic non-QM AAA spreads have tightened approximately 20-25 basis points year to date, surpassing 2025 levels. While we intend to retain portions of Home Express’s production for our securitization program, we will continue to evaluate relative value between selling the loans in the secondary market and securitizing and retaining portions of the capital structure in our investment portfolio. 2025 represented a meaningful transition year for the portfolio and the broader business. We repositioned capital, diversified sources of earnings, and expanded platform capabilities. As Phil mentioned in his remarks, while our core discipline remains unchanged, we believe these steps enhance our value proposition and improve the durability of our earnings profile. With that, I will turn it over to Kyle to discuss residential origination.

Kyle Walker, President and CEO of HomeXpress Mortgage, HomeXpress Mortgage: Thank you, Jack, and good morning, everyone. I’d like to begin by noting that the transition into the Chimera organization has gone smoothly throughout our first quarter of ownership. Although the relationship is new, we are already seeing meaningful synergies between the Chimera, Palisades, platform, and Home Express. Home Express currently has 332 employees and is licensed to originate mortgage loans in 46 states. We primarily focus on originating non-QM consumer and business purpose loans through a network of 6,000 mortgage brokers and bankers. These loans are sold in pools to investors who either aggregate and securitize the loans or hold them in their portfolios. Home Express originated $1.04 billion in loans during the fourth quarter, representing an 18% increase over the third quarter and marks a record for our company. For the full year 2025, we originated $3.4 billion in loan volume.

As Subra noted, Home Express’s EBITDA was $11 million in the fourth quarter. Throughout 2025, we have been focused on expanding our lending capacity by further building our sales and operations teams. We believe this, combined with our continual technology enhancements, will support the continuation of our origination growth into future quarters. We have always been very focused on our cost metrics, and we reached a new record low GAAP cost to originate in the fourth quarter of 201 basis points, which produced a net margin of 111 basis points. In 2025, we launched a non-delegated correspondent program to serve a growing segment of mortgage bankers seeking to fund non-QM and business purpose loans. Home Express underwrites these loans to our guidelines, with the bankers funding the loans in their names. We now have 55 mortgage bankers approved to deliver closed loans to Home Express.

While volume in this channel was modest in the fourth quarter at $47 million, we expect it to represent a growing share of our origination volume going forward. We increased our total warehouse funding capacity to $1.35 billion in the fourth quarter, which we expect will be sufficient to fund our anticipated growth in the near term. With the anticipated continued growth of the non-QM and business purpose market, we are optimistic that our business will continue to grow, and we look forward to realizing the benefits that our partnership with Chimera can deliver.

Phil Kardis, President and Chief Executive Officer, Chimera Investment Corporation: Thanks, Kyle. We’re glad to have Home Express as part of the Chimera team, and as you said, we’re already seeing the benefits of the partnership. Now we’ll open the call for questions.

Speaker 7: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Trevor Cranston with Citizens JMP. Please proceed with your question.

Trevor Cranston, Analyst, Citizens JMP: Hey, thanks. Good morning. Looking at the Home Express numbers, obviously, fourth quarter was pretty strong, both in terms of production volume and gain on sale. Also saw a nice jump. Can you give us an update on kind of how you guys are seeing volume and gain on sale so far in the first quarter? I know you mentioned that AAA spreads have tightened quite a bit year-to-date. Thanks.

Kyle Walker, President and CEO of HomeXpress Mortgage, HomeXpress Mortgage: We’re seeing the typical seasonal reduction in volume after the holidays, but we think that 2026 is going to be a great year. We think the first quarter is going to be a pretty good quarter in comparison to last year. We’re seeing the gain on sale premiums to be pretty good in comparison to the fourth quarter, and we’re optimistic about the revenue for the first quarter.

Trevor Cranston, Analyst, Citizens JMP: Got it. Okay, that’s helpful. And then as you go through the year and continue to free up capital in some cases and reposition the portfolio, can you talk about where you see the best relative value today between adding more agencies after the spread tightening that’s occurred versus potentially doing securitizations of non-agency assets?

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah. Hey, Trevor. This is Jack. One of the things that we continue to be really focused on is the portfolio construction. So there’s certain objectives that we have that we’ve talked about in terms of what we’re trying to do with the portfolio, namely creating more balance. And part of that is having that liquid component with respect to agencies, which I think we’ve done a really good job in 2025 of building up. The other book in there would be to have somewhat of a hedge vis-à-vis our MSR allocation, which at 1% continues to be well below what our otherwise target would be.

Then in between those two bookends is the credit piece of the portfolio, where we think that having the Home Express production in-house and being able to securitize that and retain certain parts of the capital structure in our investment portfolio can certainly be accretive. As you point out, agency spreads have come in where we’re holding leverage right now. We still see that as relatively attractive or at least meeting our return threshold somewhere in that low to mid double digits. But I would say where we are from an allocation perspective today, we’re pretty comfortable with ±5%, I would say. So really, for the balance of the year, that will continue to serve as our liquidity bucket. MSRs continues to be a focus of ours. And right now, as Kyle mentioned, we’re seeing pretty strong demand in the secondary market for loans.

We’re constantly evaluating the cost-benefit analysis of selling loans in the secondary market versus retaining them for our investment portfolio.

Trevor Cranston, Analyst, Citizens JMP: Got it. Okay. I appreciate the comments. Thank you.

Speaker 7: Thank you. Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.

Doug Harter, Analyst, UBS: Thanks and good morning. I was hoping you could put the dividend increase in context, kind of how you thought about sizing that increase and how you think about kind of retaining some capital for book value growth/being able to grow the investment portfolio, operating businesses versus kind of maximizing the dividend.

Kyle Walker, President and CEO of HomeXpress Mortgage, HomeXpress Mortgage: Hi, this is Phil. Thanks for the question. I think as we look at that issue, what we look at is we look at it over the period of a year. We recognize as we become more of an operating company, we expect EAD to potentially be variable from short period to short period. But so how we look at it is we look at over the course of the year, and we feel like that dividend is one that will have sufficient EAD coverage on and will provide us sufficient coverage for us to have the proper allocations to help grow the operating aspects of our business. So that’s kind of the balance we struck and to give the market some feel for where we think we’ll be throughout the year.

Doug Harter, Analyst, UBS: I guess just on that point, would you expect going forward to kind of give guidance for the full year in the first quarter dividend, or is that kind of unique to this year since it’s kind of the first?

Kyle Walker, President and CEO of HomeXpress Mortgage, HomeXpress Mortgage: Yeah, I mean, that’s hard to say. As we looked at it for this year, we did think it would be helpful to the market to address the questions that you asked, which were like, "How much do you expect to have in a dividend? How much do you expect to retain?" And we thought it would be helpful to the market to go ahead and try to lay out what our expectations were. Whether we continue to do that a year from now, we’ll just have to wait and see.

Doug Harter, Analyst, UBS: Okay. I appreciate that, Phil. Thank you.

Kyle Walker, President and CEO of HomeXpress Mortgage, HomeXpress Mortgage: Sure.

Speaker 7: Thank you. Our next question comes from the line of Bose George with KBW. Please proceed with your question.

Bose George, Analyst, KBW: Hey, guys. Good morning. On the residential segment, are you guys originating second liens at the moment, or is that an incremental opportunity? And then where do you see industry non-QM volume in 2026 versus 2025?

Kyle Walker, President and CEO of HomeXpress Mortgage, HomeXpress Mortgage: We currently are not originating second mortgages. We originate through a wholesale broker network, and it’s difficult with small loan amounts like second mortgages to originate those in a profitable manner. So we haven’t got into the second mortgage market. All the statistics and analytics that we see for non-QM and business purpose loans in 2026 is growing, increasing over 2,000 in 2025. So we’re seeing numbers as large as 20%-25% growth in the market. So we are anticipating that the market’s going to grow and that we will get our share of the increased market going forward.

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah. And hey, the other thing, Bose, I would just say on the second lien side, I mean, when you have a servicing business, as you know, that’s a very good mechanism for sourcing second lien borrowers and a way to kind of address some of the prepayment activity associated with your MSRs. So perhaps at some point down the road, that could be more of a strategy for us. But at this point, as Kyle said, it’s not something that we’re originating. And then just in terms of the non-QM volume outlook, this was a major thesis for us early last year as we were sort of thinking about the acquisition of Home Express and the viability of doing that. And I think 2025 sort of supported our case.

But going into 2026, I mean, we saw a considerable increase in both origination volume and non-QM in 2025, plus issuance volume. And looking out into 2026, I mean, we’re projecting not just on the issuance volume, but on the origination volume side, that could be anywhere from $110 billion-$130 billion, which is based on modest growth in overall mortgage originations, including conventional and agencies, plus having non-QM capture another 100 basis points or so of wallet share.

Bose George, Analyst, KBW: Okay, great. That’s helpful. Thanks. And then actually, just switching over to the change in book value this quarter and the reduction in the value related to your securitized debt, is that happening mainly because that’s more liquid than the loans on the other side? And should we just kind of see that as a timing issue?

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah. I mean, it’s a good question. So maybe we’ll just address book value quarter to date. I assume somebody’s going to ask that. So we’re basically flat down, call it 30 basis points quarter to date. And the one thing, and maybe it’s a good time just to talk about our views of capital at risk and value at risk. There’s been a pretty heavy steepening in the yield curve during 2025. And I think in the prior quarters, we’ve talked about the impact on our loans as well as on our securitized debt. And basically, our loan values have increased, but the value of our securitized debt has increased at a faster pace, having the effect of reducing reported book value. Okay? And while that’s an important accounting outcome, it doesn’t really change how we view our economic risk or capital at risk.

That’s because a core part of our strategy is exercising the call rights that we own on our securitizations, where we redeem the bonds at par. Basically, the mark-to-market fluctuations in our securitized debt, it doesn’t affect the economics of our call option, nor does it affect the earnings power of our capital. Just wanted to give you kind of how we think about that. We’re focused squarely on managing capital at risk. The way that we think about that is we evaluate based on the cash flow generating capital that we have, not on the short-term valuation movements of our securitized liabilities.

Bose George, Analyst, KBW: Okay, great. That’s helpful. Thanks.

Speaker 7: Thank you. Our next question comes from the line of Eric Hagen with BTIG. Please proceed with your question.

Eric Hagen, Analyst, BTIG: Hey, thanks. Good morning. Maybe following up on this bullish non-QM outlook, I mean, do you think there’s any room for credit enhancement levels to come down in the securitization trusts? And to the extent that we ever saw more flexibility for credit enhancement levels, how do you think that would drive your appetite to take leverage on the subordinate pieces that you retain from securitization?

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah, good question. I mean, but on some deals, we see quite a bit of differentiation among, call it, AAA enhancement levels across various deals. We see the rating agencies consistently reviewing their models as more data comes in. You’re as aware as anybody that losses have been de minimis in the Non-QM sector. But we are seeing in the 2022, 2023 cohorts where delinquencies are creeping up. So I guess our expectation isn’t that there’s a material decline in credit enhancement levels. For us, Eric, I mean, we actually look at securitization in two different components. One, horizontal risk retention and vertical risk retention. So the horizontal, obviously, we have certain types of requirements with respect to how much we must retain if we’re holding horizontal. Then on the vertical side, we’re holding most of that would be AAAs.

So for us, it’s really just an economic consideration. The nice thing about securitizing and retaining the horizontal piece is that you’re basically funding your investment with fixed-rate term financing. So you’re not taking liquidity risk. And so certainly, from that perspective, we’re more comfortable taking the leverage than if it was like mark-to-market repo.

Eric Hagen, Analyst, BTIG: That’s really helpful, Color. I appreciate that. All right, here. As you guys know, the administration is focused on reducing mortgage rates by buying agency MBS. But the GSCs, of course, still hold a huge portfolio of mortgage loans, which they usually target for loss mitigation. Do you guys think the GSCs could ever look to sell more of the loan portfolio, mainly in an effort to create more room for MBS purchases? And do you think there’s a deep enough market for them to potentially pursue that opportunity?

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Are you talking about the NPL sales?

Eric Hagen, Analyst, BTIG: Yes. Yeah.

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Oh, yeah.

Eric Hagen, Analyst, BTIG: Exactly.

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah, for sure. For sure. I mean, I would hope that they would. I mean, they’ve certainly been sellers in the past. So I think that could certainly be an avenue that they’ve used historically, and they could certainly use again to the extent that the economics made sense for them to do so.

Eric Hagen, Analyst, BTIG: Okay. Thank you, guys.

Speaker 7: Thank you. Our next question comes from the line of Kenneth Lee with RBC Capital Markets. Please proceed with your question.

Kenneth Lee, Analyst, RBC Capital Markets: Hey, good morning. Thanks for taking my question. Just one on third-party assets under management and growth around there. How do you think about potential contribution of fee revenues or fee-related earnings over time? And to see a meaningful pickup, would there have to be a pickup under loans under management, or is there any other avenues that you’re looking at there? Thanks.

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah, I mean, that’s certainly a focus of ours to diversify our earnings and grow our fee earning capabilities. I mean, that group is really bifurcated into two different pieces, one, the majority of which is managing loans on a third-party basis. And that creates a couple of different fee revenue streams. So we’re constantly working to grow that business both sort of with external loans. And there’s also synergies with respect to Home Express production to the extent that we sell loans and we can retain the asset management function on a go-forward basis. So we’re certainly looking to exploit some of those synergies as well. And then on the more discretionary credit fund side, we certainly remain focused on looking at building separately managed accounts and growing fees through that channel as well.

Kenneth Lee, Analyst, RBC Capital Markets: Gotcha. And then relatedly, what are you seeing in terms of client demand or interest for loans? Is there any kind of color around a mix of either institutional investors? What types? Sounds like from the prepared remarks, you’re seeing stronger demand there, but just want to get a little bit more color on that. Thanks.

Jack Macdowell, Chief Investment Officer, Chimera Investment Corporation: Yeah, if you’re talking about the demand in the secondary market for Home Express’s loan sales, I mean, it’s a consortium of different buyers from insurance companies to dealers to asset managers who oftentimes are a crossover between securities, crossing over into the loan space. So yeah, I mean, just like we’ve seen spreads tighten on AAA non-QM 20-25 basis points to start the year, we’re seeing very strong demand for non-QM loans in the secondary market from a whole host of investors. And maybe just to follow up on that question, the types of investors, I mean, you continue to see insurance companies looking to crossover and get exposure to the whole loans.

So that is an area, I think, that we continue to be focused on to the extent that we can provide somewhat of a one-stop shop for folks who are looking to get exposure to non-QM loans but perhaps don’t have the infrastructure to manage those loans. We have the in-house capability, and we can provide that one-stop shop.

Eric Hagen, Analyst, BTIG: Great. Very helpful there. Thanks again.

Speaker 7: Thank you. We have reached the end of the question-and-answer session. I would like to turn the floor back to CEO Phil Kardis for closing remarks.

Phil Kardis, President and Chief Executive Officer, Chimera Investment Corporation: I’d like to thank everybody for participating in our 2025 fourth-quarter earnings call. We look forward to speaking with you again for our 2026 first-quarter earnings call. Thanks again.

Speaker 7: Thank you. This concludes today’s conference, and you may disconnect your lines at this time. We thank you for your participation.