CHIMERA INVESTMENT CORP (CIM)

Item 2. 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 1 of this Quarterly Report on Form 10-Q.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this report that are subject to risks and uncertainties. These forward-looking statements include information about, among other things, possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “goal,” “target,” “assume,” ‘‘believe,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘estimate,’’ “project,” “budget,” “forecast,” “predict,” “potential,” ‘‘plan,’’ ‘‘continue,’’ ‘‘intend,’’ ‘‘should,’’ ‘‘may,’’ “could,” “would,’’ “will’’ or similar expressions, we intend to identify forward-looking statements. Statements regarding the following subjects, among others, are forward-looking by their nature:

•our ability to obtain funding on favorable terms and access the capital markets;

•our ability to achieve optimal levels of leverage and effectively manage our liquidity;

•changes in inflation, the yield curve, interest rates and mortgage prepayment rates;

•our ability to manage credit risk related to our investments and comply with the Dodd-Frank Act and related laws and regulations relating to credit risk retention for securitizations;

•rates of default, delinquencies, forbearance, deferred payments or decreased recovery rates on our investments;

•the concentration of properties securing our securities and residential loans in a small number of geographic areas;

•our ability to execute on our business and investment strategy;

•our ability to determine accurately the fair market value of our assets;

•changes in our industry, the general economy or geopolitical conditions, including the ongoing conflicts involving the U.S. in the Middle East;

•our ability to successfully integrate and realize the anticipated benefits of any acquisitions, including the acquisition of HomeXpress;

•our ability to originate or acquire quality and profitable loans at an appropriate and consistent cost;

•our ability to sell the loans that we originate or acquire;

•our ability to refinance or obtain additional liquidity for borrowing;

•our ability to manage, maintain and expand our relationships with our clients, the independent mortgage brokers and bankers;

•our ability to operate our investment management and advisory services and manage any regulatory rules and conflicts of interest;

•the degree to which our hedging strategies may or may not be effective;

•our ability to effect our strategy to securitize residential mortgage loans;

•our ability to compete with competitors and source target assets at attractive prices;

•the ability of servicers and other third parties to perform their services at a high level and comply with applicable law and expanding regulations;

•our dependence on information technology and its susceptibility to cyber-attacks;

•the development, proliferation and use of artificial intelligence;

•our ability to find and retain qualified executive officers and key personnel;

•our ability to comply with extensive government regulation, including, but not limited to, federal and state consumer lending regulations;

•the impact of and changes in governmental regulations, tax law and rates, accounting guidance, refinancing or borrowing guidelines and similar matters;

•our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the “1940 Act”);

•our ability to maintain our classification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes;

•the volatility of the market price and trading volume of our shares; and

•our ability to make distributions to our stockholders in the future.

Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and prospects may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Executive Summary

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We are a diversified, internally managed REIT, that serves the U.S. residential real estate market. Through our Investment Portfolio and Residential Origination segments, we acquire, manage, finance and originate residential mortgage and real estate-related assets, with the objective of delivering attractive risk-adjusted returns to shareholders.

In 2025, we reevaluated the composition of our reportable segments based on changes in the significance of certain business activities, including the acquisition of HomeXpress Mortgage Corp. (“HomeXpress”) in October 2025 (the “HomeXpress Acquisition”), and the manner in which our management reviews operating results and allocates resources. As a result of this reevaluation, we now have two reportable segments: (i) Investment Portfolio, and (ii) Residential Origination. The Investment Portfolio segment consists of our investments and third-party advisory services activities. The Residential Origination segment consists of the stand-alone residential mortgage origination business of HomeXpress that originates Non-QM residential mortgage loans (both consumer loans and Investor Loans) and other Non-Agency and Agency mortgage loan products.

Investment Portfolio Segment

As of June 30, 2026, based on the fair value of our interest-earning assets, approximately 55.6% of our investment portfolio was allocated to residential mortgage loans held for investment, 36.9% to Agency MBS, 5.1% to Non-Agency RMBS, 2.2% to LHFS, and less than 1% to interests in MSR financing receivables.

We utilize a variety of channels, including securitizations, warehouse facilities, repurchase agreements and other capital market activities to finance our investments, manage liquidity, improve capital efficiency, support the implementation of our investment strategies, as well as enhance our return on equity. We manage interest rate risk using hedging instruments such as interest rate swaps, swap futures, treasury futures, swaptions, and interest rate caps. We also use TBA securities to hedge certain risks within our Agency portfolio.

Our investment strategy is intended to be effective across a variety of economic, rate, and credit environments. We seek to approach portfolio management in a disciplined manner and expect to operate in an environment characterized by ongoing uncertainty related to global trade dynamics, fiscal and monetary policy, inflation, labor market conditions, economic growth, and domestic and geopolitical tensions.

Fees earned from investment management, as well as third-party asset management and advisory services, are included in this segment.

Residential Origination Segment

HomeXpress is a specialty mortgage lender focused primarily on providing first lien, consumer Non-QM loans, and Investor Loans solutions to the residential housing market on a national scale through mortgage brokers and bankers. As of June 30, 2026, HomeXpress had approximately 6,300 approved wholesale brokers and non-delegated correspondent bankers. Non-QM loans are designed for borrowers who do not meet traditional qualified mortgage standards and typically carry higher interest rates and offer more flexible solutions. Investor Loans are secured by first liens on non-owner occupied 1–8 unit investment rental properties. HomeXpress is a leading originator of these residential mortgage loans and does so substantially on a wholesale basis through independent mortgage brokers and bankers. In the second quarter of 2026, HomeXpress sold 69% of all of the loans it originated on a servicing-released basis to third-party institutional investors, and the remaining 31% of the loans were purchased by the Investment Portfolio segment under our strategy of sponsoring securitizations of Non-QM loans using HomeXpress collateral. HomeXpress uses warehouse financing to fund loans from origination through sale. While the residential real estate market and associated mortgage loan origination volumes are heavily influenced by economic factors such as interest rates, housing prices and employment conditions, additional loan origination growth for HomeXpress is expected to be realized from further development of its existing wholesale origination network, as well as the growth of its recently implemented non-delegated correspondent channel. Additional growth is also expected from the expansion of its FHA, VA and conventional Agency-conforming channel and the implementation of delegated correspondent lending platform. As of June 30, 2026, LHFS by HomeXpress constituted approximately 5.4% of our interest-earning assets based on fair value.

Market Conditions and our Strategy

Interest Rates, Inflation, Labor Markets, and Economic Activity

Financial markets during the second quarter of 2026 were shaped primarily by evolving expectations for Federal Reserve monetary policy amid persistent inflation, resilient labor market conditions and continued geopolitical developments. Although tensions in the Middle East remained elevated early in the quarter, energy markets stabilized following a temporary ceasefire and easing concerns over disruptions to global oil supplies. While lower oil prices moderated inflation concerns, inflation remained above the Federal Reserve’s long-term target, contributing to continued uncertainty regarding the path of monetary policy.

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At its June meeting, the Federal Reserve maintained its target range for the federal funds rate at 3.50% to 3.75%. Although no change in policy rates was announced, updated economic projections reflected persistent inflation concerns and a more restrictive policy outlook than investors had anticipated entering the quarter. As a result, investor expectations shifted from near-term interest rate cuts toward the possibility of a rate increase later in the year.

Treasury yields increased across the curve during the quarter, led by shorter-term maturities as markets repriced expectations for future monetary policy. The yield on the two-year U.S. Treasury increased by 38 basis points to 4.17%, while the ten-year U.S. Treasury yield increased by 15 basis points to 4.47%. The yield curve flattened meaningfully during the quarter, with the spread between the two-year and ten-year Treasury yields narrowing from 52 basis points to 29 basis points.

Mortgage and Credit Markets

Mortgage and credit markets remained constructive throughout the second quarter despite higher benchmark interest rates. Primary mortgage rates increased only modestly as tighter mortgage spreads modestly offset a portion of the increase in Treasury yields. The average 30-year fixed mortgage rate increased from 6.38% to 6.49% during the quarter, while mortgage rate spreads relative to the 10-year Treasury yield tightened from the elevated levels experienced earlier in the year.

Agency mortgage-backed securities outperformed comparable-duration U.S. Treasuries during the quarter. Current coupon Agency MBS spreads tightened 18 basis points a

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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. 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.

This section of the 2025 Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. 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.

Executive Summary

We are a diversified real estate company that invests in, originates, and manages primarily residential real estate assets. The assets we may invest in and manage for others, through our wholly-owned subsidiary 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. Also, through our wholly-owned subsidiary, HomeXpress, we originate consumer Non-QM and investor business purpose residential mortgage loans as well as QM residential mortgage loans.

In 2025, we reevaluated the composition of our reportable segments based on changes in the significance of certain business activities, including the acquisition of HomeXpress, and the manner in which our management reviews operating results and allocates resources. As a result of this reevaluation, we report as two reportable segments: (i) Investment Portfolio, and (ii) Residential Origination. The Investment Portfolio segment consists of our investments and third-party advisory services activities. The Residential Origination segment consists of the stand-alone mortgage origination business of HomeXpress that originates consumer Non-QM, investor business purpose, and other Non-Agency and Agency mortgage loan products.

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). As of December 31, 2024, based on the fair value of our interest earning assets, approximately 88% of our investment portfolio was allocated to residential mortgage loans, 4% to Agency RMBS, and 8% to Non-Agency RMBS.

We utilize a variety of channels, including securitizations, warehouse facilities, repurchase agreements and other capital market activities to finance our investments, manage liquidity, improve capital efficiency, support the implementation of our investment strategies, as well as to enhance our potential return on equity. We manage interest rate risk using hedging instruments such as interest rate swaps, swap futures, treasury futures, swaptions, and interest rate caps.

Our investment strategy is intended to be durable across a variety of economic, rate, and credit environments. We seek to approach portfolio management in a disciplined manner and expect to operate in an environment characterized by ongoing uncertainty related to global trade dynamics, fiscal and monetary policy, inflation, labor market conditions, economic growth, and domestic and geopolitical tensions.

Residential Origination Segment

During the fourth quarter we completed the HomeXpress Acquisition, which closed on October 1, 2025. We raised liquidity through staggered sales of select assets, some of which we sourced from our Agency RMBS liquidity allocation and the rest from what we viewed to be fully priced Non-Agency RMBS positions. Separately, we also issued unsecured debt.

The HomeXpress Acquisition represents a strategically significant milestone and broadens our business capabilities. We expect that this acquisition will provide us with direct exposure to the growing residential consumer Non-QM and investor business purpose mortgage loan origination market and will enhance the diversification of our earnings sources beyond our core investment activities. As of December 31, 2025, loans held for sale by HomeXpress constituted approximately 6% of our interest earning assets based on fair value.

HomeXpress is a specialty mortgage lender focused primarily on providing first lien, consumer Non-QM loans, and investor business purpose solutions to the residential housing market on a national basis through mortgage brokers and bankers. Non-

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QM loans are designed for borrowers who do not meet traditional qualified mortgage standards and typically carry higher interest rates and offer more flexible solutions for potential borrowers. Investor business purpose loans are secured by first liens on non-owner occupied 1–8 unit investment rental properties. HomeXpress is a leading originator of these residential mortgage loans and does so substantially on a wholesale basis through independent mortgage brokers and bankers. HomeXpress currently sells all the loans it originates on a servicing-released basis to third-party institutional investors. Warehouse financing is used by HomeXpress to fund these loans from origination through sale. While the residential real estate market and associated mortgage loan origination volumes are heavily influenced by economic factors such as interest rates, housing prices and employment conditions, additional loan origination growth for HomeXpress is expected to be realized from further development of its existing wholesale origination network as well as from the growth in its recent implementation of a non-delegated correspondent channel. Additional growth is also expected from expansion in its FHA, VA and conventional agency-conforming channel and the implementation of delegated correspondent lending platform.

For a full description of our business, see Part 1 – Business in this Annual Report on Form 10-K.

Market Conditions and our Strategy

Interest Rates, Inflation, Labor Markets, and Economic Activity

Interest rates across the U.S. Treasury curve fluctuated throughout the year as market expectations regarding the timing and magnitude of policy easing evolved in response to incoming inflation, labor, and economic data. Short-term interest rates declined over the course of the year alongside expectations for easing monetary policy, while longer-term Treasury yields declined more slowly reflecting continued inflation uncertainty and term-premium dynamics.

Inflation, as measured by the Consumer Price Index (“CPI”), moderated at times during the year but remained above the Federal Reserve’s stated 2.0% objective. CPI inflation ranged between 2.3% and 3.0% on a year-over-year basis during 2025 and ended the year at 2.7%. Shelter costs continued to be a significant contributor to overall inflation, with rates of increase that generally exceeded those of goods and energy prices.

Labor market conditions moderated over the course of the year but remained relatively resilient. The unemployment rate increased to 4.4% at year-end, but still remained historically low, while job gains and broader indicators pointed to an easing labor market trajectory. Economic activity remained solid as real gross domestic product increased at an annualized rate of 3.8% in the second quarter and 4.4% in the third quarter of 2025.

With this backdrop, the Federal Reserve held short term rates steady through the first half of 2025 and eased 25 basis points at each of the final three Federal Open Market Committee meetings, bringing the yearend federal funds target range between 3.50% and 3.75%.

Consistent with these dynamics, the yield curve evolved with a steepening bias during 2025. The two-year Treasury yield dropped 77 basis points during the year to 3.47%, while the ten-year yield declined just 39 basis points, resulting in the yield curve steepening by 38 basis points during 2025.

Housing Market

U.S. housing market conditions in 2025 were shaped by continued affordability challenges and an ongoing imbalance between housing supply and demand. While mortgage interest rates, home prices, insurance costs, and property taxes continued to pressure homebuyer affordability, several of the largest drivers showed signs of easing over the course of the year.

According to the Freddie Mac Primary Mortgage Market Survey, the average 30-year fixed mortgage rate declined from 6.85% at the beginning of the year to 6.15% at year-end, a decrease of approximately 70 basis points, with most of the decline occurring in the second half of 2025.

Housing supply conditions remained constrained, particularly in the existing home market, as elevated mortgage rates continued to limit homeowner mobility. Existing home inventory increased modestly during the year but remained below long-term averages. In contrast, new home supply and construction remained relatively more active. Homebuilders continued to support transaction volumes through the use of mortgage rate buydowns and other incentives, which helped offset affordability pressures and support new home sales despite higher headline financing costs.

Home price growth moderated relative to prior years, and year-over-year national home price appreciation ended the year below consumer wage growth, representing a step toward easing affordability challenges.

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Execution of Our Strategy in 2025

During 2025, we focused on diversifying the portfolio and repositioning the Company as a diversified, vertically integrated residential real estate platform. To execute on these objectives, we exercised redemption rights with respect to several securitized transactions and raised capital organically through re-securitizations of the underlying mortgage loans and loan sales to third parties. We also raised capital through monetizing certain fully valued assets as well as through the issuance of senior unsecured debt. These activities provided the capital necessary as we expanded our platform and mortgage lending capabilities through the acquisition of HomeXpress, increased our allocation to liquid Agency RMBS, made our first investment in MSRs, and began to reshape our allocation of capital, investment mix, and sources of income and earnings.

Full Year and Fourth Quarter 2025 Business Highlights - Investment Portfolio Segment

Investment Activity

Asset Purchases

Agency RMBS. Predominantly starting with the second quarter and through the rest of the year 2025, we purchased approximately $4.3 billion of Agency RMBS, taking advantage of relative value opportunities while simultaneously increasing our liquid securities allocation. These investments allow us to deploy capital in a relatively expedient manner upon raising funds through capital market transactions, asset divestitures, portfolio run-off, or other means and enable us to maintain liquidity that we can access for future investments or other strategic objectives, including business acquisitions. During the fourth quarter we added $606 million of Agency RMBS, net of sales.

MSR Investment. During the third quarter, we gained exposure to a $6.5 billion pool of Fannie Mae MSRs through a third-party servicing partnership. The weighted average interest rate on the loans at the time of acquisition was 4.02% and the weighted average LTV ratio and borro

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