Chimera Narrows Loss as Portfolio Margin Tightens
HomeXpress originated $1.1 billion of loans, up 30% from a year earlier.
Chimera Investment Corp. (CIM), a mortgage real estate investment trust, narrowed its second-quarter loss as smaller investment-sale and debt-extinguishment charges offset pressure on interest margins. The GAAP net loss available to common shareholders was $4.0 million, or $0.05 a diluted share, compared with $65.0 million, or $0.78 a share, in the first quarter. Chimera earned $14.0 million, or $0.17 a diluted share, a year earlier.
The quarter marked a sharp improvement in the Investment Portfolio's bottom line alongside weaker underlying interest economics. The segment recorded net income of $8.7 million after a $51.9 million first-quarter loss, as realized investment-sale losses contracted to $9.6 million from $40.4 million and debt-extinguishment losses fell to $2.7 million from $38.9 million.
Earnings available for distribution declined sequentially to $39.0 million, or $0.46 an adjusted diluted share, from $45.8 million, or $0.54 a share. The measure remained above the $32.1 million, or $0.39 a share, reported a year earlier. That left the $0.45 quarterly dividend covered by one cent a share, down from nine cents of coverage in the first quarter.
Net interest income fell 6% from the first quarter to $70.5 million, while rising 7% from a year earlier. Investment Portfolio economic net interest income declined to $66.3 million from $72.8 million sequentially, and its net interest margin compressed to 1.9% from 2.1%. The average asset yield slipped to 5.9% as the economic average cost of funds rose to 4.3%.
Chimera shifted further toward Agency residential mortgage-backed securities. Average Agency RMBS increased 37% sequentially to $5.01 billion, while average loans held for investment fell 13% to $8.10 billion. Agency securities accounted for 36.8% of portfolio fair value at June 30, up from 24.2% at year-end, as GAAP leverage increased to 5.6-to-1 and recourse leverage rose to 3.3-to-1.
Residential Origination provided a counterweight to the margin pressure. Segment net income rose 9% sequentially to $8.7 million, and gains on loan originations and sales increased 4% to $22.3 million. HomeXpress generated $12 million of EBTDA, representing a 17.3% annualized return on Chimera's initial equity investment.
Other expenses declined 11% sequentially to $48.3 million as depreciation, amortization and impairment fell, though transaction expenses increased to $3.2 million. Expenses were 78% higher than a year earlier, reflecting increases in compensation and administrative costs following the October 2025 HomeXpress acquisition.
Chimera completed two residential-mortgage-loan re-securitizations totaling $487 million and retained another $122 million of newly originated HomeXpress loans. Quarter-end retained loans reached $301 million, extending the origination business's role in a portfolio carrying higher leverage and thinner dividend coverage.