Executive Summary

Q4 2024 delivered a sharp GAAP loss and book value decline: GAAP diluted EPS was -$2.07, and GAAP book value per share fell to $19.72; economic return on book value was -10.1% for the quarter .
Core earnings power was steadier: Earnings Available for Distribution (EAD) was $0.37 per share, with economic net interest income of $69.2 million and a 1.5% net interest spread .
Strategic pivot advanced: Closed Palisades acquisition in December, began fee-based advisory revenue, and outlined plans to diversify with Agency RMBS and potential MSR purchases; issued call notices on NR securitizations to unlock capital in early 2025 .
Liquidity/hedging remained solid: ~$610 million cash + unencumbered assets at year-end; executed January 2025 securitization (CIM 2025 I‑1), optimized swaps/swaptions/futures; margin calls in Q4 were immaterial .
Near-term stock narrative: Book value volatility and GAAP loss likely pressured sentiment, but catalysts include resecuritizations, fee-based income ramp, and MSR strategy; management noted post-year-end book value up ~3% on rate/spread moves as of call date .

What Went Well and What Went Wrong

What Went Well

Fee-based income and platform scale: “With the Palisades acquisition, we have embarked on our strategy of enhancing returns… through diversification of revenue… [and] grow our nondiscretionary investment asset management and advisory services” .
Portfolio construction progress: Sold Agency CMOs, added short-duration RTLs, closed 2025 investor-loan securitization, and maintained strong demand across the capital structure; first time selling down to BB in a deal .
Hedge/liquidity positioning: ~~$610 million total cash and unencumbered assets; swaps (~~$1.5B at 3.56%), swaption executed in January, and futures/cap overlays to protect spreads and EAD .

What Went Wrong

GAAP mark-to-market hit: GAAP diluted EPS -$2.07, driven by net unrealized losses on financial instruments at fair value ($181.2 million) and other adjustments excluded from EAD; book value per share fell to $19.72 .
Spread/curve dynamics: Steepening in December and wider long-end rates vs short-end pressured loan valuations relative to securitized debt, amplifying quarter-end book value volatility .
Transaction/one-time costs: Q4 transaction expenses rose ~$4.7 million, primarily from Palisades acquisition; EAD excludes non-recurring acquisition-related items and non-cash imputed compensation ($10.3 million) .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
GAAP Net Income (Loss) Available to Common ($USD Millions)	$33.9	$113.7	$(168.3)
GAAP Diluted EPS ($)	$0.41	$1.39	-$2.07
EAD per Adjusted Diluted Share ($)	$0.37	$0.36	$0.37
Economic Net Interest Income ($USD Millions)	$72.4	$71.5	$69.2
Yield on Avg Interest-Earning Assets (%)	5.9%	6.1%	6.0%
Avg Cost of Funds (%)	4.2%	4.5%	4.5%
Net Interest Spread (%)	1.7%	1.6%	1.5%
GAAP Book Value/Share ($)	$21.27	$22.35	$19.72
Economic Return on GAAP Book Value (%)	1.4%	6.8%	-10.1%

Segment/Portfolio Mix (Fair Value % of Portfolio)

Category	Q3 2024	Q4 2024
Loans Held for Investment	84.1%	87.6%
Agency RMBS (Total)	7.6%	3.7%
Non-Agency RMBS (Total)	8.3%	8.3%
Agency CMBS – Project Loans	0.2%	0.3%
Agency CMBS – Interest-Only	0.6%	0.1%

Key KPIs and Balance Sheet

KPI	Q2 2024	Q3 2024	Q4 2024
Total Assets ($USD Millions)	$13,131.9	$13,702.4	$13,116.5
Total Liabilities ($USD Millions)	$10,490.6	$10,965.1	$10,590.3
Cash & Equivalents ($USD Millions)	$162.3	$97.3	$84.0
GAAP Leverage (x)	3.8:1	3.9:1	4.0:1
Recourse Leverage (x)	1.0:1	1.2:1	1.2:1

Non-GAAP reconciliation and drivers: EAD remained $0.37/share as large non-cash/unrealized items (e.g., $181.2 million unrealized losses on financial instruments, derivatives, transaction and acquisition-related costs, and $10.3 million non-cash imputed compensation) were excluded per company definition .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Common Dividend per Share	2024	Raised to $0.35 in Q2 and to $0.37 in Q3	Not updated in Q4 materials; FY dividends totaled $1.42	Maintained (no new update)
Resecuritizations/Call Rights	Early 2025	N/A	Issued call notices on NR securitizations; expect resecuritizations in next couple of months	Initiated/Accelerating
Fee-Based Income (Palisades)	2025	N/A	Expect to grow advisory services; Palisades named asset manager on 2025 securitization	Initiated/Expanding
Portfolio Allocation (Agency RMBS)	2025	N/A	Expect to grow Agency RMBS to diversify, provide liquidity, and volatility protection	Raised Emphasis
MSR Strategy	2025	N/A	Exploring MSR purchases to hedge duration and stabilize book value	New Initiative
Financing Facility	Jan 2025	N/A	New larger non-/limited mark-to-market facility, >400 bps rate reduction, ~$62 million cash freed	Improved Terms

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024, Q3 2024)	Current Period (Q4 2024)	Trend
Macro rates/curve	Q2: Expect cuts; volatility persists . Q3: 6.1% asset yield, 4.5% cost; steepening helpful .	Long end rose; term premium up; curve steepened; hurt GAAP BV; EAD steady .	Mixed (BV pressure; core stable)
Portfolio diversification	Q2: First large Agency investment; RPL securitization . Q3: ~$600M securities purchased; Palisades deal announced .	Sold Agency CMOs; added RTL; committed non-QM; closed Palisades .	Advancing
Fee-based income (Palisades)	Q2: None. Q3: Acquisition announced and strategic rationale .	Closed; advisory services active; fee income to grow .	Ramping
Hedging & liquidity	Q2: Swaps/option; ~$649M cash/unencumbered . Q3: $648M; swaps 3.56% .	~$610M; swaption exercised; futures and cap added; margin calls immaterial .	Robust
Dividend policy	Q2: Raised to $0.35 . Q3: Raised to $0.37 .	FY 2024 dividends $1.42; no new common declaration in Q4 PR .	Stable
MSR initiative	Q2/Q3: Not core focus.	Target allocations across coupon stack; negative-duration hedge; equity sizing TBD .	Emerging priority
Securitization pipeline	Q2: CIM 2024-R1 . Q3: Detailed RPL deal, strong execution .	Closed CIM 2025 I‑1; strong demand; call notices on NR deals .	Active/Accelerating

Management Commentary

CEO on strategic shift: “We expect to continue to diversify our portfolio, increase liquidity and grow our fee-based income revenue stream… we expect to grow our Agency RMBS portfolio… [and] look to potential opportunities to acquire mortgage servicing rights” .
CFO on Q4 metrics: “GAAP net loss… $168.3 million or $2.07 per share… GAAP book value… $19.72 per share… EAD… $30.4 million or $0.37 per share… yield on average interest-earning assets was 6%, cost of funds 4.5%, net interest spread 1.5%” .
CIO on BV volatility: “The change in book value was a direct result of the changes in interest rates and credit spreads… we estimate our GAAP book value has increased approximately 3% due to rate and spread movements since year end” .
CEO on Palisades rationale: “We believe the acquisition of Palisades will further strengthen and or expand our business and provide additional opportunities for growth” .

Q&A Highlights

Margin calls: Management described Q4 margin calls as “really immaterial,” indicating limited liquidity stress .
Securitization demand: Credit spreads tightened through 2024/early 2025; strong demand including “first time we’ve sold down to a BB” in 2025 deal .
MSR allocation: Will consider across coupon stack; sizing depends on capital freed from resecuritizations; intent is to hedge duration and stabilize book value with a cash-flowing asset rather than yield-diluting derivatives .
Hedging posture: Focused on locking in earnings/dividends via liability hedges; some retained pieces are mark-to-market, but push continues toward non/limited mark-to-market fixed-rate facilities .
GSE reform: Potentially long process; may present spread-driven entry points into Agencies and push non-core products into non-Agency space; policy aims to avoid disrupting housing finance .

Estimates Context

S&P Global consensus estimates for Q4 2024 EPS and revenue were not available via our data connection at the time of analysis; as a result, comparisons to Wall Street consensus are not included (S&P Global request limit exceeded). Values would have been retrieved from S&P Global if accessible.

Key Takeaways for Investors

Core earnings resilience: Despite a headline GAAP loss and book value decline, EAD held at $0.37/share with stable net interest spread (1.5%), supporting dividend capacity near-term .
Book value sensitivity: Quarter-end BV hit by curve steepening and mark-to-market; management noted ~3% BV recovery post year-end on rates/spreads—be mindful of ongoing volatility catalysts .
Catalysts ahead: Resecuritizations of NR deals, unlocking equity/cash for redeployment; fee-based advisory revenue scaling; potential MSR purchases to hedge duration and stabilize book value .
Portfolio mix shift: Agency RMBS exposure reduced into year-end (7.6% to 3.7% FV), while loans rose (84.1% to 87.6% FV); watch for tactical moves in Agencies/MSRs as rates evolve .
Funding improvements: New larger facility lowered rates by >400 bps and freed ~$62 million, supporting accretive investment pipeline and reduced earnings sensitivity to floating costs .
Liquidity and hedging foundation: ~$610 million cash/unencumbered assets; layered swaps, swaption, futures/cap strategy to protect EAD while accepting some GAAP BV volatility .
Trading implications: Short-term sentiment likely tied to BV marks and macro prints; medium-term thesis hinges on resecuritization execution, fee-income ramp, and MSR deployment to smooth BV while sustaining EAD.

CHIMERA INVESTMENT CORP (CIM)·Q4 2024 Earnings Summary