Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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. And our first question will come from Bose George with KBW.

Everyone, good morning. First, just on book value, can you just talk about the drivers of the change in book value during the second quarter and where does mark-to-market book value stand quarter to date?

Yeah, sure. This is Jack. Just on the second quarter book value move, one thing to keep in mind, the vast majority even still today of our GATT portfolio is comprised of securitized loans. So we have about $8 billion of loans on balance sheet against, what, $5.5 billion of securitized debt. So those are in fixed rate, non-marked market term securitizations. We're not hedging the book value there, and that's the vast majority of the move in our book value. We had a pretty substantive sell-off in rates during the quarter, and that drove the value of the loans down, and also the sec debt, but the loans moved more than the sec debt during this quarter. The one thing to also point out there, too, is as we've continued to sort of reposition, diversify the portfolio, we now have a quarter of the portfolio in agencies. We've got about 10%, 11% of the capital allocated to Home Express. And both of those things contributed positively to book value. But it's just a function of our consolidated gap securitization that's driving that book value change. And just to reiterate, I think we've talked about this in the past. The one reason that we're not looking to hedge that is as the gyrations in interest rates change values on both the asset and liability side there, it really doesn't have any impact on our earnings power dividend and paying ability. So on the residential credit side of the book, what we're hedging is our floating rate liabilities with respect to our repo to ensure that our earnings power remains intact. But we take that the book value volatility on that part of the book is going to fluctuate with interest rates.

Okay, yeah, that makes sense. So yeah, just the mark-to-market book value part.

Yeah, so quarter to date, there's been a bit of a sell-off in rates, so we're down about 1.5% quarter to date.

Okay, great. And then just actually a follow-up on the book value, just on the securitized portion. Since that doesn't impact your earnings out of that, I mean, essentially, does that your ROE on your remaining capital in that, does that just go up when those marks happen?

Yeah, so, I mean, our GAAP book value will change, certainly. So, yeah, I guess from a GAAP ROE standpoint, as the loan value declines, then, yeah, our earnings power remains intact, and so our ROE.

Okay, great. That makes sense. And then just on Home Express, just based on your guidance, it sounds like the higher rate outlook is not having a, you know, much, at least a meaningfully negative impact. So, can you just talk about what rates are doing to Home Express in the back half of the year? And also, just talk about the margins in the non-delegated correspondent versus the traditional wholesale.

We're seeing continued increase in volume on a month-to-month basis. We think the third quarter is going to be an increase over the second quarter. There has been some margin compression. We're very focused on maintaining our underwriting standards, pricing deliberately, and looking for operational efficiencies to try to drive down our cost. As far as the non-delegated correspondent, it is slightly less margin business than our wholesale business. I would say maybe 10 to 15 basis points less in margin. But it appears to be much more efficient in how we can process the loan, so I think our costs originate on that business.

Okay, great. Thank you.

Our next question will come from Trevor Cranston with JMP Securities.

Hi. Thanks. Good morning. Can you talk a little bit about your outlook for the agency basis after the spread tightening that we saw during the second quarter and sort of how you compare incremental returns on investing in agency MPS versus new credit opportunities today?

Yeah, that's a good question. And I would say on the agency front, I mean, we've built up, you know, over $600 million of capital allocated to agencies. Spreads have, you know, been moving around, but we're still generating something in the low to mid-teens area with respect to the capital allocated there. And, you know, there's still good demand coming in. First half of the year, we obviously have the first quarter demand coming from the GSE. So there's technical support with respect to spreads in the agency space, and we look at agencies as both a relative value bucket where we can generate returns, but also a source of liquidity that we can draw on for other opportunities. And right now, the bar to draw on that capital is relatively high, just given where yields are in the agency space. With that being said, we do feel like we are at a bit of an inflection point with respect to the work that we've been putting in over the last year and a half in repositioning the portfolio. I think what you heard from Phil's remarks as well as in my remarks is that, you know, the opportunity set for us as we see it on a go for basis is really to start leaning into one of our core competencies, which is what the vast majority of our infrastructure is built around, which is residential credit. So, again, you know, and that includes retaining more loans from Home Express, buying loans from third parties, securitizing those loans, and really creating optionality with respect to whether or not we want to, you know, retain the credit portion of the capital stack for our investment portfolio, where we would be targeting something in the mid-teens area, or we want to distribute the entire structure and turn over that capital and generate gain on sale or capital markets. revenue.

Okay, that's helpful. Thank you.

Moving next to Marissa Lobo with UBS.

Good morning and thank you. For the inaugural Home Express securitization, will Chimera retain the residual equity piece? And if so, how should we expect that to be reflected in EAD going forward?

Yeah, so like I was saying, whenever we're looking to do a securitization, whether it's Home Express or third-party loans, what our intent is to structure those deals and then up to the time of distribution evaluate a variety of factors. One, our capital needs, our portfolio construction objectives, relative value in the market. And based on those factors, we make a determination as to whether or not we would retain the credit portion of the capital stack, which would essentially be investing for long-term earnings over the next several years or distributing the entire structure and booking the gain on sale, which would go through EAD and earnings and then turning over that capital and, you know, rinse and repeating it. So, right now, I mean, that's, we're still working through those dynamics. We're looking to get that first deal done probably in the latter part of the third quarter. And as we approach, you know, the date of that deal, we'll start, you know, honing in on the decision to, you know, what we're going to retain.

Okay. Thank you for that. And could you just update us on third-party advisory? You know, how much AUM are you managing and how should we think about that revenue stream contributing to EAD going forward?

Yeah. So I guess the way I would think about Palisades advisory services is They serve, you know, multiple functions. One, they serve third-party clients with respect to helping them with all their residential whole loan service or oversight and data needs, and that generates revenue from third parties on a fee basis. And they're also very instrumental in overseeing the Chimera portfolio and our focus on buying loans from third parties, securitizing them. So it's really a function of external versus internal resource allocation. I will say just on the third-party business, you know, there is competition in that space, and we've also seen somewhat of a reduction in transaction activity from some of our clients, so we're seeing a little bit of dilution with respect to third-party fee revenue, but we're actively redeploying those resources to help focus on some of our whole loan needs at the REIT level.

And also with the Home Express securitization and the third-party conduit securitization, so we'll expect to see.

Got it. Okay. Appreciate the answers.

And our next question will come from Doug Harder with BTIG.

All right. Thanks, and good morning. Can you talk about where you are in terms of redeploying the capital from the call deals in the first quarter and where we are in terms of seeing that earnings? Thank you.

Yeah. Hey, Doug. So when we raised $195 million from the calls and the sale in late first quarter, we actually had about a $900 and close to a billion dollar TVA short just from a risk management perspective that we held into April. So we actually closed out of that position. So there was some degradation with respect to the negative carrier offshore position in April. But after that, we were primarily fully deployed. And so we're realizing the benefits of that $195 million redeployment, you know, for the, you know, today and for the better part of the second quarter. The one thing to just highlight and point out, though, and this kind of goes back to our consolidated securitizations of the, you know, we've got $8 billion of loans, $5.5 billion of securitized debt. The way that those deals are structured is that when principal comes in, it delevers the structures. And then over time, that's going to dilute our earnings power up until we call the deal, pull the capital out, and then redeploy it once again. So part of the earnings accretion, if you will, from the first quarter activities, we're definitely seeing that, but it's being offset by some of the deleveraging in other parts of the portfolio. But still, there's a net benefit to it. But we're seeing that, you know, today and in the back half of Q2.

All right. Because I guess where I'm just struggling is, you know, one of the logics of kind of the book value decline that you took from calling those deals was to see earnings accretion from that, you know, and X, the one-time items, the earnings seem relatively flat. So, you know, just, and I understand your point there about replacing some of the degradation, but, you know, just, you know, was wondering if, you know, kind of where we were in seeing that accretion, but I appreciate the answer. Sure.

And this now concludes our question and answer session. I would like to turn the floor back over to Phil Cardis for closing comments.

Thank you. To our shareholders, thank you for your continued support.

Over the past couple of years, we've made a lot of progress towards our destination and we look forward to updating you again next quarter ladies and gentlemen thank you for your participation this does conclude today's teleconference you may disconnect your lines and have a wonderful day.