Cherry Hill Mortgage Investment Corporation Q3 FY2025 earnings call

• The third quarter saw reduced macro volatility with tariff concerns fading and the Fed proceeding with rate cuts. Rates were mostly contained with the 10-year yield ending marginally lower. - Cherry Hill's portfolio components like mortgages, swaps, futures, and MSRs performed well, with lower coupon mortgages outperforming higher coupons. - Shifted RMBS portfolio to benefit from lower interest rates and spread tightening. - MSR portfolio had a UPB of $16.2 billion and a market value of ~$219 million, with net CPR averaging ~5.9% in Q3. - Board adjusted dividend to $0.10 per share. - Strategic partnership with Real Genius LLC, with positive momentum, and optimism about Real Genius' growth with lower mortgage rates. - Monitoring economic environment and seeking accretive investment opportunities while maintaining liquidity and prudent leverage.

The MSR portfolio had a UPB of $16.2 billion and a market value of approximately $219 million. The MSR and related net assets represented approximately 41% of equity capital and approximately 22% of investable assets, excluding cash at quarter end. The RMBS portfolio accounted for approximately 39% of equity capital and, as a percentage of investable assets, represented approximately 78%, excluding cash at quarter end. The RMBS net interest spread was approximately 2.87% for the third quarter, higher than the previous quarter as increased asset purchases more than offset higher interest expenses.

• Monitoring the economic environment closely. - Seeking out investment opportunities believed to be accretive to the business. - Focused on thoughtfully growing the company while maintaining strong liquidity and prudent leverage.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those discussed. Examples include interest income, financial guidance, IRRs, future expected cash flows, prepayment and recapture rates, delinquencies, and non-GAAP financial measures. - Market volatility could impact portfolio performance.

Q: Regarding the Real Genius acquisition -- or partnership, sorry, was that more opportunistic? Or could we see more partnerships like that in the future?

A: So I'm not really prepared to forecast, but to the extent that we see things that are interesting that are accretive, sure, we'll look at them. This was a long time in the making for this investment. And broadly speaking, we're really happy with how it's progressing. But to the extent that we find opportunities that fit within the skill set of people here, we'll absolutely look at them.

Q: If I could pick your brain about just your thoughts on expenses going forward. I'm looking at G&A plus comp. It looks like it was about a 12.5% sequential rise. Is there a sort of run rate that you guys are targeting going forward? Is there a seasonality to that combined number?

A: Mikhail, it's Apeksha Yes, their G&A and comp and benefits were both up this quarter, and that is mostly due to changes in personnel that we had during the second quarter and the third quarter of the year as well as professional fees that related to those changes. Going forward, we do anticipate those costs going down, especially with having a new in-house GC now. As of this point, though, it's difficult for us to quantify exactly what that would be, but we are anticipating them going down.

Q: The sequential rise in servicing costs, what was driving that there?

A: That was essentially part of the deboarding fee that got reimbursed in Q2. So it's not a typical ongoing expense. And that was something that in Q2 lowered the expense. Q3, we didn't have it, of course, because we didn't have the deboarding again. And so you saw that quarter-over-quarter change, but Q3 is more similar to our ongoing run rate.

Q: Any update on the current book value?

A: The usual. I turn it over to Apeksha.

A: We're seeing our October 31 book value per share up about 1.2% from September 30. And obviously, that's before any fourth quarter dividend accrual as the Board has not yet met to approve it.