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Greetings, and welcome to the Chimera Investment Corporation Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to [ Mean Sung ]. Please go ahead.

Thank you, operator, and thank you, everyone, for participating in Chimera's Second Quarter 2025 Earnings Conference Call. Before we begin, I'd like to review the safe harbor statement. During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These events are based on current expectations and assumptions that are subject to risks and uncertainties, which are outlined in the Risk Factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We encourage you to read the forward- looking statement disclaimers in our earnings release and our quarterly and annual filings. During the call today, we may also discuss non-GAAP financial measures. Please refer to our SEC filings and earnings supplement for reconciliation to the most comparable GAAP measures. Additionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call. We do not undertake and specifically disclaim any obligation to update or revise this information. I will now turn the conference over to our President and Chief Executive Officer, Phil Kardis.

Thank you. Good morning, and welcome to the Chimera Investment Corporation's Second Quarter 2025 Earnings Call. It's great to have you with us today. Joining me on the call are Jack Macdowell, our Chief Investment Officer; and Subra Viswanathan, our Chief Financial Officer. After my remarks, Subra will review the financial results, and then Jack will review our portfolio before opening the call for questions. You may be familiar with the ancient Greek parable, "the fox knows many things, but the hedgehog knows one big thing." It's a simple parable, but powerful. The fox is clever, always trying new things. The hedgehog, it just sticks to what it knows best, and the fox cannot defeat him. And good to great, Jim Collins took that idea and asked what separates great companies from the rest? He found the answer was not simply trying new things. It was focus. He called it the hedgehog concept, the intersection of 3 key questions. What are you deeply passionate about? What can you be the best in the world at? And what drives your economic engine? A couple of years ago, we looked at ourselves in the mirror and realized we were too focused on securitizing reperforming residential mortgage loans. We needed to change, but not by becoming something new, not by chasing the new hot idea, rather by becoming more of who we already are, something we're deeply passionate about that we believe we can be the best at and will drive our economic engine, and that's residential mortgage credit. The first step, the acquisition of the Palisades Group, which enhanced our existing expertise in residential mortgage credit, brought us third-party mortgage loan management, portfolio optimization and third-party private capital raising. The second step was portfolio diversification. We have started selling some of our assets and have relevered some of our securitizations and used those proceeds to acquire Agency RMBS, which supports our REIT and 40 Act compliance as well as providing us with a source of liquidity and income. And more recently, to acquire $6.5 billion of Fannie Mae mortgage servicing rights through a servicing partnership. We made progress, but there's still more work to be done. The third step is the acquisition of HomeXpress, a leading non-QM originator with a history of growth and profitability. We currently have broad, deep experience in acquiring, financing and managing a range of residential mortgage credit assets, both for ourselves and for others, and HomeXpress adds the production of those assets to our platform. But this is not just vertical integration, but this is strategic clarity. With both Palisades and HomeXpress, we look for companies that expanded and enhanced our existing capabilities. We expect both acquisitions to be accretive, not through subtraction or reduction in headcount or other so-called cost saving synergies, but through addition, the addition of complementary capabilities, the addition of talent and the addition of scale and scope. So what's next? We're not done yet. We'll continue to look for opportunities to grow the platform, both organically as well as adding new pieces, all the while being diligent to our core principles, our expertise in residential mortgage credit, our hedgehog status. Our new trajectory will not be linear. As we noted during the last earnings call, while we successfully relevered our NR securitization, it takes time to effectively deploy capital, especially given the volatility surrounding Liberation Day, which resulted in a short-term drag on earnings in April and May before we hit our stride in June. Also, while we believe HomeXpress acquisition will be meaningfully accretive to our earnings as we expect 2026 and 2027 to be especially strong years for non-QM originations, we may experience decreased earnings in the short term as we redeploy capital for the acquisition and integrate them as an operating subsidiary. We also expect to invest some of those earnings to grow the platform and our assets to support future growth of our dividend. As we look forward to the future, what's the big takeaway? We're a company that knows one big thing, residential mortgage credit and executes it. We'll continue diversifying our portfolio and income streams, growing recurring fee income, adding liquidity and looking for opportunities to add accretive platforms and invest in accretive assets, all with the focus of growing our assets and dividend or total economic return over the long term. I'll now hand it off to Subra to walk you through the financials.

Thank you, Phil. I will review Chimera's financial highlights for the second quarter of 2025. GAAP net income for the second quarter was $14 million or $0.17 per share. GAAP book value at the end of second quarter was $20.91 per share. For the second quarter, our economic return on GAAP book value was 0.5% based on the quarterly change in book value and the $0.37 second quarter dividend per common share. And year-to-date 2025, our economic return on GAAP book value was 9.8%. On an earnings available for distribution basis, net income for the second quarter was $32.1 million or $0.39 per share. Our economic net interest income for the second quarter was $69 million. For the second quarter, the yield on average interest-earning assets was 6%, our average cost of funds was 4.5% and our net interest spread was 1.5%. Total leverage for the second quarter was 4.5:1 while recourse leverage ended the quarter at 1.8:1. Recourse leverage increased this quarter as we increased our investments in agency securities. For liquidity and strategic developments, the company ended the quarter with $561 million in total cash and unencumbered assets. As Phil mentioned, during the quarter, we announced a definitive agreement to acquire HomeXpress Mortgage Corporation. This transaction is expected to close in the fourth quarter of 2025. On the investment front, we deployed approximately $2.3 billion in new Agency RMBS investments during the quarter, primarily in the back half as opportunities arose. For repo and hedging, we had $2.4 billion outstanding repo liabilities secured by the residential credit portfolio. 58% of the outstanding residential credit repo or $1.4 billion had a floating rate sensitivity, and we maintained $1.6 billion in notional value of various interest rate hedges protecting the repo liabilities. We had $1.4 billion in either non or limited mark-to-market features on our outstanding repo agreements, representing 58% of our secured recourse funding for the residential credit portfolio. On the Agency RMBS side, we had $2 billion of interest rate swap notionals with various tenants protecting against $2.1 billion of outstanding repo liabilities. Additionally, during the quarter related to the Agency RMBS hedges, we entered and closed out $2.5 billion notional of swaption contracts with varying maturities. For the second quarter of 2025, our economic net interest income return on average equity was 10.5%. Our GAAP return on average equity was 5.4%, and our EAD return on average equity was 7.5%. And lastly, compensation, general, administrative and servicing expenses were marginally lower this quarter. Our transaction expenses were lower by $5 million this quarter, reflecting the costs associated with increased securitization activity in the prior quarter. I will now turn the call over to Jack to review our portfolio and investment activity.

Thanks, Subra, and good morning, everyone. The second quarter was shaped primarily by policy developments, including international trade uncertainty, the administration's tax proposal, regulatory capital relief initiatives, geopolitical events and ongoing scrutiny of Federal Reserve rate policy. The early April tariff escalation rattled risk markets, pushing interest rate volatility to levels not seen since October 2023. Investors repriced the odds of a June Fed rate cut peaking at an implied 1.6 cuts on April 8 as concerns of a tariff-induced recession increased. But as trade time lines extended and policy tensions eased, risk sentiment stabilized and volatility finished the quarter below its starting point. Economic data remained a key market driver as the Fed maintained its data-dependent stance. While early Q2 consumer sentiment surveys showed weakness, June data improved notably. Hard data revealed surprising economic resilience despite tariff concerns. Employment statistics consistently met or exceeded expectations and core PCE inflation ended the quarter at 2.8%, just 10 basis points above where it began. The yield curve steepened during the quarter, with the 2-year treasury yield declining approximately 16 basis points, supported by softening inflation expectations and a more balanced economic backdrop. Conversely, long-duration treasuries faced headwinds with the 10-year [indiscernible] hedging up 2 basis points, while the 30-year sold off roughly 20, pressured by mounting fiscal supply concerns and uncertainty around duration demand. This dynamic produced significant curve steepening with the 2s, 10 spread widening approximately 19 basis points and the 2s and 30s by roughly 37 basis points. Corporate credit spreads outperformed non-Agency RMBS as investment grade and high-yield corporates tightened 11 and 57 basis points, respectively, while non-Agency RMBS was wider by 5 to 10 basis points across the capital stack. Generically, Agency MBS held up better against treasury hedges with current coupon OAS tightening 8 basis points, whereas swap OAS traded within a 23 basis point range, ending 2 basis points wider. Housing conditions remain challenging against the backdrop of low affordability and market uncertainty. Through June 2025, existing home sales registered the weakest year-to-date activity in nearly 27 years outside of 2009. While resale inventory remains historically low, May's 1.5 million units represented the highest level since June 2020. Home price forecasts have moderated with most year-to-date projections now ranging between 0% and 4% for 2025. The bright spot continues to be the non-QM market, where originations and issuance volumes continue to outpace 2024 levels and are on track to reach the highest post-crisis level on record. Our book value declined 1.2% during the quarter, primarily driven by the rally at the short end of the curve that impacted our securitized debt valuations more significantly than the corresponding gains in our loan portfolio. With respect to the portfolio, we entered April with $253 million in cash and a fortified liability structure that allowed us to navigate market volatility comfortably. Our funding remains stable throughout the turbulence as approximately 61% of our portfolio liabilities are comprised of nonrecourse term financing. The remaining 39% is made up of repo with approximately $2.1 billion secured against liquid Agency MBS and $2.4 billion against non-Agency RMBS. Notably, 58% of our non-agency repo or $1.4 billion is non-mark-to-market or limited mark-to-market, providing stability in our funding during times of market stress. We ended Q2 with approximately 62% of the portfolio's capital allocated to legacy reperforming loans, which compares to roughly 68% at the end of the first quarter. RPL portfolio fundamentals performed consistent with expectations. Cash flow velocity remained steady. Prepayments increased each month of the quarter, consistent with seasonal factors, while RPL delinquencies ended the quarter lower at 8.4%. With ample liquidity coming into Q2, we remain disciplined while markets work through early quarter volatility. Consistent with the strategy we outlined in Q1, we focused on repositioning toward more liquid assets through an expanded Agency MBS allocation. We began deploying capital following the peak volatility period, adding positions opportunistically in late April and more aggressively in May when spreads remained wide with the majority of settlement activity occurring in the back half of the quarter. That deliberate pacing resulted in a modest drag on earnings in Q2 while also preserving strategic flexibility and underscoring our commitment to disciplined risk management amid evolving market dynamics. During the quarter, we committed over $300 million of capital toward the purchase of approximately $2.3 billion of agency pass- throughs, utilizing approximately 6.5 turns of leverage. We hedged these positions with swaps to achieve tighter duration alignment, match our SOFR-based funding profile and capitalize on structural carry advantages in the current negative swap spread environment. We expect these positions to deliver high-quality carry with levered ROEs in the low to mid-teens. After quarter end, we closed on our first MSR transaction consisting of $6.5 billion of Fannie Mae loans through a third-party servicing partnership. The portfolio consists of 4-year seasoned loans with a 4% average interest rate, $220,000 average balance, 71% loan-to-value and 750 average borrower credit score. The transaction deployed approximately $37 million of capital at an expected levered ROE in the low teens. This asset class complements our residential credit and Agency MBS holdings while helping balance portfolio interest rate sensitivities. Looking ahead, we continue to evaluate liquidity-generating opportunities within our portfolio of securitizations where we hold exercisable redemption rights. That currently includes 18 callable deals consisting of approximately $6 billion of loans. We analyze the economics of exercising call rights and either selling the underlying loans or as we did in Q1, resecuritize them. Our decision framework incorporates breakeven ROE thresholds, near-term book value impacts and longer-term earnings accretion potential. While some opportunities may offer accretive redeployment, they may require near-term book value reductions when redeeming discounted securitization debt at par. We carefully weigh enhanced earnings power against book value impacts and corresponding payback periods. And as we identify deals that meet our economic thresholds, we expect to pursue these strategies as we continue repositioning our portfolio and platform. As mentioned, on June 12, we announced the acquisition of HomeXpress, marking another strategic step in transforming our portfolio and platform capabilities. From a business standpoint, HomeXpress' founders and senior leadership have built a high-caliber team serving brokers and correspondent lenders in the non-QM and DSCR markets at scale. Additionally, they have a strong network of institutional investment partners that have been consistent buyers of HomeXpress' loan production over the years, and we intend to continue supporting and growing those relationships. From a portfolio perspective, the HomeXpress platform creates a pipeline of investable assets, not only for the REIT, but also for our investment and asset management clients while simultaneously supporting the growth of our third-party MSR footprint. We're excited about the cultural alignment, business synergy and HomeXpress' ability to capture market share in the expanding non-QM sector. We are pleased with the progress made in Q2 as we patiently deployed the capital raised, ending with over $300 million allocated to Agency MBS, prepared for our first MSR investment that closed in early July and announced the acquisition of HomeXpress. We look forward to maintaining this momentum through the third quarter. And that concludes our prepared remarks. We'll now turn the line back over to the operator for questions.

[Operator Instructions] Our first question today is coming from Bose George from KBW.

Actually, in the prepared remarks, you suggested that there might be more to do in terms of -- on the acquisition front or sort of pieces as the company continues to evolve. Can you just discuss what direction that could be?

Yes. What I want to signal is that as with HomeXpress, I mean, we will continue to be open to opportunities that make sense within our kind of core competency of residential credit. And that's -- we'll just remain open to those things, and we're more signaling that. It's still possible to continue to grow those to the extent that they could be synergistic within that framework.

Okay. That makes sense. And then after the HomeXpress deal closes, do you think you have all the pieces in place to generate a double-digit ROE next year?

Yes. I think, Bose, just from an earnings power perspective, I mean, obviously, we're doing several things that are focused on increasing our earnings power, increasing our EAD. HomeXpress is obviously a critical component to that. We think that's going to be materially accretive as we go forward in 2026 and beyond. The other thing that we alluded to in some of the prepared remarks was just our efforts to generate liquidity and earnings power just from our existing callable securitization. So that's something that we're continuing to focus on and try to identify the economics of. The other thing, too, is just looking across our portfolio, we've got a lot of legacy positions. So identifying any underperforming or fully valued assets and seeking to sell those, redeploy them into more accretive investments. And I think as we've mentioned on prior calls, another element that we're very focused on is continuing to increase the revenue and earnings attribution from our fee-based businesses, our asset management and investment management platforms. So look, all those pieces and then there's obviously market dynamics that flow into this with respect to the path of Fed rate policy, and that obviously impacts our net interest margin and things like that. But we certainly believe that we're laying the foundation and are on the right path for continuing to increase our earnings power going forward.

Next question today is coming from Trevor Cranston from Citizens JMP.

As you guys continue to go through the portfolio repositioning process, can you talk about how you sort of envision the long-term capital allocation mix between the legacy credit portfolio and the newer Agency/MSR asset classes?

Yes, sure. It's a good question. And obviously, that is a function of several things, market conditions being one; two, the legacy portfolio naturally will run off over time. But we're certainly focused on sort of what we have in-house that we're looking at, which is kind of our model portfolio. And one of our primary goals there is to have a diversified portfolio across complementary sectors or product types that would provide stability and durability across different economic housing and interest rate environments. The legacy portfolio, primarily made up of the reperforming loans, super seasoned loans. They've got a ton of equity in them. In many cases and for many reasons, we like those assets. At the same time, they were securitized in a different period of the market. And so we're looking and they've delevered. And as they continue to delever, that has an impact on our earnings power. So going forward, I would say -- MSRs, we did our first MSR transaction. It's now less than 2% of our overall capital allocation. As we think about where we want to be from an equity duration perspective, again, depending on the types of MSRs that we're buying, are they at the money? Are they more out of the money like the trade that we did in July? I see those being anywhere from 15% to 25%, something like that, give or take. Agencies, we've mentioned, is a very important component of our overall portfolio allocation, but that's going to be a function of our liquidity needs, where we're seeing relative value, some of the opportunistic -- relative value opportunities we're seeing in other products and sectors. So it's hard to nail down like what is our specific long-term portfolio allocation. But what I can say is agencies has a permanent role there, MSRs have a permanent role there, and being opportunistic around other product sectors is something that we're always going to do just because we've got the capabilities to allocate and manage assets across the entire spectrum of residential credit products. And so we don't want to limit ourselves to any just 1 or 2. I don't know if that helps, but hopefully, it gives you some idea of what we're thinking.

Next question today is coming from Doug Harter from UBS.

Hoping you could talk about how you're thinking about the dividend strategy going forward once HomeXpress closes and how you think about retaining some capital from that business versus increasing the payout?

This is Phil. Yes, I mean, as we signaled, we are -- we look at a variety of factors. We look at what our liquidity needs are, what the investment horizon is. And we're looking to maintain and grow kind of the total economic return. And there's a couple of levers there. As you know, there's the dividend, there's book value, there's assets that support both. And so as we look at HomeXpress, we do believe it's going to be materially accretive to our earnings. And the question will be at the time of next year as we look through things, we will want to take some of that and make sure we invest it to grow that platform and assets. And some of that, we will want to make sure that we're providing some near-term dividend. That mix, we haven't determined, but those are the kind of factors we'll think about as we go forward because acquiring new and accretive assets is going to support the current dividend and allow that dividend to grow. So we have to strike an appropriate balance between using some of those earnings to grow the dividend now versus making the investments that will grow the dividend in the future.

Great. And then shifting to the secured financings. It looks like as of June 30, that rate came down about 60 basis points from the prior quarter. I guess can you just talk about what drove that and how much of that benefit you saw during the second quarter?

Doug, it's Subra. Thanks for your question. So that 60 basis points is really a result of our increase in financing of our agency portfolio. So that just brought the weighted average rate down.

Okay. That makes sense. And then is there -- has there been any significant change in book value quarter-to-date or through July, whichever?

Yes. I think as of the end of last Friday, we were down about 55 basis points on book value. That was primarily driven by our loan portfolio being relatively flat quarter-to-date, and we are seeing spreads tighten marginally on securitized -- senior securitized debt. So that increased the value of our sec debt and had a nominal impact on our book value.

[Operator Instructions] Our next question is coming from Eric Hagen from BTIG.

Maybe following up on that last point. I mean you mentioned some mark-to-market noise related to the move at the short end of the yield curve last quarter. I mean what's the outlook from here if the Fed cuts rates? And how will that drive your appetite to call the remaining securitized debt that you have that's currently callable?

Yes. No, that's a great question, Eric. And certainly, if rates -- if they cut rates sort of where we're seeing Fed futures and things like that, that would certainly have multiple impacts on how we look at things. I mean, one, that would increase our net interest margin. We've set up our non-agency hedges in a bit of an asymmetric way with our $1 billion cap that we put on earlier this year. So as rates go down -- we're protected if rates go up. But to the extent that rates go down, we're going to see a benefit there from our net interest margin. At the same time, if rates go down, that -- depending on where other parts of the curve move, that should also help the economics in our callable securitization analysis. So we certainly could see some of those deals that may not be currently economic to call, we could certainly see them move into the box and be more actionable. So yes, those things are definitely something that we're paying close attention to.

Got it. That's helpful. That's helpful. All right. So we're looking at the really low mark-to-market LTV for these seasoned reperforming loans. I imagine the DTI is probably too high for most of those folks to get a cash out refi or take on more debt. But there's so much innovation in our market right now, right, especially with like home equity products. I mean, are there other equity products which could appeal to these borrowers, which either drive a refi event or strengthen the underlying credit in some way?

Yes. That's another good question. And we're very familiar with a lot of these home equity products that are out there, including the ones that require no monthly scheduled payments. So I do think they -- some of these borrowers would be ripe for those types of products to the extent that they wanted to tap into the equity in their homes. With that being said, if you think about the profile of the borrower in this portfolio, they've been in the house 17, 18, 19, 20 years. If they didn't refinance back in 2021, I think in many cases, these folks are just planning on living in these places for the rest of their lives almost. And basically, we're seeing that captured in the prepayment speeds that are basically right around housing turnover levels. So I agree with you, it very well could be a world where some of these home equity products and the marketing reach that they're making gets to these borrowers, and we could see some pickup in payoff speeds. But I will say from a credit perspective, I'm not sure that any of those products will really -- we're looking toward those to improve the credit profile. We're seeing, like I said in the prepared remarks, very good cash flow velocity. You've got a ton of equity in these loans. The profile of borrower, they may miss a payment or 2 around the holidays. They pick it back up again when they get their tax returns just as a general profile. So yes, it's -- I'm not sure if that answered the question.

No, that was really helpful detail. No, that was good stuff. I appreciate that. One more, if I may. I mean, do you have a sense for how much of the production from HomeXpress will be capitalized on the balance sheet versus sold to third parties going forward?

Yes. I think it's really important for us to really emphasize the fact that -- and I alluded to it in the prepared remarks, but their business has been built around relationships they have with institutional investors who have been multiyear partners to them and buying their production, and we expect to continue to support that and continue to develop those relationships and sell to third parties. At the same time, as we see HomeXpress' production volume grow, we do expect to be in a position to retain a portion of that production, whether it's for the REIT balance sheet, for our credit funds, our third-party clients on the asset management side. But we certainly do not -- we want to strike a very good balance with respect to continuing to make sure that we grow the relationships that they already have in place and that they've been building over the years versus what we're retaining. I can't tell you that -- we don't have a specific number or percentage at this point. I think it's something that we're still working through and making sure that we're thoughtful as we go down that path.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

This is Phil Kardis again. I want to thank everyone for participating in our second quarter earnings call, and we look forward to speaking with you in November for our third quarter call. Thank you.