Cherry Hill Mortgage Investment (US:CHMI)2026-03-05 22:06Financial Performance - Interest income for the year ended December 31, 2025 was $61.1 million, an increase of $5.3 million compared to $55.8 million in 2024, driven by new securities purchases and higher yielding securities [269]. - Interest expense decreased to $49.8 million in 2025 from $55.8 million in 2024, a reduction of $6.0 million due to lower financing rates and decreased notes payable [270]. - Servicing fee income fell to $43.3 million in 2025 from $48.5 million in 2024, a decrease of $5.2 million attributed to changes in portfolio size [271]. - Net interest income for 2025 was $11.3 million, a significant increase from just $29,000 in 2024 [263]. - Total income for the year ended December 31, 2025 was $23.3 million, down from $34.6 million in 2024 [263]. - Net income for 2025 was $6.9 million, compared to $12.2 million in 2024, reflecting a decrease of 43% [263]. - The company reported a net loss applicable to common stockholders of $3.0 million in 2025, compared to a net income of $2.1 million in 2024 [263]. Assets and Liabilities - Total assets as of December 31, 2025 were $1.54 billion, an increase from $1.49 billion in 2024 [268]. - Total liabilities increased to $1.30 billion in 2025 from $1.26 billion in 2024 [268]. - The company’s investments in RMBS totaled $1.21 billion as of December 31, 2025, compared to $1.12 billion in 2024 [268]. Expenses - Servicing costs decreased to $9.3 million for the year ended December 31, 2025, down from $12.4 million in 2024, a reduction of approximately 25% [272]. - General and administrative expenses decreased to $7.7 million in 2025 from $10.7 million in 2024, a reduction of approximately 30% attributed to lower professional fees [279]. - Compensation and benefits expense increased to $6.5 million in 2025 from $1.6 million in 2024, a rise of 306.3% due to the company operating as an internally managed entity [280]. Gains and Losses - Realized loss on RMBS decreased to $6.0 million in 2025 from $6.6 million in 2024, reflecting a decline of about 9.1% due to fewer RMBS securities sold [273]. - Realized gain on investments in MSRs dropped to $0 in 2025 from $0.5 million in 2024, a decrease of 100% as no MSRs were sold [274]. - Realized gain on derivatives fell to $7.0 million in 2025, down 67.2% from $21.3 million in 2024, primarily due to decreased interest income and increased losses on interest rate swaps [275]. - Unrealized gain on RMBS measured at fair value through earnings increased significantly to $35.6 million in 2025 from a loss of $19.4 million in 2024, a net change of $55.0 million [276]. - Unrealized loss on derivatives rose to $39.8 million in 2025 from a gain of $9.8 million in 2024, an increase of $49.6 million due to interest rate changes [277]. Financing and Liquidity - The company had outstanding repurchase agreement borrowings of approximately $1,137.2 million as of December 31, 2025, reflecting an increase due to the purchase of new RMBS securities [309][311]. - The liquidity strategy includes maintaining sufficient cash reserves to meet margin calls and operational expenses, with a focus on investing in targeted assets as the economy normalizes [306][307]. - The company expects to meet its long-term liquidity requirements through cash on hand and potential additional borrowings [307]. - The average monthly amount of borrowings under repurchase agreements for the quarter ended December 31, 2025, was $1,135,331 million [311]. - The weighted average term to maturity of borrowings under repurchase agreements was 16 days as of December 31, 2025 [315]. - As of December 31, 2025, approximately $90.8 million was outstanding under the Fannie Mae MSR Revolving Facility, down from $95.6 million as of December 31, 2024 [318]. Cash Flow - Operating activities generated cash of approximately $19.1 million for the year ended December 31, 2025, compared to a cash usage of approximately $4.7 million for the year ended December 31, 2024 [319]. - Investing activities used cash of approximately $66.7 million in 2025, a decrease from $141.3 million in 2024, primarily due to RMBS purchases [319]. Shareholder Information - The company’s GAAP loss per diluted share for the year ended December 31, 2025, was $0.09, while the GAAP income per diluted share for 2024 was $0.07 [322]. - The company intends to distribute at least 90% of its REIT taxable income annually, subject to board authorization and operational requirements [320]. - The company may need to sell assets or borrow funds to meet cash distribution requirements if cash available for distribution is less than REIT taxable income [321]. Market Conditions - The Federal Reserve reduced its federal funds rate target by 75 basis points to a range of 3.50% to 3.75% since September 2025, impacting interest expenses and income [331].