CHIMERA INVESTMENT CORP
For the period ended Jun 30, 2025. Filed Aug 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.
Jun 30, 2025 · Filed Aug 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 2025-03-31; filed 2025-05-08.
0001628280-25-023813
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent 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 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 251 previous paragraphs and 250 current paragraphs.
128 unchanged; 78 reworded; 41 added; 41 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 21 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 (41)
Current report
•delays and/or unforeseen events that could cause the HomeXpress Acquisition (as defined below) to be delayed or not consummated
Current report
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 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.
Current report
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 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;
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◦invested $2.3 billion ($402 million will settle in the third quarter) in Agency RMBS Pass-throughs;
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◦added $1.9 billion in swaps with varying tenors as part of the hedging framework associated with the Agency RMBS portfolio;
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◦generated $9 million in revenue attributable to investment management and third-party advisory services; and
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◦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 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.
Current 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.
Current 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.
Current 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.
Current report
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 report
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 report
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 report
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 report
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 report
Strategic Acquisition of HomeXpress Mortgage Corp
Current 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.
Current 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.
Current report
Secured Financing Activity
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Investment Activity
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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.
Current report
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 report
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 report
Investment and third-party asset management and advisory fees
Current report
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 report
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 report
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 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.
Current report
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 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.
Current report
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 report
Interest expense increased by $14 million, or 11.4%, to $135 million for the quarter ended June 30, 2025, as compared to $121 million for the quarter ended March 31, 2025. This increase was primarily driven by an increase in our borrowings under secured financing agreements collateralized by Agency RMBS balance of $807 million to finance the Agency RMBS purchases during the quarter. During the quarter ended June 30, 2025, the interest expense on secured financing agreements collateralized by Agency RMBS increased by $8 million due to higher balances. Additionally, the interest expense on Securitized debt, collateralized by Loans held for investments and secured financing agreements collateralized by Loans held for investments increased by $3 million and $2 million, respectively, due to higher financing rates during the quarter ended June 30, 2025, as compared to the quarter ended March 31, 2025.
Current report
Interest expense increased by $16 million, or 6.6%, to $257 million for the six months ended June 30, 2025, as compared to $241 million for the six months ended June 30, 2024. The increase was primarily driven by an increase in interest expense on our secured financing agreements collateralized by Agency RMBS of $15 million, driven by higher borrowings to finance our Agency CMO and Agency Pass-through purchases during the six months ended June 30, 2025, as compared to the prior period. Additionally, the interest expense on our Long Term Debt increased to $7 million during the six months ended June 30, 2025 as compared to $1 million for the six months ended June 30, 2024, driven by our additional unsecured long term debt issuance.
Current report
Six months ended June 30, 2025 compared to the six months ended June 30, 2024
Current report
During the quarter ended June 30, 2025, we had realized loss of $6 million on the sale of 29 swaption contracts. During the six months ended June 30, 2025, we exercised a swaption contract with $500 million notional and entered into a less than one-year swap with $500 million notional with a 3.45% fixed pay rate.
Current report
(1) The values for secured financing agreements in the table above is net of$1 million of deferred financing costs as of June 30, 2025.
Current report
Awards under the Plan may include stock options, stock appreciation rights, restricted stock, dividend equivalent rights (“DERs”) and other share-based awards (including RSUs). Under the Plan, any of these awards may be performance awards that are conditioned on the attainment of performance goals.
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Removed paragraphs (41)
Previous report
We use leverage to seek to increase our potential returns and to finance the acquisition of our assets. We expect to finance our investments using a variety of financing sources, including securitizations, warehouse facilities, repurchase agreements and the capital markets. We may seek to manage our debt and interest rate risk by utilizing interest rate hedges, such as interest rate swaps, swaptions, caps, options, and futures to reduce the effect of interest rate fluctuations related to our financing sources.
Previous report
Our investment strategy is intended to take advantage of opportunities in the current interest rate and credit environment. 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 believe that our strategy will enhance our ability to pay dividends on our common shares throughout changing market cycles. We expect to take into consideration the long-term trends in the value of our assets and liabilities in assessing our investment strategy.
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In the first quarter of 2025, U.S. investors attempted to acclimate to the new administration’s policy shifts aimed at immigration reform, restructuring trade partnerships, and reducing federal government inefficiencies. Volatility fluctuated within a moderate range during the quarter as markets sought to interpret the administration’s messaging, with equity and fixed income volatility rising between the last part of February through early March, only to retreat going into quarter end.
Previous report
With this backdrop, we continue to approach portfolio management in a disciplined manner and are expecting to operate in an uncertain environment defined in part by higher interest rates and increased rate volatility for the foreseeable future. As a result, we took a number of actions during the quarter that put us in a well-balanced position. In summary, as noted above we,
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◦Increased our liquidity by executing on our re-lever strategy, including through two resecuritizations CIM 2025-R1 and CIM 2025-NR1, and raising approximately $187 million in cash with a weighted average cost of 5.84 %.
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◦Executed on a new $288 million securitization, CIM 2025-I1.
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◦Invested $149 million in Agency Pass-throughs, while expanding our Agency security liquidity bucket.
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◦Generated $9 million revenue from investment management and advisory services.
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◦Successfully executed on the re-financing of two maturing non-MTM financing facilities totaling $587 million.
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◦Added a 2-year $1 billion SOFR Interest rate cap, converted a $500 million notional swaption into a swap, and added $155 million Swap futures.
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During the first quarter, the market began to adjust expectations with respect to the potential for increased inflation and slowing economic growth due to the administration’s stated policy initiatives (e.g. tariffs and trade) and actions (e.g. federal government staff reductions and illegal immigrant deportation activity). As of March 2025, the Consumer Price Index ("CPI") rose by 2.4% year-over-year, with a 0.1% month-over-month decline, indicating a cooling trend. Core CPI, excluding food and energy, increased by 2.8%, marking the smallest rise since March 2021. Since quarter end, the implementation of extensive tariffs has raised concerns about a potential stagflationary environment. Many economists have increased the estimated risk of a recession to be 45%, with expectations of reduced GDP growth and heightened inflation. The Federal Reserve maintained its target range between 4.25% and 4.5% during its March meeting, citing persistent inflation above the 2% target and heightened uncertainty due to new tariffs and global economic conditions.
Previous report
The yields on two-year and ten-year U.S. Treasury notes each declined by thirty six basis points during the quarter reflecting investor concerns about potential economic slowdown. Since April 2, interest rate volatility increased alongside the ten-year U.S. Treasury which has traded in a 50 basis point range, highlighting concerns with respect to the effects of policy execution.
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Spreads on most credit products were wider throughout the first quarter. In Securitized Products spreads, the credit curve flattened, with yield hungry buyers providing substantial demand for mezzanine bonds which outperformed relative to their more senior parts of the capital structure.
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Residential credit performance continued to remain strong in the first quarter of 2025, driven by robust fundamentals given by low defaults, rising home prices and record levels of homeowners’ equity. Mortgage loan yields tightened across Non-QM and jumbo products during the quarter between 25 and 50 basis points. Securitized product spreads, however, were wider across securitizations backed by Non-QM and RPL collateral. Non-investment grade corporate bond spreads and yields were also wider during the quarter, while investment grade yields were tighter by approximately 18 basis points in the quarter.
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The spread between 30-year fixed mortgage rates and 10-year U.S. Treasury yields experienced notable fluctuations influenced by economic uncertainty and policy changes. The spread narrowed by fifteen basis points to 256 basis points over the 10-year Treasury in the first quarter. While mortgage rates decreased in early 2025, elevated credit spreads suggest that borrowing costs remained high compared to historical norms. Economic factors, including inflation concerns and policy uncertainties, contributed to this environment.
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Home prices continued to rise modestly, with national year-over-year growth reported at approximately 3.9% as of February 2025.Despite modest price growth, elevated mortgage rates and high absolute levels of home prices continued to present affordability headwinds for would be homebuyers. In 97% of U.S. counties, median-priced homes were less affordable compared to historical averages. High mortgage rates and economic uncertainties led to cautious buyer behavior. Pending home sales in February dropped 3.6% year-over-year, indicating a slowdown in market activity.
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The U.S. continued to face a significant housing shortage, estimated at 4.5 million homes. Tariffs on imported building materials may increase construction costs, adding to the already high cost of a new home. This, coupled with labor shortages and regulatory hurdles, continued to constrain new housing development so far this year.
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Liquidity Enhancement Activity during the 1st quarter 2025
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During the first quarter of 2025, we continued to seek to optimize our liabilities through securitization, enabling us to have long-term non-MTM financing on our residential mortgage loans. During the quarter, we exited a maturing $104 million non-MTM secured facility and separately entered into a new non-MTM secured facility with a principal amount of $167 million that will mature in 18 months in January 2027. The interest rate on the new facility was 412.5 basis points lower than the maturing facility.
Previous report
In addition, we extended a maturing $407 million non-MTM secured facility by an additional 24 months to February 2027. The old facility had a spread of 375 basis points over SOFR with a cap rate of 8.75%. The new facility has two separate terms: (i) an approximately $283 million financing facility with a fixed rate of 8.15%, and (ii) an approximately $136 million floating-rate facility at a rate of SOFR +425 basis points.
Previous report
As a normal discipline of our business operation, we routinely evaluate the potential economic and portfolio benefits of exercising our redemption rights with respect to our sponsored securitizations.
Previous report
We have discussed on previous earnings calls the potential to effectively alter borrowing costs and/or organically raise liquidity by tactically exercising these call rights. Through this strategy, this quarter we redeemed securities in seven outstanding CIM securitizations and sponsored two new CIM securitizations as further detailed below. The net result of these transactions enabled the company to organically generate in excess of $187 million in capital for new investments, while moderately lowering our cost of financing by 17 basis points from a weighted average cost of 6.21% from the seven terminated securitizations to a 6.04% weighted average cost on the two new securitizations. Below we describe these transactions in more detail.
Previous report
On March 25, 2025, we sponsored two securitizations of residential mortgage loans with an aggregate principal balance of $646 million. The mortgage loans for both securitizations were sourced from the redemption of prior Chimera-sponsored securitizations, including CIM 2021-NR1, CIM 2021-NR2, CIM 2021-NR3, CIM 2021-NR4, CIM 2022-NR1, CIM 2023-NR1, and CIM 2023-NR2.
Previous report
CIM 2025-R1 was a $392 million securitization of residential mortgage loans. The loans had a weighted average coupon of 5.74%, with weighted average FICO scores of 636, and LTV ratio of 50.80%. Securities issued by CIM 2025-R1, with an aggregate balance of approximately $333 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 $59 million and certain interest-only securities. We also retained an option to call the securitized mortgage loans on the earlier of (i) March 25, 2027, 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 March 25, 2025. The weighted average cost of debt on securities sold was 5.74%. Our subsidiary, PAS, is the asset manager for the securitization.
Previous report
CIM 2025-NR1 was a $254 million securitization of residential mortgage loans. The loans had a weighted average coupon of 5.67%, with weighted average FICO scores of 597, and LTV ratio of 61.61%. Securities issued by CIM 2025-NR1, with an aggregate balance of approximately $184 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 $70 million. We also retained an option to call the securitized mortgage loans, at the direction of the majority class B1 certificate holder, beginning on March 25, 2026. The weighted average cost of debt on securities sold was 6.59%. PAS is the asset manager for the securitization.
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Secured Financing Activity during the quarter ended March 31, 2025
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Securitization Activity during the quarter ended March 31, 2025
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On January 31, 2025 we sponsored CIM 2025-I1, a $288 million securitization of residential mortgage investor loans. The loans had a weighted average coupon of 7.9%, with weighted average FICO scores of 748, and LTV ratio of 64%. Securities issued by CIM 2025-I1, with an aggregate balance of approximately $276 million, were sold in a private placement to institutional investors. These senior securities represented approximately 95.8% of the capital structure. We retained subordinate interests in securities with an aggregate balance of approximately $12 million and certain interest-only securities. We also retained an option to call the securitized mortgage loans on the earlier of (i) February 25, 2028, or (ii) when their unpaid principal balance is less than or equal to 30% of the unpaid principal balance of the securitized mortgage loans as of the cut-off date. The weighted average cost of debt on securities sold was 5.8%. The securitization is rated by Fitch and Morningstar DBRS. PAS is the asset manager for the securitization.
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Asset purchases during the quarter ended March 31, 2025
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Agency-issued pass-through securities –During the quarter, we purchased approximately $149 million of Pass-throughs, thereby expanding our liquidity securities bucket. These investments have added portfolio value and enable us to maintain liquidity while we seek to make future investments in residential loans and credit securities and pursue other strategic objectives.
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In addition, we executed on a total of $155 million pay fixed Eris Swap futures at a weighted average par equivalent pay fixed rate of 3.84%. In addition to providing interest rate protection, these Swap futures also provide a liquidity cushion with lower margin requirements relative to cleared interest rate swaps. We also entered into a $1 billion two-year Interest rate cap with a 3.95% strike, thereby providing protection against further rate movements as existing interest rate swaps mature.
Previous report
Palisades advisory fees
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Through the Palisades Acquisition, we have started earning investment management and advisory fees. In addition, PAS was hired to provide asset management services for three securitizations issued by Chimera during the quarter and we continue to provide services to unaffiliated investors and private credit funds. Palisades’ fee-based income (both transaction and advisory fees) contributed $9 million in revenue during the quarter, while adding a new client service mandate and anticipating to add additional clients in 2025.
Previous report
Compensation, general, administrative, and servicing expenses were higher marginally quarter-over-quarter, when excluding imputed compensation expenses related to the Palisades Acquisition. General and administrative expenses were higher marginally when accounting for the increased costs related to the Palisades platform this quarter. Our transaction expenses were higher during the quarter as a result of costs related to securitization transactions. Lastly, the change in compensation expense for the quarter was primarily driven by the effects of the $10 million initial imputed compensation charge relating to the Palisades Acquisition during the quarter ended December 31, 2024. The first quarter balance included an increase in compensation and salary expenses related to full quarter charges related to the Palisades Acquisition headcount additions. The first quarter includes long term equity award expense acceleration due to retirement eligible employees. Please see “ – Results of Operations – Compensation, General, Administrative, and Servicing expenses” for additional quarterly information.
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As we plan for the remainder of the year, we expect continued market uncertainty and the resulting volatility. Given our liquidity position, we believe we are well positioned to take advantage of accretive investment opportunities that will arise from this volatility.
Previous report
The increase in net income available to common shareholders for the quarter ended March 31, 2025, as compared to the quarter ended December 31, 2024, was primarily driven by an increase in unrealized gains on financial instruments at fair value of $310 million, and an increase in net interest income of $3 million, offset in part by an increase in net losses on derivatives of $8 million.
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Interest income decreased slightly by $1 million or 0.5%, to $191 million for the quarter ended March 31, 2025, as compared to $192 million for the quarter ended December 31, 2024. This slight decrease in our interest income during the quarter ended March 31, 2025 was primarily due to a slight decline in our average asset earning balances as compared to the quarter ended December 31, 2024.
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Interest expense decreased by $5 million, or 4.1%, to $121 million for the quarter ended March 31, 2025, as compared to $127 million for the quarter ended December 31, 2024. This decrease was primarily driven by a reduction in our secured financing agreements collateralized by Agency RMBS balance of $150 million and lower borrowing costs driven by a lower federal funds rate. During the quarter ended March 31, 2025, the interest expense on secured financing agreements collateralized by Agency RMBS decreased by $3 million due to lower balances, and the interest expense on secured financing agreements collateralized by Non-Agency RMBS and Loans held for investments decreased by $1 million and $1 million, respectively, due to lower rates as compared to the quarter ended December 31, 2024.
Previous report
Our Earnings available for distribution for the quarter ended March 31, 2025 were $34 million, or $0.41 per average diluted common share, and increased by $3 million, compared to $31 million, or $0.37 per average diluted common share for the quarter ended March 31, 2024. This increase in Earnings available for distribution was primarily driven by higher interest income driven by Agency CMO and Agency Pass-through purchases and an increase in investment management and advisory fees related to our advisory business.
Previous report
On May 10, 2024, our Board of Directors approved a 1-for-3 reverse stock split of our common stock. The reverse stock split was effective after the close of trading on May 21, 2024, and shares of our common stock began trading on a reverse split-adjusted basis on the New York Stock Exchange beginning at the opening of trading on May 22, 2024. As a result of the reverse stock split, every three shares of our common stock was converted into one share of common stock, reducing the number of issued and outstanding shares of our common stock from approximately 241 million to approximately 80 million and reducing the number of authorized shares from 500 million to approximately 167 million. No fractional shares were issued in connection with the reverse stock split. Each stockholder who was otherwise entitled to receive a fractional share of our common stock was entitled to receive a cash payment in lieu of a fractional share. The reverse stock split was not subject to stockholder approval and did not change the par value of our common stock. All common shares, outstanding options and per share amounts for all periods presented were retroactively adjusted to reflect the reverse stock split.
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Reworded paragraphs (78)
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•our ability to successfully integrate and realize the anticipated benefits of any acquisitions, including the Palisades Acquisition (as defined below);
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•our ability to successfully integrate and realize the anticipated benefits of any acquisitions, including the HomeXpress Acquisition (as defined below) and the Palisades Acquisition;
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•the volatility of the market price and trading volume of our shares; and
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•the volatility of the market price and trading volume of our shares;
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•our ability to make distributions to our stockholders in the future.
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•our ability to make distributions to our stockholders in the future; and
Previous wording
We are a publicly traded REIT that is primarily engaged in the business of investing for itself and for unrelated third parties through its investment management and advisory services in a diversified portfolio of mortgage assets, including residential mortgage loans, Non-Agency RMBS, Agency RMBS, business purpose and investor loans, including RTLs, and other real estate-related assets such as Agency CMBS. Our investments may be direct or indirect, including through one or more limited partnerships managed by a registered investment advisor. We may make other similar investments as well as invest in entities that originate or service mortgage loans. The MBS and other real estate-related securities we purchase may include investment-grade, non-investment grade, and non-rated classes. We use leverage to increase potential returns from our investments. Our principal business objective is to provide attractive risk-adjusted returns through the generation of distributable income and through asset performance linked to mortgage credit fundamentals. We selectively invest in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return.
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. 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.
Previous wording
We currently focus our investment activities primarily on acquiring residential mortgage loans. In addition, we acquire and own Non-Agency RMBS and Agency MBS. At March 31, 2025, based on the fair value of our interest earning assets, approximately 87% of our investment portfolio was residential mortgage loans, 8% of our investment portfolio was Non-Agency RMBS, and 5% of our investment portfolio was Agency MBS. At December 31, 2024, based on the fair value of our interest earning assets, 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 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.
Previous wording
Our secured financing costs decreased by 26 basis points during the quarter, and our secured financing agreements (recourse liabilities) increased by a net $170 million. As of March 31, 2025, we had no outstanding warehouse financing exposure (recourse liabilities) backed by RPLs.
Current 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.
Previous wording
We currently target low-to-mid teen levered returns on the Pass-throughs, and expect the levered return on this investment 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 15% range, and in any case, expect the levered return to exceed our cost of capital and be accretive to our earnings.
Previous wording
Loans - We committed to purchase $32 million of residential transition loans during the first quarter, which we anticipate will settle in the second quarter. We will utilize leverage through our warehouse facilities on these loans and expect to achieve a mid-to-high teen levered return. In addition, $100 million of RTL loans settled during the quarter, which were originally purchased in 2024 with a weighted average purchase yield of 8.68%.
Current wording
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 wording
We continue to maintain our strategy in 2025 to use interest rate hedges to help mitigate the impact of higher interest rates on our future financing costs and protect against the impact of higher interest rates eroding our earnings and dividend paying ability. Our hedging strategies are dynamic. We focused on limiting the impact of higher interest rates, while maintaining optionality for our portfolio to benefit from potential lower interest rates in the future. Over the quarter, we converted $500 million of swaptions to a pay-fixed 1-year swap with a weighted average coupon of 3.45%. In addition, $500 million of pay fixed 3.45% swaps matured.
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 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.
Previous wording
As of March 31, 2025, we maintained open interest rate hedge positions in: (i) a $500 million 3.43% pay-fixed interest rate swap maturing in April 2025, (ii) a $500 million 3.49% pay-fixed interest rate swap maturing in April 2025, (iii) a $500 million 3.76% pay-fixed interest rate swap maturing in June 2025, (iv) a $500 million 3.45% pay-fixed interest rate swap maturing in January 2026, (v) a $90 million 3.90% par rate equivalent pay-fixed 2-year Eris swap futures maturing in March 2027, (vi) a $25 million 3.71% par rate equivalent pay-fixed 5-year Eris swap futures maturing in March 2030, (vii) a $40 million 3.78% par rate equivalent pay-fixed 10-year Eris swap futures maturing in March 2035. We also have a long position in a 2-year $1 billion Interest rate cap with a strike rate of 3.95% that we executed in January 2025.
Current 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.
Previous wording
Considering the velocity and magnitude of interest rate movements, we maintain a hedging program to manage the interest rate risk for the time differential between loan purchase commitment and the closing of loans into securitization. We use a combination of various U.S. Treasury futures contracts to hedge our exposure to future financing costs. Our hedging techniques attempt to mitigate the interest rate risk but do not capture the impact of credit spread risk. As part of our ongoing securitization execution hedging strategy, we entered into $200 million of short 2-year treasury futures contracts during the fourth quarter of 2024 to hedge the securitization execution. The treasury futures contracts were terminated during the first quarter of 2025 upon closing of the CIM 2025-I1 transaction.
Current wording
Loan Acquisitions. Considering the velocity and magnitude of interest rate movements, we maintain a hedging program to manage the interest rate risk for the time differential between loan purchase commitment and the closing of loans into securitization. We use a combination of various U.S. Treasury futures contracts to hedge our exposure to future financing costs. Our hedging techniques attempt to mitigate the interest rate risk but do not capture the impact of credit spread risk. We did not have any loan commitments or related futures hedges as of the end of the quarter.
Previous wording
While we intend to continue to look for opportunities to acquire and securitize mortgage loans, we expect to also grow our Agency RMBS portfolio. In addition to supporting our regulatory compliance, we believe that a larger Agency RMBS portfolio will provide portfolio diversity, more stable dividends, and a source of liquidity for opportunistic asset and business acquisitions and provide protection in periods of high market volatility. We also intend to look at opportunities to acquire MSRs, which we believe will help hedge our loan portfolio, as well as provide a diverse source of income for our dividends. We continue to evaluate business acquisitions and their overall potential synergies and benefits in conjunction with, and relative to, new investment opportunities available in the open market and through organic growth.
Current wording
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 first quarter of 2025. Our economic return (as measured by the change in book value per common share plus common stock dividend) was 9.20% for the first quarter of 2025.
Current 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.
Previous wording
The table below presents our net income (loss) on a GAAP basis for the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024.
Current 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.
Previous wording
(1) Includes interest income of consolidated VIEs of $144,402, $142,921, and $146,917 for the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively.
Current 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.
Previous wording
(2) Includes interest expense of consolidated VIEs of $69,651, $70,083, and $73,123 for the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively.
Current 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.
Previous wording
Results of Operations for the quarters Ended March 31, 2025, December 31, 2024, and March 31, 2024.
Current 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.
Previous wording
Our primary source of income is interest income earned on our assets, net of interest expense paid on our financing liabilities.
Current wording
Our primary source of income is interest income earned on our assets, net of interest expense paid on our financing liabilities, and investment and asset management fees earned through our investment management and advisory business.
Previous wording
For the quarter ended March 31, 2025, our net income available to common shareholders was $146 million, or $1.79 per average basic common share, as compared to a net loss available to common shareholders of $168 million, or $2.07 per average basic common share for the quarter ended December 31, 2024. As discussed earlier, the yields on two-year and ten-year U.S. Treasury Notes declined and residential credit spreads remained relatively flat during the quarter ended March 31, 2025, which resulted in market pricing gains on our investment portfolio and increased the net income available to common shareholders. During the quarter ended March 31, 2025, we had unrealized gains on financial instruments at fair value of $129 million, net interest income of $69 million, and investment and asset management fees of $9 million, offset in part by operating expenses of $34 million and preferred stock dividend of $21 million.
Current 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.
Previous wording
For the quarter ended March 31, 2025, our net income available to common shareholders was $146 million, or $1.79 per average basic common share, compared to a net income of $111 million, or $1.37 per average basic common share for the quarter ended March 31, 2024. The increase in net income available to common shareholders for the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024 was primarily driven by an increase in net unrealized gains on financial instruments at fair value of $52 million, and an increase in investment management and advisory fees of $9 million. This increase was offset in part by a decrease on net gains on derivatives of $13 million, an increase in transaction expense of $6 million due to higher securitization activity, and an increase in compensation expense of $4 million, due to the Palisades Acquisition during the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024.
Current 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.
Previous wording
Interest income increased by $4 million, or 2.2%, to $191 million for the quarter ended March 31, 2025 as compared to $187 million, for the quarter ended March 31, 2024. This increase was primarily driven by our Agency CMO and Agency Pass-through purchases during the period. During the quarter ended March 31, 2025, the interest income on our Agency RMBS portfolio increased by $7 million driven by these purchases as compared to the quarter ended March 31, 2024.
Current 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.
Previous wording
Interest expense remained relatively unchanged at $121 million for the quarters ended March 31, 2025 and 2024, respectively. As we rebalanced our investment portfolio, we reduced our average secured financing agreements collateralized by Agency CMBS and Non-Agency RMBS, which combined with lower financing costs due to Fed rate cuts, decreased our interest expense on secured financing agreements collateralized by Non-Agency RMBS, Agency CMBS and Loans held for investments by $3 million during the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024. Our average securitized debt balances decreased by $571 million, which decreased our interest expense on Securitized debt by $4 million during the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024. These decreases were primarily offset by an increase in interest expense on our secured financing agreements collateralized by Agency RMBS by $5 million, driven by higher borrowings to finance our Agency CMO and Agency Pass-through purchases, and an interest expense on our Long term debt of $3 million during the quarter ended March 31, 2025 as compared to the quarter ended March 31, 2024.
Current wording
These increases were offset by a decrease in our average securitized debt balance of $486 million, which decreased our interest expense on Securitized debt by $1 million during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. As we rebalanced our investment portfolio, we reduced our average secured financing agreements collateralized by Agency CMBS and Non-Agency RMBS, which combined with lower financing costs, decreased our interest expense on secured financing agreements collateralized by Agency CMBS and Non-Agency RMBS by $5 million during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024.
Previous wording
Our Economic net interest income is a non-GAAP financial measure that equals GAAP net interest income adjusted for net periodic interest cost of derivatives and excludes interest earned on cash. For the purpose of computing economic net interest income and ratios relating to cost of funds measures throughout this section, interest expense includes net payments on our derivatives, which is presented as a part of Net gains (losses) on derivatives in our Consolidated Statements of Operations. Interest rate swaps and Swap futures are used to manage the increase in interest paid on secured financing agreements in a rising rate environment. Presenting the net contractual interest payments on interest rate derivatives with the interest paid on interest-bearing liabilities reflects our total contractual interest payments. We believe this presentation is useful to investors because it depicts the economic value of our investment strategy by showing all components of interest expense and net interest income of our investment portfolio. However, Economic net interest income should not be viewed in isolation and is not a substitute for net interest income computed in accordance with GAAP. Where indicated, interest expense, adjusting for any interest earned on cash, is referred to as Economic interest expense. Where indicated, net interest income reflecting net periodic interest cost of interest rate swaps and any interest earned on cash, is referred to as Economic net interest income.
Current wording
Our Economic net interest income is a non-GAAP financial measure that equals GAAP net interest income adjusted for net periodic interest cost of derivatives and excludes interest earned on cash. For the purpose of computing economic net interest income and ratios relating to cost of funds measures throughout this section, interest expense includes net payments on our derivatives, which is presented as a part of Net gains (losses) on derivatives in our Consolidated Statements of Operations. Interest rate swaps and Swap futures are used to manage the increase in interest paid on secured financing agreements in a rising rate environment. Presenting the net contractual interest payments on interest rate derivatives with the interest paid on interest-bearing liabilities reflects our total contractual interest payments. We believe this presentation is useful to investors because it depicts the economic value of our investment strategy by showing all components of interest expense and net interest income of our investment portfolio. However, Economic net interest income should not be viewed in isolation and is not a substitute for net interest income computed in accordance with GAAP. Where indicated, interest expense, adjusting for any interest earned on cash, is referred to as Economic interest expense. Where indicated, net interest income reflecting net periodic interest on derivatives and any interest earned on cash, is referred to as Economic net interest income.
Previous 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 $72 million for the quarter ended March 31, 2025 from $69 million for the quarter ended December 31, 2024. The net interest margin, which equals the Economic net interest income as a percentage of the net average balance of our interest-earning assets less our interest-bearing liabilities, remained steady at 1.50% for the quarter ended March 31, 2025, as compared to the quarter ended December 31, 2024. Our Average net interest-earning assets remained relatively unchanged at $2.0 billion for the quarters ended March 31, 2025, and December 31, 2024 . Our net interest rate spread, which equals the yield on our average interest-earning assets less the economic average cost of funds, remained unchanged at 1.18 for the quarter ended March 31, 2025, as compared to the quarter ended December 31, 2024.
Current wording
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) decreased by $3 million to $69 million for the quarter ended June 30, 2025 from $72 million for the quarter ended March 31, 2025. The net interest margin, which equals the Economic net interest income as a percentage of the net average balance of our interest-earning assets less our interest-bearing liabilities, remained unchanged at 1.5% for the quarter ended June 30, 2025, as compared to the quarter ended March 31, 2025.
Previous wording
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) increased by $4 million to $72 million for the quarter ended March 31, 2025 from $68 million for the quarter ended March 31, 2024. The net interest margin, which equals the Economic net interest income as a percentage of the net average balance of our interest-earning assets less our interest-bearing liabilities, increased by 20 basis points for the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024. Our Average net interest-earning assets decreased by $77 million to $2.0 billion for the quarter ended March 31, 2025, compared to $2.1 billion for the same period of 2024. Our net interest rate spread, which equals the yield on our average interest-earning assets less the economic average cost of funds, increased by 10 basis points for the quarter ended March 31, 2025, as compared to the quarters ended March 31, 2024. The increase in our net interest spread was primarily driven by higher interest income in our Agency RMBS portfolio due to Agency CMO and Agency Pass-through purchases.
Current wording
Our Average net interest-earning assets decreased by $196 million to $1.8 billion for the quarter ended June 30, 2025, compared to $2.0 billion for the quarter ended March 31, 2025. Our net interest rate spread, which equals the yield on our average interest-earning assets less the economic average cost of funds, decreased by 20 basis points to 2.1% for the quarter ended June 30, 2025, as compared to 2.3% for the quarter ended March 31, 2025.
Previous wording
Average interest-bearing liabilities increased by $140 million for the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024. Economic interest expense decreased by $1 million for the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024, primarily due to Fed rate cuts.
Current wording
Average interest-bearing liabilities increased by $732 million for the quarter ended June 30, 2025, as compared to the quarter ended March 31, 2025. Economic interest expense increased by $13 million for the quarter ended June 30, 2025, as compared to the quarter ended March 31, 2025, due to an increase in borrowings under our secured financing agreements to fund our Agency RMBS purchases.
Previous wording
For the quarter ended March 31, 2025, we recorded an increase in provision for credit losses of $3 million, as compared to an increase in provision of credit losses of $4 million for the quarter ended December 31, 2024. For the quarter ended March 31, 2025, we recorded an increase in provision for credit losses of $3 million, as compared to an increase in provision of credit losses of $1 million for the quarter ended March 31, 2024. The changes in provision for credit losses for the quarter ended March 31, 2025 as compared to the quarter ended December 31, 2024 and March 31, 2024, are primarily due to a deterioration in cashflows on certain investments.
Current wording
For the quarter ended June 30, 2025, we recorded an increase in provision for credit losses of $4 million, as compared to an increase in provision of credit losses of $3 million for the quarter ended March 31, 2025. For the six months ended June 30, 2025, we recorded an increase in provision for credit losses of $8 million, as compared to an increase in provision of credit losses of $5 million for the six months ended June 30, 2024. The changes in provision for credit losses for the quarter and six months ended June 30, 2025, as compared to the quarter and six months ended March 31, 2025 and June 30, 2024, are primarily due to a deterioration in cashflows on certain investments.
Previous wording
We use derivatives to economically hedge the effects of changes in interest rates on our portfolio, specifically our secured financing agreements. Unrealized gains and losses include the change in market value, period over period, on our derivatives portfolio. Changes in market value are generally a result of changes in interest rates. We may or may not ultimately realize these unrealized derivative gains and losses depending on trade activity, changes in interest rates and the values of the underlying securities. The net gains and losses on our derivatives include both unrealized and realized gains and losses. Realized gains and losses include the net cash paid and received on our interest rate swaps and Swap futures during the period as well as sales, terminations and settlements of our swaps, swaptions and U.S. Treasury futures.
Current wording
We use derivatives to economically hedge the effects of changes in interest rates on our portfolio, specifically our secured financing agreements. Unrealized gains and losses include the change in market value, period over period, on our derivatives portfolio. Changes in market value are generally a result of changes in interest rates. We may or may not ultimately realize these unrealized derivative gains and losses depending on trade activity, changes in interest rates and the values of the underlying securities. The net gains and losses on our derivatives include both unrealized and realized gains and losses. Realized gains and losses include the net cash paid and received on our interest rate swaps, swap futures, and swaptions during the period as well as sales, terminations and settlements of our swaps, swaptions, interest rate cap and U.S. Treasury futures.
Previous wording
The table below shows a summary of our net gains (losses) on derivative instruments, for the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively.
Current wording
The tables below show a summary of our net gains (losses) on derivative instruments, for the quarters ended June 30, 2025 and March 31, 2025, and six months ended June 30, 2025 and June 30, 2024, respectively.
Previous wording
During the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024, we recognized total net losses on derivatives of $2 million, total net gains on derivatives of $5 million and total net gains on derivatives of $11 million, respectively. Changes in market value are generally a result of changes in interest rates. We may or may not ultimately realize these unrealized derivative gains and losses depending on trade activity, changes in interest rates and the values of the underlying securities.
Current wording
Changes in market value are generally a result of changes in interest rates. We may or may not ultimately realize these unrealized derivative gains and losses depending on trade activity, changes in interest rates and the values of the underlying securities.
Previous wording
The weighted average pay rate on our interest rate swaps at March 31, 2025 was 3.53% and the weighted average receive rate was 4.41%. At March 31, 2025, the weighted average maturity on our interest rate swaps was less than one year.
Current wording
The weighted average pay rate on our interest rate swaps at June 30, 2025 was 3.61% and the weighted average receive rate was 4.14%. At June 30, 2025, the weighted average maturity on our interest rate swaps was less than 6 years. The weighted average pay rate on our interest rate swaps at December 31, 2024 was 3.56% and the weighted average receive rate was 4.49%. At December 31, 2024, the weighted average maturity on our interest rate swaps was less than one year.
Previous wording
We had no swap terminations during the quarters ended March 31, 2025 and 2024.
Current wording
We had a realized loss of $3 million related to the swap terminations during the quarter ended June 30, 2025. We had realized losses of $9 million related to the maturity of three swaps during the quarter and six months ended June 30, 2025. We had a realized loss of $17 million related to the maturity ofone swap during the quarter and six months ended June 30, 2024.
Previous wording
During the quarter ended March 31, 2025, we exercised our one swaption contract with$500 million notional and entered into a less than one-year swap with$500 million notional with a 3.45% fixed pay rate. During the quarter ended March 31, 2024, we exercised our two swaption contracts with $1.0 billion notional and entered into two one-year swaps with $1.0 billion notional with a weighted average 3.46% fixed pay rate.
Current wording
During the quarter ended June 30, 2024, we exercised one swaption contract with a $500 million notional, and entered into a one-year swap with $500 million notional and a weighted average fixed pay rate of 3.76%. During the six months ended June 30, 2024, we exercised three swaption contracts, each with $500 million notional, and entered into three one-year swaps, each with $500 million notional and a weighted average fixed pay rate of 3.56%.
Previous wording
During the quarter ended March 31, 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. Wedid not have any Treasury futures contract positions or activity during the quarter ended March 31, 2024. We were short 1,000 two-year U.S. Treasury futures contract at December 31, 2024.
Current wording
During the quarter and 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. During the quarter and six months ended June 30, 2024, we entered into 1,391 short 5-year and 1,684 short 5-year U.S. Treasury futures contract with a notional of $139 million and $168 million, respectively.
Previous wording
During the quarter ended March 31, 2025, we entered into short positions on Swap future contracts. We are short 400 10year SOFR Swap future contracts, 900 two-year SOFR Swap future contracts and 250 five-year SOFR Swap future contracts. The net par equivalent pay fixed rate on our Swap futures at March 31, 2025 was 3.84% and the weighted average receive rate was 4.41%. At March 31, 2024 we held no Swap future contracts.
Current wording
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 wording
During the quarter ended March 31, 2025, we entered into an Interest rate cap. We paid$7 million for a two-year Interest rate cap with a strike rate of 3.95% on SOFR as the market reference rate. At March 31, 2024, we held no Interest rate cap.
Current wording
During the six months ended June 30, 2025, we entered into an Interest rate cap. We paid$7 million for a two year Interest rate cap with a strike rate of 3.95% on SOFR as the market reference rate. At June 30, 2024, we held no Interest rate caps.
Previous wording
During the fourth quarter of 2024, we started earning investment management and advisory fees through certain investment management agreements entered into with our investment partnerships and privately offered pooled investment vehicles, insurance companies, and other institutional clients. We recognized investment management and advisory fees of $9 million and $3 million for the quarters ended March 31, 2025 and December 31, 2024.
Current wording
During the fourth quarter of 2024, we started earning investment management and advisory fees through certain investment management agreements entered into with our investment partnerships and privately offered pooled investment vehicles, insurance companies, and other institutional clients. We recognized investment management and advisory fees of $9 million for the quarters ended June 30, 2025 and March 31, 2025, respectively. We recognized investment management and advisory fees of $18 million during the six months ended June 30, 2025.
Previous wording
During the quarter ended March 31, 2025, the yields on two-year and ten-year U.S. Treasury Notes declined and residential credit spreads remained relatively flat, which resulted in market pricing gains on our investment portfolio. We recorded Net unrealized gains on financial instruments at fair value of $129 million and $77 million for the quarters ended March 31, 2025 and March 31, 2024, respectively. We had net unrealized losses on financial instruments at fair value of $181 million for the quarter ended December 31, 2024.
Current wording
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.
Previous wording
We did not have any sales during the quarter ended March 31, 2025. We rebalanced a portion of our investment portfolio and sold Agency CMO assets during the quarter ended December 31, 2024, which resulted in a net realized losses of $1 million. We had net realized losses of $4 million during the quarter ended March 31, 2024 primarily driven by our sales of Agency CMBS investments as a part of our portfolio optimization efforts.
Current wording
During the quarter ended June 30, 2025, we rebalanced a portion of our investment portfolio and sold certain of our Agency CMO, Agency RMBS and Non-Agency RMBS assets, which resulted in a net realized loss of $2 million. Proceeds from these sales were largely re-invested in liquid Agency RMBS Pass-through securities. We had a net realized loss of $4 million during the six months ended June 30, 2024 which was primarily driven by our sales of Agency CMBS investments as a part of our portfolio optimization efforts.
Previous wording
We did not acquire any securitized debt collateralized by Non-Agency RMBS during the quarters ended March 31, 2025, December 31, 2024 and March 31, 2024.
Current wording
We did not acquire any securitized debt collateralized by Non-Agency RMBS during the quarters ended June 30, 2025 and March 31, 2025 and during the six months ended June 30, 2025 and June 30, 2024.
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Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) increased by $1 million to $141 million for the six months ended June 30, 2025 from $140 million for the six months ended June 30, 2024. The net interest margin, which equals the Economic net interest income as a percentage of the net average balance of our interest-earning assets less our interest-bearing liabilities, decreased by 10 basis points to 2.1% for the six months ended June 30, 2025, as compared to 2.2% for the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Our Average net interest-earning assets decreased by $142 million to $1.9 billion for the six months ended June 30, 2025, compared to $2.0 billion for the same period of 2024. Our net interest rate spread, 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, 2025, as compared to the six months ended June 30, 2024.
Current report — wording carried from elsewhere
During the quarters ended June 30, 2025 and March 31, 2025, we recognized total net losses on derivatives of $15 million and $2 million, respectively. During the six months ended June 30, 2025 and June 30, 2024, we recognized total net losses on derivatives of $18 million and net gains on derivatives of $12 million, respectively.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
The weighted average pay rate on our interest rate swap at December 31, 2024 was 3.56% and the weighted average receive rate was 4.49%. At December 31, 2024, the weighted average maturity on our interest rate swap was less than one year.
Previous report — wording carried elsewhere
During the year ended December 31, 2024, we exercised ourthree swaption contracts, each with $500 million notional, and entered into three one-year swaps, each with $500 million notional and a weighted average fixed pay rate of 3.56%.
Previous report — wording carried elsewhere
At December 31, 2024, the weighted average borrowing rates for our secured financing agreements collateralized by Agency RMBS was 4.8%, Agency CMBS was 4.8% and Non-Agency MBS and Loans held for investment was 6.8%.
Previous report — wording carried elsewhere
PSU awards are designed to align compensation with our future performance. The PSU awards granted during the three months ended March 31, 2025 and 2024, include a three-year performance period ending on December 31, 2026 and December 31,