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What changed in CHIMERA INVESTMENT CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CHIMERA INVESTMENT CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+919 added−604 removedSource: 10-K (2026-02-18) vs 10-K (2025-02-19)

Top changes in CHIMERA INVESTMENT CORP's 2025 10-K

919 paragraphs added · 604 removed · 460 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

70 edited+61 added−28 removed39 unchanged
Biggest changeThe following briefly discusses the principal types of investments that we have made and may in the future make: Residential Mortgage Loans We invest in residential mortgage loans (mortgage loans secured by residential real property) through secondary market purchases from banks, non-bank financial institutions, lenders, originators, and the Agencies.
Biggest changeAs 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. 6 The following briefly discusses the principal types of investments that we have made and may in the future make: Residential Mortgage Loans We invest in residential mortgage loans through secondary market purchases from banks, non-bank financial institutions, lenders, originators, and the Agencies, and we may choose to retain loans originated by HomeXpress, our wholly owned lending subsidiary acquired in 2025.
Secured financing agreements include all non-securitization financing arrangements and are generally, but not always, for shorter terms. Our secured financing agreements are primarily comprised of warehouse facilities and repurchase agreements. • Warehouse Facilities . We have utilized and may in the future utilize credit facilities for capital needed to fund our assets.
Secured financing agreements include all non-securitization financing arrangements and are generally, but not always, for shorter terms. Our secured financing agreements are primarily comprised of repurchase agreements. • Warehouse Facilities . We have utilized and may in the future utilize credit facilities for capital needed to fund our assets.
To ensure we qualify as a REIT, no 8 person may own more than 9.8%, in value or number of shares, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock, which includes our common stock and preferred stock, unless our Board of Directors waives this limitation.
To ensure we qualify as a REIT, no person may own more than 9.8%, in value or number of shares, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock, which includes our common stock and preferred stock, unless our Board of Directors waives this limitation.
Many of our competitors are significantly larger than we are, have access to greater capital and other resources, and may have other advantages over us.
Many of our competitors are significantly larger than we are, have access to greater capital and other resources, and may have other advantages over us.
However, in certain circumstances we may select loans for diligence review utilizing risk-based sampling criteria such as property location, loan size, loan-to-value ratio ("LTV"), borrower’s credit score, delinquency status and history and other criteria we believe to be important indicators of credit risk.
However, in certain circumstances we may select loans for diligence review utilizing risk-based sampling criteria such as property location, loan size, LTV ratio, borrower’s credit score, delinquency status and history and other criteria we believe to be important indicators of credit risk.
We may also invest in other mortgage and real estate-related products, such as junior lien loans, home equity lines of credit, home equity option or shared appreciation contracts, reverse mortgage loans, single-family rental properties, credit risk transfer securities, home improvement loans, and/or manufactured housing loans.
We may also invest in other mortgage and real estate-related products, such as junior lien loans, home equity lines of credit, home equity option or shared appreciation contracts, reverse 8 mortgage loans, single-family rental properties, credit risk transfer securities, home improvement loans, and/or manufactured housing loans.
We engage third parties to perform independent reviews of the mortgage files to assess the credit underwriting and adherence to compliance at origination with respect to the mortgage loans, as well as our ability to enforce the lien on the related mortgaged properties. We typically review all of the loans we acquire.
We engage third parties to perform independent reviews of the mortgage files to assess the credit underwriting and adherence to compliance at origination with respect to the mortgage loans, as well as our ability to enforce the lien on the related mortgaged 7 properties. We typically review all of the loans we acquire.
We generally finance these subordinate securities with secured financing agreements. The securities we do not retain are typically sold through securities underwriters. Other than the Risk Retention Rules, there is no limit on the amount we may retain of these below-investment-grade subordinate certificates.
We generally finance these subordinate securities with 5 secured financing agreements. The securities we do not retain are typically sold through securities underwriters. Other than the Risk Retention Rules, there is no limit on the amount we may retain of these below-investment-grade subordinate certificates.
We may, and in the past we did, invest in Agency CMBS. The Agency CMBS we have acquired are Ginnie Mae Construction Loan Certificates (“CLCs”) and the resulting project loan certificates, or PLCs, when the construction project is complete. Each CLC is backed by a single multifamily property or health care facility.
We may, and in the past we did, invest in Agency CMBS. The Agency CMBS we have acquired are Ginnie Mae Construction Loan Certificates (“CLCs”) and the resulting project loan certificates, when the construction project is complete. Each CLC is backed by a single multifamily property or health care facility.
Each of the consolidated entities is independent of us and of each other, and the assets and liabilities of these entities are not owned by us or legal obligations of ours, respectively, although we are exposed to certain financial risks associated with any role we carry out for these entities (e.g., as sponsor or depositor) and, to the extent we hold securities issued by, or other investments in, these entities, we are exposed to the performance of these entities and the assets they hold.
Each of the consolidated entities is independent of us and of each other, and the assets and liabilities of these entities are not owned by us or legal obligations of ours, respectively, although we are exposed to certain financial risks associated with any role we carry out for these entities (e.g., as sponsor, depositor or asset manager) and, to the extent we hold securities issued by, or other investments in, these entities, we are exposed to the performance of these entities and the assets they hold.
Currently, we do not use term securitization to finance RTLs, but we may evaluate revolving securitization structures in the future as a means of financing the portfolio. Our investor loans are made to individuals securing non-primary residences as well as to individuals or businesses who rent the residential properties secured by such loans.
Currently, we do not use term securitization to finance RTLs, but we may evaluate term securitization in the future as a means of financing the portfolio. Our investor loans are made to individuals securing non-primary residences as well as to individuals or businesses who rent the residential properties secured by such loans.
Our RTLs are loans to businesses that are secured by real property where the proceeds are generally used by the borrower to acquire and renovate the property. Upon completion of the renovation, the borrower will typically either (i) sell the property, or (ii) refinance and retain the property as a portfolio rental.
Our business purpose loans, or RTLs, are loans to businesses that are secured by real property where the proceeds are generally used by the borrower to acquire and renovate the property. Upon completion of the renovation, the borrower will typically either (i) sell the property, or (ii) refinance and retain the property as a portfolio rental.
In these programs, we typically sell the senior securities to an unrelated third party and retain the subordinate securities, which include the first-loss securities which are subject to the Risk Retention Rules, and the interest-only securities. We are generally required under GAAP to consolidate the assets and liabilities of the “I” securitization entities for financial reporting purposes.
In these programs, we typically sell the senior securities to an unrelated third party and retain the subordinate securities, which include the first-loss securities which are subject to the Risk Retention Rules, and the IOs. We are generally required under GAAP to consolidate the assets and liabilities of the “I” securitization entities for financial reporting purposes.
Investment Guidelines We have adopted a set of investment guidelines that set out the asset classes, risk tolerance levels, diversification requirements and other criteria used to evaluate the merits of specific investments as well as the overall portfolio composition. Our investment committee periodically reviews our compliance with the investment guidelines.
Investment Guidelines We have adopted a set of investment guidelines that set out the asset classes, risk tolerance levels, diversification requirements and other criteria used to evaluate the merits of specific investments as well as the overall portfolio composition. Our investment committee periodically reviews the appropriateness of our investment guidelines and related compliance.
We seek to maintain formal relationships with multiple counterparties to maintain warehouse lines on favorable terms. • Repurchase Agreements . We have financed certain of our assets through repurchase agreements. We anticipate that repurchase agreements will be one of the sources we will use to achieve our desired amount of leverage for our real estate assets.
We seek to maintain formal relationships with multiple counterparties to maintain warehouse lines on favorable terms. • Repurchase Agreements . We have financed certain of our assets through repurchase agreements. We anticipate that repurchase agreements will be one of the sources we will use to achieve our desired amount of leverage for our investments.
We did not sponsor any securitizations under our “J” and “INV” programs during the year ended December 31, 2024. 4 “R” and “NR” Non-Rated Programs. The securities issued in our “R” and “NR” securitizations are generally not rated and are subject to the Risk Retention Rules.
We did not sponsor any securitizations under our “J” and “INV” programs during the year ended December 31, 2025. “R” and “NR” Non-Rated Programs. The securities issued in our “R” and “NR” securitizations are generally not rated and are subject to the Risk Retention Rules.
We may also invest in CMOs issued by the Agencies. CMOs consist of multiple classes of securities, with each class bearing different stated maturity dates. Monthly payments of principal, including prepayments, are first returned to investors holding the shortest maturity class; investors holding the longer maturity classes receive principal only after the first class has been retired.
We may also invest in Agency CMOs. Agency CMOs consist of multiple classes of securities, with each class bearing different stated maturity dates. Monthly payments of principal, including prepayments, are first returned to investors holding the shortest maturity class; investors holding the longer maturity classes receive principal only after the first class has been retired.
The payments received from the underlying loans are used to make the payments on the RMBS. Based on the sequential payment priority, the risk of nonpayment for the most senior, or investment grade, RMBS is lower than the risk of nonpayment for the most junior, or non-investment grade, bonds.
The payments received from the underlying loans are used to make the payments on the RMBS. Based on the payment priorities, the risk of nonpayment for the most senior, or investment grade, RMBS is lower than the risk of nonpayment for the most junior, or non-investment grade, bonds.
Our Securitization Programs We currently have the following five securitization programs: • Our “R” program, our most active program, securitizes seasoned RPLs, whether newly acquired from a third party or upon the exercise of a call option, in a Real Estate Mortgage Investment Conduit (“REMIC”) transaction; • Our “NR” program securitizes seasoned residential mortgage loans that are not eligible to be securitized in REMIC, transactions; • Our “I” program securitizes Non-Agency eligible investor mortgage loans; • Our “J” program securitizes jumbo prime residential mortgage loans; and • Our “INV” program securitizes Agency-eligible investor mortgage loans.
Our Securitization Programs We currently have the following five securitization programs: • Our “R” program securitizes seasoned RPLs, whether newly acquired from a third party or upon the exercise of our redemption rights, in a Real Estate Mortgage Investment Conduit (“REMIC”) transaction; • Our “NR” program securitizes seasoned residential mortgage loans that are not eligible to be securitized in REMIC, transactions; • Our “I” program securitizes Non-Agency eligible investor mortgage loans; • Our “J” program securitizes jumbo prime residential mortgage loans; and • Our “INV” program securitizes Agency-eligible investor mortgage loans.
Our Board of Directors and its committees have adopted the following guidelines for our investments and borrowings: • No investment shall be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes; • No investment shall be made that would cause us to be required to register as an investment company under the 1940 Act; • With the exception of real estate and real estate related assets, no single industry shall represent greater than 20% of the securities or aggregate risk exposure in our portfolio; and • Investments in non-rated or deeply subordinated ABS or other securities that are non-qualifying assets for purposes of the 75% REIT asset test will be limited to an amount not to exceed 50% of our stockholders’ equity.
Our Board of Directors and its committees have adopted guidelines for our investments and borrowings, including the following: • No investment shall be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes; • No investment shall be made that would cause us to be required to register as an investment company under the 1940 Act; • No investment or hedging activity shall be made that would require us to register as a commodity pool or commodity pool operator under the Commodity Act; • With the exception of real estate and real estate related assets, no single industry shall represent greater than 20% of the securities or aggregate risk exposure in our portfolio; and • Investments in non-rated or deeply subordinated MBS or other securities that are non-qualifying assets for purposes of the 75% REIT asset test will be limited to an amount not to exceed 50% of our stockholders’ equity.
In addition to the Non-Agency RMBS structure and cash flow priorities, we evaluate numerous credit characteristics of the underlying mortgage loans, including, but not limited to, loan balance distribution, geographic concentration, property type, occupancy, adjustable interest rate periodic and lifetime caps, LTV characteristics and Fair Isaac Corporation (“FICO”) score distributions.
In addition to the Non-Agency RMBS structure and cash flow priorities, we evaluate numerous credit characteristics of the underlying mortgage loans, including, but not limited to, loan balance distribution, geographic concentration, property type, occupancy, adjustable interest rate periodic and lifetime caps, LTV characteristics and FICO score distributions.
Securities in this portfolio are monitored for variance from expected prepayments, defaults, loss severities, losses and cash flow. The due diligence process is particularly important and costly with respect to newly formed originators or issuers because there may be little or no information publicly available about these entities and investments.
Securities in this portfolio are monitored for variance from expected prepayments, defaults, loss severities, losses and cash flow. The due diligence process is particularly important and costly with respect to newly formed originators or issuers because there may be little or no information publicly available about these entities and investments. We may also invest in Agency RMBS and Non-Agency RMBS.
Our Board of Directors and its committees also review our investment portfolio and related compliance with our investment policies and procedures and investment guidelines at regularly scheduled risk and audit committee meetings.
Our Board of Directors and its committees also review our investment portfolio and related compliance with our investment policies and procedures and investment guidelines at regularly scheduled meetings.
See “Risk Factors - Risks Related to Regulatory, Accounting and Our 1940 Exemption - Loss of our 1940 Act exemption would adversely affect us and negatively affect the market price of shares of our capital stock and our ability to distribute dividends.” Investment Advisers Act of 1940 TPG is registered with the SEC as an investment adviser under the Advisers Act, and PAS is a relying adviser with respect to TPG’s investment adviser registration.
See “Risk Factors - Risks Related to Regulatory, Accounting and Our 1940 Exemption - Loss of our 1940 Act exemption would adversely affect us and negatively affect the market price of shares of our capital stock and our ability to distribute dividends.” Investment Advisers Act of 1940 The Palisades Group, LLC (“TPG”) is registered with the SEC as an investment adviser under the Advisers Act of 1940 (the “Advisers Act”), and PAS is a relying adviser with respect to TPG’s investment adviser registration.
We may invest in securities issued in various collateralized debt obligation, or CDO, offerings to gain exposure to bank loans, corporate bonds, asset-backed securities, mortgages, RMBS, CMBS, and other instruments.
We may invest in securities issued in various CDO, offerings to gain exposure to bank loans, corporate bonds, asset-backed securities, mortgages, RMBS, CMBS, and other instruments.
We conduct a due diligence review of each servicer before the servicer is retained and periodically thereafter. The duties of servicers are generally required to be performed in accordance with industry-accepted servicing practices and the terms of the relevant pooling and servicing agreement, mortgage note and applicable law.
Third-party servicers service the mortgage loans in our portfolio. We conduct a due diligence review of each servicer before the servicer is retained and periodically thereafter. The duties of servicers are generally required to be performed in accordance with industry-accepted servicing practices and the terms of the relevant servicing agreement, mortgage note and applicable law.
In these programs, we typically sell the senior securities to an unrelated third party and retain the subordinate securities, which include the first-loss securities which are subject to the Risk Retention Rules, and the interest-only securities. During 2024, we sponsored one “R” securitization.
In these programs, we typically sell the senior securities to an unrelated third party and retain the subordinate securities, which include the first-loss securities which are subject to the Risk Retention Rules, and the IOs. During 2025, we sponsored one “R” securitization and one “NR” securitization.
In addition, some of our competitors may have higher risk tolerances, different risk assessments, or fewer regulatory burdens and restrictions, which could allow them to consider a wider variety of investments and establish more favorable relationships than we can.
In addition, some of our competitors may have higher risk tolerances, different risk assessments, or fewer regulatory burdens and restrictions, which could allow them to consider a wider variety of investments and establish more favorable relationships than we can. The asset management industry is extremely competitive.
We have invested in and intend to continue to invest in Non-Agency RMBS, which are typically certificates created by the securitization of a pool of mortgage loans that are collateralized by residential real estate properties. The respective bond class sizes are determined based on the review of the underlying collateral, the security’s cash flow priorities and credit enhancement.
We also invest in investment grade, non-investment grade and non-rated Non-Agency RMBS, which are typically certificates created by the securitization of a pool of mortgage loans that are collateralized by residential real estate properties. The respective bond class sizes are determined based on the review of the underlying collateral, the security’s cash flow priorities and credit enhancement.
Under the U.S. federal income tax laws applicable to REITs, we generally enter certain transactions to hedge indebtedness that we incur, or plan to incur, to acquire or carry real estate assets.
Under the U.S. federal income tax laws applicable to REITs, we generally enter certain transactions to hedge indebtedness that we incur, or plan to incur, with respect to acquiring or carrying real estate assets.
We provide competitive financial benefits such as a 401(k) retirement plan with a company match and offer a comprehensive healthcare benefit plan and other tools to support our employees’ health and well-being. We also generally grant awards of restricted stock units on an annual basis to a meaningful portion of our employees.
We provide competitive financial benefits such as a 401(k) retirement plan with a company match and offer a comprehensive healthcare benefit plan and other tools to support our employees’ health and well-being. Our employees are also eligible for grant awards of restricted stock units.
Government securities and securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company for private funds set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
Excluded from the term “investment securities,” among other things, are U.S. 11 Government securities and securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company for private funds set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
We may invest in MSRs either through excess servicing rights or the entire MSR. In an 6 excess servicing rights transaction, we would purchase from a servicer a portion of the servicing fee that exceeds the amount needed by the servicer to provide the servicer an acceptable return.
We may invest in MSRs either through excess servicing rights or the entire MSR. In an excess servicing rights transaction, we would purchase from a servicer a portion of the servicing fee that exceeds the amount needed by the servicer to provide the servicer an acceptable return. Such transactions are similar to acquiring a senior IO from a securitization trust.
The percentage of our financing allocated to such facilities will vary depending on market conditions. We believe that non-MTM facilities will continue to be a material portion of our financing strategy. We may also seek financing through capital markets offerings when appropriate.
The percentage of our financing allocated to such facilities will vary depending on market conditions. We believe that non-MTM facilities will continue to be a material portion of our financing strategy. We may also seek financing through capital markets offerings when appropriate. Residential Origination With respect to HomeXpress, we use warehouse facilities to fund newly originated loans.
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.
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 offer internal training programs on financial markets, business ethics, government regulatory rules and other topics. We encourage personnel to attend industry sponsored or other conferences and have a tuition reimbursement program to help personnel to further develop their skills and to stay current on evolving trends impacting our industry.
We encourage personnel to attend industry sponsored or other conferences and have a tuition reimbursement program to help personnel to further develop their skills and to stay current on evolving trends impacting our industry.
Currently, the primary sources of such income are the fees we receive from institutions for our non-discretionary investment management and advisory services less the cost of providing such services. In the future, Discretionary Funds are expected to be a source of investment management and advisory services fees and incentive-based income for us.
Currently, the primary sources of such income are the fees we receive from institutions for our non-discretionary investment management and advisory services less the cost of providing such services.
We believe our management team has the experience necessary to effectively implement our growth strategy and continue to drive shareholder value. We provide competitive compensation and benefits to attract and retain key personnel, while also providing a safe, inclusive and respectful workplace. We continue to have a focus on diversity initiatives.
We believe our management team has the experience necessary to effectively implement our growth strategy and continue to drive shareholder value. We provide competitive compensation and benefits to attract and retain key personnel, while also providing a safe, inclusive and respectful workplace. We offer internal training programs on financial markets, business ethics, government regulatory rules and other topics.
In one or more states, in lieu of relying on such licenses, we may contribute our acquired residential mortgage loans to one or more trusts in which we or our subsidiaries hold beneficial interests; title to these residential mortgage loans may be held by one or more federally-charted banks as trustee, which may be exempt from state licensing requirements. 9 There can be no assurance that the use of the trusts will satisfy an exemption from licensing requirements because regulatory agencies may adopt different interpretations of applicable laws.
In one or more states, in lieu of relying on such licenses, we may contribute our acquired residential mortgage loans to one or more trusts in which we or our subsidiaries hold beneficial interests; title to these residential mortgage loans may be held by one or more federally-charted banks as trustee, which may be exempt from state licensing requirements.
We are not required to maintain any specific debt-to-equity ratio as we believe the appropriate leverage for the particular assets we are financing depends on the credit quality and risk of those assets. At December 31, 2024 and 2023, our ratio of debt-to-equity was 4.0:1.
Investment Portfolio Our Investment Portfolio segment is not required to maintain any specific debt-to-equity ratio as we believe the appropriate leverage for the particular assets our Investment Portfolio segment is financing depends on the credit quality and risk of those assets.
We make investment decisions based on various factors, including expected cash yield, relative value, risk-adjusted returns, credit fundamentals, macroeconomic considerations, supply and demand dynamics, credit and market risk concentration limits, liquidity, cost of 3 financing and financing availability. Our investment strategy is intended to take advantage of opportunities in the current interest rate and credit environment.
Our risk management approach emphasizes asset-level credit performance, prepayment and interest rate sensitivity. We make investment decisions based on various factors, including expected cash yield, relative value, risk-adjusted returns, credit fundamentals, macroeconomic considerations, supply and demand dynamics, credit and market risk concentration limits, liquidity, cost of financing and financing availability.
“I” Programs. The securities issued in our “I” securitizations are rated by one or more nationally recognized statistical ratings organizations and are subject to the Risk Retention Rules.
PAS, our wholly-owned asset management capability, served as asset manager on each of these two securitizations. “I” Programs. The securities issued in our “I” securitizations are rated by one or more nationally recognized statistical ratings organizations and are subject to the Risk Retention Rules.
Competition In acquiring real estate-related assets for ourselves or for any new Discretionary Fund in our capacity as investment manager, we compete with other mortgage REITs, investment management firms, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, exchange traded funds, mutual funds, institutional investors, investment banking firms, financial institutions, private equity funds, hedge funds, governmental bodies (including the Federal Reserve) and other entities.
In acquiring these assets, we expect to compete with other mortgage REITs, investment management firms, specialty finance companies, savings and loan associations, banks, mortgage bankers, institutions offering to make residential mortgage 13 loans, insurance companies, exchange traded funds, mutual funds, institutional investors, investment banking firms, financial institutions, private equity funds, hedge funds, governmental bodies (including the Federal Reserve) and other entities.
In addition to our strategy of building a durable portfolio of residential mortgage assets, we may invest in operational platforms, including entities that originate or service mortgage loans, and other businesses, partnerships or investments that could enhance our business activities and returns to our shareholders through diversification of revenue from capital lite fee income.
In addition to our strategy of building a durable portfolio of residential mortgage assets, we intend to continue to grow our fee income and enterprise value by growing our existing operational platforms as well as looking for opportunities to acquire additional operating platforms, including entities that originate or service mortgage loans, and other businesses, partnerships or investments that could enhance our business activities and returns to our shareholders through diversification of revenue and growth of our enterprise value.
We may seek to manage our debt and interest rate risk by utilizing interest rate hedges, such as interest rate swaps, caps, options and futures to reduce the effect of interest rate fluctuations related to our financing sources.
We may seek to manage our debt and interest rate risk by utilizing interest rate hedges, such as interest rate swaps, caps, options and futures to reduce the effect of interest rate fluctuations related to our financing sources. During 2025, we focused on diversifying the portfolio and repositioning the Company as a diversified, vertically integrated residential real estate platform.
We believe that our strategy of generating income from our portfolio along with fees and incentive-based income from our third-party investment management and advisory services, while remaining open to opportunities to enhance these activities, will provide us an opportunity to pay dividends throughout changing market cycles.
We believe that our strategy of generating income from our portfolio along with fees and incentive-based income from our third-party investment management and advisory services and loan origination business, while remaining open to opportunities to enhance these activities, will provide us an opportunity to pay dividends throughout changing market cycles and grow our share price over time through increasing our enterprise value. 4 Our Investment Strategy We selectively invest in residential mortgage assets with a focus on credit analysis and risk management.
The assets we may invest in and manage for others include residential mortgage loans, Non-Agency RMBS, Agency RMBS, business purpose loans (“BPLs”) (including residential transition loans (“RTLs”)) and investor loans, mortgage servicing rights (“MSRs”) and other real estate-related assets such as Agency CMBS, junior liens and home equity lines of credit, or HELOCs, equity appreciation rights, and reverse mortgages.
The assets we may invest in and manage for others, through our wholly-owned subsidiary Palisades Advisory Services LLC (“PAS”), include residential mortgage loans, Non-Agency RMBS, Agency RMBS, business purpose loans (including RTLs) and investor loans, MSRs and other real estate-related assets such as Agency CMBS, junior liens and HELOCs, equity appreciation rights, and reverse mortgages.
The existence of these entities, as well as the possibility of additional entities forming in the future, may limit our ability to grow fees from our non-discretionary investment management and advisory services or our ability to obtain new third-party non-discretionary accounts. Available Information Our investor relations website is www.chimerareit.com.
The existence of these entities, as well as the possibility of additional entities forming in the future, may limit our ability to grow fees from our non-discretionary investment management and advisory services or our ability to obtain new third-party non-discretionary accounts. Through our subsidiary, HomeXpress, we originate consumer Non-QM, investor business purpose, and other mortgage loan products.
See “Risk Factors – Risks Related to Our Recent Acquisition and Investment Management and Advisory Services – We may be unable to successfully integrate and realize the anticipated benefits of the Palisades Acquisition which may adversely affect our operations.” Licenses While we are not required to obtain licenses to purchase MBS, the purchase and sale of residential mortgage loans in the secondary market may, in some circumstances, require us, or the entities, including securitization trusts, we use to conduct our business, to maintain various state licenses.
See “Risk Factors – Risks Related to Our Investment Management and Advisory Services – Two of our subsidiaries are currently required to be registered as an investment adviser or a relying adviser, subjecting us to extensive regulation and examination by the SEC that could adversely affect our ability to manage our business.” Licenses to Purchase and Sell Residential Mortgage Loans While we are not required to obtain licenses to purchase MBS, the purchase and sale of residential mortgage loans in the secondary market may, in some circumstances, require us, or the entities, including securitization trusts, we use to conduct our business, to maintain various state licenses.
In the future, however, we may decide to originate mortgage loans or other types of credit products, and we may elect to service mortgage loans and other types of assets.
In the future, however, subject to obtaining the requisite licenses and approvals, we may elect to service mortgage loans and other types of assets.
For purposes of calculating this ratio, our equity is equal to the total stockholders’ equity on our Consolidated Statements of Financial Condition, and our debt consists of securitized debt, long-term debt, and secured financing agreements. 7 Subject to maintaining our qualification as a REIT, we may use a variety of sources to finance our investments, including the following primary sources: • Securitization .
For purposes of calculating this ratio, our equity is equal to the total stockholders’ equity on our Consolidated Statements of Financial Condition, and our debt consists of securitized debt, long-term debt, and secured financing agreements.
We did not sponsor any securitizations under our “I” securitization program in 2024. The table below sets forth certain information about our “R” securitizations we completed during the year ended December 31, 2024.
During 2025, we sponsored one “I” securitization. The table below sets forth certain information about our “R”, “NR”, and “I” securitizations we completed during the year ended December 31, 2025.
We expect to continue financing our investments using a variety of sources, and as part of our overall strategy, may continue to finance a portion of our loan portfolio with long-term secured facilities.
We expect to continue financing our investments using a variety of sources, and as part of our overall strategy, may continue to finance a portion of our loan portfolio with long-term secured facilities. When we securitize mortgage loans, we typically retain the most subordinate classes of securities, which means we are the first-loss security holder.
We seek to maintain formal relationships with many counterparties with the intent to obtain financing on the most favorable terms available while diversifying counterparty credit risk.
We seek to maintain formal relationships with many counterparties with the intent to obtain financing on the most favorable terms available while diversifying counterparty credit risk. We maintain a portion of our financing in non-MTM facilities and limited MTM to finance a portion of our Non-Agency RMBS, including risk retention securities.
In addition, if we do obtain such licenses in the future and acquire MSRs, we do not intend to perform the servicing ourselves but rather retain third-party servicers to service the loans for us.
We may also acquire the entire MSR from a servicer, which would require that we obtain certain mortgage servicing licenses which we currently do not have. In addition, if we do obtain such licenses in the future and acquire MSRs, we may choose to perform the servicing ourselves or retain third-party servicers to service the loans for us.
Human Capital The human capital objectives we focus on in managing our business include attracting, developing, and retaining key personnel. Our employees are critical to the success of our organization, and we are committed to supporting our employees’ professional development.
We also believe that our relationship with our employees is good and none of our employees are unionized or represented under a collective bargaining agreement. Our human capital objectives include attracting, developing, and retaining key personnel. Our employees are critical to the success of our organization, and we are committed to supporting our employees’ professional development.
Our Interest Rate Hedging and Risk Management Strategy From time to time, we use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings.
As of December 31, 2025, HomeXpress was in compliance will all terms and conditions associated with its warehouse facilities. Our Interest Rate Hedging and Risk Management Strategy Investment Portfolio Segment We use derivative financial instruments to hedge a portion of the interest rate risk associated with our borrowings.
We plan to execute our business strategy through a combination of organic and external growth, depending on opportunities and market conditions.
HomeXpress primarily generates income from the origination and sale of its mortgage loan products and, to a lesser degree, the interest on its loans held for sale. We plan to execute our business strategy through a combination of organic and external growth, depending on opportunities and market conditions.
Government securities and cash items) on an unconsolidated basis (the “40% test”). Excluded from the term “investment securities,” among other things, are U.S.
Government securities and cash items) on an unconsolidated basis (the “40% test”).
A significant element of our financing strategy is to acquire residential mortgage loans for our portfolio with the intention of securitizing them. In our securitizations, we generally create subordinate certificates, providing a specified amount of credit enhancement, which we intend or are required under the Risk Retention Rules to retain in our portfolio.
In our securitizations, we generally create subordinate certificates, providing a specified amount of credit enhancement, which we intend or are required under the Risk Retention Rules to retain in our portfolio. However, we may also choose to sponsor securitizations where we retain a portion of the issued securities, known as vertical risk retention.
At December 31, 2023, based on the fair value of our interest earning assets, approximately 91% of our investment portfolio was residential mortgage loans, 8% of our investment portfolio was Non-Agency RMBS, and 1% of our investment portfolio was Agency MBS.
Our Investment Portfolio Segment As of December 31, 2025, based on the fair value of our interest earning assets, approximately 65% of our investment portfolio was allocated to residential mortgage loans, 23% to Agency MBS, 5% to Non-Agency RMBS and less than 1% to interests in MSR financing receivables (excluding loans held for sale by HomeXpress).
Accordingly, the investment grade class is typically sold at a lower yield compared to the non-investment grade or unrated classes which are sold at higher yields. Other Real Estate-Related Assets We may invest in MSRs, which are the rights to service a pool of residential mortgage loans in exchange for a portion of the interest payments on such loans.
These IO RMBS represent the right to receive a specified proportion of the contractual interest cash flows of the underlying mortgage loans. Other Real Estate-Related Assets We may invest in MSRs, which are the rights to service a pool of residential mortgage loans in exchange for a portion of the interest payments on such loans.
In both cases, we securitize the investor loans as part of our loan securitization program. 5 We acquire residential mortgage loans primarily to securitize them, as discussed above, or to retain them in our portfolio as loans held for investment.
We invest in loans that are eligible for sale to one or more of the Agencies as well as loans that are not eligible for sale to either of the Agencies. In both cases, with respect to our investment portfolio, we securitize the investor loans as part of our loan securitization program.
Until we securitize our residential mortgage loans, we finance our residential mortgage loan portfolio through warehouse facilities and repurchase agreements, as discussed under “Our Financing Strategy” below. Currently, we acquire mortgage loans in the secondary market that are originated by third parties and are not underwritten to our specifications. Third-party servicers service the mortgage loans in our portfolio.
We primarily use securitization to finance our investments in residential mortgage loans. However, in certain instances we may retain them in our portfolio as loans held for investment. Until we securitize our residential mortgage loans, we finance our residential mortgage loan portfolio through warehouse facilities and repurchase agreements, as discussed under “Our Financing Strategy” below.
See “ Risk Factors - Risks Associated with Our Investments - A significant portion of the RMBS we acquire through securitization is subject to the Risk Retention Rules which materially limit our ability to sell or hedge such investments as needed, which may require us to hold investments that we may otherwise desire to sell during times of severe market disruption in the mortgage, housing, credit or related sectors” discussion in Item 1A “Risk Factors” section for more details.
See “ Risk Factors - Risks Associated with Our Investments - A significant portion of our investments are in Non-Agency RMBS that are the most subordinate securities in securitizations, making us the first-loss security holder, which means these securities are subject to significant credit risk, are illiquid, and are difficult to value.” discussion in Item 1A “Risk Factors” section for more details.
(2) At the time of issuance. Our Investment Portfolio 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.
As of December 31, 2025, based on the fair value of our interest earning assets approximately 6% of our portfolio capital was allocated to loans held for sale.
The duration mismatch may cause refinancing risk and we may seek to hedge this risk as part of our normal course interest rate hedge strategy. Operational and Regulatory Structure REIT Qualification We have elected to be treated as a REIT for U.S. federal income tax purposes.
The duration mismatch may cause refinancing risk and we may seek to hedge this risk as part of our interest rate hedge strategy. Residential Origination HomeXpress operates a daily hedging program that utilizes financial instruments (2-year and 5-year U.S. Treasury futures) in an effort to protect its operational results from interest rate risk.
DEAL (1) TOTAL ORIGINAL FACE ORIGINAL FACE OF TRANCHES SOLD (2) ORIGINAL FACE OF TRANCHES RETAINED (2) TOTAL REMAINING FACE REMAINING FACE OF TRANCHES SOLD REMAINING FACE OF TRANCHES RETAINED (dollars in thousands) CIM 2024-R1 468,148 351,813 116,335 446,882 330,560 116,321 (1) For certain of the above securitization deals, we retained certain IO and/or excess servicing classes.
DEAL (1) TOTAL ORIGINAL FACE ORIGINAL FACE OF TRANCHES SOLD (2) ORIGINAL FACE OF TRANCHES RETAINED (2) TOTAL REMAINING FACE REMAINING FACE OF TRANCHES SOLD REMAINING FACE OF TRANCHES RETAINED (dollars in thousands) CIM 2025-I1 $ 287,673 $ 275,735 $ 11,938 $ 232,747 $ 220,617 $ 11,938 CIM 2025-R1 391,790 333,021 58,769 366,344 307,576 58,731 CIM 2025-NR1 254,432 184,463 69,969 174,726 154,491 63,818 (1) For certain of the above securitization deals, we retained certain IO and/or excess servicing classes.
Item 1. Business The Company We are a publicly traded REIT that is primarily engaged in the business of investing in a diversified portfolio of mortgage assets for ourselves and for unrelated third parties through our third-party investment management and advisory services.
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.
Our Business Strategy Our principal business objective is to provide attractive risk-adjusted returns through the generation of distributable income from our investment portfolio whose asset performance is linked to mortgage credit fundamentals and fees generated from providing third-party investment management and advisory services to third parties .
The Residential Origination segment consists of the stand-alone mortgage origination business of HomeXpress that originates consumer Non-QM, investor business purpose, and other Non-Agency and Agency mortgage loan products. Our Business Strategy Our principal business objectives are to provide attractive risk-adjusted returns and distributable income through investment performance linked to mortgage credit fundamentals and to grow our enterprise value of time.
Removed
We hold our investments through our various subsidiaries. The MBS and other real estate-related securities we purchase may include investment-grade, non-investment grade, and non-rated securities.
Added
Item 1. Business The Company We are a diversified real estate company that invests in, originates, and manages primarily residential real estate assets.
Removed
Our investment management and advisory services are provided on a discretionary basis through investment funds that we manage (the “Discretionary Funds”) and on a non-discretionary basis with respect to assets acquired and owned by third-party institutions, including insurance companies, credit funds, and other institutional investors.
Added
Also, through our wholly-owned subsidiary, HomeXpress Mortgage Corp. (“HomeXpress”), we originate consumer Non-QM and investor business purpose residential mortgage loans as well as QM residential mortgage loans.
Removed
We were incorporated in Maryland on June 1, 2007 and started trading on the NYSE in November 2007.
Added
Chimera Investment Corporation was incorporated in Maryland on June 1, 2007 and started trading on the NYSE in November 2007, and is structured as an internally managed real estate investment trust (REIT) for U.S. federal income tax purposes. Acquisition of HomeXpress Mortgage Corp.
Removed
On December 2, 2024, the Company acquired The Palisades Group, LLC (“TPG”), Palisades Advisory Services, LLC (“PAS”), Palisades Technology Holdings, LLC, and their respective subsidiaries for cash consideration of $30 million at closing, plus an additional potential earnout of up to $20 million over five years contingent upon achieving certain financial targets, with the option for us to pay 50% of the earnout payments in common shares (the “Palisades Acquisition”).
Added
On October 1, 2025, the Company completed the acquisition of HomeXpress (the “HomeXpress Acquisition”) for total consideration of $272 million, which consisted of (i) cash of $124 million, representing the Adjusted Book Value of HomeXpress as of September 30, 2025, (ii) cash premium of $120 million, and (iii) issuance of 2,077,151 shares of the Company's common stock.
Removed
As a result of the Palisades Acquisition, we began providing investment management and advisory services primarily through TPG and PAS (together with TPG, “Palisades”). TPG is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”), and PAS is a relying adviser with respect to TPG’s investment adviser registration.
Added
As a result of the HomeXpress Acquisition, the Company began originating consumer Non-QM, investor business purpose, and other mortgage loan products through its subsidiary, HomeXpress during the fourth quarter. In 2025, the Company reevaluated its composition and the number of our reportable segments based on changes in the significance of certain business activities, including the HomeXpress Acquisition.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

153 edited+191 added−22 removed279 unchanged
Biggest changeRisks Associated with Our Investments • Interest rate fluctuations, including as a result of the Federal Reserve's monetary policy, may have various negative effects on us and may lead to reduced earnings and increased volatility in our earnings. • Changes in the yield curve may cause differences in timing between interest rate adjustments on our interest-earning assets and our borrowings, adversely affecting our net interest spread. • Significant changes in interest rates, particularly increases in long-term rates, may reduce the market value of our investments and negatively affect our book value, earnings and cash available for distribution. • The impact of inflation and related monetary policy efforts may adversely affect our financial performance. • A significant portion of our investments are in the most subordinated first-loss position of the capital structure of Non-Agency RMBS, disproportionately exposing us to credit risk. • A significant portion of the RMBS we acquire through securitization is subject to the Risk Retention Rules. • We have a significant amount of investments in Non-Agency RMBS collateralized by mortgage loans that do not meet the prime loan underwriting standards and are subject to increased risk of losses. • The nature of the mortgage loans we acquire and that underlie the RMBS we acquire exposes us to credit risk that could negatively affect the value of those assets and investments. • Changes in prepayment rates could negatively affect the value of our investment portfolio, which could result in reduced earnings or losses and negatively affect the cash available for distribution to our stockholders. • A significant portion of our Non-Agency RMBS and residential loans are secured by properties in a small number of geographic areas and may be disproportionately affected by adverse events in those markets. • We may change our investment strategy, adjust our asset allocation, or enter other operating businesses or financing plans without stockholder consent, which may result in riskier investments or subject us to new or increased regulatory risks and have an adverse effect on our business, results of operations and financial condition. • Changes in the fair values of our assets, liabilities, and derivatives can reduce earnings, affect liquidity, increase earnings volatility, and create volatility in our book value. • Our calculations of the fair value of the assets we own or consolidate are based upon assumptions that are inherently subjective and involve a high degree of management judgment. • Any deterioration or uncertainty in market conditions for mortgages and mortgage-related assets, as well as in broader U.S. and global economic and geopolitical conditions, could have a material adverse effect on us.
Biggest changeRisks Associated with Our Investments • Interest rate fluctuations and changes in the yield curve may have various negative effects on us and may lead to reduced earnings, increased volatility in our earnings, and reduction in our book value. • The impact of inflation and related monetary policy efforts may adversely affect our financial performance. • The nature of the mortgage loans we acquire and that underlie the RMBS we acquire exposes us to credit risk that could negatively affect the value of those assets and investments. • A significant portion of our investments are in the most subordinated first-loss position of the capital structure of Non-Agency RMBS, disproportionately exposing us to credit risk. • A significant portion of the RMBS we acquire through securitization is subject to the Risk Retention Rules. • We have a significant amount of investments in Non-Agency RMBS collateralized by mortgage loans that do not meet the prime loan underwriting standards and are subject to increased risk of losses. • Our investments in mortgage loans and MSRs depend on the performance of third-party mortgage servicers. • Falling rates may accelerate mortgage prepayments, reducing future servicing income and decreasing MSR valuations. • We may be required to fund servicing advances on delinquent loans with respect to our MSR investments, which could create liquidity demands, particularly during market downturns or periods of increased borrower distress. • Changes in prepayment rates could negatively affect the value of our investment portfolio, which could result in reduced earnings, book value impairments, and/or negatively affect the cash available for distribution to our stockholders. • A significant portion of our Non-Agency RMBS and residential loans are secured by properties in a small number of geographic areas and may be disproportionately affected by adverse events in those markets. • We may change our investment strategy, adjust our asset allocation, or enter other operating businesses or financing plans without stockholder consent. • Changes in the fair values of our assets, liabilities, and derivatives can reduce earnings, affect liquidity, increase earnings volatility, and create variability in our book value. • Our calculations of the fair value of the assets we own or consolidate as well as liabilities related to consolidated securitizations are based upon assumptions that are inherently subjective, and the failure to realize such valuations may have a material adverse effect on our financial condition. • Any deterioration or uncertainty in market conditions for mortgages and mortgage-related assets, as well as in broader U.S. and global economic and geopolitical conditions, could have a material adverse effect on us.
In response to the COVID-19 pandemic, wide-ranging legal protections for homeowners, including foreclosure moratoria and forbearance provisions, were enacted and extended multiple times including through the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act), which was signed into law on March 27, 2020, and rules and letters issued by the Federal Housing Agency and the CFPB.
In 2020, in response to the COVID-19 pandemic, wide-ranging legal protections for homeowners, including foreclosure moratoria and forbearance provisions, were enacted and extended multiple times including through the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act), which was signed into law on March 27, 2020, and rules and letters issued by the Federal Housing Agency and the CFPB.
Accordingly, our role as investment manager and advisor is subject to certain risks including, but not limited to: • the possibility that investors in a Discretionary Fund or a managed account might become bankrupt or otherwise be unable to meet their capital commitment obligations; • to the extent we were to become a general partner or limited partner in a new Discretionary Fund, the possibility that operating and/or management agreements applicable to such Discretionary Fund or a managed account may restrict our ability to transfer or liquidate our interest when we desire or on advantageous terms; • that our relationships with clients of our non-discretionary investment management and advisory services are generally contractual in nature and may be terminated (with or without cause) under the terms of the applicable agreements; • that our role as investment manager and advisor of a Discretionary Fund or a managed account is generally contractual in nature and may be terminated or dissolved under the terms of the applicable agreements, or we may be removed as the non-member manager of the general partner of the existing Discretionary Funds; • that our role as the general partner of any new Discretionary Fund is generally contractual in nature, and we may be removed as the general partner of any new Discretionary Fund under the terms of the applicable agreements; • that we may fail to manage conflicts of interests among the general partner and limited partners of Discretionary Funds, and their respective principals, officers, employees, members and affiliates, as well as any conflicts of interests involving our business outside of the Discretionary Funds or managed accounts; • that disputes between us and the investors in a Discretionary Fund or a managed account may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the investments owned by such Discretionary Fund or managed account to additional risk; • that by reason of being the general partner for new Discretionary Funds, non-member manager of the general partner for existing Discretionary Funds, or investment manager, we will be required to make various decisions and perform various tasks, including preparing disclosures, tax filings and financial reports, that could expose us to liability, including for claimed breaches of fiduciary duties; • that difficult market conditions could adversely affect a Discretionary Fund in many ways, including by negatively impacting its performance and reducing the ability of new Discretionary Funds to raise or deploy capital, thereby reducing assets under management and lowering management fee income and incentive-based income; • that SEC examination of one or more of our subsidiaries currently required to be registered as an investment adviser or relying adviser may uncover deficiencies and potentially subject us to enforcement proceedings and sanctions for violations, including censure or termination of SEC registration, litigation and reputational harm; and • that our business and financial condition may be materially adversely impacted by the loss of any of our key executives or other investment professionals.
Accordingly, our role as investment manager and advisor is subject to certain risks including, but not limited to: • the possibility that investors in a Discretionary Fund or a managed account might become bankrupt or otherwise be unable to meet their capital commitment obligations; • to the extent we were to become a general partner or limited partner in a new Discretionary Fund, the possibility that operating and/or management agreements applicable to such Discretionary Fund or a managed account may restrict our ability to transfer or liquidate our interest when we desire or on advantageous terms; • that our relationships with clients of our non-discretionary investment management and advisory services are concentrated with certain clients and are generally contractual in nature and may be terminated (with or without cause) under the terms of the applicable agreements; • that our role as investment manager and advisor of a Discretionary Fund or a managed account is generally contractual in nature and may be terminated or dissolved under the terms of the applicable agreements, or we may be removed as the non-member manager of the general partner of the existing Discretionary Funds; • that our role as the general partner of any new Discretionary Fund is generally contractual in nature, and we may be removed as the general partner of any new Discretionary Fund under the terms of the applicable agreements; • that we may fail to manage conflicts of interests among the general partner and limited partners of Discretionary Funds, and their respective principals, officers, employees, members and affiliates, as well as any conflicts of interests involving our business outside of the Discretionary Funds or managed accounts; • that disputes between us and the investors in a Discretionary Fund or a managed account may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the investments owned by such Discretionary Fund or managed account to additional risk; • that by reason of being the general partner for new Discretionary Funds, non-member manager of the general partner for existing Discretionary Funds, or investment manager, we will be required to make various decisions and perform various tasks, including preparing disclosures, tax filings and financial reports, that could expose us to liability, including for claimed breaches of fiduciary duties; • that difficult market conditions could adversely affect a Discretionary Fund in many ways, including by negatively impacting its performance and reducing the ability of new Discretionary Funds to raise or deploy capital, thereby reducing assets under management and lowering management fee income and incentive-based income; • that SEC examination of one or more of our subsidiaries currently required to be registered as an investment adviser or relying adviser may uncover deficiencies and potentially subject us to enforcement proceedings and sanctions for violations, including censure or termination of SEC registration, litigation and reputational harm; and • that our business and financial condition may be materially adversely impacted by the loss of any of our key executives or other investment professionals.
Pursuant to the statute, our Board of Directors has by resolution exempted business combinations between us and any other person, provided, that such business combination is first 34 approved by our Board of Directors (including a majority of our directors who are not affiliates or associates of such person). • Unsolicited Takeovers : The “unsolicited takeover” provisions of Maryland law, permit our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to any or all of five provisions, including a classified board, a two-thirds vote requirement for removing a director, a requirement that the number of directors be fixed only by vote of the directors, a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred, and majority requirement for the calling of a special meeting of stockholders.
Pursuant to the statute, our Board of Directors has by resolution exempted business combinations between us and any other person, provided, that such business combination is first approved by our Board of Directors (including a majority of our directors who are not affiliates or associates of such person). • Unsolicited Takeovers : The “unsolicited takeover” provisions of Maryland law, permit our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to any or all of five provisions, including a classified board, a two-thirds vote requirement for removing a director, a requirement that the number of directors be fixed only by vote of the directors, a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred, and majority requirement for the calling of a special meeting of stockholders.
Under Maryland law, no distributions on stock may be made if, after giving effect to the distribution, (i) the corporation would not be able to pay the indebtedness of the corporation as such indebtedness becomes due in the usual course of business or (ii) 35 except in certain limited circumstances when distributions are made from net earnings, the corporation’s total assets would be less than the sum of the corporation’s total liabilities plus, unless the charter provides otherwise (which our charter does, with respect to any outstanding series of preferred stock), the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution.
Under Maryland law, no distributions on stock may be made if, after giving effect to the distribution, (i) the corporation would not be able to pay the indebtedness of the corporation as such indebtedness becomes due in the usual course of business or (ii) except in certain limited circumstances when distributions are made from net earnings, the corporation’s total assets would be less than the sum of the corporation’s total liabilities plus, unless the charter provides otherwise (which our charter does, with respect to any outstanding series of preferred stock), the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution.
This restriction may discourage a tender offer or other transactions or a change in the composition of our Board of Directors or control that might involve a premium price for our shares or otherwise be in the best interests of our stockholders and any shares issued or transferred in violation of such restrictions being automatically transferred to a trust for a charitable beneficiary, thereby resulting in a forfeiture of the additional shares. • Our charter permits our Board of Directors to issue stock with terms that may discourage a third party from acquiring us.
This restriction 47 may discourage a tender offer or other transactions or a change in the composition of our Board of Directors or control that might involve a premium price for our shares or otherwise be in the best interests of our stockholders and any shares issued or transferred in violation of such restrictions being automatically transferred to a trust for a charitable beneficiary, thereby resulting in a forfeiture of the additional shares. • Our charter permits our Board of Directors to issue stock with terms that may discourage a third party from acquiring us.
Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends and the reduced corporate tax rate could cause certain non-corporate investors to perceive investments in REITs to be relatively 36 less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.
Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends and the reduced corporate tax rate could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.
A significant part of our business and growth strategy is to engage in various securitization transactions related to mortgage assets, and such transactions expose us to potentially material risks, including without limitation: • Financing at Unfavorable Terms Risk: Engaging in securitization transactions and other similar transactions generally require us to incur short-term debt on a recourse basis to finance the accumulation of residential mortgage 23 loans.
A significant part of our business and growth strategy is to engage in various securitization transactions related to mortgage assets, and such transactions expose us to potentially material risks, including without limitation: • Financing at Unfavorable Terms Risk: Engaging in securitization transactions and other similar transactions generally require us to incur short-term debt on a recourse basis to finance the accumulation of residential mortgage loans.
In addition, to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold some of our assets through our TRSs or other subsidiary corporations that will be subject to corporate-level income tax at regular corporate rates.
In addition, to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may originate or hold some of our assets through our TRSs or other subsidiary corporations that will be subject to corporate-level income tax at regular corporate rates.
In the event that short-term rates exceed longer-term rates, we could experience negative net interest spread and incur operating losses. 15 Additionally, when principal from our investments is returned (either through scheduled or unscheduled payments) and must be reinvested in new assets, the spread between the yields on new investments and our available borrowing rates may narrow.
In the event that short-term rates exceed longer-term rates, we could experience negative net interest spread and incur operating losses. Additionally, when principal from our investments is returned (either through scheduled or unscheduled payments) and must be reinvested in new assets, the spread between the yields on new investments and our available borrowing rates may narrow.
Such delays, problems or unintentional disclosures could damage our reputation, result in regulatory sanctions or liability to third parties and/or increase our costs and cause losses that have a material adverse impact on our business, financial results and financial condition. Cyber criminals are now deploying sophisticated techniques to conduct more advanced and persistent attacks.
Such delays, problems or unintentional 39 disclosures could damage our reputation, result in regulatory sanctions or liability to third parties and/or increase our costs and cause losses that have a material adverse impact on our business, financial results and financial condition. Cyber criminals are now deploying sophisticated techniques to conduct more advanced and persistent attacks.
If we fail to meet or satisfy any of these covenants or representations and warranties, we would be in default under these agreements and our lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable, enforce their 14 respective rights against collateral pledged under such agreements, and restrict our ability to make additional borrowings.
If we fail to meet or satisfy any of these covenants or representations and warranties, we would be in default under these agreements and our lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable, enforce their respective rights against collateral pledged under such agreements, and restrict our ability to make additional borrowings.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: • 85% of our REIT ordinary income for that year; • 95% of our REIT capital gain net income for that year; and • any undistributed taxable income from prior years.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: 45 • 85% of our REIT ordinary income for that year; • 95% of our REIT capital gain net income for that year; and • any undistributed taxable income from prior years.
As a result, we might have to limit our use 30 of advantageous hedging techniques or implement certain hedges through a TRS. This could increase the cost of our hedging activities or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.
As a result, we might have to limit our use of advantageous hedging techniques or implement certain hedges through a TRS. This could increase the cost of our hedging activities or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.
Government securities for purposes of the REIT 75% asset test or the qualification of income or gains from dispositions of TBAs as gains from the sale of real property or other qualifying income for purposes of the REIT 75% gross income test, we intend to treat the GAAP value of our TBAs under which we contract to purchase to-be-announced Agency RMBS (“TBAs”) as qualifying assets for purposes of the REIT 75% asset test, and we treat income and gains from our TBAs as qualifying income for purposes of the REIT 75% gross income test.
Government securities for purposes of the REIT 75% asset test or the qualification of income or gains from dispositions of TBAs as gains from the sale of real property or other qualifying income for purposes of the REIT 75% gross income test, we intend to treat the GAAP value of our TBAs under which we contract to purchase to-be-announced Agency RMBS as qualifying assets for purposes of the REIT 75% asset test, and we treat income and gains from our TBAs as qualifying income for purposes of the REIT 75% gross income test.
We can retain either an “eligible vertical interest” (which consists of at least 5% of each class of securities issued in the securitization), an “eligible horizontal residual interest” (which is the most subordinate class of securities with a fair market value of at least 5% of the aggregate credit risk) or a combination of both totaling 5% (the “Required Credit Risk”).
We can retain either an “eligible vertical interest” (which consists of at least 5% of each class of securities issued in the securitization), an “eligible horizontal residual interest” (which is the most 21 subordinate class of securities with a fair market value of at least 5% of the aggregate credit risk) or a combination of both totaling 5% (the “Required Credit Risk”).
We report the fair values of securities, loans, derivatives, and certain other assets on our Consolidated Statements of Financial Condition. In computing the fair values for these assets, we may make several market-based assumptions, including 19 assumptions regarding future interest rates, prepayment rates, discount rates, credit loss rates, and the timing of credit losses.
We report the fair values of securities, loans, derivatives, and certain other assets on our Consolidated Statements of Financial Condition. In computing the fair values for these assets, we may make several market-based assumptions, including assumptions regarding future interest rates, prepayment rates, discount rates, credit loss rates, and the timing of credit losses.
The cost and availability of the short-term debt we use to finance our mortgage loans before securitization impacts the profitability of our securitization transactions. This short-term debt cost is affected by several factors including its availability to us, its interest rate, its duration, and the percentage of our mortgage loans for which third parties are willing to provide short-term financing.
The cost and availability of the short-term debt we use to finance our mortgage loans before securitization impacts our profitability. This short-term debt cost is affected by several factors including its availability to us, its interest rate, its duration, and the percentage of our mortgage loans for which third parties are willing to provide short-term financing.
The price that investors in MBS will pay for securities issued in our securitization transactions also has a significant impact on the profitability of the transactions to us, and these prices are impacted by numerous market forces and factors including the 24 uncertainty, potential delinquencies, and lack of liquidity.
The price that investors in MBS will pay for securities issued in our securitization transactions also has a significant impact on the profitability of the transactions to us, and these prices are impacted by numerous market forces and factors including the uncertainty, potential delinquencies, and lack of liquidity.
Thus, we are subject to the risks associated with a third party’s failure to perform, including failure to perform due to reasons such as fraud, negligence, errors, miscalculations, or insolvency. We rely on third-party servicers to service and manage the mortgage loans we beneficially own and that underlie our RMBS.
Thus, we are subject to the risks associated with a third party’s failure to perform, including failure to perform due to reasons such as fraud, negligence, errors, miscalculations, or insolvency. We rely on third-party loan servicers to service and manage the mortgage loans we beneficially own and that underlie our RMBS.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our capital stock and our business in general. 33 At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our capital stock and our business in general. At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended.
The net 29 effect of these factors will be to lower our net interest income. If we fail to qualify for exemption from registration as an investment company, our ability to use leverage would be substantially reduced, and we would not be able to conduct our business as described.
The net effect of these factors will be to lower our net interest income. If we fail to qualify for exemption from registration as an investment company, our ability to use leverage would be substantially reduced, and we would not be able to conduct our business as described.
There can be no guarantee that we will have sufficient cash to pay dividends on any series of our capital stock. Our ability to pay dividends may be impaired if any of the risks described in this Item 1A “Risk Factors” section were to occur.
There can be no guarantee that we will have sufficient cash to pay dividends on any series of our capital stock. Our ability to pay dividends may be impaired if any of the risks described in this 49 Item 1A “Risk Factors” section were to occur.
If the interest income on the investments that we have purchased with borrowed funds fails to cover the interest expense of the related borrowings, we will 13 experience net interest losses and may experience net losses from operations. Such losses could be significant because of our leveraged structure.
If the interest income on the investments that we have purchased with borrowed funds fails to cover the interest expense of the related borrowings, we will experience net interest losses and may experience net losses from operations. Such losses could be significant because of our leveraged structure.
These federal, state and local legislative or regulatory actions that result in modifications of our outstanding mortgages, or interests in mortgages acquired by us either directly through consolidated trusts or through our 26 investments in RMBS, may adversely affect the value of, and returns on, such investments.
These federal, state and local legislative or regulatory actions that result in modifications of our outstanding mortgages, or interests in mortgages acquired by us either directly through consolidated trusts or through our investments in RMBS, may adversely affect the value of, and returns on, such investments.
Fair values can change rapidly and significantly, and changes can result from changes in interest rates, perceived risk, supply, demand, and actual and projected cash flows, prepayments, and credit performance. A decrease in fair value may not necessarily be the result of deterioration in future cash flows.
Fair values can change rapidly and significantly, and changes can result from changes in interest rates, perceived risk, credit spreads, supply, demand, and actual and projected cash flows, prepayments, and credit performance. A decrease in fair value may not necessarily be the result of deterioration in future cash flows.
Risks Related to Regulatory Matters, Accounting, and Our 1940 Act Exemption 27 Our business is subject to extensive regulation that may subject us to significant costs and compliance requirements, and there can be no assurance that we will satisfactorily comply with such regulations.
Risks Related to Regulatory Matters, Accounting, and Our 1940 Act Exemption Our business is subject to extensive regulation that may subject us to significant costs and compliance requirements, and there can be no assurance that we will satisfactorily comply with such regulations.
The ownership of Non-QMs subjects us to legal, regulatory and other risks, including those arising under federal consumer protection laws and regulations designed to regulate residential mortgage loan underwriting and originators’ lending processes, standards, and disclosures to borrowers.
The ownership of Non-QMs subjects us to legal, regulatory and other risks, including 20 those arising under federal consumer protection laws and regulations designed to regulate residential mortgage loan underwriting and originators’ lending processes, standards, and disclosures to borrowers.
Changes in the fair values of our assets, liabilities, and derivatives can have various negative effects on us, including reduced earnings, less liquidity, increased earnings volatility, and volatility in our book value. Fair values for our assets and liabilities, including derivatives, can be volatile and our revenue and income can be impacted by changes in fair values.
Changes in the fair values of our assets, liabilities, and derivatives can have various negative effects on us, including reduced earnings, less liquidity, increased earnings volatility, and variability in our book value. Fair values for our assets and liabilities, including derivatives, can be volatile and our revenue and income can be impacted by changes in fair values.
In particular, we generally must ensure that at the end of each calendar quarter at least 75% of the value of our total assets consists of cash, cash items, government securities and qualifying real estate assets, including certain mortgage loans and MBS.
In particular, we generally must ensure that at the end of each calendar quarter at least 75% of the value of our total assets consists of cash, cash items, government securities and qualifying 43 real estate assets, including certain mortgage loans and MBS.
Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not 42 relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
In addition, before the Sunset Date, we may not engage in any hedging transactions if 17 payments on the hedge instrument are materially related to the Required Credit Risk and the hedge position would limit our financial exposure to the Required Credit Risk.
In addition, before the Sunset Date, we may not engage in any hedging transactions if payments on the hedge instrument are materially related to the Required Credit Risk and the hedge position would limit our financial exposure to the Required Credit Risk.
To the extent any one sub-servicer counterparty services a significant 25 percentage of the loans with respect to which we own the servicing rights, the risks associated with our use of that sub-servicer are concentrated around this single sub-servicer counterparty.
To the extent any one sub-servicer counterparty services a significant percentage of the loans with respect to which we own the servicing rights, the risks associated with our use of that sub-servicer are concentrated around this single sub-servicer counterparty.
These restrictions may interfere with our ability to obtain financing or to engage in other business activities, which may have a significant negative impact on our business, financial condition, liquidity and results of operations.
These 18 restrictions may interfere with our ability to obtain financing or to engage in other business activities, which may have a significant negative impact on our business, financial condition, liquidity and results of operations.
In addition, through provisions in our charter and Bylaws unrelated to this statute, we (i) require, unless called by the chairman of our Board of Directors, our chief executive officer, our president or our Board of Directors, the request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at the meeting to call a special meeting of stockholders, (ii) require that the number of directors be fixed only by our Board of Directors, (iii) have a classified board and (iv) have a two-thirds vote requirement for the removal of a director.
Through provisions in our charter and bylaws unrelated to this statute, we (i) require, unless called by the chairman of our Board of Directors, our chief executive officer, our president or our Board of Directors, the request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at the meeting to call a special meeting of 48 stockholders, (ii) require that the number of directors be fixed only by our Board of Directors, (iii) have a classified board and (iv) have a two-thirds vote requirement for the removal of a director.
In addition, credit losses on residential real estate loans can occur for many reasons (many of which are beyond our control), including: fraud; poor underwriting; poor servicing practices; weak economic conditions; increases in payments required to be made by borrowers; declines in the value of homes; earthquakes, the effects of climate change (including flooding, drought, wildfire and severe weather), and other natural disaster events; uninsured property loss; borrower over-leveraging; costs of remediation of environmental conditions, such as indoor mold; changes in zoning or building codes and the related costs of compliance; acts of war or terrorism; pandemics; changes in legal protections for borrowers and other changes in law or regulation; and personal events affecting borrowers, such as reduction in income and job loss.
In addition, credit losses on residential real estate loans can occur for many reasons (many of which are beyond our control), including, but not limited to: fraud; poor underwriting; poor servicing practices; weak economic conditions; increases in payments required to be made by borrowers; declines in the value of homes; earthquakes, the effects of climate change (including flooding, drought, wildfire and severe weather), and other natural disaster events; uninsured property loss; borrower over-leveraging; costs of remediation of environmental conditions, such as indoor mold; changes in zoning or building codes and the related costs of compliance; acts of war or terrorism; pandemics; changes in legal protections for borrowers and other changes in law or regulation; and personal events affecting borrowers, such as reduction in income and job loss.
In addition to greater initial and periodic margin (collateral) requirements and additional transaction fees both by the swap execution facility and the clearinghouse, the swap transactions are now subjected to greater regulation by both the CFTC and the SEC.
In addition to greater initial and 35 periodic margin (collateral) requirements and additional transaction fees both by the swap execution facility and the clearinghouse, the swap transactions are now subjected to greater regulation by both the CFTC and the SEC.
Also, if the underlying properties have been overvalued by the originating appraiser or if the values subsequently decline resulting in less collateral available to satisfy interest and principal payments due on the related security, as the first-loss security holder, we may suffer a total loss of principal, followed by losses on the more senior securities (or other RMBS that we may own).
Also, if the underlying properties have been overvalued by the originating appraiser or if the values subsequently decline resulting in less collateral available to satisfy interest and principal payments due on the related security, as the first-loss security holder, we may suffer a total loss of our investment, followed by losses on the more senior securities (or other RMBS that we may own).
We 28 cannot assure you that we will be able to obtain all the licenses we need or that we would not experience significant delays in obtaining these licenses.
We cannot assure you that we will be able to obtain all the licenses we need or that we would not experience significant delays in obtaining these licenses.
Item 1A. Risk Factors You should carefully consider the following factors, together with all the other information included in this 2024 Form 10-K, in evaluating our company and our business. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected, and the value of our stock could decline.
Item 1A. Risk Factors You should carefully consider the following factors, together with all the other information included in this 2025 Form 10-K, in evaluating our company and our business. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected, and the value of our stock could decline.
Because repurchase agreements and warehouse facilities are short-term commitments of capital, lenders may respond to market conditions making it more difficult for us to renew or replace on a continuous basis our maturing short-term borrowings and have and may continue to impose more onerous conditions when rolling such financings.
Because repurchase agreements and warehouse facilities are often short-term commitments of capital, lenders may respond to market conditions by making it more difficult for us to renew or replace on a continuous basis our maturing short-term borrowings and have and may continue to impose more onerous conditions when rolling such financings.
We may change our investment strategy or asset allocation or enter other operating businesses or financing plans at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this 2024 Form 10-K.
We may change our investment strategy or asset allocation or enter other operating businesses or financing plans at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this 2025 Form 10-K.
These assumptions are inherently subjective and involve a high degree of management judgment, particularly for illiquid securities and other assets for which market prices are not readily determinable. These assumptions may be more difficult to calculate during times of severe market disruption in the mortgage, housing or related sectors.
These assumptions are inherently subjective and involve a high degree of management judgment, particularly for illiquid securities and other assets for which market prices are not readily determinable. These assumptions may be more difficult to calculate during times of severe market disruption in the mortgage, housing, rates or other financial market related sectors.
The occurrence of any of these risks could materially adversely impact our results of operations, financial condition, and business. Enhanced Non-QM Loan Risks .
The occurrence of any of these risks could materially adversely impact our results of operations, financial condition, and business. Non-QM Loan Risks .
Further discussion of the risk of our ownership and valuation of illiquid securities is set forth in the Risk Factors above and in this 2024 Form 10-K. Any deterioration or uncertainty in broader U.S. and global economic conditions could materially adversely affect our business and financial condition.
Further discussion of the risk of our ownership and valuation of illiquid securities is set forth in the Risk Factors above and in this 2025 Form 10-K. Any deterioration or uncertainty in broader U.S. and global economic conditions could materially adversely affect our business and financial condition.
In the future, we may form and manage new Discretionary Funds for which we may act as the general partner and investment manager.
In the future, we may form and manage new Discretionary Funds 32 for which we may act as the general partner and investment manager.
Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in this 2024 Form 10-K. Additionally, we may enter other operating businesses that may or may not be closely related to our current business.
Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in this 2025 Form 10-K. Additionally, we may enter other operating businesses that may or may not be closely related to our current business.
We expect to satisfy the 20% limitation discussed above and conduct transactions with any TRS on an arm's length basis. There can be no assurance, however, that we will be able to comply with the 20% limitation or to avoid application of the 100% excise tax.
We expect to satisfy the 25% limitation discussed above and conduct transactions with any TRS on an arm's length basis. There can be no assurance, however, that we will be able to comply with the 25% limitation or to avoid application of the 100% excise tax.
Our failure to appropriately manage or address conflicts of interest could damage our reputation and adversely affect our business, financial condition and results of operations. As we expand the number and scope of our business, we may confront potential conflicts of interest relating to our investment activities and the Discretionary Funds’ investment activities.
Our failure to appropriately manage or address conflicts of interest could damage our reputation and adversely affect our business, financial condition and results of operations. 33 As we expand the number of funds and scope of our business, we may confront potential conflicts of interest relating to our investment activities and the Discretionary Funds’ investment activities.
To the extent global economic conditions negatively affect the U.S. economy, they also could negatively affect the credit performance of the loans in our investment portfolio. Volatility or uncertainty in global or domestic political conditions also can significantly affect economic conditions and financial markets.
To the extent global economic conditions negatively affect the U.S. economy, they also could negatively affect the credit performance of the loans in our investment portfolio. Volatility or uncertainty in global or domestic political conditions also can significantly affect economic conditions and financial markets. Global or domestic political unrest could adversely affect economic conditions and financial markets.
For a description of the credit risk we are exposed to, see the Risk Factor below captioned “The nature of the mortgage loans we acquire and that underlie the RMBS we acquire, exposes us to credit risk that could negatively affect the value of those assets and investments.” In addition, many of our Non-Agency RMBS securities are first loss and subject to the Risk Retention Rules.
For a description of the credit risk we are exposed to, see the Risk Factor above captioned “The nature of the mortgage loans we acquire and that underlie the RMBS and MSRs we acquire exposes us to credit risk that could negatively affect the value of those assets and investments.” In addition, many of our Non-Agency RMBS securities are first loss and subject to the Risk Retention Rules.
Recent years have seen frequent and severe natural disasters in the U.S., including wildfires, hurricanes, high winds, severe flooding and mudslides, the frequency and intensity of which may be 18 indicative of the impact of climate change.
Recent years have seen frequent and severe natural disasters in the U.S., including wildfires, hurricanes, high winds, hail, severe flooding and mudslides, the frequency and intensity of which may be indicative of the impact of climate change.
Our calculations of the fair value of the assets we own or consolidate are based upon assumptions that are inherently subjective and involve a high degree of management judgment, and such assumptions may be more difficult to calculate during times of severe market disruption in the mortgage, housing or related sectors.
Our calculations of the fair value of the assets we own or consolidate are based upon assumptions that are inherently subjective and involve a high degree of management judgment, and such assumptions may be more difficult to calculate during times of severe market disruption in the mortgage, housing, rates or other financial market related sectors.
Changes in prepayment rates could negatively affect the value of our investment portfolio, which could result in reduced earnings or losses and negatively affect the cash available for distribution to our stockholders. There are seldom any restrictions on borrowers’ abilities to prepay their residential mortgage loans.
Changes in prepayment rates could negatively affect the value of our investment portfolio, which could result in reduced earnings, losses, book value impairments and/or negatively affect the cash available for distribution to our stockholders. There are seldom any restrictions on consumer borrowers’ abilities to prepay their residential mortgage loans.
We are required to obtain various state licenses to purchase mortgage loans in the secondary market and there is no assurance we will be able to obtain or maintain those licenses.
We may be required to obtain various state licenses to purchase mortgage loans in the secondary market and there is no assurance we will be able to obtain or maintain those licenses.
The staggered terms of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interests of our stockholders.
The classified terms of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interests of our stockholders.
The characteristics of hedging instruments present various concerns, including illiquidity, enforceability, and counterparty risks, which could adversely affect our business and results of operations. As indicated above, from time to time we enter into swaps. Entities entering into swaps are exposed to credit losses in the event of non-performance by counterparties to these transactions.
The characteristics of hedging instruments present various concerns, including illiquidity, enforceability, and counterparty risks, which could adversely affect our business and results of operations. As indicated above, from time to time we enter into various forms of hedge instruments. Entities entering into derivatives are exposed to credit losses in the event of non-performance by counterparties to these transactions.
In general, any material decline in the economy or significant problems in a particular real estate market would likely cause a decline in the value of residential properties securing the mortgages in that market, thereby increasing the risk of delinquency, default, and foreclosure of mortgage loans underlying our Non-Agency RMBS and residential loan investments and the risk of loss upon liquidation of these assets.
In general, any material decline in the economy or significant problems in a particular real estate market would likely cause a decline in the value of residential properties securing the mortgages in that market, thereby increasing the risk of delinquency, default, and foreclosure of mortgage loans underlying our investments and the risk of loss upon liquidation of these assets.
Thus, the performance of our Non-Agency RMBS that are backed by these types of loans could be correspondingly worse than those backed by prime mortgage loans especially during times of economic stress, which could materially adversely impact our results of operations, financial condition, and business. Greater General Credit Risks .
Thus, the performance of our Non-Agency RMBS that are backed by these types of loans could be correspondingly worse than those backed by other types of mortgage loan products, especially during times of economic stress, which could materially adversely impact our results of operations, financial condition, and business. Greater General Credit Risks .
For further information regarding our assets recorded at fair value see Note 5 to the consolidated financial statements within this 2024 Form 10-K. Use of different assumptions could materially affect our fair value calculations and our financial results and our actual experience may cause us to substantially revise our assumptions.
For further information regarding our assets recorded at fair value see Note 6 to the consolidated financial statements within this 2025 Form 10-K. Use of different assumptions could materially affect our fair value calculations and our financial results and our actual experience may cause us to substantially revise our assumptions.
While the likelihood that major mortgage finance system reform will be enacted in the short term remains uncertain, it is possible that the adoption of any such reforms could adversely affect the types of assets we can buy, the costs of these assets and our business operations.
While the likelihood that major mortgage finance system reform will be enacted in the short term or through administrative action remains uncertain, it is possible that the adoption of any such reforms could adversely affect the types of assets we can buy, the costs of these assets and our business operations.
We rely on third-party servicers to service the residential mortgage loans that we acquire through consolidated trusts and that underlie the MBS that we acquire.
We rely on third-party servicers to service the residential mortgage loans that we acquire through consolidated trusts and that underlie the RMBS that we acquire.
Any changes in regulatory and legal requirements, including changes in their interpretation and enforcement by lawmakers and regulators, could materially and adversely affect our business and our financial condition, liquidity, and results of operations. Our business is subject to extensive regulation by federal and state governmental authorities, self-regulatory organizations, and securities exchanges.
A ny changes in regulatory and 40 legal requirements, including changes in their interpretation and enforcement by lawmakers and regulators, could materially and adversely affect our business and our financial condition, liquidity, and results of operations. Our business is subject to extensive regulation by federal and state governmental authorities, self-regulatory organizations, and securities exchanges.
Rules issued by the Commodities Futures Trading Commission (the “CFTC”) that became effective in October 2012 require the clearing of all swap transactions through registered derivatives clearing organizations, or swap execution facilities, through standardized documents under which each swap counterparty transfers its position to another entity whereby the centralized clearinghouse effectively becomes the counterparty to each side of the swap.
Rules issued by the Commodity Futures Trading Commission (the “CFTC”) that became effective in October 2012 require, with limited exceptions, the clearing of all standardized swap transactions through registered derivatives clearing organizations, or swap execution facilities, through standardized documents under which each swap counterparty transfers its position to another entity whereby the centralized clearinghouse effectively becomes the counterparty to each side of the swap.
As of December 31, 2024, we had amounts outstanding under repurchase agreements with 13 separate lenders, including amounts at risk with Nomura Securities International, Inc. (“Nomura”), of 20% of our equity related to the collateral posted on secured financing agreements.
As of December 31, 2025, we had amounts outstanding under repurchase agreements with 20 separate lenders, including amounts at risk with Nomura Securities International, Inc. (“Nomura”), of 18% of our equity related to the collateral posted on secured financing agreements.
The operations acquired through the Palisades Acquisition are subject to certain of the same risks as our existing business.
The operations acquired through the HomeXpress Acquisition are subject to certain of the same risks as our existing business.
The departure of any of our executive officers or other key personnel, or our inability to attract, motivate and retain highly qualified e mployees at all levels of the firm in light of the intense competition for talent, could adversely affect our business, operating results or financial condition, diminish our investment opportunities, or weaken our relationships with lenders, counterparties and other parties important to our business and strategy.
The departure of any of our executive officers or other key personnel, or our inability to attract, motivate and retain highly qu alified employees at all levels of the firm in light of the intense competition for talent, could adversely affect our business, operating results or financial condition, diminish our investment opportunities, or weaken our relationships with lenders, counterparties and other parties important to our business and strategy.
In addition, if we purchased an investment at a premium, faster than expected prepayments would result in a faster than expected amortization of the premium paid, which would adversely affect our earnings. Conversely, if these investments were purchased at a discount, faster than expected prepayments would accelerate our recognition of income.
In addition, if we purchased an investment at a premium, faster than expected prepayments would result in a faster than expected amortization of the premium paid, which would adversely affect our earnings. Conversely, if these investments were purchased at a discount, slower than expected prepayments would reduce our recognition of the discount, which would adversely affect our earnings.
Also, we may not pledge our interest in any Required Credit Risk as collateral for any financing unless such financing is full recourse to us. We have financed our Required Credit Risk in full recourse transactions.
Also, we may not pledge our interest in any Required Credit Risk as collateral for any financing unless such financing is full recourse to us.
Competition may affect our ability to source our target assets at attractive prices and have a material adverse effect on our business, financial condition and results of operations. We operate in a highly competitive market for investment opportunities.
Competition may affect our ability to source our target assets at attractive prices and grow our investment management and advisory services, which may have a material adverse effect on our business, financial condition and results of operations. We operate in a highly competitive market for investment opportunities.
Because our assets, on average, bear interest based on longer-term rates than our borrowings, a flattening or inversion of the yield curve would tend to decrease—and has in recent years decreased—our net interest margin, net income, book value, and the market value of our net assets.
Because our assets, on average, bear interest based on longer-term rates than our borrowings, a flattening or inversion of the yield curve would tend to decrease our net interest margin, net income, book value, and the market value of our net assets.
Failure of residential mortgage loan originators or servicers to comply with the ability-to-repay laws and regulations could subject us, as an assignee or purchaser of these loans (or as an investor in securities backed by these loans), to monetary penalties assessed by the Consumer Financial Protection Bureau (the “CFPB”) through its administrative enforcement authority and by mortgagors through a private right of action against lenders or as a defense to foreclosure, including by recoupment or setoff of finance charges and fees collected, 16 and could result in rescission of the affected residential mortgage loans, which could adversely impact our business and financial results.
Failure of residential mortgage loan originators or servicers to comply with the CFPB’s Ability-to-Repay Rule could subject us, as an assignee or purchaser of these loans (or as an investor in securities backed by these loans), to monetary penalties assessed by the CFPB through its administrative enforcement authority and by mortgagors through a private right of action against lenders or as a defense to foreclosure, including by recoupment or setoff of finance charges and fees collected, and could result in rescission of the affected residential mortgage loans, which could adversely impact our business and financial results.
Our portfolio includes or may include investments in mortgage pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Congress may consider legislation that would significantly reform the country’s mortgage finance system, including, among other things, eliminating Freddie Mac and Fannie Mae and replacing them with a single new MBS insurance agency.
Our portfolio includes or may include investments in mortgage pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. The FHFA and Congress have considered various measures that would significantly reform the country’s mortgage finance system, including, among other things, eliminating Freddie Mac and Fannie Mae and replacing them with a single new MBS insurance agency.
During a period of rising or elevated interest rates (as has been the case in recent years), our borrowing costs generally will increase at a faster pace than our interest earnings on the leveraged portion of our investment portfolio, which could result in a decline in our net interest spread and net interest margin.
During a period of rising or elevated interest rates, our borrowing costs generally will increase at a faster pace than our interest earnings on the leveraged portion of our investment portfolio, which could result in a decline in our net interest spread and net interest margin.
Given our reliance on short-term borrowings to generate interest income, if the curve continues to flatten or even invert, or if the Federal Reserve finds itself falling behind on inflation and more aggressively tightens current projections, our results of operations, financial condition and business could be materially adversely impacted.
Given our reliance on short-term borrowings to generate interest income, if the yield curve were to flatten or even invert, or if the Federal Reserve finds itself falling behind on inflation and more aggressively tightens monetary policy, our results of operations, financial condition and business could be materially adversely impacted.
Two of our subsidiaries are currently required to be registered as an investment adviser or a relying adviser, subjecting us to extensive regulation that could adversely affect our ability to manage our business.
Two of our subsidiaries are currently required to be registered as an investment adviser or a relying adviser, subjecting us to extensive regulation and examination by the SEC that could adversely affect our ability to manage our business.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would no longer be required to distribute any of our net taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders. 31 Distributions may be treated as unrelated business taxable income to tax-exempt investors.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would no longer be required to distribute any of our net taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders.
With respect to the termination of an existing swap, the amount due would generally be equal to the unrealized loss of the open swap position with the hedging counterparty and could also include other fees and charges.
With respect to the termination of an existing derivative or hedge instrument, the amount due would generally be equal to the unrealized loss of the open position with the hedging counterparty and could also include other fees and charges.
These risks may be more acute during periods of heightened volatility in securities prices in the mortgage sector, such as those experienced in recent years, making it more difficult to raise capital accretive to our earnings, book value and overall results of operations.
These risks may be more acute during periods of heightened volatility in securities prices in the mortgage sector, making it more difficult to raise capital accretive to our earnings, book value and overall results of operations.
In addition, the occurrence of a natural disaster or a terrorist attack may cause a sudden decrease in the value of real estate in the area or areas affected and would likely reduce the value of the properties securing the mortgages collateralizing our Non-Agency RMBS or Loans held for investments.
In addition, the occurrence of a natural disaster or a terrorist attack may cause a sudden decrease in the value of real estate in the area or areas affected and would likely reduce the value of the properties securing the mortgages collateralizing our investments.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn December 2024, we completed the Palisades Acquisition and have aligned all new employees acquired through such acquisition with our cybersecurity training and governance framework, including the Incident Response Team, which now includes legacy Palisades employees.
Biggest changeIn October 2025, we completed the acquisition of HomeXpress and have initiated the process of integrating its cybersecurity function into our governance framework. This integration includes incorporating legacy HomeXpress personnel into our Incident Response Team.
We collaborate with service providers to help assess the sufficiency of their cybersecurity measures and require service providers to notify us promptly of cyber incidents that may affect our systems or data. 37 Lastly, we use technology to minimize our exposure to cybersecurity vulnerabilities and promote a safe information and communications systems environment.
We collaborate with service providers to help assess the sufficiency of their cybersecurity measures and require service providers to notify us promptly of cyber incidents that may affect our systems or data. Lastly, we use technology to minimize our exposure to cybersecurity vulnerabilities and promote a safe information and communications systems environment.
We periodically perform an independent third-party cybersecurity maturity assessment of our systems, policies and procedures focused on the NIST’s CSF and the SEC's Office of Compliance Inspections and Examinations cybersecurity guidance.
We periodically perform an independent third-party cybersecurity maturity assessment of our 51 systems, policies and procedures focused on the NIST’s CSF and the SEC’s Office of Compliance Inspections and Examinations cybersecurity guidance.
We test the resiliency of our systems through penetration and disaster recovery tests to continually improve our business continuity plan against an ever-changing threat landscape, create redundancies where appropriate for the protection of the Company’s assets, have engaged a security operations center to provide 24/7 monitoring of our environment to detect and respond to suspicious activities in the network, and have cybersecurity insurance.
We test the resiliency of our systems through penetration and disaster recovery tests to continually improve our business continuity plans against an ever-changing threat landscape, create redundancies where appropriate for the protection of the Company’s assets, have engaged a security operations center to provide 24/7 monitoring of our environment to detect and respond to suspicious activities in the network, and have cybersecurity insurance.
The Company’s CISO has a Bachelor of Engineering degree in information technology and more than 25 years of experience in the information technology space, including extensive experience leading our internal IT infrastructure and cybersecurity team.
The Company’s CISO has a Bachelor of Engineering degree in information technology and more than 28 years of experience in the information technology space, including extensive experience leading our internal IT infrastructure and cybersecurity team.
Refer to Item 7A, "Quantitative or Qualitative Disclosures about Market Risk - Risk Management" included in this 2024 Form 10-K for additional information on our enterprise risk management.
Refer to Item 7A, “Quantitative or Qualitative Disclosures about Market Risk - Risk Management” included in this 2025 Form 10-K for additional information on our enterprise risk management.
In addition, we maintain a cyber incident response plan to facilitate our response to cybersecurity incidents and formed an Incident Response Team composed of the Chief Information Security Officer & Head of IT Infrastructure (“CISO”), the Chief Credit & Risk Officer, the Chief Legal Officer, the Head of Operations, the Chief Compliance Officer of the RIA, the Head of Data Science, and the Associate General Counsel.
In addition, we maintain a cyber incident response plan to facilitate our response to cybersecurity incidents and formed an Incident Response Team composed of the Chief Information Security Officer & Head of IT Infrastructure (“CISO”), the Head of Portfolio Analytics, the Chief Legal Officer, the Head of Operations, the Chief Compliance Officer of Advisory Services, the Head of Data Science, the Associate General Counsel, and certain senior IT officers of HomeXpress.
We avail ourselves of third-party technologies and tools, including tools provided by the Cybersecurity and Infrastructure Security Agency (CISA), other government agencies and third-party cybersecurity experts.
We avail ourselves of third-party technologies and tools, including tools provided by the Cybersecurity and Infrastructure Security Agency (CISA), other government agencies and third-party cybersecurity experts. We have completed the integration of the Palisades IT assets into our established cybersecurity programs and information technology general controls.
As part of our cybersecurity risk management process, we also conduct third-party led tabletop exercises to practice and prepare to respond to a confirmed or suspected security incident and to highlight any areas for potential improvement. We also maintain policies, procedures and governance structures designed to help us identify, assess and respond to cybersecurity risks.
As part of our cybersecurity risk management process, we also conduct third-party led tabletop exercises to practice and prepare to respond to a confirmed or suspected security incident and to highlight any areas for potential improvement. Our cybersecurity vendors are increasingly incorporating artificial intelligence and machine learning technologies into their products to enhance threat detection, prevention, and response capabilities.
We have a written cybersecurity framework that closely aligns with the NIST’s CSF.
We also maintain policies, procedures and governance structures designed to help us identify, assess and respond to cybersecurity risks. We have a written cybersecurity framework that closely aligns with the NIST’s CSF.
We are conducting comprehensive risk assessments to identify additional steps that may be necessary to fully align the legacy Palisades information systems and cyber security practices with our systems and practices.
We are conducting comprehensive cybersecurity risk assessments to identify and prioritize remediation efforts and to align HomeXpress’ cybersecurity programs and IT general controls with our existing practices.
Added
These technologies are designed to analyze large volumes of data, identify anomalous behavior, and detect potential threats that may not be identifiable through signature-based or rules-based approaches alone.
Added
While AI-enabled tools may improve the speed and effectiveness of threat identification and response, their effectiveness depends on the quality of underlying data, model tuning, and ongoing oversight, and such tools may not prevent all cybersecurity incidents. We utilize AI-enabled security capabilities as part of our broader, layered cybersecurity program, in combination with human review and established controls.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs a result of the Palisades Acquisition, we have acquired leases on spaces located at 6001 Bold Ruler Way, Suite 110, Austin, Texas 78746, which runs through December 2026, 401 South 1st Street, Suite 850, Austin, Texas 78704, which runs through March 2035, and 909 Davis Street, Ste 500, Evanston, Illinois 60201, which runs through June 2025. Item 3.
Biggest changeIn addition, we have leases through November 2026, for our off-site back-up facilities and data centers located in Wappingers Falls, New York and Norwalk, Connecticut. 52 As a result of the Palisades acquisition in December 2024, we acquired leases on spaces located at 6001 Bold Ruler Way, Suite 110, Austin, Texas 78746, which runs through December 2026, 401 South 1st Street, Suite 850, Austin, Texas 78704, which runs through March 2035, and 909 Davis Street, Ste 500, Evanston, Illinois 60201, which runs through August 2029.
Item 2. Properties As of December 31, 2024, we do not own any property. Our corporate headquarters is located in leased space at 630 Fifth Avenue, Ste 2400, New York, New York 10111, telephone (212) 626-2300. Our office lease expires in January 2027. We believe that this space is suitable and adequate for our current needs.
Item 2. Properties As of December 31, 2025, we do not own any property. Our corporate headquarters is located in leased space at 630 Fifth Avenue, Ste 2400, New York, New York 10111, telephone (212) 626-2300. Our office lease expires in January 2027. We believe that this space is suitable and adequate for our current needs.
Removed
In addition, we have leases through November 2026, for our off-site back-up facilities and data centers located in Wappingers Falls, New York and Norwalk, Connecticut.
Added
As a result of the HomeXpress Acquisition, we have acquired leases for HomeXpress’ two primary facilities located in 1936 E Deere Ave, Suite 200, Santa Ana, California 92705, and 4902 Eisenhower Blvd, Suite 155, Tampa, Florida , 33634. HomeXpress’ corporate office is in Santa Ana, California.
Added
In 2025, HomeXpress renewed its Santa Ana, California lease and extended it to September 2027. HomeXpress’ lease for Tampa, Florida is active through August 2029. Our Investment Portfolio segment utilizes the New York City, Wappingers Falls, Norwalk, Austin, and Evanston offices and facilities. Our Residential Origination segment utilizes the Santa Ana and Tampa offices. Item 3. Legal Proceedings None.
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Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn January 2024, the Company's Board of Directors updated the authorization to include the Company's preferred stock into the Repurchase Program and increased the authorization by $33 million back up to $250 million. Such authorization does not have an expiration date, and at present, there is no intention to modify or otherwise rescind such authorization.
Biggest changeSuch authorization does not have an expiration date, and at present, there is no intention to modify or otherwise rescind such authorization.
The program does not obligate the Company to acquire any specific number of shares, and all repurchases will be made in accordance with Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The company did not repurchase any of its common stock and preferred stock during the year ended December 31, 2024.
The program does not obligate the Company to acquire any specific number of shares, and all repurchases will be made in accordance with Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The company did not repurchase any of its common stock and preferred stock during the year ended December 31, 2025.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock began trading publicly on the NYSE under the trading symbol “CIM” on November 16, 2007. As of January 31, 2025, we had 80,922,573 shares of common stock issued and outstanding which were held by 167 holders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock began trading publicly on the NYSE under the trading symbol “CIM” on November 16, 2007. As of January 31, 2026, we had 83,402,526 shares of common stock issued and outstanding which were held by 167 holders of record.
The graph and table assume that $100 was invested in our common stock and each of the two other indices on December 31, 2019. 39 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Chimera 100 57 92 39 40 41 S&P 500 Index 100 118 152 125 157 197 iShares Mortgage Real Estate ETF 100 79 92 67 77 76 The information in the share performance graph and table has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness can be guaranteed.
The comparison is for the period from December 31, 2020 to December 31, 2025 and assumes the reinvestment of dividends. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Chimera 57 92 39 40 41 41 S&P 500 Index 118 152 125 157 197 232 iShares Mortgage Real Estate ETF 79 92 67 77 76 86 The information in the share performance graph and table has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness can be guaranteed.
Share Performance Graph The following graph and table set forth certain information comparing the yearly percentage change in cumulative total return on our common stock to the cumulative total return of the Standard & Poor’s Composite-500 Stock Index or S&P 500 Index, and the iShares Mortgage Real Estate ETF, an industry index of mortgage REITs.
The approximate dollar of shares that may yet to be purchased under the share repurchase program was $250 million as of December 31, 2025. 53 Share Performance Graph The following graph and table set forth certain information comparing the yearly percentage change in cumulative total return on our common stock to the cumulative total return of the Standard & Poor’s Composite-500 Stock Index or S&P 500 Index, and the iShares Mortgage Real Estate ETF, an industry index of mortgage REITs.
Our Board of Directors declared dividends of $1.42 and $2.10 per share during 2024 and 2023, respectively. Purchases of Equity Securities In June 2023, the Company's Board of Directors increased the authorization of the Company's share repurchase program, or the Repurchase Program, by $73 million to $250 million.
Our Board of Directors declared dividends of $1.48 and $1.42 per share during 2025 and 2024, respectively. Purchases of Equity Securities In January 2024, the Company's Board of Directors updated the authorization to include the Company's preferred stock into the Repurchase Program and increased the authorization by $33 million back up to $250 million.
Removed
The approximate dollar of shares that may yet to be purchased under the share repurchase program was $250 million as of December 31, 2024.
Removed
The comparison is for the period from December 31, 2019 to December 31, 2024 and assumes the reinvestment of dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(2) Calculated based on reported losses to date, utilizing widest data set available (i.e., life-time losses, 12-month loss, etc.) December 31, 2023 Principal or Notional Value at Period-End (dollars in thousands) Weighted Average Amortized Cost Basis Weighted Average Fair Value Weighted Average Coupon Weighted Average Yield at Period-End (1) Weighted Average 3 Month Prepay Rate at Period-End Weighted Average 12 Month Prepay Rate at Period-End Weighted Average 3 Month CDR at Period-End Weighted Average 12 Month CDR at Period-End Weighted Average Loss Severity (2) Weighted Average Credit Enhancement Non-Agency MBS Senior $ 1,073,632 $ 45.69 $ 62.98 5.7 % 17.3 % 4.1 % 5.0 % 1.5 % 1.8 % 32.2 % 2.6 % Subordinated $ 583,049 $ 50.92 $ 47.49 3.3 % 6.7 % 4.6 % 5.7 % 0.2 % 0.9 % 18.4 % 6.5 % Interest-only $ 2,874,680 $ 5.49 $ 3.16 0.5 % 4.2 % 4.5 % 5.0 % 0.9 % 1.0 % 24.9 % 1.9 % Agency RMBS Interest-only $ 392,284 $ 4.90 $ 3.83 0.1 % 5.7 % 8.6 % 9.4 % N/A N/A N/A N/A Agency CMBS Project loans $ 86,572 $ 101.44 $ 91.46 4.0 % 3.8 % — % — % N/A N/A N/A N/A Interest-only $ 478,239 $ 1.62 $ 1.73 0.5 % 8.2 % 0.3 % 1.0 % N/A N/A N/A N/A Loans held for investment $ 12,028,480 $ 98.35 $ 94.90 5.7 % 5.4 % 6.5 % 6.5 % 0.6 % 0.6 % 23.9 % N/A (1) Bond Equivalent Yield at period-end.
Biggest changeDecember 31, 2025 Principal or Notional Value at Period-End (dollars in thousands) Weighted Average Amortized Cost Basis Weighted Average Fair Value Weighted Average Coupon Weighted Average Yield at Period-End (1) Weighted Average 3 Month Prepay Rate at Period-End Weighted Average 12 Month Prepay Rate at Period-End Weighted Average 3 Month CDR at Period-End Weighted Average 12 Month CDR at Period-End Weighted Average Loss Severity (2) Weighted Average Credit Enhancement Non-Agency RMBS Senior $ 852,887 $ 42.78 $ 59.21 5.7 % 20.3 % 4.5 % 4.6 % 2.4 % 2.2 % 23.6 % 1.1 % Subordinated 453,269 48.99 51.47 4.2 % 9.3 % 8.7 % 8.3 % 1.6 % 0.8 % 46.6 % 4.7 % Interest-only 2,428,976 6.03 3.25 0.8 % 4.4 % 5.1 % 5.1 % 1.4 % 1.2 % 43.5 % — % Agency RMBS Pass-through 3,096,299 97.79 99.52 5.0 % 5.3 % 9.6 % 6.3 % N/A N/A N/A N/A CMO 330,871 99.94 100.31 5.1 % 5.1 % 18.7 % 12.3 % N/A N/A N/A N/A Interest-only 367,866 5.07 4.04 0.6 % 6.5 % 7.8 % 8.7 % N/A N/A N/A N/A Agency CMBS Project loans 39,693 101.52 81.98 3.4 % 3.3 % — % — % N/A N/A N/A N/A Interest-only 123,375 2.67 2.11 0.7 % 13.0 % — % — % N/A N/A N/A N/A Loans held for investment Re-performing Loans 8,946,869 97.86 98.21 5.2 % 5.5 % 6.7 % 6.6 % 0.6 % 0.4 % 34.4 % 9.3 % Prime Loans 386,617 90.91 94.50 4.3 % 5.9 % 5.9 % 4.1 % — % — % 37.8 % — % Investor Loans 569,775 102.11 104.20 7.5 % 7.1 % 18.2 % 12.9 % — % — % 32.4 % 12.4 % Business Purpose Loans 85,339 99.50 96.45 8.4 % 9.0 % 25.2 % 30.5 % 0.4 % 0.5 % 14.1 % — % (1) Bond Equivalent Yield at period-end.
Weighted Average Yield is calculated using each investment's respective amortized cost.
Weighted Average Yield is calculated using each investment's respective amortized cost.
However, if our cash resources are insufficient to satisfy our liquidity requirements, we may sell additional investments, reduce our dividends, issue debt or additional common or preferred equity securities to meet our liquidity needs.
However, if our cash resources are insufficient to satisfy our liquidity requirements, we may sell additional investments, reduce our dividends, or issue debt or additional common or preferred equity securities to meet our liquidity needs.
The excluded amounts do not include any normal, recurring compensation paid to our employees. Transaction expenses are primarily comprised of costs only incurred at the time of execution of our securitizations, certain structured secured financing agreements, and business combination transactions and include costs such as underwriting fees, legal fees, diligence fees, accounting fees, bank fees and other similar transaction-related expenses.
The excluded amounts do not include any normal, recurring compensation paid to our employees. 74 Transaction expenses are primarily comprised of costs only incurred at the time of execution of our securitizations, certain structured secured financing agreements, and business combination transactions and include costs such as underwriting fees, legal fees, diligence fees, accounting fees, bank fees and other similar transaction-related expenses.
In addition, when financing assets using the standard form of SIFMA Master Repurchase Agreements, the counterparty to the agreement typically nets its exposure to us on all outstanding repurchase agreements and issues margin calls if movement of the fair values of the assets in the aggregate exceeds their allowable exposure to us.
In addition, when financing assets using the standard form of SIFMA Master Repurchase Agreements, the counterparty to the agreement typically 82 nets its exposure to us on all outstanding repurchase agreements and issues margin calls if movement of the fair values of the assets in the aggregate exceeds their allowable exposure to us.
Critical accounting policies are described in this section. An accounting policy is considered critical if it requires management to make assumptions or judgments about matters that are 65 highly uncertain at the time the accounting estimate was made or require significant management judgment in interpreting the accounting literature.
Critical accounting policies are described in this section. An accounting policy is considered critical if it requires management to make assumptions or judgments about matters that are highly uncertain at the time the accounting estimate was made or require significant management judgment in interpreting the accounting literature.
We are not obligated to provide any financial support to these VIEs. 67 Our Consolidated Statements of Financial Condition separately present: (i) our direct assets and liabilities, and (ii) the assets and liabilities of our consolidated securitization vehicles net of intercompany eliminations representing securities from the securitization trusts retained by us.
We are not obligated to provide any financial support to these VIEs. Our Consolidated Statements of Financial Condition separately present: (i) our direct assets and liabilities, and (ii) the assets and liabilities of our consolidated securitization vehicles net of intercompany eliminations representing securities from the securitization trusts retained by us.
Pursuant to the terms of the Sales Agreements, we may offer and sell shares of our common stock, having an aggregate offering price of up to $500 million from time to time in “at the market offerings” through any of the Sales Agents under the Securities Act.
Pursuant to the terms of the Sales Agreements, we may offer and sell shares of our common stock, having an aggregate offering price of up to $500 million from time to time in “at the market offerings” through any of the sales agents under the Securities Act of 1933.
The determination of the baseline, the market expectation, requires significant judgment. To corroborate that the estimates of fair values generated by these internal models are reflective of current market prices, we compare the fair values generated by the model to non-binding independent prices provided by an independent third-party pricing service.
The determination of the baseline and the market expectation, requires significant judgment. To corroborate that the estimates of fair values generated by these internal models are reflective of current market prices, we compare the fair values generated by the model to non-binding independent prices provided by an independent third-party pricing service.
These costs are all incurred prior to or at the execution of the transaction and do not recur. Recurring expenses, such as servicing fees, custodial fees, trustee 53 fees and other similar ongoing fees are not excluded from earnings available for distribution.
These costs are all incurred prior to or at the execution of the transaction and do not recur. Recurring expenses, such as servicing fees, custodial fees, trustee fees and other similar ongoing fees are not excluded from Earnings available for distribution.
Our principal sources of capital and funds for additional investments primarily include earnings, principal paydowns and sales from our investments, borrowings under securitizations and re-securitizations, secured financing agreements and other financing facilities including warehouse facilities, and proceeds from equity or other securities offerings.
Our principal sources of capital and funds for additional investments primarily include earnings, principal paydowns and sales from our investments, borrowings under securitizations and re-securitizations, secured financing agreements and other financing facilities, including warehouse facilities, and proceeds from equity or other securities 80 offerings.
In 2022, we entered into separate Distribution Agency Agreements (the “Existing Sales Agreements”) with each of Credit Suisse Securities (USA) LLC, JMP Securities LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and RBC Capital Markets, LLC (the “Existing Sales Agents”).
In 2022, we entered into separate Distribution Agency Agreements (the “Existing Sales Agreements”) with each of Credit Suisse Securities (USA) LLC, JMP Securities LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and RBC Capital Markets, LLC.
We believe that excluding these costs is useful to investors as it is generally consistent with our peer group’s treatment of these costs in their non-GAAP measures presentation, mitigates period to period comparability issues tied to the timing of securitization and structured finance transactions, and is consistent with the accounting for the deferral of debt issue costs prior to the fair value election option made by us.
We believe that excluding these costs is useful to investors as it is generally consistent with our peer group’s treatment of these costs in their non-GAAP measures presentation, mitigates period to period comparability issues tied to the timing of securitization and structured finance transactions, and is consistent with the accounting for the deferral of debt issuance costs prior to the fair value election option made by us.
For VIEs’ that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIEs’ economic performance may be determined by an entity’s involvement with the design of the VIE. Our Consolidated Statements of Financial Condition contain the assets and liabilities related to 41 consolidated variable interest entities or VIEs.
For VIEs’ that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIEs’ economic performance may be determined by an entity’s involvement with the design of the VIE. Our Consolidated Statements of Financial Condition contain the assets and liabilities related to 36 consolidated variable interest entities or VIEs.
The RMBS re-securitization transactions contain Non-Agency RMBS comprised of primarily first lien mortgages of 2005-2007 vintages. Our determination to consolidate these 41 VIEs was significantly influenced by management’s judgment related to the activities that most significantly impact the economic performance of these entities and the identification of the party with the power over such activities.
The RMBS re-securitization transactions contain Non-Agency RMBS comprised of primarily first lien mortgages of 2005-2007 vintages. Our determination to consolidate these 36 VIEs was significantly influenced by management’s judgment related to the activities that most significantly impact the economic performance of these entities and the identification of the party with the power over such activities.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this 2024 Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this 2025 Form 10-K, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Long Term Debt Expense During the second quarter of 2024, we issued $65 million aggregate principal amount of 9.00% unsecured senior notes due 2029 that pay quarterly interest. After deducting the underwriting discount and other debt issuance costs, we received approximately $62 million of proceeds.
Long Term Debt Expense During the second quarter of 2024, we issued $65 million aggregate principal amount of 9.00% unsecured senior notes due 2029 that pay quarterly interest. After deducting the underwriting discount and other debt issuance costs, we received approximately $251 million of proceeds.
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 interest rate swaps, which is presented as a part of Net gains (losses) on derivatives in our Consolidated Statements of Operations.
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.
For the PSU awards granted during the year ended December 31, 2024, and 2023, the final number of shares awarded will be between 0% and 200% of the PSUs granted based equally on the Company Economic Return and share price performance compared to a peer group.
For the PSU awards granted during the year ended December 31, 2025, and 2024, the final number of shares awarded will be between 0% and 200% of the PSUs granted based equally on the Company Economic Return and share price performance compared to a peer group.
Capital Expenditure Requirements At December 31, 2024 and December 31, 2023, we had no material commitments for capital expenditures. Dividends To maintain our qualification as a REIT, we must pay annual dividends to our stockholders of at least 90% of our taxable income (subject to certain adjustments).
Capital Expenditure Requirements At December 31, 2025 and December 31, 2024, we had no material commitments for capital expenditures. Dividends To maintain our qualification as a REIT, we must pay annual dividends to our stockholders of at least 90% of our taxable income (subject to certain adjustments).
Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under “Risk Factors” in this 2024 Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under “Risk Factors” in this 2025 Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
We believe these non-MTM and limited MTM facilities significantly reduce our financing risks. See Note 5 to our Consolidated Financial Statements for a discussion on how we determine the fair values of the RMBS collateralizing our secured financing agreements.
We believe these non-MTM and limited MTM facilities significantly reduce our financing risks. See Note 6 to our consolidated financial statements for a discussion on how we determine the fair values of the RMBS collateralizing our secured financing agreements.
In February 2023, we amended the Existing Sales Agreements and entered into separate Distribution Agency Agreements (together with the Existing Sales Agreements, as amended, the “Sales Agreements”) with J.P. Morgan Securities LLC and UBS Securities LLC (replacing Credit Suisse Securities LLC) to include J.P.
In February 2023, we amended the Existing Sales Agreements and entered into separate Distribution Agency Agreements (together with the Existing Sales Agreements, as amended, the “Sales Agreements”) with J.P. Morgan Securities LLC and UBS Securities LLC (replacing Credit Suisse Securities LLC) to include J.P. Morgan Securities LLC and UBS Securities LLC as additional sales agents.
To corroborate that the estimates of fair values generated by these internal models are 66 reflective of current market prices, we compare the fair values generated by the model to non-binding independent prices provided by an independent third-party pricing services.
To corroborate that the estimates of fair values generated by these internal models are 89 reflective of current market prices, we compare the fair values generated by the model to non-binding independent prices provided by an independent third-party pricing services.
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.
We believe this presentati on 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.
On September 30, 2025, all 10,400,000 issued and outstanding shares of Series C Preferred Stock with an outstanding liquidation preference of $260 million will become callable at a redemption price equal to the liquidation preference plus accrued and unpaid dividends through, but not including the redemption date.
On September 30, 2025, all 10,400,000 issued and outstanding shares of Series C Preferred Stock with an outstanding liquidation preference of $260 million became callable at a redemption price equal to the liquidation preference plus accrued and unpaid dividends through, but not including, the redemption date.
Compensation expense will be recognized on a straight-line basis over the three-year vesting period based on an estimate of the Company Economic Return and share price performance in relation to the entities in the peer group and will be adjusted each period based on our best estimate of the actual number of shares awarded.
Compensation expense will be recognized on a straight-line basis over the three-year vesting period based on an es timate of our Economic Return and share price performance in relation to the entities in the peer group and will be adjusted each period based on our best estimate of the actual number of shares awarded.
In light of the applicability of the Act to the aforementioned preferred stock, we believe, given all of the information available to the us to date, that three-month CME Term SOFR plus the applicable tenor spread adjustment of 0.26161% per annum have automatically replaced, or will automatically replace, three-month LIBOR as the reference rate for calculations of the dividend rate payable on the relevant preferred stock for dividend periods from and after (i) March 30, 2024, in the case of the Series B Preferred Stock, (ii) September 30, 2025, in the case of the Series C Preferred Stock, and (iii) March 30, 2024, in the case of the Series D Preferred Stock.
In light of the applicability of the Act to the aforementioned preferred stock, we believe, given all of the information available to us to date, that three-month CME Term SOFR plus the applicable tenor spread adjustment of 0.26% per annum have automatically replaced three-month LIBOR as the reference rate for calculations of the dividend rate payable on the relevant preferred stock for dividend periods from and after (i) March 30, 2024, in the case of the Series B Preferred Stock, (ii) September 30, 2025, in the case of the Series C Preferred Stock, and (iii) March 30, 2024, in the case of the Series D Preferred Stock.
The notes to our consolidated financial statements describe our direct assets and liabilities and the assets and liabilities of our consolidated securitization vehicles. See Note 9 to our consolidated financial statements for additional information related to our investments in VIEs.
The notes to our consolidated financial statements describe our direct assets and liabilities and the assets and liabilities of our consolidated securitization vehicles. See Note 10 to our consolidated financial statements for additional information related to our investments in VIEs.
Our three-year Company Economic Return is equal to our change in book value per common share plus common stock dividends. Share price performance equals change in share price plus common stock dividends.
Our three-year Company Economic Return is equal to the Company’s change in book value per common share plus common stock dividends. Share price performance equals change in share price plus common stock dividends.
For employees who are retirement eligible, defined as years of service to us plus age that is equal to or greater than 65, the service period is considered to be fulfilled and all grants are expensed immediately.
For employees who are retirement elig ible, defined as years of service to us plus age that is equal to or greater than 65, the service period is considered to be fulfilled and all grants are expensed immediately.
Servicing and Asset Manager Fee Expense The servicing fees and asset manager expenses were $30 million and $33 million for the year ended December 31, 2024 and December 31, 2023, respectively. These servicing fees are primarily related to the servicing costs of the whole loans held in consolidated securitization vehicles and are paid from interest income earned by the VIEs.
Servicing and Asset Manager Fee Expense Servicing fees and asset manager expenses were $28 million and $30 million for the year ended December 31, 2025 and December 31, 2024, respectively. These servicing fees are primarily related to the servicing costs of the whole loans held in consolidated securitization vehicles and are paid from interest income earned by the VIEs.
To minimize the risk of margin calls, as of December 31, 2024, we have entered into $853 million of financing arrangements for which the collateral cannot be adjusted as a result of changes in market value, minimizing the risk of a margin call as a result in price volatility. We refer to these agreements as non-MTM facilities.
To minimize the risk of margin calls, as of December 31, 2025, we have entered into $890 million of financing arrangements for which the collateral cannot be adjusted as a result of changes in market value, minimizing the risk of a margin call as a result in price volatility. We refer to these agreements as non-MTM facilities.
In addition we have entered into certain secured financing agreements that are not subject to additional margin requirement until the drop in fair value of collateral is greater than a threshold. We refer to these agreements as limited MTM facilities. As of December 31, 2024 we have $512 million of limited MTM facilities.
In addition we have entered into certain secured financing agreements that are not subject to additional margin requirement until the drop in fair value of collateral is greater than a threshold. We refer to these agreements as limited MTM facilities. As of December 31, 2025 we have $402 million of limited MTM facilities.
We include our secured financing agreements, long term debt, and securitized debt in the numerator of our leverage ratio and stockholders’ equity as the denominator. At December 31, 2024, we had secured financing agreements with 13 counterparties. All of our secured financing agreements are secured by Agency MBS, Non-Agency RMBS and Loans held for investment and cash.
We include our secured financing agreements, long term debt, and securitized debt in the numerator of our leverage ratio and stockholders’ equity as the denominator. At December 31, 2025, we had secured financing agreements with 20 counterparties. All of our secured financing agreements are secured by Agency MBS, Non-Agency RMBS and Loans held for investment and cash.
At December 31, 2024, the weighted average haircut on our remaining secured financing agreements collateralized by Agency RMBS was 5.1%, Agency CMBS was 5.5%, and Non-Agency RMBS and Loans held for investment was 26.0%.
At December 31, 2024, the weighted average haircut on the Company's secured financing agreements collateralized by Agency RMBS was 5.1%, Agency CMBS was 5.5% and Non-Agency RMBS and Loans held for investment was 26.0%.
Due to the non-recourse nature of these VIEs our net exposure to loss from investments in these entities is limited to our retained beneficial interests. At December 31, 2024, we consolidated 39 residential mortgage loan securitizations and 2 RMBS re-securitization transactions which are VIEs. The residential mortgage loan securitizations contain jumbo prime and Non-QM residential mortgage loans.
Due to the non-recourse nature of these VIEs our net exposure to loss from investments in these entities is limited to our retained beneficial interests. 90 At December 31, 2025, we consolidated 34 residential mortgage loan securitizations and 2 RMBS re-securitization transactions which are VIEs. The residential mortgage loan securitizations contain jumbo prime and Non-QM residential mortgage loans.
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. With the Palisades Acquisition, we have embarked on our strategy of enhancing returns to our shareholders through diversification of revenue from fee-based income.
We also intend to look at opportunities to acquire additional MSRs, which we believe will help hedge our loan portfolio, as well as provide a diverse source of income for our dividends. With the HomeXpress and Palisades acquisitions, we have embarked on our strategy of enhancing returns to our shareholders through diversification of revenue from fee-based income.
This section of the 2024 Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
This section of the 2025 Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
We granted 245 thousand RSU awards during the year ended December 31, 2024 with a grant date fair value of $5 million for the 2024 performance year. We granted 333 thousand RSU awards during the year ended December 31, 2023 with a grant date fair value of $6 million for the 2023 performance year.
We granted 245 thousand RSU awards during the year ended December 31, 2024 with a grant date fair value of $5 million for the 2024 performance year.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Item 15 of this 2024 Form 10-K. The discussion may contain certain forward-looking statements that involve risks and uncertainties.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Part IV of this 2025 Form 10-K. The discussion may contain certain forward-looking statements that involve risks and uncertainties.
Not included in the table above are the unfunded construction loan commitments of $5 million as of December 31, 2024 and December 31, 2023. We expect the majority of these commitments will be paid within one year and are reported under Payable for investments purchased in our Consolidated Statements of Financial Condition.
Not included in the tables above are the unfunded construction loan commitments of $3 million and $5 million as of December 31, 2025 and December 31, 2024. We expect the majority of these commitments will be paid within one year and are reported under Payable for investments purchased in our Consolidated Statements of Financial Condition.
We delineate between (1) Agency MBS and (2) Non-Agency RMBS as follows: The Agency MBS are mortgage pass-through certificates, CMOs, and other RMBS representing interests in or obligations backed by pools of residential mortgage loans issued or guaranteed as to principal and/or interest repayment by agencies of the U.S.
Our investments in MBS includes investments in both Agency MBS and Non-Agency MBS. We delineate between (1) Agency MBS and (2) Non-Agency RMBS. The Agency MBS are mortgage pass-through certificates, CMOs, and other RMBS representing interests in or obligations backed by pools of residential mortgage loans issued or guaranteed as to principal and/or interest repayment by agencies of the U.S.
Our estimates are deemed to be significant to the fair value measurement process, which renders the resulting Non-Agency fair value estimates Level 3 inputs in the fair value hierarchy. Level 3 assets represent approximately 93% and 97% of total assets measured at fair value on a recurring basis as of December 31, 2024 and 2023, respectively.
Our estimates are deemed to be significant to the fair value measurement process, which renders the resulting Non-Agency fair value estimates Level 3 inputs in the fair value hierarchy. Level 3 assets represent approximately 70% of total assets measured at fair value on a recurring basis as of December 31, 2025 and 2024, respectively.
The weighted average maturities of the secured financing agreements with Nomura were 108 days. The amount at risk with Nomura was $512 million. At December 31, 2023, we had amounts at risk with Nomura, of 17% of our equity related to the collateral posted on secured financing agreements.
At December 31, 2024, we had amounts at risk with Nomura of 20% of our equity related to the collateral posted on secured financing agreements. The weighted average maturities of the secured financing agreements with Nomura were 108 days. The amount at risk with Nomura was $512 million.
As of December 31, 2024 and December 31, 2023, we had $526 million and $377 million of unencumbered assets available to us which can be pledged to access additional short-term financing or sold to raise additional cash, if necessary.
As of December 31, 2025 and December 31, 2024, we had $249 million and $526 million of unencumbered assets available to us which can be pledged to access additional short-term financing or sold to raise additional cash, if necessary.
During the year ended December 31, 2024, we entered into 1,391 short 5-year and 1,684 short 5-year U.S. Treasury futures contracts with notional amounts of $139 million and $168 million, respectively, which we subsequently covered for a net realized loss of $4.9 million.
During the year ended December 31, 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, which we subsequently covered for a net realized loss of $5 million.
GAAP recourse leverage is calculated as a ratio of our secured financing agreements over stockholders' equity. The following table presents details of each asset class in our portfolio at December 31, 2024 and December 31, 2023. The principal or notional value represents the interest income earning balance of each class.
GAAP recourse leverage is calculated as a ratio of our secured financing agreements over stockholders' equity. The following table presents details of each asset class in our portfolio, excluding interests in MSR financing receivables, at December 31, 2025 and December 31, 2024. The principal or notional value represents the interest income earning balance of each class.
We believe the appropriate leverage for the particular assets we are financing depends on the credit quality and risk of those assets. At December 31, 2024 and December 31, 2023, the carrying value of our total interest-bearing debt was approximately $10.0 billion and $10.1 billion, respectively, which represented a leverage ratio of approximately 4.0:1 and 4.0:1, respectively.
We believe the appropriate leverage for the particular assets we are financing depends on the credit quality and risk of those assets. At December 31, 2025 and December 31, 2024, the carrying value of our total interest-bearing debt was approximately $13.1 billion and $9.9 billion, respectively, which represented a leverage ratio of approximately 5.1:1 and 4.0:1, respectively.
Grants of Performance Share Units (“PSUs”) PSU awards are designed to align compensation with our future performance. The PSU awards granted during the years ended December 31, 2024 and 2023, include a three-year performance period ending on December 31, 2026 and December 31, 2025, respectively.
Grants of Performance Share Units (“PSUs”) PSU awards are designed to align compensation with the Company’s future performance. The PSU awards granted during the year ended December 31, 2025 and 2024, include a three-year performance period ending on December 31, 2027 and December 31, 2026, respectively.
Net Income (Loss) and Return on Total Stockholders' Equity The table below shows our Net Income and Economic net interest income as a percentage of average stockholders' equity and Earnings available for distribution as a percentage of average common stockholders' equity. Return on average equity is defined as our GAAP net income (loss) as a percentage of average equity.
Net Income (Loss) and Return on Total Stockholders' Equity The table below shows our Net income (loss) and Economic net interest income as a percentage of average stockholders' equity Earnings available for distribution as a percentage of average common stockholders' equity, and Average Tangible Common Equity.
It authorized the issuance of up to 7 million shares of our common stock for the grant of awards under the Plan (adjusted on a retroactive basis to reflect the Company's 1-for-3-reverse stock split effected on May 21, 2024).
It authorized the issuance of up to 6,666,667 shares of our common stock for the grant of awards under the Plan (adjusted on a retroactive basis to reflect the Company's 1-for-3-reverse stock split effected on May 21, 2024).
The estimated principal repayment schedule of the securitized debt is based on expected cash flows of the residential mortgage loans or RMBS, as adjusted for expected principal write-downs on the underlying collateral of the debt. 64 December 31, 2024 (dollars in thousands) Contractual Obligations Within One Year One to Three Years Three to Five Years Greater Than or Equal to Five Years Total Secured financing agreements $ 2,504,915 $ 337,245 $ — $ — $ 2,842,160 Securitized debt, collateralized by Non-Agency RMBS — 13 — 13 26 Securitized debt at fair value, collateralized by Loans held for investment 1,288,028 2,091,147 1,937,868 2,253,020 7,570,063 Interest expense on MBS secured financing agreements (1) 29,737 1,364 — — 31,101 Interest expense on securitized debt (1) 255,162 394,250 257,323 292,081 1,198,816 Total $ 4,077,842 $ 2,824,019 $ 2,195,191 $ 2,545,114 $ 11,642,166 (1) Interest is based on variable rates in effect as of December 31, 2024.
December 31, 2024 (dollars in thousands) Contractual Obligations Within One Year One to Three Years Three to Five Years Greater Than or Equal to Five Years Total Secured financing agreements $ 2,504,915 $ 337,245 $ — $ — $ 2,842,160 Securitized debt, collateralized by Non-Agency RMBS — 13 — 13 26 Securitized debt at fair value, collateralized by Loans held for investment 1,288,028 2,091,147 1,937,868 2,253,020 7,570,063 Interest expense on MBS secured financing agreements (1) 29,737 1,364 — — 31,101 Interest expense on securitized debt (1) 255,162 394,250 257,323 292,081 1,198,816 Total $ 4,077,842 $ 2,824,019 $ 2,195,191 $ 2,545,114 $ 11,642,166 (1) Interest is based on variable rates in effect as of December 31, 2024.
Considering the velocity and magnitude of interest rate movements, we maintained a hedging program to manage the interest rate risk for the time differential between loan purchase commitment and the closing of loans into securitization. In addition, we used a combination of various U.S. Treasury futures contracts to hedge our exposure to future financing costs.
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.
During the year ended December 31, 2024, we used cash to purchase $1.1 billion Agency MBS, $657 million Loans held for investment and $96 million Non-Agency RMBS offset by cash received for principal repayments on Agency MBS, Non-Agency RMBS and Loans held for investment of $1.5 billion and from the sale of our Agency MBS of $569 million.
During the year ended December 31, 2024, we used cash to purchase $1.1 billion Agency MBS, $657 million Loans held for investment and $96 million Non-Agency RMBS offset by cash received for principal repayments on Agency MBS, Non-Agency RMBS and Loans held for investment of $1.5 billion and from the sale of our Agency MBS of $569 million Our financing activities provided cash of $2.1 billion and used cash of $522 million for the year ended December 31, 2025 and 2024, respectively.
Economic Interest Expense and the Cost of Funds The borrowing rate at which we are able to finance our assets using secured financing agreements is typically correlated to Secured Overnight Financing Rate (“SOFR”) and the term of the financing. The borrowing rate on the majority of our securitized debt is fixed and correlated to the term of the financing.
Economic Interest Expense and the Cost of Funds - Investment Portfolio Segment The borrowing rate at which we are able to finance our assets using secured financing agreements is typically correlated to SOFR and the term of the financing. The borrowing rate on the majority of our securitized debt is fixed and correlated to the term of the financing.
Our Average net interest-earning assets decreased by $127 million to $2.0 billion for the year ended December 31, 2024, compared to $2.1 billion for the same period of 2023.
Our Average net interest-earning assets decreased by $254 million to $1.8 billion for the year ended December 31, 2025, compared to $2.0 billion for the same period of 2024.
For the year ended December 31, 2024, we granted 179 thousand PSU awards to senior management with a grant date fair value of $3 million. For the year ended December 31, 2023, we granted 201 thousand PSU awards to senior management with a grant date fair value of $3 million.
For the year ended December 31, 2025, we granted 296 thousand PSU awards to senior management with a grant date fair value of $4 million. For the year ended December 31, 2024, we granted 179 thousand PSU awards to senior management with a grant date fair value of $3 million.
The table below presents our average daily secured financing agreements balance and the secured financing agreements balance at each period end for the periods presented. Our balance at period-end tends to fluctuate from the average daily balances due to the adjusting of the size of our portfolio by using leverage.
The table below presents our average daily secured financing agreements balance and the secured financing agreements balance at each period end for the periods presented. Our balance at period-end tends to fluctuate from the average daily balances due to adjustments to the size of our portfolio resulting from the use of leverage.
The following table provides GAAP measures of net income and net income per diluted share available to common stockholders for the periods presented and details with respect to reconciling the line items to Earnings available for distribution and related per average diluted common share amounts. Earnings available for distribution is presented on an adjusted dilutive shares basis.
The following table provides GAAP measures of net income and net income per diluted share available to common stockholders for the periods presented and details with respect to reconciling the line items to Earnings available for distribution and related per average diluted common share amounts.
Our net interest rate spread, which equals the yield on our average interest-earning assets less the economic average cost of funds, increased by 20 basis points for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Our net interest margin, which equals the yield on our average interest-earning assets less the economic average cost of funds, decreased by 20 basis points for the year ended December 31, 2025, as compared to the year ended December 31, 2024.
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 protection in periods of volatility.
In addition to supporting our regulatory compliance, we believe that a larger Agency RMBS portfolio will provide portfolio diversity, more stable dividends, a source of liquidity for opportunistic asset and business acquisitions, as well as allowing us to grow our fee-based operations, and protection in periods of volatility.
Interest rate swaps 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 swaps with the interest paid on interest-bearing 46 liabilities reflects our total contractual interest payments.
Interest rate swaps, Interest rate cap and Swap 64 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.
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.
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.
The cash flows from operations were primarily driven by interest received in excess of interest paid of $282 million and $304 million during the year ended December 31, 2024 and 2023, respectively. Our investing activities provided cash of $178 million and $552 million for the year ended December 31, 2024 and 2023, respectively.
The cash flows from operations were primarily driven by interest received in excess of interest paid of $282 million during the year ended December 31, 2024. Our investing activities used cash of $1.7 billion and provided cash of $178 million for the year ended December 31, 2025 and 2024, respectively.
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%.
At December 31, 2025, the weighted average borrowing rates for our secured financing agreements collateralized by Agency RMBS was 4.0%, Agency CMBS was 4.0%, Loans held for sale was 5.84% and Non-Agency MBS and Loans held for investment was 6.4%.
As of December 31, 2024 and December 31, 2023, we had $4.1 billion and $3.6 billion, respectively, of securities or cash pledged against our secured financing agreements obligations.
As of December 31, 2025 and December 31, 83 2024, we had $7.4 billion and $4.1 billion, respectively, of securities or cash pledged against our secured financing agreements obligations.
During the year ended December 31, 2024, on an aggregate basis, we purchased $1.8 billion of investments, sold $569 million of investments, and received $1.5 billion in principal payments related to our Agency MBS, Non-Agency RMBS and Loans held for investment portfolio. The following table summarizes certain characteristics of our portfolio at December 31, 2024 and December 31, 2023.
During the year ended December 31, 2025, on an aggregate basis, we purchased $4.7 billion of investments and received $1.8 billion in principal payments related to our Agency MBS, Non-Agency RMBS and Loans held for inve stment portfolio. The following table summarizes certain characteristics of our portfolio at December 31, 2025 and December 31, 2024.
Also, shares withheld for tax withholding requirements after stockholder approval of the Plan for full value awards originally granted under the Prior Plan (such as the RSUs and PSUs awarded to our named executive officers) will automatically become available for issuance under the Plan. 63 As of December 31, 2024, approximately 5 million shares were available for future grants under the Plan.
Also, shares withheld for tax withholding requirements after stockholder approval of the Plan for full value awards originally granted under the Prior Plan (such as the RSUs and PSUs awarded to our named executive officers) will automatically become available for issuance under the Plan.
Investment management and advisory fees 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, 51 insurance companies, and other institutional clients. We recognized investment management and advisory fees of $3 million for the year ended December 31, 2024.
Investment management and advisory fees 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.
Economic net interest income as a percentage of average equity increased by 27 basis points for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Economic net interest income as a percentage of average equity on our in increased by 16 basis points for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Economic Net Interest Income and the Average Earning Assets Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) increased by $10 million to $281 million for the year ended December 31, 2024 from $271 million for the year ended December 31, 2023.
Economic Net Interest Income and the Average Earning Assets - Investment Portfolio Segment Our Economic net interest income (which is a non-GAAP measure, see “Economic net interest income” discussion earlier for details) decreased by $6 million to $275 million for the year ended December 31, 2025, from $281 million for the year ended December 31, 2024.
The general and administrative expenses were at $23 million for the year ended December 31, 2024 and $25 million for the year ended December 31, 2023, respectively. The G&A expenses are primarily comprised of legal, market data and research, auditing, consulting, information technology, and independent investment consulting expenses.
G&A expenses were approximately $30 million and $23 million for the year ended December 31, 2025 and December 31, 2024. G&A expenses are primarily comprised of legal, market data and research, auditing, consulting, information technology, rent and independent investment consulting expenses.
We have made a $75 million capital commitment to a fund managed by Kah Capital Management, LLC. During the year ended December 31, 2024, we funded an additional $10 million towards that commitment, which brought our total funding to $56 million, leaving an unfunded commitment of $19 million.
We have made a $75 million capital commitment to a fund managed by Kah Capital Management, LLC. During the quarter and year ended December 31, 2025, we funded an additional $637 thousand towards that commitment, which brought the total funding to $57 million, leaving an unfunded commitment of $18 million.
At December 31, 2024, the outstanding principal amount of these notes was $140 million and the accrued interest payable on this debt was $2 million. At December 31, 2024, the unamortized deferred debt issuance cost was $5 million. The net interest expense was $7 million for the year ended December 31, 2024.
At December 31, 2025, the outstanding principal amount of these notes was $260 million and the accrued interest payable on this debt was $3 million. At December 31, 2025, the unamortized deferred debt issuance cost was $8 million. The net interest expense was $17 million and $7 million for the years ended December 31, 2025 and 2024, respectively.
Provision for Credit Losses For the year ended December 31, 2024, we recorded provision for credit losses of $10 million, as compared to provision of credit losses of $11 million for the year ended December 31, 2023.
Provision for Credit Losses For the year ended December 31, 2025, we recorded an increase in provision for credit losses of $16 million, as compared to an increase in provision of credit losses of $10 million for the year ended December 31, 2024.
Additionally, we covered and reopened our existing open 2-year U.S Treasury futures contact position for a realized gain of $641 thousand. We are short 1,000 2-year U.S. Treasury futures contracts as of December 31, 2024. During the year ended December 31, 2023, we entered into 6,000 short 5-year and 1,875 short 2-year U.S.
Additionally, we covered and reopened our existing open 2-year U.S Treasury futures contract position for a realized gain of $641 thousand. We are short 1,000 2-year U.S. Treasury futures contract at December 31, 2024. For the Residential Origination segment, during the year ended December 31, 2025, we entered into 360 short 5-year and 1,400 short 2-year U.S.
For the Years Ended December 31, 2024 December 31, 2023 December 31, 2022 (dollars in thousands, except per share data) GAAP Net income (loss) available to common stockholders $ 90,329 $ 52,354 $ (586,831) Adjustments (1) : Net unrealized (gains) losses on financial instruments at fair value (10,811) (34,373) 736,899 Net realized (gains) losses on sales of investments 5,219 31,234 76,473 (Gains) losses on extinguishment of debt — (3,875) 2,897 Increase (decrease) in provision for credit losses 9,838 11,371 7,037 Net unrealized (gains) losses on derivatives (2,963) 6,411 1,482 Realized (gains) losses on derivatives 21,540 40,957 561 Transaction expenses 7,091 15,379 16,146 Stock Compensation expense for retirement eligible awards (125) 966 (205) Amortization of intangibles and depreciation expenses (2) 321 — — Non-cash imputed compensation related to business acquisition 10,296 — — Other investment (gains) losses (9,543) (1,091) 1,866 Earnings available for distribution $ 121,192 $ 119,333 $ 256,325 GAAP net income (loss) per diluted common share $ 1.10 $ 0.68 $ (7.53) Earnings available for distribution per adjusted diluted common share $ 1.48 $ 1.53 $ 3.24 (1) As a result of the Palisades Acquisition, we updated the determination of earnings available for distribution to exclude non-recurring acquisition-related transaction expenses, non-cash amortization of intangibles and depreciation expenses, and non-cash imputed compensation expenses.
Earnings available for distribution is presented on an adjusted dilutive shares basis. 75 For the Years Ended December 31, 2025 December 31, 2024 December 31, 2023 (dollars in thousands, except per share data) GAAP net income available to common stockholders $ 144,468 $ 90,329 $ 52,354 Adjustments (1) : Net unrealized gains on financial instruments at fair value (81,735) (10,811) (34,373) Net realized losses on sales of investments 23,192 5,219 31,234 Gains on extinguishment of debt (2,142) — (3,875) Increase in provision for credit losses 15,705 9,838 11,371 Net unrealized (gains) losses on derivatives (10,371) (2,963) 6,411 Realized losses on derivatives 33,352 21,540 40,957 Transaction expenses 16,634 7,091 15,379 Stock Compensation expense for retirement eligible awards (24) (125) 966 Amortization of intangibles and depreciation expenses (2) 7,183 321 — HomeXpress acquisition intangible amortization tax impact (3) (837) — — Non-cash imputed compensation related to business acquisition 1,364 10,296 — Other investment gains (5,733) (9,543) (1,091) Earnings available for distribution $ 141,056 $ 121,192 $ 119,333 GAAP net income per diluted common share $ 1.72 $ 1.10 $ 0.68 Earnings available for distribution per adjusted diluted common share $ 1.68 $ 1.48 $ 1.53 (1) As a result of the business combinations, we updated the determination of earnings available for distribution to exclude non-recurring acquisition-related transaction expenses, non-cash amortization of intangibles and depreciation expenses, and non-cash imputed compensation expenses.
For the Quarters Ended December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Weighted average diluted shares - GAAP 81,266,223 81,855,872 82,281,890 81,718,214 77,443,108 Potentially dilutive shares (1) 1,263,734 — — — — Adjusted weighted average diluted shares - Earnings available for distribution 82,529,957 81,855,872 82,281,890 81,718,214 77,443,108 (1) Potentially dilutive shares related to restricted stock units and performance stock units excluded from the computation of weighted average GAAP diluted shares because their effect would have been anti-dilutive given the GAAP net loss available to common shareholders for the quarter ended December 31, 2024.
For the Quarters Ended December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 Weighted average diluted shares - GAAP 83,942,704 81,507,492 82,600,108 82,394,218 81,266,223 Potentially dilutive shares (1) — 1,377,857 — — 1,263,734 Adjusted weighted average diluted shares - Earnings available for distribution 83,942,704 82,885,349 82,600,108 82,394,218 82,529,957 (1) Potentially dilutive shares related to restricted stock units and performance stock units excluded from the computation of weighted average GAAP diluted shares because their effect would have been anti-dilutive given the GAAP net loss available to common shareholders for the quarters ended September 30, 2025 and December 31, 2024.
On October 30, 2021, all 5,800,000 issued and outstanding shares of Series A Preferred Stock with an outstanding liquidation preference of $145 million became callable at a redemption price equal to the liquidation preference plus accrued and unpaid dividends through, but not including the redemption date.
We declared dividends to Series D preferred stockholders of $20 million, or $2.55 per preferred share, during the year ended December 31, 2024. 85 On October 30, 2021, all 5,800,000 issued and outstanding shares of Series A Preferred Stock with an outstanding liquidation preference of $145 million became callable at a redemption price equal to the liquidation preference plus accrued and unpaid dividends through, but not including, the redemption date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAn increase (positive balance) in the "Increase/(decrease)" line item in the tables below represents an unfavorable change in expected credit losses. 68 For the Quarters Ended (dollars in thousands) Non-Agency RMBS December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Balance, beginning of period $ 81,368 $ 78,366 $ 98,035 $ 95,366 $ 81,236 Realized losses (1,182) 534 (1,940) (345) (1,225) Accretion 2,820 2,926 3,140 2,978 2,569 Losses on purchases — — — — — Losses on sold/paid-off 48 — (2) — — Increase/(decrease) 2,251 (458) (20,867) 36 12,786 Balance, end of period $ 85,305 $ 81,368 $ 78,366 $ 98,035 $ 95,366 For the Quarters Ended (dollars in thousands) Loans held for investment December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Balance, beginning of period $ 181,895 $ 190,675 $ 213,050 $ 213,644 $ 251,002 Realized losses (6,180) (6,226) (8,149) (8,078) (8,457) Accretion 2,584 2,703 2,964 2,961 3,427 Losses on purchases — — — — — Increase/(decrease) (35,071) (5,257) (17,190) 4,523 (32,328) Balance, end of period $ 143,228 $ 181,895 $ 190,675 $ 213,050 $ 213,644 Additionally, the Non-Agency RMBS which we acquire for our portfolio are reviewed by us to ensure that they satisfy our risk-based criteria.
Biggest changeFor the Quarters Ended (dollars in thousands) Non-Agency RMBS December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 Balance, beginning of period $ 93,781 $ 90,565 $ 89,065 $ 85,305 $ 81,368 Realized losses (1,441) (1,539) (1,613) (1,811) (1,182) Accretion 3,452 3,317 3,072 2,906 2,820 Losses on purchases — — — — — Losses on sold/paid-off (142) (7,328) — — 48 Increase/(decrease) (167) 8,766 41 2,665 2,251 Balance, end of period $ 95,483 $ 93,781 $ 90,565 $ 89,065 $ 85,305 For the Quarters Ended (dollars in thousands) Loans held for investment December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 Balance, beginning of period $ 97,910 $ 102,727 $ 106,961 $ 143,228 $ 181,895 Realized losses (6,565) (6,717) (7,816) (3,583) (6,180) Accretion 1,312 1,385 1,439 1,087 2,584 Losses on purchases — — — — — Increase/(decrease) 2,202 515 2,143 (33,771) (35,071) Balance, end of period $ 94,859 $ 97,910 $ 102,727 $ 106,961 $ 143,228 Additionally, the Non-Agency RMBS which we acquire for our portfolio are reviewed by us to ensure that they satisfy our risk-based criteria.
Cybersecurity Risk Our cybersecurity risk management and strategy is incorporated into our Enterprise Risk Management process. Our Board of Directors, in coordination with the Audit Committee and the Risk Committee, oversees management of cybersecurity risk. Please refer to Item 1C, “Cybersecurity” in this Annual Report on Form 10-K for additional information about our cybersecurity risk management, strategy and governance.
Cybersecurity Risk Our cybersecurity risk management and strategy is incorporated into our Enterprise Risk Management process. Our Board of Directors, in coordination with the Audit Committee and the Risk Committee, oversees management of cybersecurity risk. Please refer to Item 1C, “Cybersecurity” in our Annual Report on Form 10-K for additional information about our cybersecurity risk management, strategy and governance.
Our secured financing agreements and warehouse facilities may be of limited duration that is periodically refinanced at current market rates. We typically mitigate this risk through utilization of derivative contracts, primarily interest rate swap agreements swaptions, and futures.
Our secured financing agreements and warehouse facilities may be of limited duration that is periodically refinanced at current market rates. We typically mitigate this risk through utilization of derivative contracts, primarily interest rate swap agreements, swaptions, interest rate caps, and futures.
Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease; 71 conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of our investments may be adversely impacted.
Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of our investments may be adversely impacted.
This analysis includes an evaluation of the collateral characteristics supporting the RMBS such as borrower payment history, credit profiles, geographic concentrations, credit enhancement, seasoning, and other pertinent factors.
This analysis includes an evaluation of the collateral characteristics supporting the RMBS such as borrower payment history, credit profiles, geographic concentrations, credit enhancement, seasoning, collateral value and other pertinent factors.
Our review of Non-Agency RMBS includes utilizing a portfolio management system. Our review of Non-Agency RMBS and other ABS is based on quantitative and qualitative analysis of the risk-adjusted returns on Non-Agency RMBS and other ABS.
Our review of Non-Agency RMBS includes utilizing a portfolio management system. Our review of Non-Agency RMBS and other ABS is based on quantitative and qualitative analysis of the risk-adjusted returns on Non-Agency 92 RMBS and other ABS.
These are mortgages or RMBS in which the underlying mortgages are typically subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the security’s interest yield may change during any given period. However, our borrowing costs pursuant to our financing agreements will not be subject to similar restrictions.
These are mortgages or RMBS in which the underlying mortgages are typically subject to periodic and lifetime interest rate cap and floors, which limit the amount by which the security’s interest yield may change during any given period. However, our borrowing costs pursuant to our financing agreements will not be subject to similar restrictions.
Financial Statements and Supplementary Data Our consolidated financial statements and the related notes, together with the Reports of Independent Registered Public Accounting Firm thereon, are set forth in Part IV of this 2024 Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Financial Statements and Supplementary Data Our consolidated financial statements and the related notes, together with the Reports of Independent Registered Public Accounting Firm thereon, are set forth in Part IV of this 2025 Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
All changes in income and value are measured as percentage changes from the projected net interest income and the value of the assets we retain at the base interest rate scenario. The base interest rate scenario assumes interest rates at December 31, 2024 and various estimates regarding prepayment and all activities are made at each level of rate change.
All changes in income and value are measured as percentage changes from the projected net interest income and the value of the assets we retain at the base interest rate scenario. The base interest rate scenario assumes interest rates at December 31, 2025 and various estimates regarding prepayment and all activities are made at each level of rate change.
Our consolidated statement of financial condition includes assets of consolidated VIEs that can only be used to settle obligations and liabilities of the VIEs for which creditors do not have recourse to us. (2) Includes preferred stock dividend expense. (3) Projected Percentage Change in Market Value is based on instantaneous moves in interest rates.
Our Consolidated Statements of Financial Condition include assets of consolidated VIEs that can only be used to settle obligations and liabilities of the VIEs for which creditors do not have recourse to us. (2) Includes preferred stock dividend expense. (3) Projected Percentage Change in Market Value is based on instantaneous moves in interest rates.
Prepayment Risk As we receive prepayments of principal on these investments, premiums and discounts on such investments will be amortized or accreted into interest income. In general, an increase in actual or expected prepayment rates will accelerate the amortization of purchase premiums, thereby reducing the interest income earned on the investments.
Prepayment & Extension Risk - Investment Portfolio As we receive prepayments of principal on these investments, premiums and discounts on such investments will be amortized or accreted into interest income. In general, an increase in actual or expected prepayment rates will accelerate the amortization of purchase premiums, thereby reducing the interest income earned on the investments.
Conversely, discounts on such investments are accelerated and accreted into interest income, increasing interest income when prepayments increase. Actual prepayment results may be materially different than the assumptions we use for our portfolio. Extension Risk Management computes the projected weighted-average life of our investments based on assumptions regarding the rate at which the borrowers will prepay the underlying mortgages.
Conversely, discounts on such investments are accelerated and accreted into interest income, increasing interest income when prepayments increase. Actual prepayment results may be materially different from the assumptions we use for our portfolio. Management computes the projected weighted-average life of our investments based on assumptions regarding the rate at which borrowers will prepay the underlying mortgages.
The following table sets forth the estimated maturity or re-pricing of our interest-earning assets and interest-bearing liabilities at December 31, 2024.
The following table sets forth the estimated maturity or re-pricing of our interest-earning assets and interest-bearing liabilities at December 31, 2025.
Basis risk relates to the risk of the spread between our MBS and hedges widening. Such a widening may cause a decline in the fair value of our MBS that is greater than the increase in fair value of our hedges resulting in a net decline in book value.
Basis risk relates to the risk of the spread between our hedged assets and hedges widening. Such a widening may cause a decline in the fair value of our assets that is greater than the increase in fair value of our hedges resulting in a net decline in book value.
Business Continuity Plan Our Business Continuity Plan is prepared with the intent of providing guidelines to facilitate (i) employee safety and relocation; (ii) preparedness for carrying out activities and receiving communication; (iii) resumption and restoration of systems and business processes and (iv) the protection and integrity of the Company’s assets.
Business Continuity Plans Our Business Continuity Plans are prepared with the intent of providing guidelines to facilitate (i) employee safety and relocation; (ii) preparedness for carrying out activities and receiving communication; (iii) resumption and restoration of systems and business processes and (iv) the protection and integrity of the Company’s assets.
These analyses contain certain forward-looking statements and are subject to the safe harbor statement set forth under the heading, “Special Note Regarding Forward-Looking Statements.” Enterprise Risk Management We employ a “Three Layers of Defense Approach” to Enterprise Risk Management designed to assess and manage risk to achieve our strategic goals.
These analyses contain certain forward-looking statements 96 and are subject to the safe harbor statement set forth under the heading, “Special Note Regarding Forward-Looking Statements.” Enterprise Risk Management We employ a “Three Layers of Defense Approach” to Enterprise Risk Management designed to assess and manage our operational, strategic, and financial risks.
In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. Basis Risk We may seek to limit our interest rate risk by hedging portions of our portfolio through interest rate swaps or other types of hedging instruments.
Additionally, in extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could result in losses. Basis Risk - Investment Portfolio We may seek to limit our interest rate risk by hedging portions of our portfolio through interest rate swaps or other types of hedging instruments.
Additionally, refer to Item 1A, "Risk Factors" included in this Annual Report on Form 10-K for the year ended December 31, 2024 for additional information on risks we face.
Additionally, refer to Item 1A, "“Risk Factors” included in this Annual Report on Form 10-K for the year ended December 31, 2025 for additional information on risks we face.
Our Business Continuity Plan is designed to facilitate business process resilience in a broad range of scenarios with a dedicated Disaster Recovery Team which is comprised of executive management, head of technology, and professionals across our various business units.
Our Business Continuity Plans are designed to facilitate business process resilience in a broad range of scenarios with dedicated disaster recovery teams which are comprised of executive management and professionals across our various business units.
Our Business Continuity Plan is a "living process" that will evolve with the input and guidance of the key stakeholders, subject matter experts and industry best practices and is reviewed and updated at least annually. 73 Item 8 .
Our Business Continuity Plans are a “living process” that evolve with the input and guidance of the key stakeholders, subject matter experts and industry best practices and is reviewed and updated at least annually. Item 8 .
We estimate future credit losses based on historical experience, market trends, current delinquencies as well as expected recoveries. The net present value of these expected credit losses can change, sometimes significantly from period to period as new information becomes available. When credit loss experience and expectations improve, we will collect more principal on our investments.
The net present value of these expected credit losses can change, sometimes significantly from period to period as new information becomes available. When credit loss experience and expectations improve, we will collect more principal on our investments. If credit loss experience deteriorates, we will collect less principal on our investments.
The “First Layer of Defense” consists of assessing key risks indicators facing each respective business unit within the Company. Our risk management unit is an independent group that acts as the “Second Layer of Defense”. The risk management unit partners with various business units to understand, monitor, manage and escalate risks as appropriate.
The “First Layer of Defense” consists of assessing key risks indicators facing each respective business unit within the Company. Our risk management unit is a separate group that acts as the “Second Layer of Defense”. The risk management unit partners with various business units to enhance their understanding, monitoring, managing and escalating risks as appropriate.
A decrease (negative balance) in the "Increase/(decrease)" line item in the tables below represents a favorable change in expected credit losses.
An increase (positive balance) in the "Increase/(decrease)" line item in the tables below represents an unfavorable change in expected credit losses.
Therefore, the volatility in the fair value of our assets could increase significantly when interest rates change beyond 100 basis points. In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions.
In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions.
December 31, 2024 (1) Change in Interest Rate Projected Percentage Change in Net Interest Income (2) Projected Percentage Change in Market Value (3) -100 Basis Points 12.14 % 6.30 % -50 Basis Points 6.28 % 3.07 % Base Interest Rate — — +50 Basis Points (4.61) % (2.95) % +100 Basis Points (10.17) % (5.79) % (1) The retained securities are securities retained by us from securitization VIEs included in our portfolio and not the consolidated assets and liabilities of the VIEs.
Actual results could differ significantly from these estimates. 94 December 31, 2025 (1) Change in Interest Rate Projected Percentage Change in Net Interest Income (2) Projected Percentage Change in Market Value (3) -100 Basis Points 8.13 % 3.20 % -50 Basis Points 4.98 % 1.73 % Base Interest Rate — — +50 Basis Points (5.61) % (1.94) % +100 Basis Points (12.32) % (3.94) % (1) The retained securities are securities retained by us from securitization VIEs included in our portfolio and not the consolidated assets and liabilities of the VIEs.
We believe that residential loan credit quality, and thus the quality of our assets, is primarily determined by the borrowers’ credit profiles and loan characteristics.
We believe that residential loan credit quality, and thus the quality of our assets, is primarily determined by the borrowers’ credit profiles and loan characteristics. Through our Residential Origination, we are subject to credit risk related to loans originated prior to the sale to third parties.
Different models and methodologies can produce different duration numbers for the same securities. It is important to note that the impact of changing interest rates on fair value can change significantly when interest rates change beyond 100 basis points from current levels.
It is important to note that the impact of changing interest rates on fair value can change significantly when interest rates change beyond 100 basis points from current levels. Therefore, the volatility in the fair value of our assets could increase significantly when interest rates change beyond 100 basis points.
Interest Rate Effects on Fair Value Another component of interest rate risk is the effect changes in interest rates will have on the fair value of the assets we acquire. We face the risk that the fair value of our assets will increase or decrease at different rates than that of our liabilities, including our hedging instruments, if any.
Interest Rate Effects on Fair Value Another component of interest rate risk is the effect changes in interest rates will have on the fair value of the assets we acquire or originate.
The following table presents changes to net present value of expected credit losses for our Non-Agency RMBS and Loans held for investment portfolios during the previous five quarters. Gross losses are discounted at the rate used to amortize any discounts or premiums on our investments into income.
The favorable or unfavorable changes in credit losses are reflected in the yield on our investments in mortgage loans and recognized in earnings over the remaining life of our investments. The following table presents changes to net present value of expected credit losses for our Non-Agency RMBS and Loans held for investment portfolios during the previous five quarters.
Interest Rate Risk Our net interest income, borrowing activities and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from the effect of inflation and updated Federal Rate projections in 2024. As the Federal Reserve increases its federal funds rate, the margin between short and long-term rates could further compress.
Interest Rate Risk Our net interest income, borrowing activities and profitability could be negatively affected by volatility in interest rates factors that could lead the Federal Reserve to increase its federal funds rate, and a change in the spread between short- and long-term rates could further compress.
Risk Management Subject to maintaining our REIT status, we seek to manage risk exposure to protect our portfolio of residential mortgage loans, RMBS, and other assets and related debt against the effects of major interest rate changes.
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to incur losses. 95 Risk Management - Investment Portfolio Subject to maintaining our REIT status, we seek to manage risk exposure to protect our portfolio of residential mortgage loans, RMBS, and other assets and related debt against the effects of major interest rate changes.
In addition to statistical sampling techniques, we create adverse credit and valuation samples, which we individually review. Additionally, we closely monitor credit losses incurred, as well as how expectations of credit losses are expected to change on our Non-Agency RMBS and Loans held for investment portfolios.
Additionally, we closely monitor credit losses incurred, as well as how expectations of credit losses are expected to change on our Non-Agency RMBS and Loans held for investment portfolios. We estimate future credit losses based on historical experience, market trends, current delinquencies as well as expected recoveries.
If the market normalizes and repurchase rates fall, we may be locked into long term and higher interest expenses than are otherwise available in the market to finance our portfolio. 70 Our profitability and the value of our investment portfolio including derivatives may be adversely affected during any period as a result of changing interest rates.
Our profitability and the value of our investment portfolio, including derivatives may be adversely affected during any period as a result of changing interest rates.
We primarily assess our interest rate risk by estimating the duration of our assets compared to the duration of our liabilities and hedges. Duration essentially measures the market price volatility of financial instruments as interest rates change. We generally calculate duration using various financial models and empirical data.
Duration essentially measures the market price volatility of 93 financial instruments as interest rates change. We generally calculate duration using various financial models and empirical data. Different models and methodologies can produce different duration numbers for the same securities.
During periods of rising interest rates, the borrowing costs associated with our investments tend to increase while 69 the income earned on our investments may remain substantially unchanged or decrease. This will result in a narrowing of the net interest spread between the related assets and borrowings and may even result in losses.
The fixed spread varies depending on the type of underlying asset that collateralizes the financing. During periods of rising interest rates, the borrowing costs associated with our investments tend to increase while the income earned from our investments may remain substantially unchanged or decrease.
Most of our warehouse facilities and secured financing agreements provide financing based on a floating rate of interest calculated on a fixed spread over SOFR. The fixed spread varies depending on the type of underlying asset which collateralizes the financing.
Interest Rate Effects on Net Interest Income Our operating results depend, in large part, on differences between the income from our investments and our borrowing costs. Most of our warehouse facilities and secured financing agreements provide financing based on a floating rate of interest calculated on a fixed spread over SOFR.
Further, defaults could increase and result in credit losses to us, which could adversely affect our liquidity and operating results. Such delinquencies or defaults could also have an adverse effect on the spread between interest-earning assets and interest-bearing liabilities. We generally do not hedge against credit losses.
Such delinquencies or defaults could also have an adverse effect on the spread between interest-earning assets and interest-bearing liabilities. We generally do not hedge against credit losses. Hedging techniques are partly based on assumed levels of prepayments of our fixed-rate and hybrid adjustable-rate residential mortgage loans and RMBS.
Having non-MTM financing facilities may be useful in this market to prevent significant margin calls or collateral liquidation in a volatile market.
Having non-MTM financing facilities may be useful in this market to prevent significant margin calls or collateral liquidation in a volatile market. If the market normalizes and repurchase rates fall, we may be locked into long term and higher interest expenses than are otherwise available in the market to finance our portfolio.
This includes applications which facilitate financial transactions, transaction settlements, financial reporting, and business communication and the personnel who perform such actions. Our Business Continuity Plan provides guidelines to aid in the timely resumption of business operations and for communication with employees, service providers and other key stakeholders needed to support these operations.
Our Business Continuity Plans identify the critical systems and processes necessary for business operations as well as the resources, employees, and planning needed to support these systems and processes. Our Business Continuity Plans provide guidelines to aid in the timely resumption of business operations and for communication with employees, service providers and other key stakeholders needed to support these operations.
While we may use interest rate hedges to mitigate risks related to changes in interest rate, the hedges may not fully offset interest expense movements. Interest Rate Effects on Net Interest Income Our operating results depend, in large part, on differences between the income from our investments and our borrowing costs.
While we may use interest rate hedges to mitigate risks related to changes in interest rate, the hedges may not fully offset interest expense movements. Interest Rate Effects on Mortgage Lending Operations Higher interest rates may also impact our mortgage lending activities undertaken by HomeXpress.
However, if prepayment rates decrease in a rising interest rate environment, the life of the fixed-rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument.
When fixed-rate or hybrid adjustable-rate residential mortgage loans or RMBS are acquired via borrowings, we carefully assess the potential impact of prepayment and extension risk. If prepayment rates decrease in a rising interest rate environment, the life of the fixed-rate portion of the related assets could extend beyond expectations.
This could have a negative impact on our results from operations, as borrowing costs would no longer be fixed after the end of the hedging instrument while the income earned on the fixed and hybrid adjustable-rate assets would remain fixed.
This extension risk may result in a mismatch between the duration of the borrowings and the fixed-rate portion of the related assets, which could impact our net interest spread. In such cases, the income earned on the fixed-rate assets may remain stable, while borrowing costs could rise, potentially negatively affecting our results from operations.
Removed
If credit loss experience deteriorates, we will collect less principal on our investments. The favorable or unfavorable changes in credit losses are reflected in the yield on our investments in mortgage loans and recognized in earnings over the remaining life of our investments.
Added
Loans that default prior to sale are withdrawn from the normal course offering process and are either sold to third-party distressed asset investors or subject to internal loss mitigation, workout, or foreclosure processes.
Removed
Hedging techniques are partly based on assumed levels of prepayments of our fixed-rate and hybrid adjustable-rate residential mortgage loans and RMBS.
Added
Additionally, pursuant to the 91 terms of the related purchase and sale agreements with third party investors, we are exposed to risks of default after the sale due to certain repurchase obligations that are negotiated at the time of sale.
Removed
Actual results could differ significantly from these estimates.
Added
In addition to statistical sampling techniques, we create adverse credit and valuation samples, which we individually review. Our lending activities also utilize third-party due diligence firms.
Removed
In general, when fixed-rate or hybrid adjustable-rate residential mortgage loans or RMBS are acquired via borrowings, we may, but are not required to, enter into an interest rate swap agreement or other hedging instrument that attempts to fix our borrowing costs for a period close to the anticipated average life of the fixed-rate portion of the related assets.
Added
However, to the extent loans are funded prior to review by the third-party review vendor, and there are adverse findings with respect to such loans, depending on the deficiency we may not be able to sell the loan, or may not be able to obtain a price for the loan that exceeds our cost to originate, in which case we may realize a loss.
Removed
This strategy is designed to protect us from rising interest rates as the borrowing costs are managed to maintain a net interest spread for the duration of the fixed-rate portion of the related assets.
Added
Gross losses are discounted at the rate used to amortize any discounts or premiums on our investments into income. A decrease (negative balance) in the "Increase/(decrease)" line item in the tables below represents a favorable change in expected credit losses.
Removed
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to incur losses.
Added
Rising interest rates generally have the effect of reducing housing demand and overall activity as it increases the cost of purchasing a home. Correspondingly, the demand for mortgage credit would likely decline, reducing HomeXpress loan origination volume and related earnings.
Removed
The interest rate sensitivity of our assets and liabilities in the table could vary substantially based on actual prepayments. 72 December 31, 2024 (dollars in thousands) Within 3 Months 3-12 Months 1 Year to 3 Years Greater than 3 Years Total Rate sensitive assets $ 1,072,126 $ 5,298,513 $ 10,520 $ 6,423,555 $ 12,804,713 Cash equivalents 83,998 — — — 83,998 Total rate sensitive assets $ 1,156,124 $ 5,298,513 $ 10,520 $ 6,423,555 $ 12,888,712 Rate sensitive liabilities 2,771,254 1,957,504 — 5,146,918 9,875,676 Interest rate sensitivity gap $ (1,615,130) $ 3,341,009 $ 10,520 $ 1,276,637 $ 3,013,036 Cumulative rate sensitivity gap $ (1,615,130) $ 1,725,879 $ 1,736,399 $ 3,013,036 Cumulative interest rate sensitivity gap as a percentage of total rate sensitive assets (13) % 13 % 13 % 23 % Our analysis of risks is based on our management’s experience, estimates, models and assumptions.
Added
In the event that mortgage interest rates are trending lower, our lending operations may be exposed to risks related to early prepayments with respect to loans sold to third parties.
Removed
Our Business Continuity Plan identifies the critical systems and processes necessary for business operations as well as the resources, employees, and planning needed to support these systems and processes. Critical systems and processes are defined as those which have a material impact on core operations, financial performance, or regulatory requirements.
Added
In certain instances, pursuant to the terms of the purchase and sale agreements, we may be obliged to reimburse third-party investors that purchase our HomeXpress originated loans for the premium paid on loans that prepay shortly after sale, referred to as premium recapture. Early payoffs in excess of our reserves may adversely affect our earnings.
Added
This will result in a narrowing of the net interest spread between the related assets and borrowings and may even result in losses. Further, defaults could increase and result in credit losses to us, which could adversely affect our liquidity and operating results.
Added
Similarly, if interest rates declined and the levels of prepayments increased, this would have the effect of shortening the life of our investments in MSR financing receivables and may reduce the cash and interest income related to such investments.
Added
We face the risk that the fair value of our assets will increase or decrease at different rates than that of our liabilities, including our hedging instruments, if any. We primarily assess our interest rate risk by estimating the duration of our assets compared to the duration of our liabilities and hedges.
Added
The interest rate sensitivity of our assets and liabilities in the table could vary substantially based on actual prepayments.
Added
December 31, 2025 (dollars in thousands) Within 3 Months 3-12 Months 1 Year to 3 Years Greater than 3 Years Total Rate sensitive assets $ 733,745 $ 5,792,936 $ 593,690 $ 6,988,456 $ 14,108,826 Cash equivalents 232,292 — — — 232,292 Total rate sensitive assets $ 966,037 $ 5,792,936 $ 593,690 $ 6,988,456 $ 14,341,118 Rate sensitive liabilities 5,548,529 3,687,776 523,453 2,243,324 12,003,082 Interest rate sensitivity gap $ (4,582,492) $ 2,105,160 $ 70,237 $ 4,745,132 $ 2,338,036 Cumulative rate sensitivity gap $ (4,582,492) $ (2,477,332) $ (2,407,095) $ 2,338,037 Cumulative interest rate sensitivity gap as a percentage of total rate sensitive assets (32) % (17) % (17) % 16 % Our analysis of risks is based on our management’s experience, estimates, models and assumptions.

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