Chimera Investment ((CIM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Chimera Investment Corporation’s latest earnings call delivered a mixed sentiment, showcasing both strategic advancements and financial challenges. The acquisition of HomeXpress was highlighted as a significant positive move, expected to enhance earnings and diversification. However, the quarter was marred by a GAAP net loss, a decline in book value, and increased expenses, which tempered the optimism surrounding the acquisition and strategic repositioning efforts.
Acquisition of HomeXpress
Chimera Investment Corporation announced the completion of its acquisition of HomeXpress for $267 million. This strategic move is anticipated to be accretive to earnings and introduce a new revenue stream. The acquisition is expected to bring greater diversification and more recurring income, positioning Chimera for future growth.
Increased Origination Volume
HomeXpress reported a significant increase in origination volume, reaching $2.4 billion by UPB through September 30, marking a 36% year-over-year rise. For the fourth quarter, they project around $1 billion in originations, with an annualized return on equity estimated between 19% and 23%.
Strategic Portfolio Repositioning
Chimera has strategically repositioned its portfolio by reducing its residential credit allocation to below 70% and increasing its Agency MBS to about 17%. This move is aimed at enhancing earnings and diversification, aligning with the company’s long-term strategic goals.
Liquidity Management and Strategic Developments
The company ended the quarter with $752 million in total cash and unencumbered assets, an increase from $561 million at the end of the second quarter. This improvement was achieved through strategic asset sales and the issuance of senior unsecured notes, reflecting Chimera’s focus on maintaining strong liquidity.
GAAP Net Loss
Chimera reported a GAAP net loss of $22 million, or $0.27 per share, for the third quarter of 2025. The GAAP economic return on book value was negative 1.4% for the quarter, highlighting the financial challenges faced during this period.
Book Value Decline
The company’s book value declined by approximately 3.2% during the quarter. This decline was primarily attributed to tighter non-Agency RMBS spreads and the rally in short-term rates, impacting the overall financial performance.
Increased Compensation and Transaction Expenses
Chimera experienced an increase in compensation, general, administrative, and servicing expenses by $2 million due to onetime severance payments. Additionally, transaction expenses rose by $10 million, largely due to the HomeXpress acquisition.
Forward-Looking Guidance
During the earnings call, Chimera’s management provided forward-looking guidance, emphasizing the strategic acquisition of HomeXpress. They expect HomeXpress to originate around $1 billion in Q4 2025, translating into expected pretax earnings of $15 million to $18 million and after-tax earnings of $13 million to $15 million. Looking ahead to 2026, Chimera projects $4 billion to $4.4 billion in originations, with pretax earnings ranging from $62 million to $80 million and after-tax earnings between $53 million and $68 million. The acquisition is seen as accretive to earnings, with potential benefits including new revenue streams, greater diversification, and enhanced dividend-paying ability.
In summary, Chimera Investment Corporation’s earnings call reflected a balanced sentiment, with strategic advancements through the acquisition of HomeXpress counterbalancing the financial challenges of the quarter. The company’s focus on diversification and strategic repositioning is expected to drive future growth, despite the current hurdles.