Cherry Hill Mortgage Investment Corp (CHMI)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 was mixed: EAD per diluted share rose to $0.17 (boosted by dollar roll and hedge income), but GAAP diluted EPS was a loss of $(0.29), and book value per share fell to $3.58 from $3.82 in Q4 2024 .
• CHMI’s EAD beat Wall Street consensus ($0.17 actual vs $0.105 consensus; bold beat), while “Revenue” per S&P Global was deeply negative and volatile for mREIT accounting (actual $(0.505)M vs $2.4127M consensus; bold miss); management cautioned EAD should trend lower in Q2 due to the maturation of a large swap . Values retrieved from S&P Global.*
• RMBS net interest spread improved to 3.55% (from 2.90% in Q4), leverage was 5.2x, and unrestricted cash totaled $47.3M; management reiterated a prudent liquidity posture amid tariff-related macro uncertainty and increased use of Treasury futures as swap spreads tightened .
• Catalysts: maintained $0.15 common dividend for Q1 and Q2 2025; Q2 book value per share was down ~7% quarter-to-date before dividends, and management guided EAD lower in the near term; interim CFO appointment effective June 22 may signal operational continuity amid internalization .

What Went Well and What Went Wrong

• What Went Well

  • EAD rose to $5.4M ($0.17/share) on outsized dollar roll income and hedge income before a large swap matured; RMBS net interest spread improved to 3.55% vs 2.90% in Q4, supported by better dollar roll and repo expense .
  • Liquidity and leverage remained solid: unrestricted cash of $47.3M and aggregate leverage at 5.2x; operating expenses declined with internalization, contributing roughly $0.02/share to EAD in Q1 (“first full quarter as internally managed”) .
  • Management emphasized disciplined growth into Agency RMBS and select MSRs, maintaining hedging flexibility with swaps, TBAs, and Treasury futures amid swap spread tightening .

• What Went Wrong

  • GAAP loss to common of $(9.3)M ($(0.29)/share) driven by significant unrealized losses on derivatives and SRAs, and realized losses on RMBS, partially offset by unrealized RMBS gains and realized derivative gains .
  • Book value per share declined to $3.58 in Q1 and was down ~7% quarter-to-date through April before any dividend accrual, reflecting macro volatility and rate moves tied to tariff uncertainty .
  • Management guided that EAD would trend lower in Q2 as the large swap that had contributed income matured; RMBS NIM expected to normalize as dollar roll specialness fades and swap income declines .

Financial Results

Segment and Portfolio

Key Performance Indicators

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We were pleased to complete our first full quarter as an integrated, internally managed mortgage REIT… focused on growing our portfolio responsibly” .
• Portfolio positioning: “This uncertainty has pushed us to position the portfolio more neutral to rates to withstand the daily volatility” .
• EAD drivers and outlook: “EAD… benefited from outsized dollar roll income and income received from one of our larger hedges before it matured… we would expect EAD to be lower moving forward” .
• RMBS NIM: “We would expect the RMBS portfolio NIM to normalize towards historical levels next quarter as dollar roll income is less special and swap income is reduced as swaps mature” .

Q&A Highlights

• Allocation: Reinventing amortization income primarily into MBS; minimal MSR purchases; to materially shift mix, would require selling MSR in favor of MBS .
• Book value update: April NAV down ~3.7%, translating to ~7% book value per share decline before any Q2 dividend accrual .
• Swaps roll-off: ~$250M of payer swaps rolled off in Q1; ~$15M left in <1-year bucket (~0.9 years); broader swap position managed actively .
• EAD sensitivity: ~$0.02/share EAD benefit from internalization in Q1; EAD to trend lower due to maturation of large swap .
• MSR market post Rocket/Cooper: Limited change in MSR pricing dynamics; volumes lower; expect buying impact similar to before .
• Spec pool dynamics: Keeping pay-ups modest; cautious on one-off stories like builder buydowns; prefer proven loan balance stories in refi waves .

Estimates Context

Values retrieved from S&P Global.*
Interpretation: EPS beat reflects strong dollar roll and hedge income in Q1; reported “Revenue” for mREITs is volatile given derivative marks and fair value through earnings, and less indicative of distributable earnings power .

Key Takeaways for Investors

• EAD quality caution: Q1 EAD was aided by transient factors (dollar roll specialness, hedge income); management explicitly expects lower EAD in Q2 as swaps mature—watch for dividend coverage pressure despite declared $0.15/share .
• Book value trajectory: BVPS fell to $3.58 in Q1 and was down ~7% QTD in April; macro/tariff headlines and rate volatility remain key book value drivers in Q2 .
• RMBS NIM near-term: Improved to 3.55% in Q1, but management expects normalization in Q2 as dollar roll specialness fades and swap income declines; monitor spread environment and funding costs .
• Asset mix: Continued tilt toward Agency RMBS with limited MSR additions; potential mix shift would require MSR sales—implications for earnings volatility and liquidity .
• Risk posture: Leverage stable at ~5.2x and liquidity robust; increased reliance on Treasury futures as swap spreads tighten—expect less swap income going forward .
• Corporate developments: Internalization delivering OpEx savings (~$0.02/share EAD benefit in Q1); interim CFO effective June 22 should support operational continuity .
• Trading lens: Near-term stock reactions likely driven by Q2 BVPS updates and EAD trajectory; dividend stability is a support, but coverage will be scrutinized as EAD normalizes .