Chimera Investment Q3 2026 Earnings Call Transcript

Chimera Investment (NYSE:CIM) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Chimera Investment Corporation faced significant market challenges in Q3 2026, marked by rising interest rates and increased volatility, yet HomeXpress remained slightly profitable with a record loan origination of over $1 billion.

The investment portfolio generated $0.38 of earnings available for distribution per share, surpassing the dividend payout, and benefitted from diversification and effective hedging strategies.

GAAP net loss for the quarter was $193.6 million, with a notable decline in book value per share by 16.5% due to higher rates and wider spreads.

Strategic initiatives included refinancing non-mark-to-market repurchase facilities, reducing financing costs, and successfully completing the first securitization of HomeXpress loans under the PRSM conduit.

Looking forward, the company anticipates flat profitability for HomeXpress in Q4 but expects recovery in early 2027; ongoing development of the integrated origination and securitization platform is highlighted as a key long-term strategy.

Full Transcript

OPERATOR

Greetings. Welcome to the Chimera Investment Corporation’s third quarter earnings call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star-0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Tyra Weldon, Head of Investor Relations.

Thank you, Tyra. You may begin.

Tyra Weldon (Head of Investor Relations)

Thank you, Operator. And thank you everyone for joining us today. I’m Tyra Weldon, Head of Investor Relations. This morning Chimera released its results for the third quarter of 2026. The earnings release and presentation for the quarter are both available on our website at chimeraads.com. Before we begin, I’d like to review the Safe Harbor Statement. Today’s remarks may contain 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 we may also discuss non-GAAP financial measures. Please refer to our SEC filings and earnings supplements for reconciliations 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, Phillip Kardis.

Phillip Kardis (Chief Executive Officer)

Thanks, Tyra. Good morning and welcome to Chimera Investment Corporation’s third quarter 2026 earnings call. Joining me on the call are Subramaniam Viswanathan, our Chief Financial Officer, Jack Macdowell, our Chief Investment Officer, and Kyle Walker, the President and CEO of HomeXpress Mortgage. After my remarks, Subha will review the financial results. Jack will then review the investment portfolio and then Kyle will review HomeXpress’s results.

The third quarter was a challenging period for the mortgage markets, marked by a sharp increase in interest rates, significant volatility and a growing uncertainty about the direction of monetary policy. In fact, the 10-year Treasury experienced the third largest quarterly increase in the past decade. But that doesn’t fully capture what happened. By September, the selloff had become acute and the 10-year Treasury yield increased by more than 50 basis points in that month alone, its largest monthly increase since 2022.

In our origination business, the speed at which rates move can matter just as much, if not more, than the level of rates themselves. Kyle will discuss this in more detail, but the economics are straightforward. The secondary market reprices almost immediately when interest rates rise. Mortgage originators, however, cannot move nearly as quickly. They have a pipeline of loans locked at rates established weeks earlier. When market yields rise sharply, those loans become less valuable.

To provide investors with the returns they now require, originators must sell those loans at a lower price. That price adjustment comes directly out of the origination profitability, and that’s precisely what happened at HomeXpress. Nevertheless, HomeXpress remained slightly profitable for the quarter and I want to pause for a moment on this. We experienced the third largest rate move of the past 10 years, and HomeXpress was able to originate more than a billion of loans, a quarterly record, and still make a profit. And they did all of that without sacrificing credit standards.

While the origination-based business faced significant pressure, our investment portfolio performed well despite one of the most difficult interest rate environments in recent years. The portfolio generated $0.38 of EAD during the quarter. For the first nine months of the year, EAD totaled $1.38 per share compared with $1.35 per share in dividends. That performance reflects the benefits of the diversified investment portfolio and the hedging strategy we put in place.

Looking ahead, I want to be clear about the challenges we expect in the fourth quarter. While HomeXpress is currently locking and originating profitable loans, we expect their profitability to be roughly flat in the fourth quarter. As they continue to dispose of the third quarter pipeline, we expect them to return to profitability in the first quarter of 2027. In addition, though our investment portfolio continues to perform well, we acquired or committed to acquire loans for our securitization program.

While we held these loans ahead of securitization, they were exposed to a higher rate and wider spread environment, which we expect to impact our fourth quarter financials. The extent of this impact will depend on market conditions through the end of the year, and yesterday’s market move was a step in the right direction. We had several important accomplishments during the quarter that I don’t want to get lost in a discussion of market volatility. First, we refinanced two mature and non-mark-to-market structured repurchase facilities. Jack will review the details, but we were able to reduce the rate and the haircut. These are meaningful improvements. They reduce our financing costs, improve our capital efficiency and provide greater funding stability. Second, our interest rate hedges worked as expected, covering the margin calls we received.

Third, following quarter end, we completed the first securitization of HomeXpress loans through our new conduit, PRSM Capital. We priced PRSM 2026-HX1 in a particularly difficult market, but we believe the execution was good given the market conditions. But the significance of this transaction goes beyond the pricing of a single securitization. It represents another step in bringing together three complementary capabilities within our platform: mortgage origination, asset management and securitization.

HomeXpress originates the loans, Palisade serves as asset manager, and our securitization capabilities provide a means of financing and distributing those assets to the capital markets investors. Each of these businesses has value independently, but their real potential comes from how they work together over time. We expect this integrated platform to create efficiencies, improve our ability to respond to market opportunities and provide greater control over the economics of the loans we originate and invest in.

This is an important part of our long-term strategy. As we look beyond the fourth quarter, we believe the fundamental outlook for our investment portfolio remains favorable. HomeXpress has restored the economics of new production, our financing position has improved and our integrated origination and securitization platform continues to develop. Those are the things that will matter long after the volatility of this particular quarter has passed.

I want to conclude by noting that we cannot control interest rates, market volatility or the timing of Federal Reserve decisions. What we can control is the quality of our assets, the discipline of our underwriting, the structure of our financing, adherence to prudent risk management, and how we allocate your capital. That is where our attention remains, and I believe the decisions we’re making today will position us to deliver attractive, sustainable returns for shareholders over the long term.

I’ll now turn the call over to Subrah to discuss our financial results.

Subramaniam Viswanathan (Chief Financial Officer)

Thanks, Phil. GAAP net loss for the third quarter was $193.6 million, with net loss of $191.2 million from our investment portfolio segment and $2.4 million from residential origination. We generated approximately $32 million of earnings available for distribution, or $0.38 per share. GAAP book value per share declined 16.5% to $14.82, primarily reflecting the impact of higher rates and wider spreads during the quarter. Economic return on GAAP book value, defined as the change in book value plus dividends of $0.45, was negative 13.98% for the third quarter, while annualized EAD return on average common equity was 9.48%.

Segment performance for the quarter was as follows. For the investment portfolio, economic net interest income was $69.4 million, while annualized economic net interest income return on average equity was 13.91%. The yield on average interest-earning assets was 5.9%. Our average cost of funds was 4.3%, and the resulting net interest spread was 1.6%. For the residential origination segment, HomeXpress funded $1.12 billion in loans. EBITDA, defined as earnings before taxes, depreciation and amortization, was $0.4 million, and annualized EBITDA ROE was 0.6%.

With respect to leverage and liquidity, our total leverage was 6.5 to 1, while recourse leverage was 4.1 to 1. GAAP leverage and recourse leverage both increased during the quarter reflecting higher loans held for sale in the investment portfolio as we accumulated assets for our PRSM securitization. We ended the quarter with $561 million in total cash and unencumbered assets compared to $656 million last quarter. Total consolidated secured financing outstanding was $8.6 billion.

It was comprised of $801 million related to our residential origination warehouse loans, and the remaining approximately $7.8 billion was for our investment portfolio. Within the investment portfolio, $5.5 billion of secured financing supported agency positions, against which we maintained $3.4 billion in swaps, interest rate caps and other hedges with varying maturities, in addition to a short position of $2.4 billion in TBAs. During the quarter, excluding loans held for sale, $1.7 billion was secured by residential credit assets, of which $1.2 billion, or 73%, carried non- or limited-mark-to-market features, and $716 million, or 43%, were fixed-rate facilities.

Finally, on expenses relative to the prior quarter, compensation and servicing expenses as well as general and administrative expenses were relatively flat. Unlike the second quarter, we did not incur any transaction-related expense. As our business has expanded, we have begun identifying ways to improve efficiency and better align our cost structure with the scale and mix of our operations. In summary, the third quarter was challenging, with significant market volatility impacting our asset valuations. Despite this, our investment portfolio continued to generate EAD contribution greater than the second quarter while our residential origination segment was slightly profitable. As we approach year-end, we are focused on maintaining stronger liquidity, managing risk and driving total shareholder returns over the long term. With that, I’ll turn the call over to Jack.

Jack Lee Macdowell Jr (Chief Investment Officer)

Thanks, Subra, and good morning, everyone. The third quarter was defined by a sharp repricing of interest rates as persistent inflation, resilient economic activity, and geopolitical developments shifted expectations for Federal Reserve policy. The Fed raised rates by 25 basis points in September, while concerns about fiscal sustainability and Treasury supply added further pressure to longer-term yields. In this environment, agency MBS underperformed as higher rates and volatility contributed to wider mortgage spreads.

Residential credit markets proved more resilient, supported by investor demand and continued securitization activity, although rising financing costs and extension risk impacted whole loan prices and securitization economics. With those pressures carrying into the fourth quarter, market dynamics drove a 16.5% decline in our book value during the quarter. Consolidated loans and securitizations accounted for roughly half of that adjustment, the agency portfolio approximately 40%, and non-agencies representing the balance, partially offset by gains on our modest MSR investment.

Importantly, these valuation adjustments were largely unrealized and primarily reflected the impact of higher interest rates, wider mortgage spreads, and increased volatility rather than a deterioration in underlying credit fundamentals. Credit performance across our residential portfolio remained within expectations. We entered the quarter with a strong liquidity position, and most of our non-agency portfolio benefits from conservative non-mark-to-market financing structures.

In addition, cash received on our hedges during the quarter helped offset margin requirements on our repo financing. As a result, we did not need to sell assets to meet margin calls and our financing was uninterrupted. Toward the end of September, we tactically established a $2.4 billion short TBA position to reduce risk in response to heightened market volatility. We also increased liquidity to support the settlement of PRISM-related whole loan purchases.

Turning to our investment portfolio, we actively managed our agency MBS positions and advanced our PRISM mortgage banking and securitization initiatives during the quarter. In agencies, we sold $226 million of CMOs and $1 billion of mostly lower-coupon pass-throughs. We purchased approximately $1.9 billion of higher-coupon securities, offering more attractive carry and shorter durations. As a result, our average bond coupon increased from approximately 5.28% to 5.67% at quarter end, shortening portfolio duration by approximately nine months.

Despite the challenges during the quarter, September’s repricing has created a more attractive investment environment for agency MBS. Higher yields and wider spreads have improved prospective returns, while mortgage duration extension has reduced negative convexity as borrowers have moved further out of the money from a refinancing perspective. Taken together, we believe these dynamics have improved our risk-adjusted return opportunity. As volatility moderated in October, we unwound the short TBA position and returned the agency portfolio toward a more normalized risk profile.

This reflects our tactical approach to portfolio management, adjusting risk exposure as market conditions evolve while maintaining the flexibility to capitalize on attractive investment opportunities. As part of our PRISM conduit and mortgage banking activities, we committed to purchase approximately $330 million of loans from HomeXpress and $467 million from third parties in the third quarter. As of the related trade dates, these pools carried interest rates of approximately 7.2%, loan-to-value ratios of 71%, and average borrower credit scores of 745. Consistent with the credit quality objectives of our PRISM program, we hedged the pipeline’s duration exposure and ended the quarter with $1.2 billion of swaps against $1.2 billion of settled and unsettled loans.

With respect to the non-agency portfolio, we refinanced approximately $280 million across two maturing non-mark-to-market structured repo facilities, extending maturities by two years and reducing our cost of funds. We also expanded the facilities to approximately $355 million, providing approximately $75 million of additional reinvestment capacity. Our capital allocation shifted during the quarter alongside the growth of our PRISM conduit and mortgage banking activities. As a result, agency MBS accounted for 21% of invested capital at quarter end, a decrease of 5 percentage points. Residential credit and MSRs were broadly unchanged at 60% and 2%, respectively, and the combined HomeXpress and PRISM mortgage banking activities increased by 5% to 17%.

Turning to credit performance, underlying fundamentals across our residential loan portfolio remained stable and generally in line with expectations. Delinquencies in our legacy reperforming loan portfolio remained within the narrow range seen over the past several years, and prepayments were broadly consistent with historical levels. Our investor DSCR portfolio experienced a modest increase in September delinquencies that has since largely reversed as early-stage delinquent borrowers brought their loans current.

Importantly, this portfolio continues to outperform a comparable composite of 2022 and 2023 vintage non-QM loans. From a credit perspective, prepayments declined materially from the second quarter as higher mortgage rates reduced refinancing incentives, in line with broader trends across the non-QM market. As Phil mentioned, following quarter end we priced and closed PRISM 2026 HX1, our inaugural transaction under the PRISM shelf, backed by approximately $291 million of non-QM loans originated by HomeXpress.

This was an important milestone, particularly given the challenging securitization market where higher interest rates, increased volatility, and investor concerns around extension risk have placed pressure on new-issue spreads and transaction structures. Despite our first issuance under the PRISM shelf and Chimera Investment’s first securitization backed by HomeXpress-originated loans, we achieved competitive execution, pricing our AAA bonds at a spread of 160 basis points, in line with comparable non-QM transactions pricing in the 155 to 165 range during the same period.

We believe this reflects the strength of Chimera Investment’s established presence and reputation in the residential securitization market. The transaction also demonstrates the value of our integrated platform, with HomeXpress originating the loans, Palisades providing asset-level diligence and ongoing asset management and servicing oversight, and Chimera Investment leading the structuring and capital markets execution. While we are pleased to have successfully launched PRISM, we recognize that the third quarter was a particularly challenging period to aggregate and finance loans. Nevertheless, we remain confident in the long-term potential of our integrated platform. HomeXpress’s leading non-QM origination franchise, combined with the broader capabilities of Chimera Investment and Palisades, provides a differentiated platform and a strong foundation for sustainable earnings.

As interest rates and market volatility stabilize, we expect its earnings potential to become increasingly evident. Subject to market conditions, we intend to establish PRISM as a regular issuer in the non-QM securitization market. The third quarter also reinforced the importance of maintaining a strong balance sheet and the flexibility to navigate rapidly changing market conditions. With geopolitical events, monetary policy, and other external developments creating uncertainty, liquidity, disciplined risk management, and capital preservation will remain central to our approach for the foreseeable future. Looking ahead, we want to acknowledge the work that our team has done over the past two years to reposition the portfolio, build new capabilities, and bring these various components of our platform together.

While the current market presents challenges, we believe that work has meaningfully strengthened Chimera Investment and positioned us to generate value in ways that were previously unavailable to us. Our priority now is to translate that progress into consistent financial performance and sustainable long-term earnings for our shareholders. With that, I’ll turn it over to Kyle to discuss residential origination.

Kyle Walker

Thanks, Jack, and good morning, everyone. Home Express originated 1.12 billion in the third quarter, an increase of 27% from the third quarter of 2025 and 2% over the record second quarter. We achieved this result despite an increasingly challenging market, particularly in September with heightened interest rate volatility and wider bond spreads, pressured industry volumes and economics. Year-over-year growth was broad based, including continued expansion in our correspondent channel, which accounted for 16.8% of quarterly production.

I’d like to spend a few minutes discussing quarterly profitability and the factors that shaped it. We generated 430,000 in EBITDA while our net origination margin was negative 7 basis points. We began the quarter strong, producing 3.1 million in EBITDA with a net origination margin of 74 basis points in July. As the quarter progressed, rising interest rates and significant rate volatility impacted our business. Competitors were slower to raise their rates while we remained disciplined, balancing competitive pricing with the true economics of each loan.

At the same time, wider bond spreads and expectations for longer duration impacted the economics of loans already locked in our pipeline. Along with loans originated earlier in the quarter, it also affected pricing on new production. Tighter origination margins and less favorable secondary market execution more than offset the benefit of our higher volume levels, weighing on quarterly profitability. It is important to distinguish between the level of interest rates and the speed at which they change. Loans can be priced effectively across a range of interest rates, durations, and bond spread environments. The challenge arises when markets are extremely volatile and move so quickly that they create uncertainty around pricing and execution for both lenders and whole loan investors. Although we are quick to respond to such fluctuations by adjusting our lending rate sheets, the magnitude and pace of bond spread volatility and changing duration expectations made the transition difficult.

Because we cannot dictate market conditions or competitors’ pricing decisions, we concentrate on what we can influence: competing selectively, actively managing our operating cost base, and maintaining disciplined credit standards. First, as competition intensified, some lenders held pricing steady despite changes in the industry environment to preserve their origination volume. We chose a different path. As I noted last quarter, we are not seeking to win every loan.

We continue to compete where we saw opportunities to strengthen valuable broker relationships but remained selective about loan pricing and quality. That discipline limited our volume growth during the quarter. Second, we are strengthening the business’s underlying economics by investing in our platform and supporting our origination network. We ended the quarter with more than 6,300 approved brokers supported by 145 account executives and related sales staff. Our broad network and trusted broker partnerships positioned us well to capture growth as market conditions improve. Network size, however, is only one part of the equation. Brokers also need comprehensive and flexible loan products, reliable execution, and excellent customer service.

We continue to invest in these capabilities and in our correspondent channel, with certain costs being incurred today ahead of the volume they are structured to support. Finally, and most importantly, we did not compromise our underwriting standards even as originations grew modestly in a more competitive market and margins tightened later in the quarter. The weighted average FICO score for third quarter originations was 743 compared with 742 last quarter, while weighted average LTV was 72.39% compared with 71.56%. Credit discipline remains fundamental to how we operate.

We also continued working with our warehouse partners to improve financing economics. At quarter end, we had 1.65 billion of warehouse capacity across seven facilities, providing more than sufficient funding to support current production levels. For the remainder of the year, we will maintain credit discipline, compete selectively, and improve our operating efficiency while continuing to build the scale we have developed into meaningful earnings over time.

With that, I’ll turn the call back over to Phil.

Phillip Kardis (Chief Executive Officer)

Thanks, Kyle. And we’ll now open the call for questions.

OPERATOR

Thank you. We’ll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Our first question comes from Marissa Lobo with UBS. Please go ahead.

Marissa Lobo (Analyst)

Good morning. Thanks for taking my question. Could you talk about your outlook for the agency basis following September widening and how you’re comparing incremental returns for agency versus new residential credit opportunities today?

Jack Lee Macdowell Jr (Chief Investment Officer)

Yeah, sure. Hey, Marissa. Yeah, I mean, obviously, especially after yesterday’s move, it’s been shifting around a little bit. But I mean, we see returns for agencies somewhere in that mid-teens, call it 16, 17% range as we sit here today. And, you know, from a portfolio allocation standpoint, I would say that the marginal dollar, if you will, as we talked about in the past, sort of goes to agencies with respect to our liquidity bucket. We see that as an opportunity to sort of generate a nice nominal cash flow yield while at the same time enjoying the liquid nature of that and the optionality that allows us to draw down on it and allocate to other elements of the business as we see opportunities.

And we actually, as I think I mentioned in my prepared remarks, we did that toward the end of the third quarter. As we need to settle loans for our PRISM conduit mortgage banking activities, we would draw down on the agencies. But as we sit here today, from a relative value perspective, you know, we certainly do look at the agencies as sort of the benchmark as we look to deploy capital across other parts of the business. And right now we see the agency ROEs, on a nominal basis at least, looking pretty attractive.

Marissa Lobo (Analyst)

Okay, great. And looking at liquidity and leverage, with leverage higher, additional loans being accumulated for securitization, how are you thinking about the minimum liquidity buffer needed to operate the origination strategy through another period of volatility?

Jack Lee Macdowell Jr (Chief Investment Officer)

Yeah, well, I mean, as you point out, leverage did increase, and that was purely a function, I would say, of, you know, adding the loans in anticipation of securitizing them. So that number is going to go up and down as we aggregate loans and securitize them. If you think about it, though, even if you have, you know, $800 million of loans in the pipeline for securitization, let’s just say you’re going to hold about 10% or so, 10 to 12% of capital against that.

So you’re not talking about huge amounts of capital required to sustain at least where we are today with respect to our PRISM conduit activities. But when we think about the size of the agency portfolio and the ability to draw down on that capital to support PRISM, we feel like, you know, having 20% allocated to agencies, which is where we are today, or 21%. And I think we were at 26, 27% last quarter. So that gives us plenty of capacity to sort of draw down on the agencies to support PRISM. And then when we do the securitization and extract capital, we can then put that back into agencies until we need it, you know, for another investment down the road.

Marissa Lobo (Analyst)

Great. Appreciate the answers.

OPERATOR

Our next question comes from Trevor Cranston with Citizens. Please proceed with your question.

Trevor Cranston (Analyst)

Thanks. Good morning. I think you said in the prepared comments that you’ve lifted the TBA short position subsequent to quarter end. You know, looking at the agency book on slide 11, it looks like you had also taken the swap portfolio down significantly at some point in 3Q. So can you comment on kind of, you know, where the hedge portfolio has gone since quarter end, if the TBA has been lifted? Thanks.

Jack Lee Macdowell Jr (Chief Investment Officer)

Yeah, yeah. Hey, Trevor. The TBA was lifted, you know, incrementally over the course of October as volatility came down. So as we sit here today, the TBA short is off. And if you’re referring to the other parts of the hedge complex, what we tend to do, we’re not looking to take rate views in the agency portfolio. So we do try to manage to a pretty tight duration gap there. Keep in mind, we do have a combination of in-the-money caps as well as swaps.

And over the course of the quarter, as we moved up in coupon, we did shorten the duration of the portfolio and it did shift around our hedge complex a little bit as from swaps and caps and so forth. But at the end of the day we’re really not looking to take views and we’re managing to a pretty tight gap.

Trevor Cranston (Analyst)

Okay, got it. That’s helpful. And then can you comment on how you guys are generally thinking about potential for doing share buybacks relative to continuing to deploy capital into the investment portfolio at this point? Thanks.

Phillip Kardis (Chief Executive Officer)

Yeah, this is Phil. So as we’ve said in the past, I think right now as we look at our investment opportunities, we continue to believe that investing is preferable to doing share buybacks is kind of what our view has been.

Trevor Cranston (Analyst)

Okay, that’s fair. Thank you.

OPERATOR

Our next question is from George Bose with KBW. Please proceed with your question.

Frankie Levetion (Analyst)

Hey, guys, good morning. This is Frankie Levetion for Bose. I just want to get a little color on the non-QM market. You know, in the current trends you’re seeing there across your portfolio, you have noticed some increases in delinquency rates. So, yeah, what are you seeing there? And also maybe can you touch on execution across the non-QM securitization market? Thanks.

Jack Lee Macdowell Jr (Chief Investment Officer)

Sure, I’m happy to take that. So just if you’re looking in our investor deck on the non-QM delinquency chart, it did on our investor DSCR portfolio, you saw a small uptick there. As I mentioned in the prepared remarks, that’s a 2022, 2023 vintage portfolio and it is performing, you know, I would say meaningfully inside where sort of composite loans from that vintage are running from a delinquency standpoint. But I would say more broadly speaking, and this goes for the entire sort of non-QM market, is that, you know, as you sort of see delinquencies in that mid-single-digit range, I think if you talk to just about anybody, you know, nobody is commenting that losses are exceeding their expectations. Losses have been, you know, nominal at best across the non-QM space. So, you know, that’s consistent with what we’re seeing in our portfolio as well as the broader market in terms of just securitization execution.

I’m sure you’re probably aware that over the course of the quarter, as rates sold off and deals came to market with lower interest rates on the underlying loans, securitization structures shifted a little bit and that has impacted securitization economics overall for some of those lower interest rate pools. But I will say, and as we alluded to in our prepared remarks, we were exceptionally pleased with respect to the execution on our initial PRISM transaction, the HX1 deal.

If you just look at where AAAs were pricing the week before and the week after we did our deal, sort of putting us right in the middle there. You saw issuers that were on their 12th, 13th deal of the year and they were pricing their AAAs in the 155 to 165 area. And we got our deal done at 160. So again, we were exceptionally pleased. And when we had originally sort of modeled this out, we were expecting some concession for it being our first-time deal.

And we think that’s a testament to sort of the historical presence that Chimera Investment has had in the securitization market. And last thing I would say about that is just the fact that it’s a really important transaction for us, just in the sense that it does bring together all the different components of the business together in a synergistic and complementary way. And we see this as being a pretty important component of our ongoing business strategy.

Subramaniam Viswanathan (Chief Financial Officer)

Yeah, sure. So as of the third, I guess we were up 5%. And that was really a function of, you know, rates have tightened and spreads have tightened quarter-to-date. So unlike the breakdown that we gave in the prepared remarks, the composition of that was probably more toward the agency piece just from a book value attribution component than it was over the course of the third quarter.

OPERATOR

And once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Doug Harder with BTIG. Please go ahead.

Will Naston (Analyst)

Thanks. It’s actually Will Naston for Doug this morning. I know you cited macro volatility as a main driver of the lower Home Express margins in the quarter, but I was hoping you could talk a little bit more about how you’re thinking about margins there in the higher rate environment and I guess how that evolves if volatility comes down.

Kyle Walker

Yeah, this is Kyle. You know, we had to go through a transition from a lower interest rate environment to a higher interest rate environment, which means most of our loans are locked on 30 days. So there was a transition of about 30 days where you had to deal with loans that weren’t profitable. Today our pipeline we believe is profitable. IRR is near 8%. And so, you know, we’re still working through, I think, about one more pool that is maybe slightly profitable.

And then we think we’ll be back into a profitable margin business at the end of the fourth quarter, into the first quarter.

Will Naston (Analyst)

Got it. Thanks for taking my question.

OPERATOR

We have reached the end of the question and answer session. I would like to turn the floor back over Mr. Kardis for closing comments.

Phillip Kardis (Chief Executive Officer)

Thank you. I’d like to thank all of our shareholders for their support and also like to thank all of our employees for the hard work that they went through given the volatility of the quarter. And we look forward to talking to you early next year. Thank you.

OPERATOR

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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