Company: CIMO
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001628280-25-023813
Chunk: 167

Company: CHIMERA INVESTMENT CORP
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 2
Chunk 167
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 3.78% par rate equivalent pay-fixed 10-year Eris swap futures maturing in March 2035. We also have a long position in a 2-year $1 billion Interest rate cap with a strike rate of 3.95% that we executed in January 2025. 

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. Our hedging techniques attempt to mitigate the interest rate risk but do not capture the impact of credit spread risk. As part of our ongoing securitization execution hedging strategy, we entered into $200 million of short 2-year treasury futures contracts during the fourth quarter of 2024 to hedge the securitization execution. The treasury futures contracts were terminated during the first quarter of 2025 upon closing of the CIM 2025-I1 transaction.

Palisades advisory fees

Through the Palisades Acquisition, we have started earning investment management and advisory fees. In addition, PAS was hired to provide asset management services for three securitizations issued by Chimera during the quarter and we continue to provide services to unaffiliated investors and private credit funds. Palisades’ fee-based income (both transaction and advisory fees) contributed $9 million in revenue during the quarter, while adding a new client service mandate and anticipating to add additional clients in 2025.

Operating expenses 

Compensation, general, administrative, and servicing expenses were higher marginally quarter-over-quarter, when excluding imputed compensation expenses related to the Palisades Acquisition. General and administrative expenses were higher marginally when accounting for the increased costs related to the Palisades platform this quarter. Our transaction expenses were higher during the quarter as a result of costs related to securitization transactions. Lastly, the change in compensation expense for the quarter was primarily driven by the effects of the $10 million initial imputed compensation charge relating to the Palisades Acquisition during the quarter ended December 31, 2024. The first quarter balance included an increase in compensation and salary expenses related to full quarter charges related to the Palisades Acquisition headcount additions. The first quarter includes long term equity award expense acceleration due to retirement eligible employees. Please see “ – Results of Operations – Compensation, General, Administrative, and Servicing expenses” for additional