CHIMERA INVESTMENT CORP
For the period ended Sep 30, 2026. Filed Nov 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 5, 2026
CIM$7.31-7.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-05.
0001409493-26-000050
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-05.
0001409493-26-000068
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 358 previous paragraphs and 392 current paragraphs.
185 unchanged; 122 reworded; 77 added; 45 removed; 6 previous and 8 current paragraphs rearranged.
Tables are not compared: 28 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (77)
Current report
Financial markets during the third quarter of 2026 were shaped primarily by a significant repricing of interest rates and expectations for Federal Reserve monetary policy amid persistent inflation, resilient economic activity and geopolitical developments. Higher energy prices drove inflation pressures, while concerns regarding fiscal sustainability, Treasury supply and less supportive demand for longer duration securities contributed to upward pressure on longer term interest rates. Inflation remained above the Federal Reserve’s long-term target, with August headline CPI increasing 3.4% from the prior year and core CPI increasing 2.4%. August headline and core PCE inflation were 3.4% and 3.0%, respectively.
Current report
At its September meeting, the Federal Reserve increased its target range for the federal funds rate by 25 basis points to be between 3.75% and 4.00%. September flash PMI data subsequently reinforced the stronger growth narrative, with business activity rising at its fastest pace in over five years and, excluding the post-pandemic reopening surge, its strongest since early 2015, while input cost growth reached a near four year high. Updated economic projections reflected a more restrictive policy outlook, with the median year end federal funds rate at 4.1%. Labor market conditions remained generally stable, although job growth moderated toward quarter end, with September payrolls increasing by 29,000, prior months revised modestly lower and the unemployment rate at 4.2%.
Current report
U.S. Treasury yields increased materially across the curve during the quarter. The yield on the two-year U.S. Treasury increased from approximately 4.17% to 4.89%, while the ten-year U.S. Treasury yield increased from approximately 4.47% to 5.28%, the highest level since 2007. The yield curve modestly steepened during the quarter as longer-term yields also reflected increased concerns regarding Treasury supply and fiscal conditions.
Current report
Mortgage rates increased meaningfully during the third quarter as benchmark interest rates moved higher. The 30-year conforming mortgage rate, as measured by the Optimal Blue Mortgage Market Indices 30-Year Fixed Rate Conforming Index, increased from approximately 6.45% to approximately 7.39% during the quarter. Higher mortgage rates increased borrowing costs and further constrained refinancing and purchase activity.
Current report
Agency mortgage-backed securities underperformed comparable duration Treasuries and swaps during the quarter as higher interest rates and increased rate volatility contributed to wider mortgage spreads. Current coupon Agency MBS spreads widened approximately 18 basis points relative to Treasuries and 16 basis points relative to swaps, while option-adjusted spreads also widened. Even with the spread widening and elevated rate volatility, Agency MBS and related secured financing markets continued to function in an orderly manner.
Current report
Residential mortgage credit markets remained comparatively resilient during the quarter. Non-QM securitization issuance totaled approximately $8.4 billion through September, approximately 54% above the comparable 2025 period. Despite elevated issuance and the significant increase in benchmark interest rates, senior Non-QM spreads were generally stable to modestly wider for much of the quarter, although extension sensitive securities experienced greater spread widening late in the quarter. Investor demand and higher all-in yields continued to support new issuance, while higher financing and hedging costs placed greater pressure on whole loan pricing and sponsor securitization economics.
Current report
During the third quarter of 2026, the Non-QM origination market experienced elevated interest rate volatility and significant changes in secondary market pricing. Mortgage rates increased significantly during the quarter, particularly in September, as higher U.S. Treasury yields placed upward pressure on mortgage financing costs. Rising interest rates and heightened volatility prompted some originators to adjust mortgage pricing to reflect changing market conditions, while some competing originators were slower to raise rates in an effort to preserve loan volumes. At the same time, widening bond spreads and expectations of longer loan durations negatively impacted secondary-market pricing and whole-loan investor execution, resulting in tighter origination margins and lower profitability.
Current report
As the quarter progressed, secondary market participants adjusted pricing and execution strategies in response to higher funding costs, interest rate volatility, and changing investor return requirements. Even with these challenges, demand for Non-QM mortgage products remained relatively strong, supported by continued demand for alternative mortgage products, including investor and debt-service coverage ratio (DSCR) loans, with the segment gaining market share relative to traditional mortgage products.
Current report
Housing market fundamentals were generally supportive from a mortgage credit perspective, although higher mortgage rates constrained affordability and transaction volumes. National home prices were modestly higher year over year, with the FHFA House Price Index increasing 2.6% through July. Housing conditions remained uneven, with stronger home price appreciation across New York, New Jersey and Pennsylvania, while growth was more subdued in Texas, Florida and several Western markets.
Current report
Existing home sales declined 2.0% in August to an annualized rate of approximately 4.0 million units, while available inventory increased to 1.62 million homes, or approximately 4.9 months of supply. The median existing home price remained 1.6% above the prior year level. Increased inventory has provided homebuyers with greater negotiating power, particularly in markets where supply has recovered more rapidly, while affordability remains a significant constraint for new buyers.
Current report
The predominantly fixed rate nature of the existing mortgage stock continued to limit payment shock for existing homeowners and support residential mortgage credit performance. Higher mortgage rates instead affected the housing market primarily through reduced refinancing activity, affordability and turnover. Prepayment speeds declined across residential mortgage products during the quarter, including Non-QM, as fewer borrowers remained economically incentivized to refinance.
Current report
We intend to establish a securitization program for Non-QM and Investor Loans, providing an additional source of liquidity and capital to support HomeXpress originations. In addition to loans sourced through HomeXpress, we plan to acquire loans from other originators to build a diversified portfolio for securitization through our own program. Subsequent to quarter end, we completed the inaugural $291 million Prism securitization backed by loans originated by HomeXpress.
Current report
We utilize interest rate swaps to mitigate our exposure to interest rate volatility associated with these loans. During the quarter, we entered into interest rate swap contracts with an aggregate notional amount of $930 million, a weighted average fixed pay rate of 4.27%, and maturities ranging from 2 to 20 years. As of quarter end, our outstanding interest rate swap portfolio had an aggregate notional amount of $1.2 billion, a weighted average fixed pay rate of 4.09%, and remaining maturities ranging from 1 to 20 years.
Current report
During the third quarter of 2026, our overall secured financing costs increased by 15 basis points, primarily reflecting the rise in U.S. Treasury rates during the quarter. Secured financing agreements, representing our recourse liabilities, increased by a net $894 million, largely driven by additional leverage supporting our Agency RMBS investments. As previously discussed, under our broader deleveraging and risk management strategy, we took steps to reduce our Agency RMBS exposure by approximately $2.4 billion through short TBA positions established by quarter end.
Current report
The increase in U.S. Treasury yields and widening credit spreads across asset classes resulted in higher margin requirements during the quarter. Reductions in financing availability due to changes in asset valuations at the time of repo rollovers, together with additional variation margin posted on our repurchase agreement facilities, totaled $230 million. These requirements were more than offset by $240 million in variation margin received on our hedging portfolio, effectively mitigating the liquidity impact of the additional margin requirements. Despite the significant market volatility experienced during the quarter, financing markets remained stable, with funding capacity and liquidity available to support our investment portfolio.
Current report
During July, we successfully refinanced two maturing structured repurchase agreement facilities with non-mark-to-market financing provisions, renewing an aggregate of $355 million in financing and securing a five-percentage-point reduction in collateral haircut requirements. As part of these refinancings, we reduced the fixed interest rate on the $145 million fixed-rate facility by 113 basis points and lowered the financing spread over SOFR on the $210 million floating-rate facility by 51 basis points. Both facilities have final maturities in July 2028. These refinancings further strengthen our financing profile by reducing borrowing costs, improving capital efficiency, and providing greater funding stability and protection against market volatility.
Current report
Loans held for sale acquired during the second and third quarters for anticipated securitization exits continued to be financed through our warehouse facilities. At quarter end, approximately $756 million of loans held for sale were financed through these facilities, including $420 million of financing added during the third quarter.
Current report
Residential Credit Portfolio
Current report
During the quarter, we purchased SOFR-based interest rate caps with an aggregate notional amount of $800 million, a strike rate of 3.00%, and a total purchase price of $16 million. We also sold SOFR-based interest rate caps with an aggregate notional amount of $1.1 billion, strike rates of 3.00% and 3.30%, and total proceeds of $16 million, recognizing a realized gain of $3 million. In addition, we received $3 million in interest rate cap payments during the quarter. At quarter end, our outstanding interest rate cap positions totaled $1.3 billion in notional amount, with a weighted average strike rate of 3.00%.
Current report
ERIS SOFR Swap Futures
Current report
During the quarter, we maintained our existing ERIS SOFR swap futures positions, with no purchases or sales. At quarter end, our outstanding positions totaled $50 million in notional amount, representing a two-year pay-fixed swap equivalent with a par rate of 4.05% and a maturity of March 2027.
Current report
Agency RMBS Portfolio.
Current report
During the quarter, we made no additional purchases of interest rate caps and received $3 million in cap payments. At quarter end, our outstanding interest rate cap positions totaled $1.8 billion in notional amount, with a weighted average strike rate of 3.00%.
Current report
During the quarter, we entered into interest rate swap contracts with an aggregate notional amount of $800 million, fixed pay rates ranging from 4.01% to 4.93%, and maturities ranging from 2 to 20 years. We also terminated $2.2 billion in notional amount of interest rate swaps, recognizing a realized gain of $72 million and receiving $1 million in interest payments. At quarter end, our outstanding swap positions totaled $1.3 billion in notional amount, with a weighted average fixed pay rate of 4.04% and remaining maturities ranging from 5 to 30 years.
Current report
ERIS SOFR Swap Futures
Current report
During the quarter, we maintained our existing ERIS SOFR swap futures positions without any purchases or sales. At quarter end, our outstanding positions totaled $290 million in notional amount, comprising $60 million in ten-year pay-fixed swap equivalents at a par rate of 3.87%, maturing in June 2035, and $230 million in five-year pay-fixed swap equivalents at a par rate of 3.60%, maturing in June 2030.
Current report
Mortgage TBAs
Current report
During the quarter, as previously discussed, we established a $2.4 billion short position in TBA mortgage-backed securities to reduce our exposure to Agency pass-through securities as part of our risk management strategy. We recognized no realized gains or losses from TBA closeouts and incurred no TBA drop expense during the quarter. At quarter end, our outstanding short TBA position remained at $2.4 billion in notional amount.
Current report
Through our acquisition of Palisades in December 2024 (the “Palisades Acquisition”), we expanded our business to include investment management and advisory services, generating fee-based revenue from unaffiliated investors and private credit funds.
Current report
In response to a more competitive environment, throughout 2026, we have continued to refine Palisades’ operating model to diversify both the various types of fee-earning revenue as well as expand to a broader client base. Our strategy has centered on expanding relationships with new clients with different capital strategies and offering a broader set of services to fit their needs. To anchor these efforts, we will be leveraging Palisades’ capabilities to provide both capital markets and portfolio management services for all Chimera-sponsored securitization programs going forward. Since the Palisades Acquisition, we have added three new clients and expanded our asset management services to five Chimera-sponsored securitizations, four of which remain active and one which was re-securitized.
Current report
During the third quarter of 2026, Palisades generated approximately $8 million in transaction management and advisory fee revenue, partially offset by approximately $2 million in revenue-sharing expenses associated with the transition services agreement. After accounting for these expenses, the net contribution from these services was approximately $6 million, representing a decrease of approximately $542 thousand from the prior quarter. The increase in revenue-sharing expenses under the transition services agreement more than offset the benefit of higher transaction volumes during the third quarter. This performance reflects the ongoing transition toward a more diversified client base and fee structure as we expand Palisades’ service offerings and integrate its capabilities across Chimera’s securitization platform.
Current report
For the third quarter of 2026, HomeXpress reported a net loss of $2 million, reflecting gain on origination and sale of loans, net of approximately $11 million, net interest income of $5 million, total operating expenses of approximately $15 million, and amortization of intangibles and depreciation expense of approximately $3 million. The Residential Origination segment contributed approximately $150 thousand to Earnings Available for Distribution (“EAD”), a non-GAAP financial measure, during the third quarter of 2026. Please see “Earnings Available for Distribution” below for a reconciliation of EAD to its most directly comparable GAAP measure.
Current report
Compensation and benefits expenses decreased by $2 million, to $11 million in the third quarter of 2026 from $13 million in the second quarter of 2026, primarily due to lower bonus expense. General and administrative expenses remained relatively unchanged at $9 million during the quarters ended September 30, 2026 and June 30, 2026, respectively.
Current report
Servicing fees and asset manager expenses were $6 million and $4 million for the quarters ended September 30, 2026 and June 30, 2026, respectively. The quarter-over-quarter increase was primarily attributable to revenue-sharing expenses associated with Palisades' transaction management services under an amended client agreement, which were recognized in Servicing and asset manager fees, consistent with the gross recognition of the related revenue. We incurred no transaction expenses during the third quarter of 2026 because there was no securitization activity during the period.
Current report
During the third quarter of 2026, U.S. Treasury yields increased across the yield curve. The yield on the two-year U.S. Treasury increased 74 basis points higher to 4.88%, and the ten-year U.S. Treasury yield increased 85 basis points to 5.29%. These movements in interest rates and spreads caused our Investment Portfolio segment’s mark-to-market on the combined loan balances and securitized debt to decrease by $119 million quarter over quarter.
Current report
Finally, movements in interest rates and credit spreads resulted in a quarter-over-quarter decline of $24 million in the value of our non-agency securities portfolio.
Current report
Strategic Positioning
Current report
Over the past two years, we have made significant progress in diversifying our investment portfolio and expanding our operating platform to generate more sustainable, risk-adjusted returns. We have executed this strategy by capitalizing on market opportunities that allowed us to redeploy capital from existing investments into higher-returning assets, where the incremental earnings potential significantly outweighed the modest equity losses realized on certain dispositions.
Current report
As our business has expanded, we have initiated a review of our operating model to identify ways to improve efficiency and better align our cost structure with the scale and mix of our operations. The review includes processes and systems across the Company, as well as how we can make better use of our existing technology investments. We will continue to invest in areas that support growth while we look to reduce expenses and improve our operating efficiency over time.
Current report
While the sharp interest rate movements and market volatility experienced during the third quarter impacted both our investment portfolio and mortgage origination business segments, we believe the complementary nature of these businesses provides multiple avenues for generating earnings and delivering long-term value. As we navigate the current market environment, our strategy remains focused on preserving capital, maintaining a strong liquidity base, managing interest rate and financing risks, and selectively pursuing attractive investment opportunities while continuing to expand our mortgage origination and fee-based businesses.
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Removed paragraphs (45)
Previous report
Financial markets during the second quarter of 2026 were shaped primarily by evolving expectations for Federal Reserve monetary policy amid persistent inflation, resilient labor market conditions and continued geopolitical developments. Although tensions in the Middle East remained elevated early in the quarter, energy markets stabilized following a temporary ceasefire and easing concerns over disruptions to global oil supplies. While lower oil prices moderated inflation concerns, inflation remained above the Federal Reserve’s long-term target, contributing to continued uncertainty regarding the path of monetary policy.
Previous report
At its June meeting, the Federal Reserve maintained its target range for the federal funds rate at 3.50% to 3.75%. Although no change in policy rates was announced, updated economic projections reflected persistent inflation concerns and a more restrictive policy outlook than investors had anticipated entering the quarter. As a result, investor expectations shifted from near-term interest rate cuts toward the possibility of a rate increase later in the year.
Previous report
Treasury yields increased across the curve during the quarter, led by shorter-term maturities as markets repriced expectations for future monetary policy. The yield on the two-year U.S. Treasury increased by 38 basis points to 4.17%, while the ten-year U.S. Treasury yield increased by 15 basis points to 4.47%. The yield curve flattened meaningfully during the quarter, with the spread between the two-year and ten-year Treasury yields narrowing from 52 basis points to 29 basis points.
Previous report
Mortgage and credit markets remained constructive throughout the second quarter despite higher benchmark interest rates. Primary mortgage rates increased only modestly as tighter mortgage spreads modestly offset a portion of the increase in Treasury yields. The average 30-year fixed mortgage rate increased from 6.38% to 6.49% during the quarter, while mortgage rate spreads relative to the 10-year Treasury yield tightened from the elevated levels experienced earlier in the year.
Previous report
Agency mortgage-backed securities outperformed comparable-duration U.S. Treasuries during the quarter. Current coupon Agency MBS spreads tightened 18 basis points against a blend of treasuries and 21 basis points against a similar blend of swaps, while option-adjusted spreads also narrowed. Continued purchases by Fannie Mae and Freddie Mac, together with strong institutional demand, provided favorable technical support.
Previous report
Residential mortgage credit markets also performed well during the quarter. Non-QM securitization issuance remained robust with the first half pace running well ahead of 2025 issuance volumes by a significant margin. Despite elevated new issuance, spreads tightened across most non-agency residential mortgage sectors, reflecting strong investor appetite and favorable market technicals. AAA Non-QM spreads tightened approximately 10 basis points during the quarter, although higher benchmark interest rates resulted in increased yields on new issue securities which were reflected in whole loan pricing. Investor participation continued to broaden across the residential mortgage credit market, while lower-rated residential credit generally outperformed as investors sought incremental yield amid a constructive credit environment.
Previous report
Housing market fundamentals remained generally supportive even with mortgage rates near multi-year highs. Home prices were broadly stable to modestly higher, with several national indices reporting improving year-over-year growth during the quarter.
Previous report
Housing market conditions continued to vary by region. Price appreciation was strongest across many Northeastern and Midwestern markets, where housing inventory remained constrained relative to historical norms, and more subdued across portions of the South, Sun Belt and Mountain West where supply recovered more rapidly. Although housing supply improved nationally during the quarter, limited inventory supported home prices in some regional markets, while increased supply moderated price appreciation in others.
Previous report
Existing home sales and purchase mortgage activity remained relatively stable despite elevated mortgage rates and resilient labor market conditions. Mortgage credit performance was also resilient during the quarter. Overall mortgage delinquencies increased modestly, although industry data suggested much of the increase reflected seasonal and calendar-related factors rather than broad-based deterioration in borrower performance. Credit performance was strongest among conventional Agency mortgage loans, while stress was concentrated within certain government-insured mortgage programs. Seasonally adjusted prepayment activity also remained subdued as higher mortgage rates continued to limit refinancing activity.
Previous report
Agency DUS Bonds. During the second quarter, the Investment Portfolio segment purchased $17 million of Agency CMBS DUS bonds, deploying approximately $800 thousand of capital to acquire these investments. On a levered basis, and after incorporating the cost of interest rate hedging, these bonds are expected to generate attractive returns in the low- to mid-teens.
Previous report
Agency CMBS Project loans. During the quarter, following the funding of the underlying $33 million loan, one of the GNMA construction loan certificate bonds converted into a fully funded Agency CMBS public limited company bond. As discussed in the Asset Sales section below, this bond was subsequently sold during the quarter, resulting in no remaining exposure as of the end of the second quarter.
Previous report
During the second quarter we sponsored two securitizations of residential mortgage loans with an aggregate principal balance of $487 million. The mortgage loans for both securitizations were sourced from the redemption of prior Chimera-sponsored securitization CIM 2025-NR1 ($205 million UPB) and also included unsold loans retained from the first quarter redemption of eight securitization deals ($282 million UPB).
Previous report
Net proceeds received from the transactions were in excess of $13 million which was subsequently invested in Agency securities.
Previous report
We sponsored CIM 2026-R1, a $289 million securitization of residential mortgage loans. The loans had a weighted average coupon of 5.50%, with weighted average FICO scores of 639, and LTV ratio of 45.38%. Securities issued by CIM 2026-R1, with an aggregate balance of approximately $245 million, were sold in a private placement to institutional investors. These senior securities represented approximately 85% of the capital structure. We retained subordinate interests in securities with an aggregate balance of approximately $43 million and certain IOs. We also retained an option to call the securitized mortgage loans on the earlier of (i) May 25, 2028, or (ii) when the aggregate principal amount of the offered notes is less than, or equal to, 10% of the aggregate principal amount of the offered notes as of May 26, 2026. The weighted average cost of debt on securities sold was 4.75%. PAS acts as asset manager for the securitization.
Previous report
We also sponsored CIM 2026-NR1, a $198 million securitization of residential mortgage loans. The loans had a weighted average coupon of 5.44%, with weighted average FICO scores of 600, and LTV ratio of 56.85%. Securities issued by CIM 2026-NR1, with an aggregate balance of approximately $143 million, were sold in a private placement to institutional investors. These senior securities represented approximately 72.50% of the capital structure. We retained subordinate interests in securities with an aggregate balance of approximately $54 million. We also retained an option to call the securitized mortgage loans, at the direction of the majority class B1 certificate holder, on any payment date after May 26, 2027. The weighted average cost of debt on securities sold was 5.00%. PAS acts as asset manager for the securitization.
Previous report
We intend to establish a securitization program for Non-QM loans and Investor Loans, providing an additional source of liquidity and capital for HomeXpress originations. We expect to continue acquiring loans and plan to launch the program once a sufficient balance has been aggregated, subject to market conditions. The inaugural securitization is currently expected to close in the third or fourth quarter of 2026.
Previous report
During the second quarter of 2026, our overall secured financing costs declined by 10 basis points. Secured financing agreements (recourse liabilities) increased by a net $738 million, primarily reflecting the use of leverage to support our Agency RMBS investments. Agency RMBS financing increased toward quarter-end, while Agency CMO’s, Agency CMBS (including
Previous report
IOs), Non-Agency RMBS and Loan financing declined due to redemption of certain securitized bonds, paydowns and asset sales.
Previous report
As previously noted, the $282 million portfolio of RPL loans acquired through the first-quarter securitization unwind, which had been financed through a loan warehouse facility, was repaid during the quarter, as the loans were sold into the two new securitizations completed this quarter.
Previous report
During the second quarter, we purchased a SOFR-based interest rate cap with a 3.00% strike rate, a $500 million notional amount, and a June 2028 maturity for a total premium of $10 million. During the same period, we also exited a $500 million interest rate cap with a 3.95% strike rate that was scheduled to mature in February 2027.
Previous report
As of June 30, 2026, we maintained open interest rate hedge positions attributable to the residential credit portfolio that included: (i) a $500 million interest rate cap with a strike rate of 3.00% maturing in June 2028, (ii) a $500 million interest rate cap with a strike rate of 3.00% maturing in January 2028, (iii) a $600 million interest rate cap with a strike rate of 3.30% maturing in March 2028, and (iv) $50 million 4.05% par rate equivalent pay-fixed two-year Eris swap futures maturing in March 2027.
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Agency RMBS Portfolio. During the quarter, we purchased SOFR-based interest rate caps with a 3.00% strike rate, representing a total notional amount of $1.8 billion, for an aggregate premium of $43 million. We also entered into interest rate swap contracts with an aggregate notional amount of $781 million, with maturities ranging from 2 to 30 years and fixed pay rates ranging from 3.85% to 4.28%.
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During the quarter, we terminated interest rate swap contracts with an aggregate notional amount of $1.5 billion, realizing gains of $11.6 million and receiving $3.6 million of net interest payments.
Previous report
As of June 30, 2026, we maintained the following open interest rate hedge positions related to the Agency RMBS portfolio: (i) interest rate caps with an aggregate notional amount of $1.8 billion and a weighted average strike rate of 3.00%; (ii) interest rate swaps with an aggregate notional amount of $2.8 billion, a weighted average fixed pay rate of 3.76%, and remaining maturities ranging from less than one year to 30 years; and (iii) $60 million of 3.87% par rate equivalent pay-fixed 10-year Eris swap futures maturing in June 2035 and $230 million of 3.60% par rate equivalent pay-fixed 5-year Eris swap futures maturing in June 2030.
Previous report
Mortgage TBA Derivatives. During the quarter, we closed out short TBA mortgage securities positions with an aggregate notional amount of $966 million, recognizing realized gains of $1.4 million across various counterparties. We also recognized $1 million of TBA dollar roll (“drop”) expense during the quarter. As of June 30, 2026, we had no open short TBA mortgage securities positions.
Previous report
Through the Palisades acquisition in December 2024 (the “Palisades Acquisition”), we started earning investment management and advisory fees. In addition, PAS was hired to provide asset management services for five securitizations issued by Chimera, four of which remain active. We also continue to provide services to unaffiliated investors and private credit funds. Palisades’ fee-based income (both transaction and advisory fees) contributed $7 million in revenue during the second quarter of 2026. Fee income declined during the second quarter primarily due to a 29% decline in transaction management volume from a higher-fee-paying client, which was only partially offset by replacement activity from other clients at lower fee rates. As a result, total fee income declined by approximately $1 million compared with the prior quarter.
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For the second quarter of 2026, HomeXpress reported net income of $9 million. This was derived from gain on origination and sale of loans, net of approximately $22 million, net interest income of $4 million, total operating expenses of approximately $14 million, and amortization of intangibles and depreciation expense of approximately $3 million. Net income, excluding amortization of intangibles and depreciation and income tax expense was $12 million in the first quarter, which represents 107 basis points of HomeXpress’ loan origination volume for the quarter.
Previous report
Compensation and benefits expenses decreased by $2 million, to $13 million in the second quarter of 2026 from $15 million in the first quarter of 2026. The decrease was primarily attributable to a one-time acceleration of stock-based compensation expense recognized in the first quarter related to retirement-eligible employees.
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General and administrative expenses decreased by $1 million, to $9 million in the second quarter of 2026 from $10 million in the prior quarter, primarily reflecting normal quarter-to-quarter timing of operating expenditures.
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Servicing expenses decreased by $1 million, to $4 million in the second quarter of 2026 from $5 million in the first quarter, primarily due to lower loan balances and loan counts resulting from our portfolio reallocation strategy.
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Transaction expenses increased to $3 million in the second quarter of 2026 from $98 thousand in the first quarter of 2026. The increase was primarily driven by higher securitization activity during the second quarter.
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During the quarter, spreads on mortgage loans and related securitized assets held on the balance sheet tightened modestly compared to the prior quarter. The yield on the two-year U.S. Treasury increased 38 basis points to 4.17%, while the ten-year U.S. Treasury yield increased 15 basis points to 4.47%. The movement in rates caused our Investment Portfolio segment’s mark-to-market on loan balances to decline by $59 million and our securitized debt to increase by $15 million quarter over quarter.
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We continue to focus on building a diversified residential mortgage origination platform that can generate income from assets, gains on sale, and fees from operations with the long-term goal of growing both dividends and overall business value. Specifically, we will continue to look for opportunities to grow and diversify our portfolio, increase liquidity and grow our fee-based income revenue streams.
Previous report
With respect to our portfolio, we intend to continue to look for opportunities to securitize mortgage loans (whether we manufacture or acquire the loans) and we expect to grow our Agency RMBS and MSR portfolios. In addition to supporting our regulatory compliance, we believe that a scaled Agency MBS allocation will provide portfolio diversification, more stable dividends and a source of liquidity for opportunistic asset and business acquisitions. We intend to evaluate opportunities to acquire additional MSRs, which we believe will help hedge our loan portfolio and lending operations, and provide a diverse source of income and enhance our dividend paying ability.
Previous report
With the HomeXpress and Palisades Acquisitions, we have embarked on our strategy of enhancing returns to our shareholders through the diversification of revenue from fee-based income. Looking forward to the remainder of 2026, we will pursue opportunities to grow our residential mortgage origination platform both organically and through acquisitions. We believe that HomeXpress is well positioned to grow originations in 2026 and we will continue to assess the strategy of selling versus retaining the loan production volume of HomeXpress, and its implications on our short-term results and long-term earnings potential. HomeXpress considers loan origination volumes, loan sale premiums and cost efficiency to be key performance indicators and uses these to measure management’s effectiveness in realizing its objectives. As indicated previously, we have initiated our inaugural securitization program through acquisition of loans originated by HomeXpress into our investment portfolio, which will be securitized later in the year.
Previous report
With respect to our non-discretionary advisory business, we anticipate heightened competition could pressure client flow volumes which may lead to margin compression across existing and potential client relationships. We will, however, continue to navigate through the market challenges and look to maintain and/or grow our non-discretionary investment management and advisory services through a combination of organic and external growth, depending on opportunities and market conditions.
Previous report
Funding for these portfolio diversification and growth initiatives are expected to come from both our existing portfolio as well as capital market activities. We may continue to call, and if market conditions are appropriate, either sell loans or re-securitize the loans. Our ability to call and either sell or re-securitize the loans, as well as access the capital markets will depend on a number of factors, including prevailing portfolio objectives and market conditions.
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Our net interest rate spread, which equals the yield on our average interest-earning assets less the economic average cost of funds, decreased to 1.6% for the quarter ended June 30, 2026 compared to 1.8% for the quarter ended March 31, 2026.
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Our net interest margin, which equals the yield on our average interest-earning assets less the economic average cost of funds, decreased by 20 basis points for the quarter ended June 30, 2026, as compared to the quarter ended March 31, 2026.
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Our net interest margin, which equals the yield on our average interest-earning assets less the economic average cost of funds, decreased by 10 basis points for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.
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Previous wording
•changes in inflation, the yield curve, interest rates and mortgage prepayment rates;
Current wording
•changes in inflation, the yield curve, interest rates, including the resumption of Federal Reserve monetary tightening, and mortgage prepayment rates;
Previous wording
In 2025, we reevaluated the composition of our reportable segments based on changes in the significance of certain business activities, including the acquisition of HomeXpress Mortgage Corp. (“HomeXpress”) in October 2025 (the “HomeXpress Acquisition”), and the manner in which our management reviews operating results and allocates resources. As a result of this reevaluation, we now have two reportable segments: (i) Investment Portfolio, and (ii) Residential Origination. The Investment Portfolio segment consists of our investments and third-party advisory services activities. The Residential Origination segment consists of the stand-alone residential 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.
Current wording
In 2025, we reevaluated the composition of our reportable segments based on changes in the significance of certain business activities, including the acquisition of HomeXpress Mortgage Corp. (“HomeXpress”) in October 2025 (the “HomeXpress Acquisition”), and the manner in which our management reviews operating results and allocates resources. As a result of this reevaluation, we have two reportable segments: (i) Investment Portfolio and (ii) Residential Origination. The Investment Portfolio segment consists of our investment and third-party advisory services activities, as well as the purchase and aggregation of LHFS from HomeXpress and third-party mortgage originators for future securitizations. The Residential Origination segment consists of the stand-alone residential 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.
Previous wording
As of June 30, 2026, based on the fair value of our interest-earning assets, approximately 55.6% of our investment portfolio was allocated to residential mortgage loans held for investment, 36.9% to Agency MBS, 5.1% to Non-Agency RMBS, 2.2% to LHFS, and less than 1% to interests in MSR financing receivables.
Current wording
As of September 30, 2026, based on the fair value of our interest-earning assets, approximately 50.3% of our investment portfolio was allocated to residential mortgage loans held for investment, 37.5% to Agency MBS, 4.6% to Non-Agency RMBS, 7.4% to LHFS, and less than 1% to interests in MSR financing receivables.
Previous wording
We utilize a variety of channels, including securitizations, warehouse facilities, repurchase agreements and other capital market activities to finance our investments, manage liquidity, improve capital efficiency, support the implementation of our investment strategies, as well as enhance our return on equity. We manage interest rate risk using hedging instruments such as interest rate swaps, swap futures, treasury futures, swaptions, and interest rate caps. We also use TBA securities to hedge certain risks within our Agency portfolio.
Current wording
We utilize a variety of channels, including securitizations, warehouse facilities, repurchase agreements and other capital market activities to finance our investments, manage liquidity, improve capital efficiency, support the implementation of our investment strategies, as well as enhance our return on equity. We manage interest rate risk using hedging instruments such as interest rate swaps, swap futures, U.S. Treasury futures, swaptions, and interest rate caps. We also use TBA securities to hedge certain risks within our Agency portfolio.
Previous wording
HomeXpress is a specialty mortgage lender focused primarily on providing first lien, consumer Non-QM loans, and Investor Loans solutions to the residential housing market on a national scale through mortgage brokers and bankers. As of June 30, 2026, HomeXpress had approximately 6,300 approved wholesale brokers and non-delegated correspondent bankers. Non-QM loans are designed for borrowers who do not meet traditional qualified mortgage standards and typically carry higher interest rates and offer more flexible solutions. Investor Loans are secured by first liens on non-owner occupied 1–8 unit investment rental properties. HomeXpress is a leading originator of these residential mortgage loans and does so substantially on a wholesale basis through independent mortgage brokers and bankers. In the second quarter of 2026, HomeXpress sold 69% of all of the loans it originated on a servicing-released basis to third-party institutional investors, and the remaining 31% of the loans were purchased by the Investment Portfolio segment under our strategy of sponsoring securitizations of Non-QM loans using HomeXpress collateral. HomeXpress uses warehouse financing to fund loans from origination through sale. While the residential real estate market and associated mortgage loan origination volumes are heavily influenced by economic factors such as interest rates, housing prices and employment conditions, additional loan origination growth for HomeXpress is expected to be realized from further development of its existing wholesale origination network, as well as the growth of its recently implemented non-delegated correspondent channel. Additional growth is also expected from the expansion of its FHA, VA and conventional Agency-conforming channel and the implementation of delegated correspondent lending platform. As of June 30, 2026, LHFS by HomeXpress constituted approximately 5.4% of our interest-earning assets based on fair value.
Current wording
HomeXpress is a specialty mortgage lender focused primarily on providing first lien, consumer Non-QM loans, and Investor Loans solutions to the residential housing market on a national scale through mortgage brokers and bankers. As of September 30, 2026, HomeXpress had approximately 6,300 approved wholesale brokers and non-delegated correspondent bankers. Non-QM loans are designed for borrowers who do not meet traditional qualified mortgage standards and typically carry higher interest rates and offer more flexible solutions. Investor Loans are secured by first liens on non-owner occupied 1–8 unit investment rental properties. HomeXpress is a leading originator of these residential mortgage loans and does so substantially on a wholesale basis through independent mortgage brokers and bankers. In the third quarter of 2026, HomeXpress sold 68% of all of the loans it originated on a servicing-released basis to third-party institutional investors, and the remaining 32% of the loans were purchased by the Investment Portfolio segment under our strategy of sponsoring securitizations of Non-QM loans using HomeXpress collateral. HomeXpress uses warehouse financing to fund loans from origination through sale. While the residential real estate market and associated mortgage loan origination volumes are heavily influenced by economic factors such as interest rates, housing prices and employment conditions, additional loan origination growth for HomeXpress is expected to be realized from further development of its existing wholesale origination network, as well as the growth of its recently established non-delegated correspondent channel. Additional growth is also expected from the expansion of its FHA, VA and conventional Agency-conforming channel and the implementation of a delegated correspondent lending platform. As of September 30, 2026, Loans held for sale (“LHFS”) by HomeXpress constituted approximately 5.7% of our interest-earning assets based on fair value.
Previous wording
Second Quarter 2026 Business Highlights - Investment Portfolio Segment
Current wording
Third Quarter 2026 Business Highlights - Investment Portfolio Segment
Previous wording
Agency RMBS. During the second quarter, we settled approximately $967 million of Agency RMBS, deploying capital raised from legacy loan sales (from the first quarter) while simultaneously increasing our allocation to liquid securities. Of the $967 million securities that settled in the second quarter, $601 million were originally traded in the first quarter. These investments enable us to deploy capital in a relatively expedient manner upon raising funds through capital market transactions, asset divestitures, portfolio run-off, or other means and maintain liquidity for future investments or other strategic objectives, including business acquisitions.
Current wording
Agency RMBS. During the third quarter, we traded and settled approximately $1.9 billion of notional in Agency RMBS, deploying capital raised from second quarter re-securitizations and prepayments during the second and third quarters while simultaneously increasing our allocation to liquid securities. During the quarter, we increased leverage to capitalize on investment opportunities, generating incremental net interest income. Leverage subsequently declined to the historical operating range by quarter end. Investing in Agency RMBS enables us to deploy capital in a relatively expedient manner through capital market transactions, asset divestitures, portfolio run-off, or other means and maintain liquidity for future investments or other strategic objectives, including business acquisitions.
Previous wording
Agency securities. In the second quarter, we sold $575 million of notional in a combination of Agency CMBS, Agency CMBS IOs, Agency CMOs and Agency home equity conversion mortgage (“HECM”) IOs. Net liquidity raised, after payment of principal on a secured financing facility that held these securities as collateral, was $19 million. The capital raised via these sales was re-deployed into higher-yielding Agency Pass-through securities.
Current wording
Agency securities. In the third quarter, we sold $1.0 billion of Agency Pass-through securities and $226 million of Agency CMOs. Net liquidity raised, after payment of principal on a secured financing facility that held these securities as collateral, was $33 million. These sales contributed to a reduction in the overall leverage of our Agency portfolio by quarter end and resulted in a net realized loss of $27 million during the quarter.
Previous wording
During the first quarter, the Investment Portfolio segment committed to purchase $187 million of newly originated Non-QM loans and Investor Loans from our subsidiary, HomeXpress. The Investment Portfolio segment further committed to purchase an additional $131 million of loans during the second quarter. An aggregate of $301 million of loans acquired from HomeXpress, settled during the second quarter of 2026.
Current wording
During the first quarter of 2026, the Investment Portfolio segment committed to purchase $187 million of newly originated Non-QM and Investor Loans from our subsidiary, HomeXpress, followed by an additional $131 million of purchase commitments during the second quarter. Of these commitments, an aggregate of $301 million in loans settled during the second quarter of 2026. During the third quarter, we further expanded our loan acquisition activities, committing to purchase approximately $797 million of loans sourced from HomeXpress and other third-party originators, of which $461 million settled during the quarter. Net of financing, we deployed approximately $52 million of equity during the third quarter, bringing total equity deployed since the inception of the program to approximately $88 million.
Previous wording
At quarter end, total recourse financing exposure for the investment portfolio was $7.0 billion, with $5.0 billion attributable to Agency RMBS and $1.9 billion attributable to residential credit investments. We continue to evaluate opportunities to finance retained securities from securitizations using longer-term, limited recourse or, where appropriate, non-mark-to-market financing structures. Currently, $1.2 billion, or 17%, of our residential credit-related recourse financings is in these types of facilities.
Current wording
At quarter end, total recourse financing associated with our investment portfolio was $7.8 billion, comprising $5.5 billion related to Agency positions and $2.4 billion related to residential credit investments. We continue to evaluate opportunities to finance retained securities from securitizations through longer-term facilities with limited recourse or, where appropriate, non-mark-to-market provisions. Currently, approximately $1.2 billion, representing 73% of our residential credit-related recourse financing, excluding LHFS, is structured through these facilities, providing greater financing stability and reducing our exposure to short-term market volatility.
Previous wording
Residential Credit Portfolio. We continued to use derivatives to mitigate the impact of interest rates on our future financing costs and protect against the potential for higher interest rates eroding our earnings and dividend-paying ability. Our hedging strategy for the residential credit portfolio seeks to limit the impact of higher short-term interest rates, while maintaining optionality in the event interest rates decline in the future.
Current wording
We continued to use derivatives to mitigate the impact of interest rates on our future financing costs and protect against the potential for higher interest rates eroding our earnings and dividend-paying ability. Our hedging strategy for the residential credit portfolio seeks to limit the impact of higher short-term interest rates, while maintaining optionality in the event interest rates decline in the future.
Previous wording
Second Quarter 2026 Business Highlights - Residential Origination Segment
Current wording
Third Quarter 2026 Business Highlights - Residential Origination Segment
Previous wording
HomeXpress’ loan origination strategy is focused on providing consistent high-quality service to its network of independent mortgage brokers and bankers and having an agile and responsive approach to shifts in market demand for its loan products, institutional investor appetite and regulatory environments. We expect continued growth in loan originations to come from further penetration of HomeXpress’ existing independent mortgage brokers network and the development of new relationships with them and non-delegated correspondent lenders. Our business strategy is also focused on driving loan origination process and operational efficiencies through our customized technology and risk assessment framework so that we can control and enhance the cost of originating our loans. HomeXpress currently sells all the loans it originates on a servicing-released basis to third-party institutional investors for cash premiums. HomeXpress uses warehouse financing to fund originated loans prior to sale.
Current wording
HomeXpress’ loan origination strategy is focused on providing consistent high-quality service to its network of independent mortgage brokers and bankers and having an agile and responsive approach to shifts in market demand for its loan products, institutional investor appetite and regulatory environments. We expect continued growth in loan originations to come from further penetration of HomeXpress’ existing independent mortgage brokers network and the development of new relationships with them and non-delegated correspondent lenders. Our business strategy is also focused on driving loan origination process and operational efficiencies through our customized technology and risk assessment framework so that we can control and enhance the cost of originating our loans. HomeXpress sells its originated loans on a servicing-released basis to third-party institutional investors or to the Company’s Investment Portfolio segment for aggregation and potential securitization. HomeXpress uses warehouse financing to fund originated loans prior to sale.
Previous wording
During the second quarter of 2026, HomeXpress originated residential mortgage loans as detailed by the product and channel breakdown below. The weighted average interest rate, FICO score and LTV on all these loans were 7.036%, 740 and 72.7%, respectively.
Current wording
During the third quarter of 2026, HomeXpress originated residential mortgage loans as detailed by the product and channel breakdown below. The weighted average interest rate, FICO score and LTV on the Consumer Non-QM loans and Investor Loans were 7.2%, 743 and 72.4%, respectively.
Previous wording
HomeXpress funded $1.1 billion of volume during the quarter ended June 30, 2026 as compared to $884 million during the first quarter, an increase of 23.8% quarter over quarter.
Current wording
HomeXpress funded $1.12 billion in volume during the quarter ended September 30, 2026 as compared to $1.09 billion during the second quarter, an increase of 2% quarter over quarter.
Previous wording
HomeXpress maintained a sufficient overall liquidity position during the second quarter of 2026 with its cash balances and seven warehouse lines of credit. HomeXpress had total available capacity of $1.5 billion in warehouse lines as of June 30, 2026, which are all priced based on the 30-day SOFR plus a weighted pricing spread of approximately 192 basis points. As of June 30, 2026, HomeXpress held $802 million on UPB on the balance sheet that was financed with $727 million of advances from the warehouse lines of credit, with an average advance rate of 91%.
Current wording
HomeXpress maintained a sufficient overall liquidity position during the third quarter of 2026 with its cash balances and seven warehouse lines of credit. HomeXpress had total available capacity of $1.7 billion in warehouse lines as of September 30, 2026, which are all priced based on the 30-day SOFR plus a weighted pricing spread of approximately 192 basis points. As of September 30, 2026, HomeXpress held $890 million on UPB on the balance sheet that was financed with $801 million of advances from the warehouse lines of credit, with an average advance rate of 90%.
Previous wording
Prior to funding a loan, HomeXpress typically enters into an IRLC with the prospective borrower. These IRLCs are accounted for as derivatives and are valued based on market conditions, loan characteristics, estimated remaining direct expenses, and subject to the anticipated loan funding probability (Pull-through Rate). As of June 30, 2026, the fair value of HomeXpress’ IRLCs was a $4 million asset. Upon funding of a locked loan, the IRLC is derecognized and the loan is recorded as LHFS at fair value, with origination fees recognized and direct loan origination costs expensed as incurred. As of June 30, 2026, the total estimated fair value of HomeXpress’ LHFS in excess of principal balance was $17 million. The table below shows the effect on fair value of the IRLC based on a change in the Pull-through Rate:
Current wording
Prior to funding a loan, HomeXpress typically enters into an IRLC with the prospective borrower. These IRLCs are accounted for as derivatives and are valued based on market conditions, loan characteristics, estimated remaining direct expenses, and subject to the anticipated loan funding probability (Pull-through Rate). As of September 30, 2026, the fair value of HomeXpress’ IRLC assets was $1 million. Upon funding of a locked loan, the IRLC is derecognized and the loan is recorded as LHFS at fair value, with origination fees recognized and direct loan origination costs expensed as incurred. As of September 30, 2026, the total estimated fair value of HomeXpress’ LHFS in excess of principal balance was $9 million. The table below shows the effect on fair value of the IRLC based on a change in the Pull-through Rate:
Previous wording
HomeXpress operates a daily hedging program that utilizes financial instruments (shorting two-year and five-year U.S. Treasury futures) and FNMA and GNMA TBAs to protect its operational results from interest rate risk from the Non-Agency and Agency production, respectively. The program covers loans from the day the IRLC is issued through the day a loan is committed for sale to an investor. As of June 30, 2026, HomeXpress had hedging instruments with a notional amount of $232 million for U.S. Treasury futures, $18 million for TBAs and $295 million for IRLC.
Current wording
HomeXpress operates a daily hedging program that utilizes financial instruments (shorting two-year and five-year U.S. Treasury futures) and FNMA and GNMA TBAs to protect its operational results from interest rate risk from the Non-Agency and Agency production, respectively. The program covers loans from the day the IRLC is issued through the day a loan is committed for sale to an investor. As of September 30, 2026, HomeXpress had hedging instruments with a notional amount of $377 million for U.S. Treasury futures, $15 million for TBAs and $317 million for IRLC.
Previous wording
Compensation and benefits expenses for the Residential Origination segment remained relatively unchanged at $12 million for both the first and second quarters of 2026. Compensation and benefits primarily consist of salaries, incentive compensation, employee benefits, and other personnel-related costs. As of June 30, 2026, the Residential Origination segment had 358 employees compared to 351 as of March 31, 2026.
Current wording
Compensation and benefits expenses for the Residential Origination segment were $12 million in each of the third and second quarters of 2026. These expenses primarily consist of salaries, incentive compensation, employee benefits, and other personnel-related costs. As of September 30, 2026, the segment had 363 employees compared to 358 employees as of June 30, 2026.
Previous wording
General and administrative expenses for the Residential Origination segment also remained relatively unchanged at $2 million for both the second and first quarters of 2026. General and administrative expenses include occupancy, technology and platform costs, professional fees, and other corporate overhead allocated to the segment. These expenses are generally fixed in nature but may fluctuate based on operating scale, continued investments in the origination platform, and integration activities related to the HomeXpress Acquisition.
Current wording
General and administrative expenses for the Residential Origination segment were $3 million for the third quarter, up from $2 million in the second quarter of 2026. General and administrative expenses include occupancy, technology and platform costs, professional fees, and other corporate overhead allocated to the segment. These expenses are generally fixed in nature but may fluctuate based on operating scale, continued investments in the origination platform, and integration activities related to the HomeXpress Acquisition.
Previous wording
During the first half of 2026, we continued to execute our strategy of diversifying our portfolio while maintaining flexibility to capitalize on evolving market opportunities. In connection with these activities, we selectively evaluated and completed asset dispositions of investments that we believe were fully valued, did not meet our risk-adjusted return thresholds, or were no longer aligned with our long-term portfolio objectives. These sales consisted primarily of underlying loans from sponsored securitizations, with proceeds redeployed into higher-yielding investments to enhance earnings power, dividend capacity, and return on equity.
Current wording
During the first nine months of 2026, we executed our strategy of diversifying our portfolio while maintaining flexibility to capitalize on evolving market opportunities. In connection with these activities, we selectively evaluated and completed asset dispositions of investments that we believe were fully valued, did not meet our risk-adjusted return thresholds, or were no longer aligned with our long-term portfolio objectives. These sales consisted primarily of underlying loans from sponsored securitizations, with proceeds redeployed into higher-yielding investments to enhance earnings power, dividend capacity, and return on equity.
Previous wording
Agency mortgage spreads also tightened by approximately 18 basis points against a blend of treasury yields during the quarter. After accounting for interest rate and TBA hedges, the market value of the Agency MBS portfolio increased by approximately $24 million.
Current wording
During the quarter, current coupon Agency MBS spreads widened approximately 18 basis points relative to Treasuries, while option-adjusted spreads also widened. After accounting for interest rate and TBA hedges, the market value of the Agency MBS portfolio decreased by $97 million quarter over quarter.
Previous wording
These factors contributed to a decline in book value per share of approximately 3.2%, to $17.75 as of June 30, 2026, compared to $18.34 in the prior quarter.
Current wording
These factors contributed to a decline in book value per share of approximately 16.5%, to $14.82 as of September 30, 2026, compared to $17.75 in the prior quarter.
Previous wording
We declared common stock dividends of $0.45 per share for the second quarter of 2026. Economic return on book value, defined as the change in book value plus dividends, was (0.76)% for the second quarter, while Earnings Available for Distribution (“EAD”) return on average common equity was 10.35%. EAD is a non-GAAP measure. Please see “Earnings Available for Distribution” below for a reconciliation of EAD to its most directly comparable GAAP measure.
Current wording
We declared common stock dividends of $0.45 per share for the third quarter of 2026. Economic return on book value, defined as the change in book value plus dividends, was (13.98)% for the third quarter, while EAD return on average common equity was 9.48%. EAD is a non-GAAP measure. Please see “Earnings Available for Distribution” below for a reconciliation of EAD to its most directly comparable GAAP measure.
Previous wording
The table below presents our net income on a GAAP basis for the quarters ended June 30, 2026 and March 31, 2026, and the six months ended June 30, 2026 and June 30, 2025.
Current wording
The table below presents our net income on a GAAP basis for the quarters ended September 30, 2026 and June 30, 2026, and the nine months ended September 30, 2026 and September 30, 2025.
Previous wording
(1) Includes interest income of consolidated VIEs of $106,189 and $129,069 for the quarters ended June 30, 2026 and March 31, 2026, respectively, and $235,258 and $286,220 for the six months ended June 30, 2026 and 2025, respectively.
Current wording
(1) Includes interest income of consolidated VIEs of $104,642 and $106,189 for the quarters ended September 30, 2026 and June 30, 2026, respectively, and $339,901 and$423,817 for the nine months ended September 30, 2026 and 2025, respectively.
Previous wording
(2) Includes interest expense of consolidated VIEs of $54,598 and $63,879 for the quarters ended June 30, 2026 and March 31, 2026, respectively, and $118,478 and $142,690 for the six months ended June 30, 2026 and 2025, respectively.
Current wording
(2) Includes interest expense of consolidated VIEs of $55,287 and $54,598 for the quarters ended September 30, 2026 and June 30, 2026, respectively, and $173,765 and $213,076 for the nine months ended September 30, 2026 and 2025, respectively.
Previous wording
(3)Includes interest income from investment in MSR financing receivables of a consolidated VIE of $454 and $1,395 for the quarters ended June 30, 2026 and March 31, 2026, respectively, and $1,850 for the six months ended June 30, 2026. We did not hold any investments in MSR financing receivables for the six months ended June 30, 2025.
Current wording
(3)Includes interest income from investment in MSR financing receivables of a consolidated VIE of $312 and $454 for the quarters ended September 30, 2026 and June 30, 2026, respectively, and $2,162 and $363 for the nine months ended September 30, 2026 and for the nine months ended September 30, 2025.
Previous wording
(4) Includes a related-party, non-cash imputed compensation expense from the Palisades Acquisition of $341 and $341 for the quarters ended June 30, 2026 and March 31, 2026, respectively, and $682 and $682 for the six months ended June 30, 2026 and 2025, respectively.
Current wording
(4) Includes a related-party, non-cash imputed compensation expense from the Palisades Acquisition of $302 and $341 for the quarters ended September 30, 2026 and June 30, 2026, respectively, and $984 and $1,023 for the nine months ended September 30, 2026 and 2025, respectively.
Previous wording
Our results for the quarter and six months ended June 30, 2026 reflect the continued integration and full-period impact of our Residential Origination segment, which was acquired during the fourth quarter of 2025, and as such, prior periods may not be directly comparable.
Current wording
Our results for the quarter and nine months ended September 30, 2026 reflect the continued integration and full-period impact of our Residential Origination segment, which was acquired during the fourth quarter of 2025, and as such, prior periods may not be directly comparable.
Previous wording
Results of Operations for the Quarters Ended June 30, 2026 and March 31, 2026, and for the Six Months Ended June 30, 2026 and June 30, 2025.
Current wording
Results of Operations for the Quarters Ended September 30, 2026 and June 30, 2026, and for the Nine months ended September 30, 2026 and September 30, 2025.
Previous wording
For the quarter ended June 30, 2026, our net loss available to common shareholders was $4 million, or $(0.05) per average basic common share, compared to a net loss of $65 million, or $(0.78) per average basic common share for the quarter ended March 31, 2026. The decrease of $61 million in net loss available to common shareholders for the quarter ended June 30, 2026, as compared to the quarter ended March 31, 2026, was primarily driven by a decrease in losses on extinguishment of debt of $36 million, a decrease in net realized losses on sales of investment of $31 million, and an increase in interest income of $2 million, offset by an increase in interest expense of $7 million and an increase in net unrealized losses on financial instruments at fair value of $6 million. These changes were driven by favorable mark-to-market impacts resulting from tighter credit spreads on mortgage loans, securitized assets and Agency MBS, partially offset by the effects of changes in interest rates. Our total other expenses decreased by $6 million for the quarter primarily due to an impairment of certain asset management contracts that was recognized in the prior quarter.
Current wording
For the quarter ended September 30, 2026, our net loss available to common shareholders was $194 million, or $(2.31) per average basic common share, compared to a net loss of $4 million, or $(0.05) per average basic common share for the quarter ended June 30, 2026. The increase of $190 million in net loss available to common shareholders for the quarter ended September 30, 2026, as compared to the quarter ended June 30, 2026, was primarily driven by an increase in net unrealized losses on financial instruments at fair value of $348 million, an increase in net realized losses on sales of investment of $17 million, and a decrease in gain on origination and sale of loans, net of $11 million, offset by an increase in net gains on derivatives of $181 million. These changes were primarily driven by unfavorable mark-to-market impacts resulting from higher market interest rates and widening spreads on Agency MBS during the quarter, which adversely affected the fair value of our mortgage-related financial instruments, partially offset by gains on our derivative positions. Our total other expenses decreased by $1 million during the third quarter of 2026, primarily due to the absence of securitization-related transaction expenses, as we did not complete any securitizations during the period.
Previous wording
For the six months ended June 30, 2026, our net loss available to common shareholders was $69 million, or $(0.82) per average basic common share, compared to a net income of $160 million, or $1.97 per average basic common share for the six months ended June 30, 2025. The decrease of $229 million in net income available to common shareholders for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was primarily driven by a decrease in net unrealized gains on financial instruments at fair value of $217 million, an increase in losses on extinguishment of debt of $44 million, an increase in net realized losses on sales of investments of $48 million, and an increase to compensation and benefits of $27 million due to the inclusion of staffing costs and rising headcounts from the HomeXpress Acquisition. The decrease in net income available to common shareholders was partially offset by an increase in net gains on derivatives of $68 million, an increase in net interest income of $10 million, a decrease in servicing and asset manager fees of $5 million, and the addition of gain on origination and sale of loans, net, of $44 million attributable to HomeXpress operations which were not a part of our results of operations for the six months ended June 30, 2025.
Current wording
For the nine months ended September 30, 2026, our net loss available to common shareholders was $263 million, or $(3.14) per average basic common share, compared to a net income of $138 million, or $1.69 per average basic common share for the nine months ended September 30, 2025. The decrease of $401 million in net income available to common shareholders for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, was primarily driven by a decrease in net unrealized gains on financial instruments at fair value of $571 million, an increase in net realized losses on sales of investments of $77 million, an increase in losses on extinguishment of debt of $44 million, and an increase to compensation and benefits of $37 million due to the inclusion of staffing costs and rising headcounts from the HomeXpress Acquisition. The decrease in net income available to common shareholders was partially offset by an increase in net gains on derivatives of $275 million and the addition of gain on origination and sale of loans, net, of $55 million attributable to HomeXpress operations which were not a part of our results of operations for the nine months ended September 30, 2025.
Previous wording
Our interest income revenues are driven primarily by our Investment Portfolio segment. Interest income increased slightly by $2 million, or 1.1%, to $222 million for the quarter ended June 30, 2026 as compared to $219 million for the quarter ended March 31, 2026. This slight increase in our interest income during the quarter ended June 30, 2026 was due to a slight increase in our average interest-earning asset balances of $174 million as compared to the quarter ended March 31, 2026. The increase in interest income is also due to a higher average balance of LHFS in our Residential Origination segment during the quarter. In addition, as a result of our portfolio reallocation, interest income on loans decreased by approximately $24 million, which was fully offset by a corresponding $24 million increase in interest income from Agency RMBS.
Current wording
Our interest income revenues are driven primarily by our Investment Portfolio segment. Interest income increased by $9 million, or 4.1%, to $231 million for the quarter ended September 30, 2026 as compared to $222 million for the quarter ended June 30, 2026. This increase in our interest income during the quarter ended September 30, 2026 was primarily driven by our Agency RMBS purchases as we continued to deploy capital raised from second quarter re-securitizations and prepayments during the second and third quarters while simultaneously increasing our allocation to liquid securities and by our LHFS purchases from both HomeXpress and third-party mortgage originators. During the quarter ended September 30, 2026, the interest income on our Agency RMBS and LHFS portfolios increased by $7 million and $7 million, respectively, as compared to the quarter ended June 30, 2026 driven by tactical increases in leverage, which was partially offset by a decrease of $4 million on our Loans held for investment portfolio due to lower loan balances at the end of the current quarter as a result of our portfolio reallocation.
Previous wording
Interest income increased by $49 million, or 12.5%, to $441 million for the six months ended June 30, 2026 as compared to $392 million for the six months ended June 30, 2025. This increase was primarily driven by the reallocation of our portfolio from loans held for investment to Agency Pass-throughs. The increase in our Agency RMBS portfolio average balance increased by $2.9 billion, resulting in an increase in interest income of $85 million. This was offset by decreases in our Loans held for investment and Non-Agency portfolios average balance of $2.2 billion and $285 million, respectively, due to asset sales and paydowns during the period, resulting in a decrease in interest income of $59 million and $9 million, respectively, as compared to the six months ended June 30, 2025.
Current wording
Interest income increased by $71 million, or 11.7%, to $672 million for the nine months ended September 30, 2026 as compared to $601 million for the nine months ended September 30, 2025. This increase was primarily driven by the reallocation of our portfolio from loans held for investment to Agency Pass-throughs. The Agency RMBS portfolio average balance increased by $2.7 billion, resulting in an increase in interest income of $127 million. We also recognized interest income of $45 million from LHFS related to our Residential Origination segment in the current period which was not part of our operations during the prior year. This was offset by decreases in our Loans held for investment and Non-Agency portfolios average balance of $2.3 billion and $259 million, respectively, due to asset sales and paydowns during the period, resulting in a decrease in interest income of $96 million and $15 million, respectively, as compared to the nine months ended September 30, 2025.
Previous wording
Interest expense increased by $7 million, or 4.7%, to $151 million for the quarter ended June 30, 2026, as compared to $144 million for the quarter ended March 31, 2026. The increase was driven by an increase in our borrowings under secured financing agreements collateralized by an Agency RMBS balance of $1.0 billion to finance purchases during the quarter, resulting in an increase in interest expense on secured financing agreements collateralized by Agency RMBS of approximately $17 million. The increase in interest expense was partially offset by a reduction in our average securitized debt balance of $880 million, as we called one securitization which resulted in a decrease of $10 million in interest expense on Securitized debt, collateralized by loans during the quarter ended June 30, 2026, as compared to the quarter ended March 31, 2026. The interest expense on secured financing agreements collateralized by Loans held for investments decreased by $2 million due to lower average loan balances resulting from our assets sales in the second quarter of 2026.
Current wording
Interest expense increased by $8 million, or 5.6%, to $160 million for the quarter ended September 30, 2026, as compared to $151 million for the quarter ended June 30, 2026. This increase was primarily driven by higher borrowings to finance the purchase of $1.9 billion of Agency RMBS pass-throughs and $461 million of LHFS in the current quarter. During the quarter ended September 30, 2026, the interest expense on secured financing agreements collateralized by Agency RMBS and LHFS increased by $3 million and $5 million, respectively, due to higher balances to finance purchases during the quarter. The increase in interest expense was partially offset by a decrease in the interest expense on secured financing agreements collateralized by Loans held for investment of $4 million due to lower average loan balances resulting from paydowns during the third quarter of 2026.
Previous wording
Interest expense increased by $39 million, or 15.1%, to $295 million for the six months ended June 30, 2026, as compared to $257 million for the six months ended June 30, 2025. This increase was primarily driven by an increase in our borrowings under secured financing agreements collateralized by an Agency RMBS balance of $2.9 billion to finance the Agency RMBS purchases during the period. During the six months ended June 30, 2026, the interest expense on secured financing agreements collateralized by Agency RMBS increased by $60 million due to higher balances. The increase was also driven by the additional interest expense of $21 million on warehouse financing used by HomeXpress to fund our loans from origination through sale. These increases were partially offset by a decrease in our average securitized debt balance of $1.3 billion, as we called eight securitizations, resulting in a decrease of $25 million in interest expense on securitized debt during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, and lower average loan balances of $421 million, resulting in a decrease of $10 million in interest expense on secured financing agreements collateralized by Loans held for investments year over year.
Current wording
Interest expense increased by $54 million, or 13.5%, to $455 million for the nine months ended September 30, 2026, as compared to $401 million for the nine months ended September 30, 2025. This increase was primarily driven by an increase in our borrowings under secured financing agreements collateralized by an Agency RMBS balance of $2.7 billion to finance the Agency RMBS purchases during the period. During the nine months ended September 30, 2026, the interest expense on secured financing agreements collateralized by Agency RMBS increased by $86 million due to these higher balances. The increase was also driven by the additional interest expense of $33 million on warehouse financing used by HomeXpress to fund our loans from origination through sale. The increase in interest expense was partially offset by a decrease in our average securitized debt balance of $1.5 billion, as we called eight securitizations, resulting in a decrease of $41 million in interest expense on securitized debt during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, and lower average loan balances of $422 million, resulting in a decrease of $22 million in interest expense on secured financing agreements collateralized by Loans held for investment year over year.
Previous wording
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) decreased by $7 million to $66 million for the quarter ended June 30, 2026, from $73 million for the quarter ended March 31, 2026.
Current wording
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) increased by $3 million to $69 million for the quarter ended September 30, 2026, from $66 million for the quarter ended June 30, 2026.
Previous wording
Our Average net interest-earning assets increased by $101 million to $1.2 billion for the quarter ended June 30, 2026, compared to $1.1 billion for the quarter ended March 31, 2026.
Current wording
Our average net interest-earning assets were $1.2 billion for the quarter ended September 30, 2026, representing a decrease of $31 million compared to the quarter ended June 30, 2026.
Previous wording
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) decreased by $2 million to $139 million for the six months ended June 30, 2026, from $141 million for the six months ended June 30, 2025.
Current wording
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) decreased by $1 million to $209 million for the nine months ended September 30, 2026, from $210 million for the nine months ended September 30, 2025.
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Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
During the quarter ended September 30, 2026, we entered into two interest rate caps. During the current quarter, we paid $16 million for $800 million notional two-year interest rate caps with strike rates of 3.00% with SOFR as the market reference rate. During the quarter ended June 30, 2026, we entered into six interest rate caps. During the prior quarter, we paid $55 million for $2.3 billion notional two-year, three-year and five-year interest rate caps with strike rates of 3.00% with SOFR as the market reference rate.
Current report — wording carried from elsewhere
At September 30, 2026, we held $3.1 billion notional two-year, three-year, and five-year interest rate caps with a weighted average strike rate of 3.00% with SOFR as the market reference rate. At June 30, 2026, we held $3.4 billion notional two-year three-year, and five-year interest rate caps with a weighted average strike rate of 3.05% with SOFR as the market reference rate.
Current report — wording carried from elsewhere
For the Residential Origination segment, during the period ended September 30, 2026, we entered into 22 Agency TBA contracts with an aggregate notional amount of $25 million. These contracts resulted in a realized gain from hedging instruments of $135 thousand included within Gain on origination and sale of loans, net. As of September 30, 2026, we held 13 open Agency TBA positions.
Current report — wording carried from elsewhere
During the nine months ended September 30, 2026, we acquired securitized debt collateralized by Loans held for investment with an amortized cost balance of $1.1 billion for $1.2 billion. These transactions resulted in net loss on extinguishment of debt of $42 million.
Current report — wording carried from elsewhere
We entered into a secured financing agreement during the fourth quarter of 2022 for which we have elected fair value option. We believe electing fair value for this financial instrument better reflects the transactional economics. The total principal balance outstanding on this secured financing at September 30, 2026 and December 31, 2025 was $283 million and
Current report — wording carried from elsewhere
The program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases.
Current report — wording carried from elsewhere
Executive Officer Plan on the liquidation date were paid at that time in accordance with applicable tax rules. All deferrals previously made under the Director Plan will remain outstanding, and all deferrals pursuant to prior elections made by directors will be paid on the originally scheduled payment dates. At both September 30, 2026 and December 31, 2025, there are approximately 92 thousand shares for which payments have been deferred until separation or a date elected by the participant. At September 30, 2026 and December 31, 2025, there are approximately 417 thousand and 269 thousand DERs earned but not yet delivered, respectively.
Current report — wording carried from elsewhere
In connection with the HomeXpress Acquisition, we issued restricted stock units under the 2025 Inducement Award Plan to certain employees of HomeXpress as a material inducement for such employees to continue their employment with HomeXpress following the completion of the HomeXpress Acquisition. In connection with this transaction, stock-based compensation expense of $7 million will be recognized on a straight-line basis over the three-year vesting period.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
In addition, we entered into $305 million of notional interest rate swaps during the quarter to help mitigate exposure to interest rate volatility on these loans.
Previous report — wording carried elsewhere
We also recognized interest income of $29 million from LHFS related to our Residential Origination segment in the current period which was not part of our operations during the prior year.
Previous report — wording carried elsewhere
For our Investment Portfolio segment, during the six months ended June 30, 2025, we covered our open short position of 1,000 two-year U.S. Treasury Futures contracts for a net realized gain of $82 thousand.
Previous report — wording carried elsewhere
During the third quarter of 2024, we issued $75 million aggregate principal amount (including the additional amount
Previous report — wording carried elsewhere
During the third quarter of 2025, we issued $120 million aggregate principal amount (including the additional amount
Previous report — wording carried elsewhere
We expect to enter into new secured financing agreements at maturity; however, there is a risk that we will not be able to renew our secured financing agreements when we desire to renew them or obtain favorable interest rates and haircuts as a result of uncertainty in the market including, but not limited to, uncertainty as a result of inflation and increases in the federal funds rate.