Cherry Hill Mortgage Investment Corporation Q4 FY2025 earnings call

• Themes from third quarter continued into fourth quarter with reduced tariff rhetoric, above-trend domestic growth, limited government shutdown, weaker employment picture offset by FOMC eases lowering Fed funds rate by 50 basis points, improving equity and credit markets.
• Cherry Hill's portfolio performance driven by tighter mortgage spreads and steeper yield curve, with mortgages, swaps, futures, and MSRs performing well, lower and middle coupon mortgages outperforming wings.
• Strategic partnership with Real Genius LLC continues to grow steadily; optimistic reduction in mortgage rates may facilitate Real Genius' growth as more homebuyers and homeowners look to purchase or refinance.
• Will continue to seek accretive investment opportunities, focus on thoughtfully growing the company while maintaining strong liquidity and prudent leverage positioning.
• Fourth quarter performance driven by stabilized interest rate environment and steeper yield curve, portfolio started slightly long duration positioned for lower rates and steepening yield curve, SOFR swap spreads widened aiding mortgage spread tightening, proactively adjusted portfolio positioning as necessary.

For the fourth quarter, the RMBS portfolio inclusive of TBAs stood at approximately $805 million at quarter end, compared to $782 million at the previous quarter end. The MSR portfolio had a UPB of $15.9 billion at a market value of approximately $215 million at quarter end. The MSR and related net assets represented approximately 40% of equity capital and approximately 21% of investable assets excluding cash at quarter end. The RMBS portfolio accounted for approximately 40% of equity capital and represented approximately 79% of investable assets excluding cash at quarter end. The MSR portfolio's net CPR averaged approximately 5.1% for the fourth quarter, down modestly from the previous quarter. The RMBS portfolio's prepayment speeds rose to 8.5% CPR for the three-month period ended December, compared to 6.1% for the prior quarter. The RMBS portfolio's net interest spread was 2.52% for the fourth quarter, lower than the previous quarter due to reduction in dollar roll income and interest earned on payer swaps.

• Will continue to proactively manage portfolio and adjust overall capital structure to add value for shareholders through improved performance and earnings in 2026.
• Expect bounce back in first quarter for RMBS portfolio's net interest spread as dollar roll income improves.
• Continue to use combination of swaps, TBA securities, and Treasury futures to hedge portfolio, with hedge portfolio marginally changing with initiation of small position in ARIS SOFR futures and expectation of their usage growing as portfolio transitions to them.

• Forward-looking statements subject to risks and uncertainties causing actual results to differ, including those related to interest income, financial guidance, IRRs, future expected cash flows, prepayment and recapture rates, delinquencies, and non-GAAP financial measures.
• Interest rate fluctuations can impact portfolio performance.
• Uncertainty in prepayment and recapture rates for MSR and RMBS portfolios.
• Market volatility can affect equity and credit markets, impacting the company's performance.

Q: Could you give a sense of how the market for Cherry Hill feels at the start of 2026 compared to 2025?

A: Julius mentioned net-net spreads went tighter initially with tweet about DSDs reinvesting into mortgage-backed securities, then gave back some, spreads ended January slightly tighter, February saw widening and yield curve flattening with flight to quality bid in market, mortgages bid-ask widened and softer tone than fourth quarter of 2025.

Q: Regarding the RMBS book, is there a normalized level for CPR you think you'll get to?

A: Julius said specified pools majority in five and five and a half coupons, portfolio currently at 8.5%, maxes itself probably around 15, majority purchased at discount so increase towards par beneficial; TBA deliverable CPR probably closer to 35 - 40, our portfolio max around 15.

Q: What is the main driver of quarter to quarter big drop in G&A expenses?

A: Apeksha said non-recurring expenses in third quarter due to personnel changes, expenses normalized in fourth quarter.

Q: How are you thinking about the equity stack, share buybacks and preferreds?

A: Eye on preferreds, Series B recently trading at discount, will have conversations on strategy for buying back; currently focused on growing, think stock is cheap relative to performance, looking forward to stock price recovering; not prepared to give explicit direction on share buybacks but think about share repurchases relative to impact on book value; as of December 31st, about 1% increase in book value compared to December 31st