$2.60
$17.70
bear $2.60
base $11.10
bull $17.70
margin of safety $5.00
market price* $8.40
Chimera Investment Corporation is a mortgage REIT. It owns U.S. residential mortgage loans and mortgage-backed securities (non-agency loans, agency securities and, since 2025, loans originated by its HomeXpress subsidiary), funded mostly with repurchase (repo) borrowings and securitized debt, and pays a large dividend. Common shareholders sit beneath roughly $930 million of preferred stock (Series A to D, with fixed 7.75-8.00% coupons costing about $86 million a year) and very large debt: in 2025 the company received about $799 million of cash interest and paid about $535 million. How we measured earnings. Reported operating cash flow is distorted at this company: in 2025 it was negative $249 million only because $1.04 billion of loans HomeXpress originated for sale ran through operating activities, and collateral posted on hedges swings it by tens or hundreds of millions each year. We removed those inventory and collateral flows and the small working-capital movements, subtracted stock compensation, and also subtracted preferred dividends, because that money is owed before common holders receive anything. There is no meaningful capital spending. Result, per common share (adjusted for the 2024 one-for-three reverse split): about $6.50 in 2017, $7.64 in 2018, $0.68 in 2019, -$0.70 in 2020, $5.82 in 2021, $3.78 in 2022, $1.16 in 2023, $1.41 in 2024 and $1.01 in 2025. Earning power was reset by the 2022 rate shock and the balance sheet has since been reshaped (2022 convertible/warrant unwinding, Palisades and HomeXpress acquisitions), so we anchor on 2023-2025, a median of about $1.16 per share; earlier years describe a different, higher-spread portfolio. One-off acquisition compensation was treated as stock-like cost. Our removal of loan-sale flows also removes HomeXpress's sale gains, so 2025 is probably a little understated. What the numbers say. Net cash interest (received minus paid) has fallen from about $304 million in 2023 to $282 million in 2024 and $265 million in 2025, roughly 6% a year, while preferred dividends are fixed. Owner earnings fell about 28% in 2025. Book value attributable to common shares has also drifted down, from roughly $22 per share at the end of 2022 to about $19.70 at the end of 2025 and about $17.70 at mid-2026, because the dividend ($1.48 in 2025; $0.45 a quarter in 2026) has exceeded the owner earnings we can measure, about $1.0-1.4 per share. We give no credit for growth: HomeXpress origination, share gains and any rebound in spreads are not yet demonstrated. Base case: about $11.10 per share. Owner earnings start at about $0.95 in 2026 (about 6% below 2025, in line with the demonstrated decline in net cash interest; the 2025 fall was steeper, but the 28% includes loan-sale gains our adjustment excludes), then erode about 3% a year through 2035 as the portfolio's spread keeps compressing, and about 2% a year after that. The portfolio's ability to keep reinvesting principal repayments (over $1.4 billion a year on the loan book) is the evidence the stream continues, but nothing supports growth. Bear case: about $2.60. The decline in spread income continues at about $12 million a year on top of the fixed $86 million preferred cost. Owner earnings fall from about $0.87 per share in 2026 to near zero by 2032, and we credit nothing after that. Leverage magnifies this: most funding is short-term repo, and the company's own agreements list delisting and leverage limits as default triggers. This case excludes any liquidation value of the underlying loans, which are carried at a much higher book value, so it is deliberately harsh. Bull case: about $17.70, close to today's book value. Spread income stabilises and owner earnings hold at the 2023-2025 median of about $1.16 for ten years (in the range of the last three years), then fade about 1% a year. This needs no new growth, only that the recent decline stops. Margin-of-safety price. Because of heavy leverage, fixed preferred costs ahead of common holders, falling spreads and a wide gap between book value and our earnings-based value, the margin-of-safety price is around $5 per share, roughly half our base value and about twice the bear case, the level at which the base case implies a 20% annual return. What would make this wrong: net interest stabilising or rising, HomeXpress producing sustained profits beyond its costs, or preferred stock being redeemed with cheaper funding would all lift value; sharper hedge or funding stress would lower it. Unreconciled: the company reports several fair-value marks and derivative settlements that we treat as non-cash under our method, so realized losses on investment sales (about $23 million in 2025, $5 million in 2024, $31 million in 2023) are not deducted from our earnings. The second-quarter 2026 report was not available to us in full text; only its headline balance-sheet figures were used.