CHIMERA INVESTMENT CORP

CHIMERA INVESTMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization

Chimera Investment Corporation, or the Company, was incorporated in Maryland on June 1, 2007 and started trading on the NYSE in November 2007. The Company elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder, or the Code.

The Company is a diversified, internally managed REIT, that serves the U.S. residential real estate market. Through its Investment Portfolio and Residential Origination segments, the Company acquires, manages, finances and originates residential mortgage and real estate-related assets, with the objective of delivering attractive risk-adjusted returns to shareholders.

The Company conducts its operations through various subsidiaries, including subsidiaries it treats as taxable REIT subsidiaries, or TRSs. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate related business. The Company currently hasthirteen wholly-owned direct subsidiaries: Chimera RMBS Whole Pool LLC and Chimera RMBS LLC formed in June 2009; CIM Trading Company LLC, or CIM Trading, formed in July 2010; Chimera Funding TRS LLC, or CIM Funding TRS, a TRS formed in October 2013; Chimera CMBS Whole Pool LLC and Chimera RMBS Securities LLC formed in March 2015; Chimera RR Holding LLC formed in April 2016; NYH Funding LLC, a TRS formed in May 2019; Kali 2020 Holdings LLC formed in May 2020; Varuna Capital Partners LLC formed in September 2020; Aarna Holdings LLC formed in November 2020; CIM Advisory Holding TRS LLC formed in October 2024; and CIM XSMSR LLC formed in July 2025.

On December 2, 2024, the Company acquired The Palisades Group, LLC (“TPG”), Palisades Advisory Services, LLC (“PAS”), Palisades Technology Holdings, LLC, and their respective subsidiaries (the “Palisades Acquisition”). As a result of the Palisades Acquisition, the Company began providing investment management and advisory services primarily through TPG and PAS (together with TPG, “Palisades”). TPG is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”), and PAS is a relying adviser with respect to TPG’s investment adviser registration. PAS is the asset manager for certain securitizations sponsored by the Company and received $36 thousand and $73 thousand for the quarter and six months ended June 30, 2026 and $45 thousand for the quarter and six months ended June 30, 2025, in asset manager fees, respectively.

On June 8, 2026, PAS entered into a transition services agreement, effective as of April 1, 2026, to facilitate the transition of certain investment management and advisory services through December 31, 2027, to a third-party servicer provider. Under the agreement, certain investment management and advisory fees are contractually allocated between PAS and the sub-advisor during the transition period. The portion allocated to the sub-advisor is reflected as a reduction of Investment management and advisory fees in the Consolidated Statements of Operations.

On October 1, 2025, the Company acquired HomeXpress Mortgage Corp. (the “HomeXpress Acquisition”). HomeXpress Mortgage Corp. (“HomeXpress”) is a leading originator of Non-QM residential mortgage loans (both consumer loans and Investor Loans) and other Non-Agency and Agency mortgage loan products with a nationwide presence across 46 states and D.C.

On May 18, 2022, the Company made a $75 million capital commitment to a fund managed by Kah Capital Management, LLC. During the quarter and six months ended June 30, 2026, the Company did not make any additional fundings toward the commitment, and the total remained $57 million leaving an unfunded commitment of $18 million. The Company's investment in this fund, which had a carrying amount of $70 million as of June 30, 2026, is included within the Investment Portfolio segment and is accounted for under the equity method within Other assets on the Consolidated Statements of Financial Condition. The Company records any gains and losses associated with its equity method investments in Other investment gains (losses) on the Consolidated Statements of Operations. Kah Capital Management ceased to provide asset servicing oversight as of the end of the first quarter of 2025. There wereno mortgage asset servicing oversight fees paid to Kah Capital Management during the quarter and the six months ended June 30, 2026. The Company paid $118 thousand of mortgage asset servicing oversight fees to Kah Capital Management during the quarter and six months ended June 30, 2025 These fees are reported within Other expenses on the Consolidated Statements of Operations.

2. Summary of the Significant Accounting Policies

(a)Basis of Presentation and Consolidation

The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. In the opinion of the Company, all normal and recurring adjustments considered necessary for a fair presentation of its financial position, results of operations and cash flows have been included. Investment transactions are recorded on the trade date.

The consolidated financial statements include the Company’s accounts, the accounts of its wholly-owned subsidiaries, and variable interest entities, or VIEs, in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

The Company uses securitization trusts considered to be VIEs in its securitization transactions. Additionally, the Company owns variable interests in entities that invest in Interests in MSR financing receivables. VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest, or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly impact the VIEs’ economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. For VIEs that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIEs’ economic performance may be determined by an entity’s involvement with the design and structure of the VIE.

The trusts are structured as entities that receive principal and interest on the underlying collateral and distribute those payments to the security holders. The assets held by the securitization entities are restricted in that they can only be used to fulfill the obligations of the securitization entity. The Company’s risks associated with its involvement with these VIEs are limited to its risks and rights as a holder of the security it has retained as well as certain risks associated with being the sponsor and depositor of and the seller, directly or indirectly to, the securitizations entities.

Determining the primary beneficiary of a VIE requires judgment. The Company determined that for the securitizations it consolidates, its ownership provides the Company with the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE. In addition, the Company has the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, or power, such as rights to replace the servicer without cause, or the Company was determined to have power in connection with its involvement with the structure and design of the VIE.

The Company’s interest in the assets held by these securitization vehicles, which are consolidated on the Company’s Consolidated Statements of Financial Condition, is restricted by the structural provisions of these trusts, and a recovery of the Company’s investment in the vehicles will be limited by each entity’s distribution provisions. Generally, the securities retained by the Company are the most subordinate in the capital structure, which means those securities receive distributions after the senior securities have been paid. The liabilities of the securitization vehicles, which are also consolidated on the Company’s Consolidated Statements of Financial Condition, are non-recourse to the Company, and can only be satisfied using proceeds from each securitization vehicle’s respective asset pool.

The assets of securitization entities are comprised of RMBS or residential mortgage loans. See Note 3, Note 4 and Note 10 for further discussion of the characteristics of the securities and loans in the Company’s portfolio.

The consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended December 31, 2025, included in the Company’s annual report on Form 10-K filed with the SEC on February 18, 2026 (the “Annual Report”).

(b)Statements of Financial Condition Presentation

The Company’s Consolidated Statements of Financial Condition include both the Company’s direct assets and liabilities and the assets and liabilities of consolidated securitization vehicles. Retained beneficial interests of the consolidated securitization vehicles are eliminated in consolidation. Assets of each consolidated VIE can only be used to satisfy the obligations of that VIE, and the liabilities of consolidated VIEs are non-recourse to the Company. The Company is not obligated to provide, nor does it intend to provide, any financial support to these consolidated securitization vehicles. The notes to the consolidated financial statements describe the Company’s assets and liabilities including the assets and liabilities of consolidated securitization vehicles. See Note 10 for additional information related to the Company’s investments in consolidated securitization vehicles. Certain prior period amounts have been reclassified to conform to the current period's presentation.

(c)Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company’s estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions could be materially different than anticipated in those estimates, which could have a material adverse impact on the Company’s results of operations and its financial condition.

The Company has made significant estimates including in accounting for income recognition on Agency MBS, Non-Agency RMBS, IO MBS (Note 3) and residential mortgage loans (Note 4), valuation of Agency MBS and Non-Agency RMBS (Note 3 and Note 6), residential mortgage loans (Note 4 and Note 6), certain secured financing agreements (Note 6 and Note 7), securitized debt (Note 6 and Note 8), interests in MSR financing receivables (Note 6 and Note 11), goodwill and intangibles included in Other assets, contingent earn-out liability included in Accounts payable and other liabilities on the Company’s Consolidated Statements of Financial Condition. Actual results could differ materially from those estimates.

(d)Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and cash deposited overnight in money market funds, which are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation, and short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities generally of three months or less.

Cash consists of unrestricted cash balances available for general corporate purposes. Restricted cash consists of cash balances that are subject to contractual or other restrictions on the Company’s ability to withdraw or use such funds. The Company’s restricted cash primarily relates to amounts held in connection with its warehouse lines of credit and escrow funds associated with recent loan originations that are to be returned to borrowers.

Restricted cash balances of $7 million and $6 million as of June 30, 2026, and December 31, 2025, respectively, are included in Other assets on the Company's Consolidated Statements of Financial Condition.

Reconciliation of cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company's Consolidated Statements of Financial Condition to the total amounts presented in the Company's Consolidated Statements of Cash Flows:

(e)Income Taxes

The Company does not have any material unrecognized tax positions that would affect its financial statements or require disclosure. No accruals for penalties and interest were necessary as of June 30, 2026 or December 31, 2025.

(f)Goodwill & Intangible Assets

At June 30, 2026, the Company had recorded goodwill of $95 million, representing the excess of the fair value of consideration transferred over the fair value of net assets acquired in connection with the Palisades and HomeXpress Acquisitions.

The amounts recorded in connection with the HomeXpress Acquisition remain subject to adjustment during the measurement period. The purchase price allocation for the Palisades Acquisition, which was completed in December 2024, has been finalized.

At June 30, 2026, the Company had intangible assets with a carrying amount of $109 million and $8 million of accumulated amortization, primarily comprised of asset management contracts and developed technology recognized as part of the Palisades Acquisition, and trade names, broker relationships, developed technology, and licenses recognized as part of the HomeXpress Acquisition. These intangible assets are amortized over their estimated useful lives, which range fromone toten years. Goodwill and intangible assets are included in Other assets on the Company’s Consolidated Statements of Financial Condition.

Goodwill is not amortized but is assessed for impairment at least annually. Intangible assets are reviewed for impairment upon the occurrence of triggering events or changes in circumstances indicating that the carrying value may not be recoverable. During the first quarter of 2026, the Company identified a triggering event related to certain asset management contracts associated with the Palisades Acquisition, resulting from changes in expected future cash flows. As a result, the Company recorded an impairment charge of $5 million to reduce the carrying value of the related intangible assets to their estimated fair value. The impairment charge is included in Depreciation, amortization, and impairment expense on the Company’s Consolidated Statements of Operations.

(g)Segment Reporting

The Company hastwo reportable segments under the guidance of ASC 280, Segment Reporting: (i) Investment Portfolio and (ii) Residential Origination. The Investment Portfolio segment consists of the Company’s investments and third-party advisory services activities. The Residential Origination segment consists of the stand-alone mortgage origination business of HomeXpress that originates Non-QM residential mortgage loans (both consumer loans and Investor Loans), and other Non-Agency and Agency mortgage loan products.

The Company's Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). The CODM uses net income and total assets in evaluating performance and determining how to allocate resources of the Company to each of its segments. Refer to Note 20 — Segment Reporting.

(h)TBA securities

The Company may purchase TBA securities as a means of investing in non-specified fixed-rate Agency RMBS and may purchase or sell TBA securities to economically hedge its investment portfolio or mortgage loan production. A TBA security is a forward contract for the purchase (“long position”) or sale (“short position”) of a fixed-rate Agency MBS at a predetermined price, with specified general collateral characteristics, including issuer, maturity, and coupon. The specific securities to be delivered are not identified until shortly before the settlement date.

The Company may hold long and/or short positions in TBA securities through transactions commonly referred to as “dollar roll” transactions. The Company accounts for all TBA securities as derivative instruments in accordance with ASC 815, Derivatives and Hedging, as it does not intend to take physical delivery of the underlying Agency RMBS and does not consider the contracts to be settled in the shortest period possible. Accordingly, TBA securities are carried at fair value.

For TBA securities held as part of the Company's Investment Portfolio segment, the economic results include (i) drop income (expense) and (ii) mark-to-market adjustments. For financial statement presentation purposes, drop income (expense) is reported within Periodic interest on derivatives, net, while mark-to-market adjustments are reported within Net unrealized gains (losses) on derivatives. Together with any realized gains and losses, these amounts are included in Net gains (losses) on derivatives in the Consolidated Statements of Operations.

For TBA securities used to economically hedge mortgage loan production within the Company's Residential Origination segment, realized and unrealized gains and losses are included within Gain on origination and sale of loans, net, in the Consolidated Statements of Operations.

The fair value of TBA securities is based on observable market inputs, including quoted prices for similar instruments in active markets, and is classified within Level 2 of the fair value hierarchy. TBA positions are presented as Derivative assets or Derivative liabilities on the Company’s Consolidated Statements of Financial Condition.

(i) Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies included in Note 2 of the consolidated financial statements of the Company’s Form 10-K for the year ended December 31, 2025.

(j)Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In July 2025, the Financial Accounting Standards Board (the “FASB”) issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. This standard allows companies to assume that conditions as of the balance sheet date remain unchanged for the remaining life of the asset. The amendments are effective for fiscal years beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted. The Company adopted the guidance on January 1, 2026, on a prospective basis. Adoption of this new standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

The Company evaluated the provisions of ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock, and ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), and determined that neither standard is currently applicable to its operations or financial reporting. Accordingly, the Company does not expect the adoption of these standards to have an impact on its unaudited consolidated financial statements or related disclosures.

In addition, there have been no changes to the accounting standards updates not yet adopted by the Company, as previously disclosed in the Company’s Annual Report for the year ended December 31, 2025.

3. Mortgage-Backed Securities

The Company classifies its Non-Agency RMBS as senior, subordinated, or interest-only. The Company also invests in Agency MBS which it classifies as Agency RMBS, to include residential and residential interest-only MBS, Pass-through securities, residential CMO, and Agency CMBS to include commercial and commercial interest-only MBS. Senior interests in Non-Agency RMBS are generally entitled to the first principal repayments in their pro-rata ownership interests at the acquisition date. The tables below present amortized cost, allowance for credit losses, fair value and unrealized gains/losses of the Company's MBS investments as of June 30, 2026 and December 31, 2025.

The following tables present the gross unrealized losses and estimated fair value of the Company’s Non-Agency MBS by length of time that such securities have been in a continuous unrealized loss position at June 30, 2026 and December 31, 2025. All Non-Agency RMBS held as available-for-sale, and not accounted under the fair value option election in an unrealized loss position, have been evaluated by the Company for current expected credit losses.

At June 30, 2026, the Company did not intend to sell any of its Agency and Non-Agency MBS classified as available-for-sale that were in an unrealized loss position, and it was not more likely than not that the Company would be required to sell these MBS investments before recovery of their amortized cost basis, which may be at their maturity. During the six months ended June 30, 2026, the Company sold certain securities, resulting in reductions to the unrealized losses associated with these securities totaling $3 million. With respect to RMBS held by consolidated VIEs, the ability of any entity to cause the sale by the VIE prior to the maturity of these RMBS is either expressly prohibited, not probable, or is limited to specified events of default, none of which have occurred as of June 30, 2026.

Gross unrealized losses on the Company’s Non-Agency RMBS (excluding Non-Agency RMBS which are reported at fair value with changes in fair value recorded in earnings), net of any allowance for credit losses, were $5 million and $7 million, at June 30, 2026 and December 31, 2025, respectively. After evaluating the securities and recording any allowance for credit losses, the Company concluded that the remaining unrealized losses reflected above were non-credit related and would be recovered from the securities' estimated future cash flows. The Company considered a number of factors in reaching this conclusion, including that it did not intend to sell the securities, it was not considered more likely than not that it would be required to sell the securities prior to recovering the amortized cost, and there were no material credit events that would have caused the Company to otherwise conclude that it would not recover the amortized cost. The allowance for credit losses is calculated by comparing the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to the net amortized cost basis. Significant judgment is used in projecting cash flows for Non-Agency RMBS.

The Company has reviewed its Non-Agency RMBS that are in an unrealized loss position to identify those securities with losses that are credit related based on an assessment of changes in cash flows expected to be collected for such RMBS, which considers recent bond performance and expected future performance of the underlying collateral. A summary of the credit losses allowance on available-for-sale securities for the quarters and six months ended June 30, 2026 and June 30, 2025 are presented below.

The following table presents significant credit quality indicators used for the credit loss allowance on our Non-Agency RMBS investments as of June 30, 2026 and December 31, 2025.

The increase in the allowance for credit losses during the quarter and six months ended June 30, 2026, is primarily due to a deterioration in cashflows on certain investments, compared to the same period of 2025. In addition, certain Non-Agency RMBS positions now have higher unrealized losses and resulted in the recognition of an allowance for credit losses which was previously limited by unrealized gains on these investments.

The following tables present a summary of unrealized gains and losses at June 30, 2026 and December 31, 2025.

Changes in prepayments, actual cash flows, and cash flows expected to be collected, among other items, are affected by the collateral characteristics of each asset class. The Company chooses assets for the portfolio after carefully evaluating each investment’s risk profile.

The following tables provide a summary of the Company’s MBS portfolio at June 30, 2026 and December 31, 2025.

(1) Bond Equivalent Yield at period end.

(1) Bond Equivalent Yield at period end.

Actual maturities of MBS are generally shorter than the stated contractual maturities. Actual maturities of the Company’s MBS are affected by the underlying mortgages, periodic payments of principal, realized losses and prepayments of principal. The following tables provide a summary of the fair value and amortized cost of the Company’s MBS at June 30, 2026 and December 31, 2025 according to their estimated weighted-average life classifications. The weighted-average lives of the MBS in the tables below are based on lifetime expected prepayment rates using the Company's prepayment assumptions for the Agency MBS and Non-Agency RMBS. The prepayment model considers a variety of factors, including but not limited to current interest rates, forward interest rate projections, shape and steepness of the interest rate curve, current mortgage rates, mortgage rates of the outstanding loan, and other borrower, loan, property, or market-related characteristics that may influence prepayment behavior.

The Non-Agency RMBS investments are secured by pools of mortgage loans which are subject to credit risk. The following table summarizes the delinquency, bankruptcy, foreclosure and real estate owned, or REO, total of the pools of mortgage loans securing the Company’s investments in Non-Agency RMBS at June 30, 2026 and December 31, 2025. When delinquency rates increase, it is expected that the Company may incur additional credit losses.

The Non-Agency RMBS in the Portfolio have the following collateral characteristics at June 30, 2026 and December 31, 2025.

(1) Value represents appraised value of the collateral at the time of loan origination.

(2) FICO as determined at the time of loan origination.

The table below presents the origination year of the underlying loans related to the Company’s portfolio of Non-Agency RMBS at June 30, 2026 and December 31, 2025.

Gross realized gains and losses are recorded in Net realized losses on sales of investments on the Company’s Consolidated Statements of Operations. The proceeds and gross realized gains and gross realized losses from sales of investments for the quarters and six months ended June 30, 2026 and 2025 are as follows:

4. Loans Held for Investment

The Loans held for investment are comprised primarily of seasoned reperforming residential mortgages. Additionally, it includes jumbo prime loans, Investor Loans, and RTLs.

The Investor Loans are loans to individuals securing non-primary residences as well as to individuals or businesses who rent out the residential properties secured by such loans. The Company purchases qualified mortgages, or QM, and non-qualified mortgages, or Non-QM, Investor Loans and securitizes them under its loan securitization program. The RTLs are loans to businesses that are secured by real property which will be renovated by the borrower. The RTLs tend to be short duration, often less than one year, and generally the coupon rate is higher than residential mortgage loans.

At June 30, 2026 and December 31, 2025, all Loans held for investment are carried at fair value. See Note 6 — Fair Value Measurements for a discussion on how the Company determines the fair values of the Loans held for investment. As changes in the fair value of these loans are reflected in earnings, the Company does not estimate or record a loan loss provision. The total amortized cost of the Company's Loans held for investment was $8.0 billion and $9.8 billion as of June 30, 2026 and December 31, 2025, respectively. The total UPB of the Company's Loans held for investment was $8.1 billion and $10.0 billion as of June 30, 2026 and December 31, 2025, respectively.

The following table provides a summary of the changes in the carrying value of Loans held for investment at fair value at June 30, 2026 and December 31, 2025:

The primary causes of the change in fair value are market demand, interest rates and changes in credit risk of mortgage loans. The Company didnot retain any beneficial interests on loan sales during the six months ended June 30, 2026 and the year ended December 31, 2025, respectively.

Residential mortgage loans

The following table presents the origination periods of the residential mortgage loan portfolio as a percentage of total current UPB:

The following table presents a summary of key characteristics of the residential loan portfolio at June 30, 2026 and December 31, 2025:

(1) Value represents appraised value of the collateral at the time of loan origination.

The following table summarizes the outstanding principal balance of the residential loan portfolio which are 30 days delinquent and greater as reported by the servicers at June 30, 2026 and December 31, 2025, respectively.

The fair value of residential mortgage loans 90 days or more past due was $465 million and$558 million as of June 30, 2026 and December 31, 2025, respectively.

5. Loans Held for Sale

LHFS consist of mortgage loans originated or acquired by the Company with the intent to sell into the secondary market. LHFS are measured and reported at fair value. See Note 6 — Fair Value Measurements for a discussion on how the Company determines the fair values of the LHFS. The Company’s fair value election for its LHFS is intended to more accurately reflect the underlying economics of the Company’s operations. With the election of the fair value option for LHFS, loan origination fees, and the related direct loan origination costs associated with the origination of LHFS are earned and expensed as incurred, respectively.

During the six months ended June 30, 2026, the Company purchased newly originated Non-QM residential mortgage loans from HomeXpress. During the quarter ended March 31, 2026, the Company, through its taxable REIT subsidiary, committed to purchase approximately $187 million of newly originated Non-QM residential mortgage loans from HomeXpress. During the quarter ended June 30, 2026, the Company, through its taxable REIT subsidiary, entered into an additional commitment to purchase approximately $131 million of newly originated Non-QM residential mortgage loans from HomeXpress. Loans with an aggregate UPB of approximately $301 million acquired pursuant to these commitments settled during the quarter ended June 30, 2026. The loans were purchased on terms that the Company believes were consistent with market terms and are included in Loans held-for-sale, at fair value on the Company’s consolidated balance sheet. As of June 30, 2026, there were no amounts outstanding between the consolidated entities related to these transactions.

The total UPB of the Company's LHFS was $1.1 billion and $872 million as of June 30, 2026 and December 31, 2025, respectively. LHFS consisted of the following as of June 30, 2026 and December 31, 2025:

The primary causes of the change in fair value are market demand, interest rates and changes in credit risk of mortgage loans.

Revenue derived from the Company’s mortgage lending activities includes certain fees collected at the time of origination and gain or loss from the sale of LHFS. Loan origination income reflects the fees earned, net of lender credits from originating the loans. These consist of fees related to loan origination, discount points, underwriting, processing and other fees. Lender credits typically are related to rebates or concessions for certain loan origination costs.

Gain or loss from the sale and mark-to-market of LHFS includes both realized and unrealized gains and losses and are included in the Gain on origination and sale of loans, net in the accompanying Consolidated Statements of Operations. The valuation of LHFS is intended to represent the value that could be obtained in a pooled whole loan sale that includes the related mortgage servicing rights, also known as a servicing released transaction.

The Company principally sells its LHFS to private investors. The Company evaluates its loan sales for sales treatment. To the extent the transfer of loans qualifies as a sale, the Company derecognizes the loans and records the gain or loss on the sale date. In the event the Company determines that the transfer of loans does not qualify as a sale, the transfer would be treated as a secured borrowing. Interest income from loans is recorded on the accrual basis. LHFS are placed on non-accrual status when any portion of the principal or interest is 90 days past due or earlier if factors indicate that the ultimate collectability of the principal or interest is not probable. Interest received from loans on non-accrual status is recorded as income when collected. Loans return to accrual status when the principal and interest become current, and it is probable that the amounts are fully collectible.

The following table provides a summary of the changes in the carrying value of LHFS at fair value at June 30, 2026, and December 31, 2025:

The Company monitors the credit quality of LHFS through its underwriting and post-origination review processes. As of June 30, 2026, the Company had $13 million of LHFS greater than 90 days delinquent with a net book value of $9 million.

Gain on Origination and Sale of Loans

The following table provides a summary of the composition of gain on origination and sale of loans, net, for the quarter and six months ended June 30, 2026:

The Company did not hold LHFS during the quarter and six months ended June 30, 2025, and therefore did not record any gain on origination and sale of loans, net.