CHIMERA INVESTMENT CORP
For the period ended Sep 30, 2025. Filed Nov 6, 2025.
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, 2025 · Filed Nov 6, 2025
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 2025-06-30; filed 2025-08-06.
0001628280-25-038345
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-06.
0001409493-25-000028
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 250 previous paragraphs and 300 current paragraphs.
130 unchanged; 102 reworded; 55 added; 17 removed; 1 previous and 13 current paragraphs rearranged.
Tables are not compared: 22 previous and 22 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 (55)
Current report
•GSE refers to a government-sponsored enterprise, such as Fannie Mae, Freddie Mac and Ginnie Mae;
Current report
•Pass-through refers to Agency-issued pass-through RMBS collateralized primarily by pools of fixed-rate single-family mortgage loans;
Current report
•Agency CMO refers to collateralized mortgage obligations guaranteed by an Agency and are included in Agency RMBS;
Current report
•Non-MTM refers to non-mark-to-market facilities, which are financial arrangements that do not require the regular revaluation of assets based on current market prices, often used for loans or securities where the value is assessed based on other criteria;
Current report
•RTLs refer to residential transition loans;
Current report
•RPLs refer to re-performing loans;
Current report
•MSRs refers to mortgage servicing rights;
Current report
•QM refers to qualified mortgages that are designed for borrowers who meet traditional lending criteria and comply with regulatory standards for safety and affordability; and
Current report
•Non-QM refers to non-qualified mortgages that are designed for borrowers who do not meet traditional qualified mortgage standards.
Current report
•our ability to originate or acquire quality and profitable loans at an appropriate and consistent cost;
Current report
•our ability to sell the loans that we originate or acquire;
Current report
•our ability to refinance or obtain additional liquidity for borrowing
Current report
Our investment strategy is intended to be durable across a variety of economic, rate, and credit environments. We continue to approach portfolio management in a disciplined manner and expect to operate in an environment characterized by ongoing uncertainty related to global trade dynamics, fiscal and monetary policy, inflation, labor market conditions, economic growth and geopolitical tensions. Consistent with that approach, we were tactical with respect to raising liquidity this quarter to fund the acquisition of HomeXpress (the “HomeXpress Acquisition”) that closed on October 1, 2025. We chose to raise liquidity by staggered sales of select assets, some of which we sourced from our Agency RMBS liquidity allocation and the other from what we viewed to be fully priced Non-Agency RMBS positions. Separately, we also issued unsecured debt.
Current report
◦completed the acquisition of HomeXpress on October 1, 2025 for $240 million in cash, comprised of an estimated adjusted book value of $120 million (subject to certain post-closing adjustments) and a premium of $120 million, plus the issuance of 2,077,151 shares of our common stock;
Current report
◦issued and closed on $120 million of 8.875% senior notes due 2030 (including $5 million from the exercise of an over-allotment option) in mid-September;
Current report
◦purchased $1.2 billion (with $187 million settling in the fourth quarter) and sold $911 million in Agency RMBS, resulting in a net increase of $275 million for the quarter;
Current report
◦sold $261 million of retained bonds related to our securitizations ($237 million RPL and $25 million Non-QM and investor loans) for $231 million in proceeds, generating $72 million in net liquidity after secured financing repayments, these bonds were converted into securitized debt;
Current report
◦sold $104 million of Non-Agency RMBS subordinate securities, $88 million of Non-Agency senior securities and $164 million of Agency CMBS IO positions for approximately $134 million in total gross proceeds, generating $44 million in net liquidity after secured financing repayments;
Current report
Early in the third quarter of 2025, global markets continued to navigate a number of uncertainties. The U.S. administration continued its tariff negotiations, reaching agreements with Japan and the European Union and extending deadlines with China and India to allow further time to reach an agreement. After quarter end, the current administration imposed tariffs on certain distinct industries, including pharmaceutical, wood products and furniture, and heavy-duty trucks; trade tensions with certain countries and overall uncertainty on the ultimate path forward remain elevated.
Current report
On the economic front, inflation increased slightly during the third quarter, reaching 3.3% in September, and the labor market began to show signs of stress, making the Federal Reserve’s pursuit of its dual mandate for price stability and maximum employment a challenge. After holding its target Fed funds range steady between 4.25% and 4.50% in July, the Federal Reserve acted to reduce its target Fed funds rate by a quarter-point in September, noting that “uncertainty about the economic outlook remains elevated” and “downside risks to employment have risen.” Further, the Federal Reserve maintained its policy to reduce its portfolio holdings under monthly caps of $5 billion for U.S. Treasuries and $35 billion for Agency RMBS. Overall, markets were resilient despite the disruptions as major indices hit record highs and interest rate volatility eased from the peak in the second quarter.
Current report
Interest rates declined throughout much of the third quarter along the yield curve as markets adjusted to expectations for rate cuts and economic uncertainty increased alongside rising unemployment and higher inflation. The yield on two-year Treasury notes fell by 11 basis points to 3.61%, while the yield on ten-year Treasury notes dropped by 8 basis points to 4.15%. Meanwhile, interest rate volatility eased to its lowest level since early 2022.
Current report
Non-QM Origination markets
Current report
The Non-QM origination markets consist of mortgage loans that do not qualify under the standard guidelines established by the GSEs. In 2024, over $46 billion of Non-QM mortgage originations were securitized and in 2025, through September, over $57 billion have been securitized and on pace to exceed $70 billion by year end.
Current report
The HomeXpress Acquisition represents a strategically significant milestone and broadens our business capabilities. We expect that this acquisition will provide us with direct exposure to the growing Non-QM mortgage loan origination market and enhance the diversification of our earnings sources beyond our core investment activities.
Current report
HomeXpress is a specialty wholesale mortgage lender focused primarily on providing Non-QM solutions to the residential housing market on a national basis. 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 for potential borrowers. HomeXpress is a leading originator of Non-QM residential mortgage loans and does so substantially on a wholesale basis through independent mortgage brokers. HomeXpress currently sells all the loans it originates on a servicing-released basis to third-party institutional investors for cash premiums. Warehouse financing is used by HomeXpress to fund these loans from origination through sale. Additional loan origination growth for HomeXpress is expected to be realized from further development of its existing wholesale origination network and also from the growth in its recent implementation of a correspondent channel. Our strategy with respect to HomeXpress emphasizes disciplined underwriting, strong secondary market execution, cost efficiency, and efficient capital utilization.
Current report
Unsecured Notes Issuance
Current report
In September, we issued $120 million of unsecured 8.875% senior notes due August 15, 2030. Net of underwriting fees and offering expenses, we received approximately $116 million in proceeds. These notes may be redeemed, in whole or in part, at any time, from time to time, at our option on or after August 15, 2027. While we continue to favor securitized debt as a source of financing for our assets, the ability to issue unsecured debt helps us to further diversify our capital structure and provides long-term financing to support our investment activities. This was our third overall unsecured bond offering, resulting in a combined total of approximately $260 million in issuance.
Current report
RMBS activities. While the purchase of Agency RMBS securities increased toward the end of the quarter, our Non-Agency RMBS financing saw a decrease of approximately $248 million due to asset sales and paydowns during the quarter.
Current report
As of September 30, 2025, we had no outstanding warehouse financing exposure (recourse liabilities) backed by residential mortgage loans, other than a $114 million facility related to business purpose loans.
Current report
Agency RMBS Pass-throughs. Predominantly during the latter half of the quarter, we purchased approximately $1.2 billion of Agency RMBS Pass-throughs after deploying capital raised through Non-Agency RMBS sales, portfolio run-off and the issuance of unsecured senior notes. These investments diversify the portfolio and enable us to maintain liquidity available for future investments while generating attractive risk-adjusted returns.
Current report
MSR Investment. As previously announced, we gained exposure to a $6.5 billion pool of Fannie Mae mortgage servicing rights through a third-party servicing partnership. The weighted average interest rate on the loans at the time of acquisition was 4.02% and the weighted average loan-to-value ratio and borrower credit score was 71% and 754, respectively. The purchase price for this investment was $38 million which represented the net asset value after financing the MSR by the mortgage loan servicing counterparty. Because MSR valuations typically increase as interest rate rise, offsetting mark-to-market declines on our residential credit portfolio, the MSR allocation helps reduce book value volatility, stabilizes returns across rate cycles and serves as a natural book value hedge to our portfolio. In addition to the hedging characteristics, MSRs are also standalone, income generating assets. The recurring servicing fees, ancillary income, recapture income and float earnings associated with MSRs contribute to earnings while diversifying our interest rate exposure.
Current report
Asset Sales. During the quarter, we sold $237 million of retained bonds from previously issued RPL securitizations and $25 million from previously issued Non-QM and investor securitization for total proceeds of $231 million. Consequently, the retained positions sold will be added to securitized debt as a result of consolidation going forward. Net liquidity raised after payment of principal on a secured financing facility that held these retained bonds as collateral was $72 million.
Current report
We also sold $104 million of Non-Agency RMBS subordinate securities, $88 million of Non-Agency RMBS senior securities and $164 million of Agency CMBS IO positions during this quarter. Net liquidity raised after payment of principal on a secured financing facility that held these securities as collateral was $44 million. These sales generated a realized loss of $8.3 million during the quarter.
Current report
As of September 30, 2025, we maintained open interest rate hedge positions attributable to the Agency RMBS portfolio that included: (i) $1.1 billion 3.47% average pay-fixed interest rate swaps with varying maturities, (ii) $575 million interest rate swaps with cancellable features with average pay-fixed rate of 4.16% with maturities in July 2032 and July 2035, (iii) $60 million 3.87% par rate equivalent pay-fixed ten-year Eris swap futures maturing in June 2035, $230 million 3.60% par rate equivalent pay-fixed five-year Eris swap futures maturing in June 2030 and $365 million 3.69% par rate equivalent pay-fixed two-year Eris swap futures maturing in June 2027.
Current report
Earnings and Book Value
Current report
Over the past several months, we have deliberately positioned the portfolio to maintain flexibility and to meet liquidity needs as they arise, including for the HomeXpress Acquisition that closed on October 1, 2025. In parallel, we continued to evaluate and execute selective asset dispositions related to investments that are fully valued, are not meeting our risk-adjusted return objectives, and/or are no longer consistent with our long-term portfolio objectives. These asset sales were comprised primarily of retained securities from sponsored securitizations and Non-Agency RMBS with proceeds being redeployed into higher-returning investments to enhance our earnings power, dividend paying ability, and return on equity.
Current report
During the quarter, as we prepared to raise liquidity for the pending acquisition of HomeXpress, we executed asset sales at various points that temporarily increased our cash holdings. These cash balances, along with the short-term uninvested proceeds from our bond issuance, earned lower yields and created a temporary drag on earnings.
Current report
As a result of these strategic liquidity actions, our earnings available for distribution declined by approximately $0.02 per share to $0.37 per share during the quarter.
Current report
Consistent with prior quarters, yields on mortgage loans and securitized products continued to tighten. This trend persisted through the quarter, with spreads on the senior bonds within our securitizations, primarily reflected as securitized debt liabilities, tightening more significantly than the spreads on the underlying mortgage loan assets.
Current report
As a result, the fair values of both our mortgage loans and securitized debt increased during the quarter. However, because the valuation increase in securitized debt (a liability) exceeded the corresponding gains in mortgage asset values, the net effect was a modest decline in book value, as the asset appreciation only partially offset the liability impact.
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Removed paragraphs (17)
Previous report
•delays and/or unforeseen events that could cause the HomeXpress Acquisition (as defined below) to be delayed or not consummated
Previous report
Our investment strategy is intended to be durable across a variety of economic, rate, and credit environments. We continue to approach portfolio management in a disciplined manner and are expecting to operate in an uncertain environment defined in part by elevated interest rates and periods of heightened rate volatility. Consistent with that approach, we were patient with respect to investing the proceeds from resecuritizations closed at the end of the first quarter. As we entered April, volatility was elevated and markets were volatile and as such, we tactically deployed into the wider spread environment with over 85% of our second quarter investments in Agency RMBS settling on May 13, 2025 or later.
Previous report
◦entered into a definitive agreement to acquire HomeXpress Mortgage Corp (“HomeXpress”), which is a leading national non-QM mortgage lender, and which transaction is expected to close in 2025 and is projected to be accretive to our earnings in 2026;
Previous report
◦invested $2.3 billion ($402 million will settle in the third quarter) in Agency RMBS Pass-throughs;
Previous report
Early in the second quarter of 2025, the U.S. administration imposed a series of tariffs on select countries, impacting global trade and prompting concerns with respect to growth and inflation. Geopolitical tensions in the Middle East and the ongoing conflict between Russia and Ukraine contributed toward market volatility. However, by the midpoint of the quarter, while overall uncertainty still remained, trade tensions began to ease and signs of de-escalation in geopolitical conflicts helped stabilize markets.
Previous report
Inflation remained contained, the labor market showed resilience, and the Federal Reserve held rates steady while emphasizing a data dependent policy stance. Treasury yields sold off through May and rallied going into quarter end. Corporate credit spreads were tighter with non-agency RMBS spreads ending the quarter slightly wider. Equity markets achieved new heights and liquidity markets remained constructive.
Previous report
Despite the improved market sentiment, risks remained elevated with the consensus forecasts assigning a 35% to 40% probability of a recession. The Consumer Price Index rose 2.4% year-over-year in June 2025, unchanged from the levels recorded in April and May, while unemployment inched higher and wage growth moderated. With this backdrop, the data did not provide the catalysts necessary for the Federal Reserve to adjust its interest rate policy, which resulted in the target rate being maintained between 4.25% and 4.50% at both the April and June FOMC meetings.
Previous report
Interest rates rose throughout much of the second quarter before falling near quarter-end. Front-end yields declined while the back end of the curve remained steady, indicating that markets have started to adjust for potential rate cuts while leaving longer term rates subject to expectations surrounding U.S. growth, inflation, fiscal responsibility, and supply-demand dynamics in U.S. government debt markets. The yield on two-year Treasury notes fell by 16 basis points to 3.72%, while the yield on ten-year Treasury notes rose by 2 basis points to 4.23%. Meanwhile, interest rate volatility spiked in early April amid tariff fears, before reversing course and finishing the quarter lower overall.
Previous report
On June 11, 2025, we entered into a Stock Purchase Agreement (as amended on August 5, 2025 and as may be further amended from time to time, the “Stock Purchase Agreement”) to acquire HomeXpress Mortgage Corp, a Delaware corporation (“HomeXpress”) (the “HomeXpress Acquisition”) from the Sellers as defined in the Stock Purchase Agreement. We have assigned the Stock Purchase Agreement to our wholly-owned subsidiary, Chimera Funding TRS LLC, a Delaware limited liability company (“Funding TRS”). Accordingly, following the closing (the “Closing”) of the HomeXpress Acquisition, HomeXpress will become our indirect wholly-owned subsidiary operating under Funding TRS. As consideration for the HomeXpress Acquisition, we will pay to the Sellers a purchase price consisting of (i) cash in an amount that equals the adjusted book value of Holdco and its subsidiaries, including HomeXpress, as of the Closing, subject to certain adjustments in accordance with the terms of the Stock Purchase Agreement, plus (ii) a premium consisting of (a) $120 million in cash and (b) 2,077,151 shares of our common stock. Closing is expected to occur in the fourth quarter of 2025, subject to the satisfaction of closing conditions as specified in the Stock Purchase Agreement.
Previous report
The HomeXpress Acquisition is strategically important as we seek to reposition our portfolio and business capabilities, and we believe the HomeXpress Acquisition will benefit us and our investors in multiple ways, including, but not limited to, offering us direct exposure to non-QM loans and further diversifying our source of earnings.
Previous report
Agency RMBS Pass-throughs. Predominantly during the middle and latter half of the quarter, we purchased approximately $2.3 billion of Agency RMBS Pass-throughs, taking advantage of relative value opportunities while simultaneously increasing our liquid securities allocation. These investments have added portfolio value and enable us to maintain liquidity which we can access for future investments or other strategic objectives, including business acquisitions.
Previous report
RTL Loans. We settled $27 million of business purpose residential transition loans during the second quarter that we committed to purchase in first quarter, funded with warehouse facilities and targeting mid-to-high teen levered returns. These loans were purchased with a weighted average asset yield of 8.46%.
Previous report
The announced acquisition of HomeXpress is an important component of our long-term business strategy; we believe that the HomeXpress Acquisition will further diversify our sources of revenue, give us the ability to manufacture investable assets for our portfolio, provide the ability to cross sell and bundle assets and services solutions for third parties, and create opportunities to strategically retain and reinvest profits.
Previous report
As discussed earlier, during the second quarter of 2025, the yield on two-year U.S Treasury Notes fell by sixteen basis points, while the yield on ten-year U.S. Treasury Notes and residential credit spreads remained relatively flat resulting in lower market pricing gains on our investment as compared to the first quarter of 2025.
Previous report
Six months ended June 30, 2025 compared to the six months ended June 30, 2024
Previous report
During the quarter ended June 30, 2025, we had a realized loss of $390 thousand on the sale of 400 10-year SOFR, Swap future contracts, 400 two-year SOFR swap future contracts and 250 five-year SOFR swap future contracts. During the quarter and six months ended June 30, 2025, we are short 500 two-year SOFR Swap future contracts. The net par equivalent pay fixed on our Swap futures at June 30, 2025 was 4.05% and the weighted average receive rate was 4.45%. At June 30, 2024, we held no Swap future contracts.
Previous report
During the quarter June 30, 2025, the yield on two-year U.S. Treasury Notes fell by sixteen basis points, while the yield on ten-year U.S. Treasury Notes rose by two basis points and the residential credit spreads remained relatively unchanged resulting in market pricing that remained relatively flat to slightly up compared to prior quarter end. We recorded net unrealized gains on financial instruments at fair value of $7 million and $129 million for the quarters ended June 30, 2025 and March 31, 2025, respectively. We recorded net unrealized gains on financial instruments at fair value of $136 million and $88 million for the six months ended June 30, 2025 and June 30, 2024, respectively.
Reworded paragraphs (102)
Previous wording
In this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or “the Company” refer to Chimera Investment Corporation and its subsidiaries unless specifically stated otherwise or the context otherwise indicates. The following defines certain of the commonly used terms in this Quarterly Report on Form 10-Q: Agency refers to a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government, such as Ginnie Mae; MBS refers to mortgage-backed securities secured by pools of residential or commercial mortgage loans; RMBS refers to mortgage-backed securities secured by pools of residential mortgage loans; CMBS refers to mortgage-backed securities secured by pools of commercial mortgage loans; Agency RMBS and Agency CMBS refer to MBS that are secured by pools of residential and commercial mortgage loans, respectively, and are issued or guaranteed by an Agency; ABS refers to asset-backed securities; Agency MBS refers to MBS that are issued or guaranteed by an Agency and includes Agency RMBS and Agency CMBS collectively; Non-Agency RMBS refers to residential MBS that are not guaranteed by any agency of the U.S. Government or any Agency; IO refers to Interest-only securities.
Current wording
In this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or “the Company” refer to Chimera Investment Corporation and its subsidiaries unless specifically stated otherwise or the context otherwise indicates. The following defines certain of the commonly used terms in this Quarterly Report on Form 10-Q:
Previous wording
•our ability to manage credit risk related to our investments and comply with the Risk Retention Rules;
Current wording
•our ability to manage credit risk related to our investments and comply with the Dodd-Frank act and related laws and regulations relating to credit risk retention for securitizations;
Previous wording
•changes in our industry, the general economy or geopolitical conditions (such as the recent tensions in international trade);
Current wording
•changes in our industry, the general economy or geopolitical conditions (such as the recent tensions in international trade and impact of prolonged federal government shutdown);
Previous wording
•our ability to successfully integrate and realize the anticipated benefits of any acquisitions, including the HomeXpress Acquisition (as defined below) and the Palisades Acquisition;
Current wording
•our ability to successfully integrate and realize the anticipated benefits of any acquisitions, including theacquisition of The Palisades Group in 2024 and the acquisition of HomeXpress;
Previous wording
•our ability to comply with extensive government regulation;
Current wording
•our ability to comply with extensive government regulation, including, but not limited to, federal and state consumer lending regulations;
Previous wording
•the impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters;
Current wording
•the impact of and changes in governmental regulations, tax law and rates, accounting guidance, refinancing or borrowing guidelines and similar matters;
Previous wording
•the volatility of the market price and trading volume of our shares;
Current wording
•the volatility of the market price and trading volume of our shares; and
Previous wording
•our ability to make distributions to our stockholders in the future; and
Current wording
•our ability to make distributions to our stockholders in the future.
Previous wording
We are a publicly traded REIT whose principal business objective is to provide attractive risk-adjusted returns and distributable income through investment performance linked to mortgage credit fundamentals. We are primarily engaged in the business of investing for our own account and on behalf of third-party clients through our investment management and advisory services activities. We invest, directly or indirectly, generally on a levered basis in diversified portfolios of mortgage assets, including residential mortgage loans, Non-Agency RMBS, Agency RMBS, Agency CMBS, MSRs, business purpose and investor loans, including RTLs, and other real estate-related assets.
Current wording
We are a publicly traded REIT, whose principal business objective is to provide attractive risk-adjusted returns and distributable income through investment performance linked to mortgage credit fundamentals. Through our mortgage lending, investment management, and advisory services platforms, we operate as a fully integrated mortgage business that originates, manages, and invests in a diversified range of mortgage assets. We invest, directly or indirectly, generally on a levered basis across a spectrum of mortgage assets, including residential mortgage loans, Non-Agency RMBS, Agency RMBS, Agency CMBS, MSRs, business purpose and investor loans, including RTLs, and other real estate-related assets. Through our indirect wholly-owned subsidiary, HomeXpress Mortgage Corp (“HomeXpress”), we also originate consumer Non-QM, investor business purpose, and other non-Agency and Agency mortgage loan products.
Previous wording
As of June 30, 2025, based on the fair value of our interest earning assets, approximately 74% of our investment portfolio was allocated to residential mortgage loans, 19% to Agency RMBS, and 7% to Non-Agency RMBS. For comparison, at December 31, 2024, approximately 88% of our investment portfolio was residential mortgage loans, 8% of our investment portfolio was Non-Agency RMBS, and 4% of our investment portfolio was Agency MBS.
Current wording
As of September 30, 2025, based on the fair value of our interest earning assets, approximately 73% of our investment portfolio was allocated to residential mortgage loans, 21% to Agency RMBS, and 6% to Non-Agency RMBS. As of December 31, 2024, based on the fair value of our interest earning assets, approximately 88% of our investment portfolio was allocated to residential mortgage loans, 4% to Agency RMBS, and 8% to Non-Agency RMBS.
Previous wording
We finance our investments using a variety of sources, including securitizations, warehouse facilities, repurchase agreements and other capital market activities which are used for liquidity management as well as to enhance our potential return on equity. We manage interest rate risk using hedging instruments such as interest rate swaps, swaptions, caps, options, and U.S. Treasury futures.
Current wording
We finance our investments using a variety of channels, including securitizations, warehouse facilities, repurchase agreements and other capital market activities which are used for liquidity management as well as to enhance our potential return on equity. We manage interest rate risk using hedging instruments such as interest rate swaps, swaptions, caps, options, and futures contracts.
Previous wording
In addition, we took a number of strategic actions during the quarter designed to continue expanding our platform capabilities and repositioning the investment portfolio, including:
Current wording
In addition, we took a number of strategic actions during the quarter designed to continue expanding our platform capabilities and repositioning the investment portfolio consistent with our long-term objectives, including:
Previous wording
◦generated $9 million in revenue attributable to investment management and third-party advisory services; and
Current wording
◦generated $9 million in revenue attributable to investment management and third-party advisory services;
Previous wording
◦subsequent to quarter end, closed on the acquisition of $6.5 billion of Fannie Mae mortgage servicing rights through an excess servicing strip partnership.
Current wording
◦closed and acquired $6.5 billion of Fannie Mae mortgage servicing rights through a third-party servicing partnership; and
Previous wording
◦added $1.9 billion in swaps with varying tenors as part of the hedging framework associated with the Agency RMBS portfolio;
Current wording
◦added $1.6 billion in swaps with varying tenors as part of the hedging framework associated with the Agency RMBS portfolio, and added $600 million in swaptions with 18-month expiries and 2-year underlying swap tenors as part of the hedging framework.
Previous wording
Credit markets reflected a stable-to-positive risk sentiment in the second quarter. Nominal MBS spreads remained flat to slightly wider as volatility subsided and demand stabilized. Corporate spreads tightened by 16 basis points for investment grade and 67 basis points for high yield. In securitized products, the credit curve remained flat to modestly wider, supported by steady collateral performance and demand across the spectrum of investors.
Current wording
Credit markets reflected a stable-to-positive risk sentiment in the third quarter. Nominal MBS spreads remained flat as volatility subsided and demand stabilized, after the initial tightening of 21 basis points earlier in the quarter. Corporate spreads tightened by 9 basis points for investment grade and 23 basis points for high yield. In securitized products, credit spreads tightened moderately, supported by strong collateral performance and broad investor demand, as year-to-date residential credit issuance volume surpassed full-year 2024 levels.
Previous wording
Residential credit fundamentals remained solid, with low defaults, rising home prices, and historically high homeowner equity continuing to support strong performance and investor demand.
Current wording
Residential credit fundamentals remained robust, underpinned by low defaults, continued strength in home prices, and historically high homeowner equity, sustaining strong performance and investor demand.
Previous wording
Mortgage rates increased modestly in the second quarter, with the Freddie Mac 30-year survey rate increasing from 6.65% to 6.77%. The spread between 30-year mortgage rates and the ten-year Treasury yield widened to 254 basis points by quarter end, up from 244 basis points at the end of the first quarter. Economic factors, including inflation concerns and policy uncertainties, continue to contribute to the current mortgage rate environment.
Current wording
Mortgage rates fell in the third quarter, with the Freddie Mac 30-year survey rate decreasing from 6.77% to 6.30%. The spread between 30-year mortgage rates and the ten-year Treasury yield narrowed to 215 basis points by quarter end, down from 254 basis points at the end of the second quarter. Economic factors, including inflation concerns and a weaker employment environment, contributed to the decline in mortgage rates.
Previous wording
The S&P CoreLogic Case-Shiller U.S. National Home Price Index increased 1.9% through April 2025, following a 4.0% gain in 2024. The NAR’s Housing Affordability Index improved modestly in the first quarter reading as income levels rose more than mortgage and housing costs. Existing home sales in the U.S. saw a slight increase in May 2025, rising 0.8% to a seasonally adjusted annual rate of 4.03 million, according to the National Association of Realtors. However, this pace is still sluggish compared to historical averages and remains lower than the previous year. Further, the Mortgage Bankers Association’s Refinance Index ended the quarter slightly up, with prepayment speeds still significantly below historical norms attributable in part to more than 5% of current homeowners estimated to hold mortgages with interest rates below 5%, or more than 160 basis points below current rates.
Current wording
After rising 2.57% in the first half of 2025, the S&P CoreLogic Case-Shiller U.S. National Home Price Index fell 0.2% and 0.3% in July and August, respectively. The National Association of Retailers (“NAR”) Housing Affordability Index improved modestly in the third quarter as housing prices and mortgage rates both declined. Existing home sales in the U.S. saw a 1.5% month-over-month increase in September 2025 to a seasonally adjusted annual rate of 4.06 million, according to the NAR. This pace remains well below historical averages and lower than at the start of the year. Further, the Mortgage Bankers Association’s Refinance Index remained relatively low for most of the third quarter before rising near quarter end, which, despite reaching its highest level since March 2022, was significantly below historical norms attributable in part to more than 70.4% of current homeowners estimated to hold mortgages with interest rates below 5%, still well below current rates.
Previous wording
The U.S. continued to face a significant housing shortage, estimated at 4.5 million homes, as development has not kept pace with demand, particularly in high growth geographies. Contributing to this shortfall are factors including higher construction costs and the threat that these costs could rise further under an increased tariff regime along with the effect of immigration policy on labor costs. In addition, increasingly burdensome permitting and zoning regulations further contribute to fewer affordable new homes and delays in delivering new homes to the market.
Current wording
The U.S. continued to face a significant housing shortage, estimated at 5 million homes by the U.S. Chamber of Commerce, as demand has exceeded construction, particularly in high growth markets. Further, higher construction costs in the wake of the recent inflationary environment have constrained new development. In addition, increasingly burdensome permitting and zoning regulations further contribute to fewer affordable new homes and delays in delivering new homes to the market.
Previous wording
Strategic Acquisition of HomeXpress Mortgage Corp
Current wording
Business overview of HomeXpress Mortgage Corp
Previous wording
During the second quarter of 2025, our secured financing costs declined by 61 basis points, and our secured financing agreements (recourse liabilities) increased by a net $1.6 billion reflecting the deployment of leverage to support the Agency RMBS portfolio allocation strategy. As of June 30, 2025, we had no outstanding warehouse financing exposure (recourse liabilities) backed by RPLs.
Current wording
During the third quarter of 2025, our secured financing costs overall declined by 27 basis points, and our secured financing agreements (recourse liabilities) increased by a net $314 million reflecting the deployment of leverage to support our Agency
Previous wording
We currently target return on equity from this Agency RMBS allocation in the 12% to 15% range, and in any case, expect the levered return to exceed our cost of capital and be accretive to our earnings.
Current wording
We currently target return on equity from this Agency RMBS allocation in the 12% to 14% range, and in any case, expect the levered return to exceed our cost of capital and be accretive to our earnings.
Previous wording
Asset Sales. During the quarter, we sold one Non-Agency RMBS for $13 million along with Agency CMO securities for $73 million. In addition, we also sold previously purchased Agency RMBS Pass-through securities of $53 million and reallocated the capital to our current portfolio strategy. We received a total of $138 million in net proceeds from this sale and a total of $98 million after paying the financing on these positions. These sales resulted in a net realized loss of $2 million during the quarter, not including any net realized interest income. Proceeds from the sales were largely re-invested in Agency RMBS that increased our liquidity allocation.
Current wording
In addition, we also sold $911 million of previously purchased Agency RMBS pass-through securities as we prepared to raise liquidity for the pending acquisition of HomeXpress during the quarter. We received a total of $916 million in proceeds from this sale and a total of $216 million after paying the financing on these positions. These sales resulted in a net realized gain of $10 million during the quarter. Proceeds from the sales were largely re-invested in Agency RMBS toward the end of the quarter after completing strategic dispositions of certain Non-Agency RMBS and issued senior unsecured debt mentioned above.
Previous wording
Residential Credit Portfolio. We continued to maintain our strategy of using interest rate 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 in our credit portfolio seeks to limit the impact of higher interest rates, while maintaining optionality in the event interest rates decline in the future. During the quarter, three pay-fixed swaps matured, including (i) a $500 million 3.43% pay-fixed interest rate swap in April 2025, (ii) a $500 million 3.49% pay-fixed interest rate swap in April 2025, and (iii) a $500 million 3.76% pay-fixed interest rate swap in June 2025.
Current wording
Residential Credit Portfolio. We continued to maintain our strategy of using interest rate 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 in our residential credit portfolio seeks to limit the impact of higher interest rates, while maintaining optionality in the event interest rates decline in the future. During the quarter, we entered into two swaptions, each with $300 million notional amounts.
Previous wording
As of June 30, 2025, we maintained open interest rate hedge positions attributable to the residential credit portfolio that included: (i) a $500 million 3.45% pay-fixed interest rate swap maturing in January 2026, (ii) a $1 billion interest rate cap with a strike rate of 3.95% maturing in February 2027, and (iii) $50 million 4.00% par rate equivalent pay-fixed two-year Eris swap futures maturing in March 2027.
Current wording
As of September 30, 2025, we maintained open interest rate hedge positions attributable to the residential credit portfolio that included: (i) a $500 million 3.45% pay-fixed interest rate swap maturing in January 2026, (ii) a $1 billion interest rate cap with a strike rate of 3.95% maturing in February 2027, (iii) $50 million 4.05% par rate equivalent pay-fixed two-year Eris swap futures maturing in March 2027, (iv) a $300 million two-year 3.40% pay fixed rate swaption that expires in January 2027, and (v) a $300 million two-year 3.17% pay fixed rate swaption that expires in February 2027.
Previous wording
Agency RMBS Portfolio. Interest rate swaps and swaptions are valuable tools for managing the interest rate and prepayment risks associated with levered Agency RMBS. By strategically using these derivatives, we seek to mitigate these risks, stabilize cash flows, and potentially enhance the overall risk-adjusted returns of the Agency RMBS portfolio. During the quarter, we executed a variety of interest rate derivative transactions across a range of tenors, including $1.9 billion in pay-fixed interest rate swaps and $2.5 billion in swaptions. We also closed out interest rate swaptions with a range of maturities and underlying swap tenors representing notional balances of $2.1 billion that resulted in net realized loss of $6 million.
Current wording
Agency RMBS Portfolio. Interest rate swaps and swaptions are valuable tools for managing the interest rate and prepayment risks associated with levered Agency RMBS. By strategically using these derivatives, we seek to mitigate these risks, stabilize cash flows, and potentially enhance the overall risk-adjusted returns of the Agency RMBS portfolio. During the quarter, we executed a variety of interest rate derivative transactions across a range of tenors, including $1.0 billion in pay-fixed interest rate swaps, $575 million in pay-fixed interest rate swaps with cancellable features, and $655 million in ERIS swap futures. We also closed out interest rate swaps with a range of maturities and underlying swap tenors representing notional balances of $1.7 billion that resulted in net realized gain of $2 million.
Previous wording
Palisades generated third-party investment, asset management and advisory fees in the amount of $9 million during the quarter and $18 million for the first half of the year. We continue to see interest from investors in residential asset management and advisory services that offer a solution for investors that want exposure to residential loans but may lack the infrastructure to manage the complexities of the strategy. We added a new mandate during the quarter and anticipate onboarding additional clients throughout 2025.
Current wording
Palisades generated third-party investment, asset management and advisory fees in the amount of $9 million during the quarter and $26 million for the nine months ended September 30, 2025. We continue to see interest from investors in residential asset management and advisory services that offer a solution for investors that want exposure to residential loans but may lack the infrastructure to manage the complexities of the strategy. We were formally engaged to provide transaction advisory services during the quarter related to a mandate executed in June 2025.
Previous wording
Compensation, general and administrative, and servicing expenses were marginally lower during the second quarter as compared to the previous quarter. Compensation expenses were lower this quarter as the first quarter included fully accelerated long-term stock incentive awards for retirement-eligible employees. General and administrative expenses and servicing fees remained flat this quarter compared to last. Our transaction expenses were lower by $5 million this quarter as first quarter expenses were comparatively elevated due to the number of securitization transactions closed.
Current wording
Compensation, general and administrative, and servicing expenses were higher during the third quarter as compared to the previous quarter. Compensation expenses were higher this quarter by $2 million due to severance payments recorded in the quarter. General and administrative expenses and servicing fees were slightly higher this quarter compared to last. Our transaction expenses were higher by $10 million this quarter due to increased expenses related to the HomeXpress Acquisition.
Previous wording
We expect the second half of the year in many ways to be a continuation of the first half, defined in part by policy uncertainty, tariff announcements, geopolitical risks, and U.S. fiscal concerns. We anticipate markets will continue to vacillate around labor, growth, and inflation data alongside ongoing speculation with respect to the pace of monetary policy easing. Against this backdrop, we are committed to maintaining flexibility, exploring opportunities to expand our platform capabilities, and strategically repositioning our investment portfolio.
Current wording
We expect the reminder of the year in many ways to be a continuation of the first nine months, defined in part by policy uncertainty, tariff announcements, geopolitical risks, and U.S. fiscal concerns. We anticipate markets will continue to vacillate around labor, growth, and inflation data, alongside ongoing speculation with respect to the pace of monetary policy easing.
Previous wording
The repositioning of our investment portfolio is an ongoing initiative that will take time to fully implement, as we adjust our strategy in response to changing market conditions by shifting our asset allocations across various asset classes as interest rate and credit cycles change over time. We are committed to diversifying the portfolio and finding ways to produce liquidity both organically and through our access to capital markets. We intend to maintain sufficient liquidity and optionality to capitalize on market opportunities aligned with our portfolio and business growth objectives.
Current wording
The repositioning of our investment portfolio is an ongoing initiative that will take time to fully implement, as we adjust our strategy in response to changing market conditions by shifting our asset allocations across various asset classes as interest rate and credit cycles change over time. We are committed to diversifying the portfolio and finding ways to produce liquidity both organically and through our access to capital markets. We intend to maintain sufficient liquidity and optionality to capitalize on market opportunities aligned with our portfolio and business growth objectives. In addition to supporting our regulatory compliance, we believe that our Agency RMBS allocation provides portfolio diversity, stable cash flows and dividend paying ability, protection in periods of high market volatility, and a source of liquidity for opportunistic asset and business acquisitions. We also intend to continue evaluating opportunities to acquire MSRs, which we believe will help balance the duration risk in our securitized loan portfolio, as well as diversify our sources of earnings to pay our dividends.
Previous wording
We declared a $0.37 dividend per common share in the second quarter of 2025. Our economic return (as measured by the change in book value per common share plus common stock dividend) was 0.5% for the second quarter of 2025.
Current wording
We declared a $0.37 dividend per common share in the third quarter of 2025. Our economic return (as measured by the change in book value per common share plus common stock dividend) was (1.4)% for the third quarter of 2025.
Previous wording
The table below presents our net income (loss) on a GAAP basis for the quarters ended June 30, 2025 and March 31, 2025, and the six months ended June 30, 2025 and June 30, 2024.
Current wording
The table below presents our net income (loss) on a GAAP basis for the quarters ended September 30, 2025 and June 30, 2025, and the nine months ended September 30, 2025 and September 30, 2024.
Previous wording
(1) Includes interest income of consolidated VIEs of $141,818 and $144,402 for the quarters ended June 30, 2025 and March 31, 2025, respectively, and $286,220 and $290,943 for the six months ended June 30, 2025 and 2024, respectively.
Current wording
(1) Includes interest income of consolidated VIEs of $137,597 and $141,818 for the quarters ended September 30, 2025 and June 30, 2025 respectively, and $423,817 and $286,220 for the nine months ended September 30, 2025 and 2024, respectively.
Previous wording
(2) Includes interest expense of consolidated VIEs of $73,038, and $69,651 for the quarters ended June 30, 2025 and March 31, 2025, respectively, and $142,690 and $142,815 for the six months ended June 30, 2025 and 2024, respectively.
Current wording
(2) Includes interest expense of consolidated VIEs of $70,387, and $73,038 for the quarters ended September 30, 2025 and June 30, 2025 respectively, and $213,076 and $142,690 for the nine months ended September 30, 2025 and 2024, respectively.
Previous wording
Results of Operations for the quarters Ended June 30, 2025 and March 31, 2025, and for the six months ended June 30, 2024 and June 30, 2024.
Current wording
Results of Operations for the quarters ended September 30, 2025 and June 30, 2025, and for the nine months ended September 30, 2025 and September 30, 2024.
Previous wording
For the quarter ended June 30, 2025, our net income available to common shareholders was $14 million, or $0.17 per average basic common share, as compared to a net income available to common shareholders of $146 million, or $1.79 per average basic common share for the quarter ended March 31, 2025. The decrease in net income available to common shareholders for the quarter ended June 30, 2025, as compared to the quarter ended March 31, 2025, was primarily driven by a decrease in unrealized gains on financial instruments at fair value of $122 million and an increase in net loss on derivatives of $13 million, partially offset by an increase in other investments gains of $3 million. During the quarter ended June 30, 2025, we had unrealized gains on financial instruments at fair value of $7 million, net interest income of $66 million, and investment management and advisory fees of $9 million, offset in part by operating expenses of $27 million and preferred stock dividend of $21 million.
Current wording
For the quarter ended September 30, 2025, our net loss available to common shareholders was $22 million, or $(0.27) per average basic common share, as compared to a net income available to common shareholders of $14 million, or $0.17 per average basic common share for the quarter ended June 30, 2025. The net loss available to common shareholders for the quarter ended September 30, 2025 was primarily driven by a decrease in unrealized gains on financial instruments at fair value of $44 million, an increase in transaction expenses of $10 million related to the HomeXpress Acquisition, and an increase in compensation and benefits of $2 million related to severance payments made during the quarter, partially offset by a decrease in net loss on derivatives of $15 million and increase in net realized gains on sales of investments of $4 million. During the quarter ended September 30, 2025, we had net interest income of $65 million and investment management and advisory fees of $9 million, offset in part by unrealized losses on financial instruments at fair value of $37 million, operating expenses of $39 million, and preferred stock dividend of $21 million.
Previous wording
For the six months ended June 30, 2025, our net income available to common shareholders was $160 million, or $1.97 per average basic common share, compared to a net income of $145 million, or $1.78 per average basic common share for the six months ended June 30, 2024. The increase in net income available to common shareholders for the quarter ended June 30, 2025, as compared to the quarter ended June 30, 2024 was primarily driven by an increase in net unrealized gains on financial instruments at fair value of $48 million and an increase in investment management and advisory fees of $18 million. This increase was offset in part by a decrease on net gains on derivatives of $30 million, an increase in transaction expense of $6 million due to higher securitization activity, and an increase in compensation expense of $9 million due to an increase in overall employee headcount and additional compensation expense related to the Palisades Acquisition during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024.
Current wording
For the nine months ended September 30, 2025, our net income available to common shareholders was $138 million, or $1.69 per average basic common share, compared to a net income of $259 million, or $3.20 per average basic common share for the nine months ended September 30, 2024. The decrease in net income available to common shareholders for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily driven by a decrease in net unrealized gains on financial instruments at fair value of $93 million, an increase on net losses on derivatives of $18 million, and increases to compensation and benefits of $15 million due to an increase in the overall employee headcount and additional compensation expense related to the Palisades Acquisition, and transaction expenses of $14 million related to a combination of the HomeXpress Acquisition and higher securitization activity. This was partially offset by an increase in investment management and advisory fees of $26 million.
Previous wording
Interest income increased by approximately $10 million or 5.1%, to $201 million for the quarter ended June 30, 2025, as compared to $191 million for the quarter ended March 31, 2025. The increase in our interest income during the quarter ended June 30, 2025 was primarily driven by our Agency RMBS purchases as we took advantage of relative value opportunities and increased our liquid security allocation, as compared to the previous quarter. During the quarter ended June 30, 2025, the interest income on our Agency RMBS portfolio increased by $12 million as compared to the quarter ended March 31, 2025 driven by our Agency Pass-through purchases, which was partially offset by a decrease of $3 million on our Loans held for investment portfolio due to lower loan balances.
Current wording
Interest income increased by approximately $8 million or 3.9%, to $209 million for the quarter ended September 30, 2025, as compared to $201 million for the quarter ended June 30, 2025. The increase in our interest income during the quarter ended September 30, 2025 was primarily driven by our Agency RMBS purchases as we continued to take advantage of relative value opportunities and increased our liquid security allocation. During the quarter ended September 30, 2025, the interest income on our Agency RMBS portfolio increased by $14 million as compared to the quarter ended June 30, 2025 driven by these purchases, which was partially offset by a decrease of $6 million on our Loans held for investment portfolio due to lower loan balances at the end of the current quarter.
Previous wording
Interest income increased by $19 million, or 5.0%, to $392 million for the six months ended June 30, 2025 as compared to $373 million, for the six months ended June 30, 2024. This increase was primarily driven by our Agency CMO and Agency Pass-through purchases during the period. During the six months ended June 30, 2025, the interest income on our Agency RMBS portfolio increased by $24 million driven by these purchases as compared to the six months ended June 30, 2024. The increase in interest income is offset by a decreases in income on our Non-agency RMBS and Loans held for investment portfolios of $3 million and $1 million, respectively, due to declining asset balances.
Current wording
Interest income increased by $32 million, or 5.7%, to $601 million for the nine months ended September 30, 2025 as compared to $569 million, for the nine months ended September 30, 2024. This increase was primarily driven by our Agency CMO and Agency Pass-through purchases during the period, resulting in an increase in interest income on our Agency RMBS portfolio of $48 million as compared to the nine months ended September 30, 2024. The increase in interest income is offset by decreases in income on our Non-agency RMBS and Loans held for investment portfolios of $5 million and $10 million, respectively, due to asset sales and paydowns during the year.
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Rearranged current paragraphs (13)
Current report — wording carried from elsewhere
•Agency refers to a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. Government, such as the Government National Mortgage Association (“Ginnie Mae”);
Current report — wording carried from elsewhere
•MBS refers to mortgage-backed securities secured by pools of residential or commercial mortgage loans;
Current report — wording carried from elsewhere
•Agency MBS refers to MBS that are issued or guaranteed by an Agency and includes Agency RMBS and Agency CMBS collectively;
Current report — wording carried from elsewhere
•RMBS refers to mortgage-backed securities secured by pools of residential mortgage loans;
Current report — wording carried from elsewhere
•CMBS refers to mortgage-backed securities secured by pools of commercial mortgage loans;
Current report — wording carried from elsewhere
•Agency RMBS and Agency CMBS refer to MBS that are secured by pools of residential and commercial mortgage loans, respectively, and are issued or guaranteed by an Agency;
Current report — wording carried from elsewhere
•Non-Agency RMBS refers to residential MBS that are not guaranteed by any agency of the U.S. Government or any Agency;
Current report — wording carried from elsewhere
•ABS refers to asset-backed securities;
Current report — wording carried from elsewhere
•IO refers to Interest-only securities;
Current report — wording carried from elsewhere
Against this backdrop, we are committed to maintaining flexibility, exploring opportunities to expand our platform capabilities, and strategically repositioning our investment portfolio.
Current report — wording carried from elsewhere
The weighted average pay rate on our interest rate swaps at September 30, 2025 was 3.65% and the weighted average receive rate was 4.24%. At September 30, 2025, the weighted average maturity on our interest rate swaps was less than 6 years.
Current report — wording carried from elsewhere
During the nine months ended September 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.
Current report — wording carried from elsewhere
During the third quarter of 2025, we issued $120 million aggregate principal amount (including the additional amount
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In addition to supporting our regulatory compliance, we believe that our Agency RMBS allocation provides portfolio diversity, stable cash flows and dividend paying ability, protection in periods of high market volatility, and a source of liquidity for opportunistic asset and business acquisitions. We also intend to continue evaluating opportunities to acquire MSRs, which we believe will help balance the duration risk in our securitized loan portfolio, as well as diversify our sources of earnings to pay our dividends.