CIM

Strategic Framework & Market Positioning

• Management frames its strategy around the Odyssey metaphor: prioritize downside risk preparation and resiliency over market prediction, maintain a fixed long-term destination (tax-advantaged dividends and enterprise growth) but remain flexible to adjust paths based on market conditions
• Long-term strategy centers on building a diversified business model that is not dependent on any single market environment

Investment Portfolio Activity

• Continued portfolio repositioning: sold $575 million notional of non-core legacy assets (CMBS, interest-only, HECM, trimmed CMO exposure) and closed out $966 million in short TBA positions, generating $19 million in redeployable capital
• Completed two re-securitizations backed by $487 million in total loans, releasing an additional $13 million in capital for reinvestment and improving financing efficiency via higher advance rates and lower cost of funds
• Shifted 5 percentage points of capital allocation to agency RMBS, bringing agency RMBS to 26% of invested capital; reduced legacy residential credit allocation by 4 percentage points to 61% of invested capital
• Adjusted hedging strategy: replaced some payer swaps with interest rate caps for both agency and residential credit portfolios to improve portfolio convexity during sustained rate rallies while maintaining higher-rate protection
• Credit performance improved quarter-over-quarter: legacy re-performing loan delinquencies fell to 8.8% from 9.1%, investor DSCR loan delinquencies fell to 4.7% from 6.1%; delinquencies on jumbo loans remained stable

Home Express Mortgage Operational Highlights

• Q2 2026 loan production grew 30% year-over-year and 24% quarter-over-quarter to a record $1.1 billion, with June hitting a monthly record of $420 million
• Net origination margin expanded 10 basis points quarter-over-quarter to 124 basis points, but remains slightly below year-ago levels due to increased industry competition
• Non-delegated correspondent channel now makes up 13% of production; credit underwriting standards remain unchanged, with weighted average FICO and LTV ratios staying in line with historical levels
• Expanded warehouse capacity to $1.65 billion in July 2026, grown the broker network to over 6,350 brokers served by 145 account executives
• Implemented new technology tools to shorten processing times, improve accuracy, and support higher volume more efficiently

• Full year 2026 Earnings Available for Distribution (EAD) is maintained at a minimum of $1.80 per share, with first half 2026 EAD totaling $1.00 per share; Q2 2026 normalized EAD of 46 cents per share matched management's projected underlying run rate of ~47 cents
• Home Express Mortgage is on track to exceed its full year 2026 $4 billion loan origination volume target, barring severe unforeseen market disruption
• Management targets two Home Express loan securitizations and one third-party loan securitization to be completed by the end of 2026, with potential to increase size or frequency based on relative market value between loan sales and securitizations
• The first Home Express securitization is on track to launch in the latter part of Q3 2026

1. Investment Portfolio Segment: Reported a net loss of $13 million, which offset the residential origination segment's net income. Economic net interest income was $66.3 million, with an annualized economic net interest income return on average equity of 12.35%. The yield on average interest earning assets was 5.9%, average cost of funds was 4.3%, resulting in a net interest spread of 1.6%. This segment contributes 83% of the firm's invested capital (including legacy residential credit at 61% and agency RMBS at 26%).
2. Residential Origination Segment (Home Express Mortgage): Reported net income of $9 million. The segment funded $1.1 billion in loans, with EBITDA of $11.8 million and an annualized EBITDA ROE of 17.3%. This segment contributes approximately 11% of the firm's invested capital.

• Persistent inflation and resilient economic activity have shifted market expectations from rate cuts to a higher-for-longer rate environment, increasing market volatility, pushing Treasury yields higher, and driving book value volatility from mark-to-market moves on consolidated securitized assets
• Ongoing industry-wide mortgage origination competition has driven margin compression for Home Express, limiting earnings growth despite rising production volume
• Third-party fee revenue for Palisades Advisory Services is facing mild dilution from increased competition and lower client transaction activity
• Deleveraging in legacy consolidated securitization structures naturally erodes earnings over time until capital can be called and redeployed into higher-yielding assets

Q: What drove Q2 2026 book value decline, and what is the quarter-to-date change in mark-to-market book value? Does the book value mark-up/mark-down impact ROE for remaining capital? / A: The majority of Chimera's GAAP portfolio consists of securitized loans paired with fixed-rate, non-mark-to-market term securitization debt. A sharp Q2 rate sell-off reduced the value of these loans more than it reduced the value of the corresponding debt, driving the net 3.2% book value decline. Agency MBS and Home Express positions contributed positively to book value, but were outweighed by this dynamic. As of the Q&A date, book value is down another 1.5% quarter-to-date driven by continued rate sell-offs. Because earnings power from the securitized loan portfolio remains intact even as GAAP loan values decline, GAAP ROE on the remaining capital actually increases when book value marks are negative. The volatility does not impact dividend-paying ability, as Chimera only hedges floating rate repo liabilities to protect earnings.

Q: What is your outlook for agency MBS spreads after Q2 tightening, and how do incremental returns compare to new residential credit opportunities? / A: Agency MBS still generates low to mid-teens returns on allocated capital, and ongoing technical support from GSE demand keeps spreads supported. While agencies remain an important liquidity and relative value holding for the portfolio, management sees more attractive long-term opportunity in leaning into its core competency of residential credit. This strategy includes retaining loans from Home Express, purchasing third-party loans, securitizing these assets, and creating optionality to either retain the credit portion of the capital stack for mid-teens long-term returns or distribute the full structure and realize immediate gain-on-sale revenue.

Q: For the first Home Express securitization, will Chimera retain the residual equity piece, and how will this impact EAD? What is the current AUM and contribution of Palisades Advisory Services? / A: Management will make a retain versus distribute decision close to the deal pricing, based on capital needs, portfolio construction objectives, and current market relative value. Retaining the credit/residual piece would generate long-term recurring earnings, while distributing the full structure would book an immediate gain-on-sale that flows through current-period EAD. For Palisades, the firm serves both internal portfolio needs and third-party clients for a fee. Third-party fee revenue has seen mild dilution from competition and lower client transaction activity, so Chimera is redeploying underutilized Palisades resources to support its internal whole loan and securitization program. New securitization activity will also generate additional fee revenue for Palisades going forward.

Q: When will the capital from Q1 2026 called deals be fully redeployed, and when will the expected earnings accretion appear? / A: The $195 million raised from Q1 called deals was largely deployed by the end of Q2 2026, after closing out a temporary short risk position in April. The full net earnings accretion from this redeployment is already being realized in the back half of Q2, though the accretion is partially offset by natural deleveraging in older legacy securitization structures that gradually reduces earnings from those portions of the portfolio until their capital can be called and redeployed.