Cherry Hill Mortgage Investment (NYSE:CHMI) reported improved fourth-quarter 2025 results as tightening mortgage spreads and a steeper yield curve supported returns across its portfolio. Management said market conditions were helped by falling realized and implied volatility, additional Federal Reserve easing during the quarter, and stronger equity and credit markets.
Quarterly performance and market backdrop
President and CEO Jay Lown said themes from the third quarter carried into the fourth, including “a further reduction in tariff rhetoric” and above-trend domestic growth that contributed to lower volatility. He noted a limited government shutdown and a slightly weaker employment picture were offset by additional Fed rate cuts that lowered the fed funds rate by a total of 50 basis points during the quarter.
Earnings, book value, leverage, and liquidity
For the fourth quarter, Cherry Hill generated GAAP net income applicable to common stockholders of $5.3 million, or $0.14 per diluted share, according to CFO Apeksha Patel. Comprehensive income attributable to common stockholders—which includes mark-to-market changes on available-for-sale RMBS—was $6.5 million, or $0.18 per diluted share.
Earnings available for distribution (EAD) attributable to common stockholders were $3.9 million, or $0.11 per share. Book value per common share ended the quarter at $3.44, up from $3.36 at Sept. 30, 2025. Lown also said net asset value (NAV), including preferred stock, increased by about $3.1 million, or 1.3%, versus Sept. 30.
Cherry Hill ended the quarter with financial leverage of 5.4x, which management described as “prudently levered,” and $55 million of unrestricted cash. Operating expenses were $3.3 million for the quarter. Patel said the company held a combined notional amount of roughly $422 million across interest rate swaps, TBAs, Treasury futures, and swap futures at quarter-end, and noted the firm has not elected hedge accounting for its interest rate derivatives.
Portfolio composition, prepayments, and hedging
Chief Investment Officer Julian Evans said the portfolio began the quarter slightly long duration, positioned for lower rates and a steepening yield curve, and maintained that posture throughout the period. He also pointed to a shift from higher to lower coupon mortgages that began in September, which he said proved advantageous as expectations for additional Fed easing increased.
At quarter-end, Cherry Hill’s MSR portfolio had unpaid principal balance (UPB) of $15.9 billion and a market value of about $215 million. Evans said MSRs and related net assets represented about 40% of equity capital and about 21% of investable assets, excluding cash, while the RMBS portfolio also accounted for about 40% of equity capital and about 79% of investable assets, excluding cash.
- MSR prepayments: Net CPR averaged about 5.1% in the fourth quarter, down modestly from the prior quarter. Evans said the portfolio’s recapture rate remained “de minimis” given limited refinance incentive, and management expects low recapture and relatively low net CPR in the near term.
- RMBS prepayments: Prepayment speeds rose to 8.5% CPR for the three months ended December, up from 6.1% in the prior quarter. Evans attributed the increase to the company’s exposure to higher coupon specified pools and mortgage rates moving lower. As of Dec. 31, the RMBS portfolio, including TBAs, was about $805 million, compared with $782 million at the prior quarter end, reflecting repositioning “towards the middle of the coupon stack.”
- Net interest spread: RMBS net interest spread was 2.52%, down quarter over quarter due to lower dollar roll income and reduced interest earned on payer swaps. Evans said he expects “a bounce back in the first quarter as dollar roll income improves.”
Evans said the hedge strategy remains intact using swaps, TBAs, and Treasury futures. During the quarter, the company initiated a small position in ICE SOFR Futures and expects usage to grow as it transitions part of the portfolio to those instruments.
Dividends, expenses, and early 2026 updates
Patel said the board declared a $0.10 per common share dividend for the fourth quarter of 2025, paid Jan. 30, 2026. The company also declared dividends on its preferred shares, including $0.5125 per share on its 8.2% Series A Cumulative Redeemable Preferred Stock and $0.6259 per share on its 8.25% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, paid Jan. 15, 2026.
During Q&A, Patel attributed a roughly 30% quarter-over-quarter drop in G&A expenses to the absence of non-recurring third-quarter expenses primarily related to personnel changes, saying expenses “have normalized” in the fourth quarter.
Management also discussed early 2026 market dynamics. Evans said the firm observed tightening in January and widening in February, along with a flattening yield curve and “more of a flight to quality bid” in the market. He added that mortgage bid-ask spreads had widened somewhat, describing a “softer tone” versus the fourth quarter.
On prepayment expectations, Evans said specified pools in the 5.5% coupon were “prepaying in that…9 to 12-ish type area,” while a move to a 5.5% mortgage rate could push speeds higher. He also said deliverable TBA collateral could be “closer in the 30s, maybe 35-40” CPR under such conditions, while the company’s overall portfolio CPR could “max” around 15 depending on how low mortgage rates go. He noted much of the portfolio was purchased at a discount, and a move “towards par would be beneficial.”
Asked about capital actions, Lown said the company is watching its preferred stock, noting the Series B had recently traded at a discount and that management would discuss a potential strategy around buybacks. On the common stock, Lown said the company is focused on growth and believes the stock is cheap relative to performance, but he did not provide explicit direction on share repurchases.
Finally, Patel provided a book value update, saying that as of March 31 the company was seeing about a 1% increase in book value compared to Dec. 31.
About Cherry Hill Mortgage Investment (NYSE:CHMI)
Cherry Hill Mortgage Investment Corporation is a real estate investment trust that focuses on acquiring, financing and managing residential mortgage loans and mortgage-related securities. The company’s portfolio consists primarily of agency and non-agency residential mortgage loans secured by single-family residences, together with mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
CHMI employs active portfolio management strategies intended to generate current income and total return for its shareholders.
