Cherry Hill Mortgage Investment Corporation ( CHMI ) is an mREIT, or a real estate investment trust that invests in mortgages. In addition to offering a high dividend yield on its common shares, the company also offers two preferred shares. The Series A preferredOther writing on Substack: https://yieldstrategies.substack.com/I am currently focused on income investing through either common shares, preferred shares, or bonds. I will occasionally break away and write about the economy at large or a special sit ...

TINTON FALLS, N.J.--(BUSINESS WIRE)--Cherry Hill Mortgage Investment Corporation (the "Company†or "CHMI†) (NYSE: CHMI) today announced the estimated Federal income tax treatment of the Company's 2025 distributions on its common and preferred stock, as described below. Shareholders are encouraged to consult with their personal tax advisors as to their specific tax treatment of the Company's distributions. Common Stock Total Record Payable Distributions Total Ordinary Nondividend Date. ...

Core Insights - 2025 has been a favorable year for mortgage real estate investment trusts (mREITs) that focus on residential mortgages, primarily due to lower funding costs from repurchase agreements resulting from a 1% reduction in the Federal Reserve rate in 2024 and an additional 0.75% cut in 2025 [1] Group 1 - mREITs are experiencing a boost in earnings due to reduced funding costs [1] - The investment landscape has been positively influenced by the macroeconomic environment, particularly the Fed's interest rate cuts [1] - The author has a long-term fundamental investment approach, focusing on REITs and financials [1]

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Core Insights - Cherry Hill Mortgage (CHMI) reported quarterly earnings of $0.09 per share, missing the Zacks Consensus Estimate of $0.11 per share, representing an earnings surprise of -18.18% [1] - The company posted revenues of $3.3 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 22.22% [2] - Cherry Hill shares have declined approximately 11% year-to-date, contrasting with the S&P 500's gain of 15.6% [3] Earnings Performance - Over the last four quarters, Cherry Hill has exceeded consensus EPS estimates only once [2] - The current consensus EPS estimate for the upcoming quarter is $0.12 on $3 million in revenues, and $0.50 on $10.4 million in revenues for the current fiscal year [7] Market Outlook - The company's stock performance in the near term will largely depend on management's commentary during the earnings call [3] - The Zacks Rank for Cherry Hill is currently 3 (Hold), indicating expected performance in line with the market [6] - The REIT and Equity Trust industry, to which Cherry Hill belongs, is currently in the top 37% of Zacks industries, suggesting a favorable industry outlook [8]

Financial Data and Key Metrics Changes - For Q3 2025, the company reported GAAP net income applicable to common stockholders of $2 million, or $0.05 per diluted share, with comprehensive income of $4.5 million, or $0.12 per diluted share [14][15] - Book value per common share increased to $3.36 from $3.34 as of June 30, 2025, reflecting a slight growth [5][15] - Earnings available for distribution (EAD) were $3.3 million, or $0.09 per share [15] Business Line Data and Key Metrics Changes - The MSR portfolio had an unpaid principal balance (UPB) of $16.2 billion and a market value of approximately $219 million, representing about 41% of equity capital [10] - The RMBS portfolio stood at approximately $782 million, up from $756 million in the previous quarter, indicating a strategic shift towards lower and middle-of-the-coupon stack mortgages [12] - The net interest spread for the RMBS portfolio was approximately 2.87%, higher than the previous quarter, driven by increased asset purchases [12] Market Data and Key Metrics Changes - The 10-year yield ended the quarter marginally lower at 4.15%, with mortgage rates hovering around 6% [4][7] - The average net CPR for the MSR portfolio was approximately 5.9%, consistent with the previous quarter, while the RMBS portfolio's prepayment speeds held steady at 6.1% CPR [10][11] Company Strategy and Development Direction - The company adjusted its dividend to $0.10 per share, aligning it with earnings power for sustainability [6] - A strategic partnership with Real Genius LLC was highlighted, focusing on enhancing the digital mortgage experience, which is expected to accelerate growth as mortgage rates decrease [6][8] - The company aims to monitor the economic environment closely while seeking investment opportunities that are accretive to its business [8] Management's Comments on Operating Environment and Future Outlook - Management noted a reduction in macro volatility and anticipated continued easing from the Fed, which could lead to higher prepayment speeds for high coupon mortgages [4][5] - The company expressed optimism regarding the potential for accelerated growth due to lower mortgage rates, which may encourage refinancing and home purchases [8] Other Important Information - Financial leverage remained consistent at 5.3 times, with $55 million of unrestricted cash, indicating a solid liquidity profile [5] - Operating expenses for the quarter were reported at $3.8 million [16] Q&A Session Summary Question: Regarding the Real Genius partnership, was it opportunistic, or can more partnerships be expected? - Management indicated that while they are not prepared to forecast, they are open to exploring interesting and creative opportunities that align with their skill set [19][20] Question: Thoughts on expenses going forward, particularly G&A and compensation? - Management acknowledged a 12.5% sequential rise in G&A and compensation, attributing it to personnel changes and professional fees, but anticipates costs to decrease moving forward [25][28] Question: Update on current book value? - Management reported that the book value per share as of October 31 was up about 1.2% from September 30, before any fourth-quarter dividend accrual [33]

Financial Performance - The company reported a total quarterly economic gain of 3.6%[5] - GAAP net income was $0.05 per share[5] - Earnings Available for Distribution (EAD) was $0.09 per share[5] - Book value per common share increased by 0.6% to $3.36, net of the quarterly dividend[7] - A dividend of $0.10 per share was declared and paid[7] Portfolio Metrics - The leverage ratio for the aggregate portfolio was 5.3x[6] - Net interest spread for RMBS was 2.9%[6] - RMBS experienced a Constant Prepayment Rate (CPR) of 6.1%[6] - MSRs had a net CPR of 5.9%[6] MSR Portfolio - Investments in MSRs totaled $218.7 million related to approximately $16.2 billion in UPB of underlying Fannie Mae and Freddie Mac loans as of September 30, 2025[20] - Recapture rate on conventional MSRs was 0.3% in the quarter[20] RMBS Portfolio - The RMBS portfolio had a fair market value of $781.539 million and a par amount of $781.032 million[26] - The weighted average coupon (GWAC) for the total RMBS portfolio was 5.8%[26] - The weighted average loan age (WALA) for the total RMBS portfolio was 25.39 months[26] - The RMBS portfolio experienced a 1-month CPR of 6.5% and a long-term CPR of 11.0%[26] Financing and Hedging - The average REPO cost was 4.3% with a weighted average days remaining to maturity of 27 days[35] - The company has borrowings with 14 financing counterparties[35] - The weighted average "haircut" on repurchase agreements was 4.4%[35] - The company utilized payer swaps with a total notional value of $712.7 million and a weighted average pay rate of 1.41%[38] - The company utilized receiver swaps with a total notional value of $116 million and a weighted average receive rate of 3.42%[38]

Financial Performance - Cherry Hill reported GAAP net income applicable to common stockholders of $2.0 million, or $0.05 per share for Q3 2025[6] - Earnings available for distribution (EAD) attributable to common stockholders were $3.3 million, or $0.09 per diluted share[5] - Comprehensive income attributable to common stockholders was $4.48 million for Q3 2025[9] Dividends - The declared regular common dividend was $0.10 per share, resulting in an annualized common dividend yield of 17.0%[6] Portfolio Metrics - The common book value per share was $3.36 as of September 30, 2025[6] - The aggregate portfolio leverage stood at 5.3x as of September 30, 2025[6] - The unpaid principal balance for the MSR portfolio was $16.2 billion, with a carrying value of $218.7 million[10] - The RMBS portfolio had a book value of approximately $1.2 billion, with a weighted average coupon of 4.98%[11] Risk Management - The company held interest rate swaps with a notional amount of $828.7 million to mitigate duration risk[12] Strategic Goals - The company is committed to strategically growing its portfolio while delivering attractive risk-adjusted returns for shareholders[4]

Financial Performance - Net income applicable to common stockholders was $1,955 thousand for the three months ended September 30, 2025, a recovery from a loss of $14,792 thousand in the same quarter of 2024[51]. - Comprehensive income for the three months ended September 30, 2025, was $7,076 thousand, compared to $3,956 thousand in the same period of 2024, indicating a positive trend[54]. - Net income for the nine months ended September 30, 2025, was a loss of $916,000 compared to a profit of $396,000 for the same period in 2024[58]. - The company reported a net operating loss (NOL) of $84.7 million as of September 30, 2025, which can be carried forward indefinitely[243]. - The provision for corporate business taxes for the nine months ended September 30, 2025, is $1,578, reflecting an effective tax rate of 238.5%[242]. Assets and Liabilities - Total assets increased to $1,521,487 thousand as of September 30, 2025, up from $1,491,175 thousand at December 31, 2024, representing a growth of 2.0%[48]. - Total liabilities increased to $1,286,028 thousand as of September 30, 2025, compared to $1,257,553 thousand at December 31, 2024, an increase of 2.3%[48]. - The accumulated deficit increased to $(271,979) thousand as of September 30, 2025, from $(249,643) thousand at December 31, 2024, indicating a growing financial challenge[48]. - Cash and cash equivalents increased to $55,447 thousand as of September 30, 2025, compared to $46,313 thousand at December 31, 2024, a growth of 19.5%[48]. - Total cash and cash equivalents and restricted cash at the end of the period was $64,651,000, up from $54,654,000 in the previous year[58]. Income and Revenue - Net interest income improved to $3,300 thousand for the three months ended September 30, 2025, compared to $109 thousand for the same period in 2024, marking a significant increase[51]. - Interest income rose to $15,643 thousand for the three months ended September 30, 2025, up from $14,327 thousand in the same quarter of 2024, reflecting a year-over-year increase of 9.2%[51]. - Servicing fee income for the nine months ended September 30, 2025, was $32,670,000, which is consistent with the previous year's figure of $36,921,000, showing a decrease of about 11.5%[106]. - The company reported a realized loss on RMBS of $10,496 thousand for the three months ended September 30, 2025, compared to a loss of $7,987 thousand in the same period of 2024[51]. - The company reported a comprehensive income of $7,076,000 for the three months ended September 30, 2025, compared to $3,956,000 for the same period in 2024, indicating an increase of about 78.5%[106]. Stock and Dividends - The company declared common dividends of $0.15 per share during the reporting period[58]. - Dividends paid during the nine months ended September 30, 2025, were $22,497,000, compared to $20,833,000 in 2024[58]. - The Company has authority to issue up to 100,000,000 shares of preferred stock, with 2,781,635 shares classified as Series A and 1,604,103 shares as Series B[138]. - The Series A Preferred Stock pays cumulative cash dividends at a rate of 8.20% per annum, equivalent to $2.05 per share[139]. - The Series B Preferred Stock has an initial dividend rate of 8.250% per annum, equivalent to $2.0625 per share, transitioning to a floating rate after April 15, 2024[140]. Investments and Market Risks - The Company is subject to credit and market risks primarily related to its investments in RMBS and Servicing Related Assets[69]. - The Company’s investments in MSRs are recorded at fair value, with fluctuations reported in net income[79]. - The Company’s derivative transactions include swaps and TBAs, primarily for interest rate risk management purposes[82]. - The Company’s two reportable segments are investments in RMBS and investments in Servicing Related Assets, which are the primary revenue-generating assets[103]. - The Company has determined that no reserves for unrecoverable advances are necessary as of September 30, 2025, and December 31, 2024[81]. Share-Based Compensation - The Company recognized share-based compensation expenses of approximately $226,000 and $231,000 for the three-month periods ended September 30, 2025, and September 30, 2024, respectively[162]. - As of September 30, 2025, there was approximately $861,000 of total unrecognized share-based compensation expense related to unvested LTIP-OP Units and RSUs, expected to be recognized over the next two years[162]. - The 2023 Equity Incentive Plan allows for the issuance of up to 2,830,000 shares of common stock through various equity-based awards[149]. - The Company granted a total of 181,942 restricted stock units (RSUs) under the 2023 Plan on May 30, 2024, with each RSU vesting ratably over a three-year period[155]. - The Company reported a net loss of $12,444,000 for the same period in 2024, compared to a net income of $4,515,000 for the three months ended September 30, 2025[167]. Derivatives and Hedging - The notional amount of interest rate swaps decreased to $828,700,000 as of September 30, 2025, from $1,171,750,000 at the end of 2024[176]. - The total notional amount of derivatives as of September 30, 2025, was $435,425,000, down from $809,275,000 at the end of 2024[176]. - The company reported a realized loss on derivatives of $15,254,000 for Q3 2025, compared to a loss of $16,831,000 in Q3 2024[186]. - The fair value of interest rate swaps as of September 30, 2025, was $13,676,000, with a weighted average pay rate of 1.82% and receive rate of 4.27%[176]. - The company utilized U.S. Treasury futures with a total notional amount of $180,400,000 as of September 30, 2025[182].

Core Insights - Cherry Hill Mortgage Investment Corp. (CHMI) is positioned to benefit from anticipated Federal Reserve rate cuts through 2026, making it a noteworthy investment opportunity [1][5] Company Overview - Cherry Hill operates as a dual-sleeve strategy REIT, with a portfolio that includes 77% agency residential mortgage-backed securities (RMBS) and 23% mortgage servicing rights (MSRs) as of Q2 2025 [2] - The business model is sensitive to market interest rate changes, which can impact asset valuation positively in favorable conditions [3] Risk Management - Cherry Hill actively manages interest rate risks by utilizing a natural hedging relationship between MSRs and RMBS to mitigate volatility [3] Financial Performance - The company has fully internalized its operating structure, aiming for better alignment between management incentives and shareholder interests, which is expected to lead to annualized cost savings [4] - Cherry Hill anticipates core earnings growth from $12.1 million in 2024 to $20.2 million in 2026, supported by a strong dividend yield of 16.2% [4] Market Opportunities - With the Fed's first rate cut initiated for 2025, further cuts are expected, which will lower borrowing costs, improve refinancing costs, and enhance asset valuations for Cherry Hill [5] - Currently, Cherry Hill trades at a discount across several key valuation metrics, presenting an opportunity for investors before broader market recognition [5]