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CI

CHIMERA INVESTMENT CORP (CIM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 GAAP diluted EPS was $1.77 and Earnings Available for Distribution (EAD) per diluted share was $0.41; GAAP book value rose 7.4% q/q to $21.17, generating 9.2% economic return for the quarter .
  • Significant beat vs S&P Global consensus: normalized EPS $0.41 vs $0.404*; revenue $200.99M vs $73.75M*, driven by large unrealized gains on financial instruments and contribution from investment management fees; EAD also ticked up sequentially to $0.41* .
  • Balance sheet actions unlocked ~$187M from re-securitizations and ~$100M via refinancing non‑MtM facilities, bolstering liquidity ($253M cash, $444M unencumbered assets) and supporting selective agency MBS deployment .
  • Management flagged Q2-to-date book value “flat to slightly down” with ~40 bps decline as of early May amid spread volatility; dividend policy remains under review with Q2 common dividend maintained at $0.37 .

What Went Well and What Went Wrong

What Went Well

  • EAD per diluted share increased to $0.41 (+11% q/q), supported by stable economic net interest spread (1.5%) and economic net interest income of $72.3M .
  • Book value per share increased to $21.17 (+7.4% q/q); economic return of 9.2% benefited from fair value gains on financial instruments ($128.9M) and advisory fee income ($8.9M) .
  • Liquidity strengthened: $187M from re-securitizations plus ~$100M from facility refinancings; management is deploying into agency MBS with a high bar while maintaining flexibility .

What Went Wrong

  • Derivatives posted net unrealized losses (-$6.5M) and lower periodic interest net (-$4.1M) vs prior-year, partially offsetting other income; transaction expenses rose to $5.7M on securitization activity .
  • Provision for credit losses increased to $3.4M in Q1; delinquency in the seasoned reperforming loan cohort remains ~8.9–9.2%, requiring continued asset management engagement .
  • Q2-to-date book value drift “flat to slightly down” (~40 bps) driven by wider credit spreads, despite offsetting effects from securitized debt valuations; management remains cautious on near-term deployment pace .

Financial Results

EPS and EAD vs Prior Periods

MetricQ1 2024Q3 2024Q4 2024Q1 2025
GAAP Diluted EPS ($)$1.36 $1.39 $(2.07) $1.77
EAD per Diluted Share ($)$0.37 $0.36 $0.37 $0.41

Revenue and EPS vs S&P Global Consensus

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($)72.04M*73.77M*73.48M*73.75M*
Revenue Actual ($)152.13M*158.94M*(110.63)M*200.99M*
Normalized EPS Consensus Mean ($)0.483*0.379*0.385*0.404*
Normalized EPS Actual ($)0.36*0.36*0.37*0.41*

Values retrieved from S&P Global.*

Margins and Spread

MetricQ1 2024Q4 2024Q1 2025
Avg Asset Yield (%)5.8% 6.0% 5.9%
Avg Cost of Funds (%)4.4% 4.5% 4.4%
Net Interest Rate Spread (%)1.4% 1.5% 1.5%

Balance Sheet and Liquidity KPIs

MetricQ4 2024Q1 2025
GAAP Book Value/Share ($)$19.72 $21.17
Economic Return (%)(10.1)% 9.2%
GAAP Leverage (x)4.0x 3.9x
Recourse Leverage (x)1.2x 1.2x
Cash ($M)$84.0 $253.3
Unencumbered Assets ($M)$526 $444

Portfolio Composition (Fair Value)

CategoryQ1 2025 ($M)% of FVQ4 2024 ($M)% of FV
Loans held for investment$10,977.7 86.5% $10,772.9 87.6%
Non‑Agency RMBS$1,059.8 8.3% $1,064.2 8.3%
Agency RMBS + CMBS$656.3 4.8% $560.0 3.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common dividend per shareQ2 2025$0.37 (Q1 2025 run-rate) $0.37 (declared) Maintained
Preferred dividendsQ2 2025N/ASeries A $0.50; Series B $0.6469; Series C $0.484375; Series D $0.6349 Declared (series rates per terms)

Note: Management indicated dividend review over the next month; decision subject to market conditions .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Liquidity & FundingQ4: Converted swaption; extended non‑MtM facility; ~$610M cash + unencumbered; push to non‑MtM financing ~$187M cash-out from re‑securitizations; ~$100M from repo refinancings; $253M cash; $444M unencumbered Improving, more flexibility
Portfolio diversificationQ3: Added securities, RTLs; announced Palisades acquisition Non‑QM securitization ($288M); specified pools ($149M); RTLs ($100M); building agency RMBS sleeve Broadening hybrid REIT profile
Palisades third‑party advisoryAnnounced/closed acquisition late 2024 Loans under mgmt up 43% YoY to ~$24B; recurring fee income ramp Growing, capital‑light revenue
MSR strategyQ4: evaluating MSRs to balance duration Potential execution later in 2025; duration hedge for credit book Under evaluation
Macro, rates, tariffsQ4: term premium rise; housing uneven Early April tariff headlines drove volatility; spreads widened; cautious deployment Volatile, cautious stance
Book value trajectoryQ4: BV $19.72, negative quarterly economic return BV +7.4% q/q to $21.17; Q2‑to‑date ~flat to down 40 bps Stabilizing; mild pressure Q2‑to‑date

Management Commentary

  • “This has been a strong quarter… Earnings available for distribution improved by 11%, our book value increased by 7.4% and our economic return was 9.2%.” — CEO Phillip Kardis .
  • “We… accomplished a cash-out refinancing of all the Company’s outstanding non-REMIC securitizations, which provided approximately $187 million in funds for new investment… extended two large non-mark to market secured financing facilities until 2027.” — CEO .
  • “Third-party loans under management… up 43% year-over-year… to nearly $24 billion… combining our on-balance sheet assets with… assets we manage for others, we’re at nearly $37 billion.” — CEO .
  • “Economic net interest income… $72.3 million; yield on average interest-earning assets 5.9%, average cost of funds 4.4%, net interest spread 1.5%.” — CFO Subra Viswanathan .
  • “We exercised our redemption rights… re-securitized… releasing $187 million of cash… breakeven return on capital ~5.8%.” — CIO Jack Macdowell .

Q&A Highlights

  • Book value Q2-to-date update: down ~40 bps as of early week; spread widening partly retraced; asset and liability duration effects offset each other .
  • Capital deployment pace: ~33–40% of $187M already allocated, prioritizing agency MBS and liquidity; remaining over next 4–8 weeks subject to market .
  • Dividend outlook: board will review next month; premature to commit given volatility; Q2 dividend maintained at $0.37 .
  • Funding resilience: structured repo lines non‑MtM/limited MtM; margin calls limited to < $20M during April volatility .
  • Credit risk perspective: RPL DQ ~10% typical for product; borrowers have high equity and long seasoning; monitoring non‑QM DQ uptick market-wide .

Estimates Context

  • EPS: Normalized EPS of $0.41 vs consensus $0.404, a modest beat; EAD per diluted share printed $0.41 consistent with normalized EPS *.
  • Revenue: $200.99M vs consensus $73.75M, a large beat, reflecting fair value gains and advisory fee income; investors should focus on EAD and economic NII for ongoing distribution capacity .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Strong quarter with book value up 7.4% and 9.2% economic return; headline GAAP benefited from $128.9M unrealized fair value gains, while EAD rose to $0.41 .
  • Liquidity meaningfully enhanced: ~$287M total dry powder from re‑securitizations and facility refinancings, enabling selective agency MBS adds at attractive entry points .
  • Funding stack quality (non‑MtM/limited MtM) reduced margin call sensitivity (<$20M in April), supporting defensive posture through volatility .
  • Near-term BV risk modest; management expects cautious deployment, with MSRs under evaluation to help balance duration and stabilize BV over time .
  • EAD trajectory and fee income from Palisades (loans under mgmt ~$24B) are positive for dividend sustainability; Q2 common dividend held at $0.37 .
  • Tactical hurdle: re‑securitizations increased annual run-rate interest expense by ~$11M; incremental returns above ~5.8% breakeven should be accretive .
  • Trading implication: consider near-term catalysts around capital deployment pace and MSR entry; medium-term thesis centers on hybrid REIT diversification and recurring advisory fees for capital-light growth .

Appendix: Additional Data Points (Q1 2025 Operating Details)

  • Net interest income: $69.2M; other income/losses: $137.3M (incl. unrealized gains on financial instruments $128.9M; advisory fees $8.9M); other expenses: $34.1M .
  • Economic NII reconciliation: GAAP NII $69.2M, net periodic derivative interest $4.1M, other ($1.1M) → Economic NII $72.3M .
  • Repo maturity ladder and hedge profile: swaps $2.155B (avg pay-fixed 3.53%), cap $1.0B (3.95% strike), hedge ratio 126%; non‑MtM share ~47% .

Source Notes

Primary company materials: Q1 2025 press release and 8‑K exhibits .
Earnings call transcript: Q1 2025 (prepared remarks and Q&A) .
Prior quarters: Q4 2024 press release and call ; Q3 2024 press release .
Other press releases: RMBS re‑securitizations (Mar 25, 2025) ; preferred dividends (May 7, 2025) ; common dividend (Jun 11, 2025) .

Values retrieved from S&P Global.*