Breaking Down Cherry Hill Mortgage Investment Corporation (CHMI) Financial Health: Key Insights for Investors

You're looking at Cherry Hill Mortgage Investment Corporation (CHMI) and, honestly, the numbers from the Q3 2025 report paint a classic mREIT picture: high yield but with real complexity underneath. The headline is that the common book value per share stood firm at $3.36 as of September 30, 2025, which is a solid anchor, but the market is clearly still cautious; the analyst consensus is a Hold with a target price of $3.38. The attraction is that juicy annualized common dividend yield, which was sitting at a staggering 17.0% in early November 2025, but you have to look past the surface: the GAAP net income applicable to common stockholders was only $2.0 million, or $0.05 per share, and the Earnings Available for Distribution (EAD) was just $3.3 million ($0.09 per share), which raises defintely questions about the long-term sustainability of that $0.10 quarterly dividend, especially with the portfolio leverage still high at 5.3x. This is why we need to dive deep into their Mortgage Servicing Rights (MSR) strategy and hedge effectiveness, because the near-term opportunity for income is clear, but so is the risk of a capital erosion event if interest rates move against them.

Revenue Analysis

You need to know where the money is actually coming from, especially with a mortgage real estate investment trust (mREIT) like Cherry Hill Mortgage Investment Corporation (CHMI), where revenue can swing wildly. The direct takeaway is this: the company's revenue engine is dominated by its Servicing Related Assets, and while reported quarterly revenue can be volatile, the third quarter of 2025 showed a dramatic year-over-year increase, albeit from a very low base.

Cherry Hill Mortgage Investment Corporation's core business revolves around two primary segments: Investments in Servicing Related Assets and Investments in Residential Mortgage-Backed Securities (RMBS). This translates into two main income streams that drive the top line:

• Net Servicing Income: Generated from the mortgage servicing rights (MSR) portfolio.
• Net Interest Income: Earned from the RMBS portfolio, which is the spread between interest earned on assets and interest paid on financing.

For the third quarter of 2025, ending September 30, 2025, the company reported quarterly revenue of $8.57 million, which actually beat analyst expectations. But looking at the components is more illuminating. Here's the quick math on the two primary income streams for Q3 2025:

The Net Servicing Income clearly carries the bulk of the operational income. This Servicing Related Assets portfolio had an unpaid principal balance of $16.2 billion as of September 30, 2025.

The year-over-year (Y/Y) revenue growth rate is where things get interesting and a defintely a bit noisy. The reported Q3 2025 revenue of $3.3 million (as cited by some analysts) compares to just $0.11 million in the year-ago quarter, representing a massive Y/Y increase of approximately 2,927.52%. That number sounds huge, but it's crucial to remember that mREIT revenue is highly susceptible to interest rate shifts and derivative gains/losses, making the raw GAAP revenue figure extremely volatile. The Trailing Twelve Months (TTM) revenue as of September 30, 2025, was $40.20 million, which was down -1,647.42% year-over-year. You see? One metric shows a huge jump, the other a huge drop. That's the mREIT reality.

A significant change in the business model is the strategic partnership with Real Genius LLC, a digital mortgage technology company, which was entered into in May 2025. This move, executed by a Cherry Hill Mortgage Investment Corporation subsidiary, is an effort to diversify and align with growth expectations. It shows management is looking to expand beyond the traditional portfolio structure, which you can read more about in their Mission Statement, Vision, & Core Values of Cherry Hill Mortgage Investment Corporation (CHMI).

Profitability Metrics

You're looking for a clear picture of Cherry Hill Mortgage Investment Corporation (CHMI)'s financial engine, especially how much of its revenue actually translates into profit. The short answer is that while the firm's profitability is volatile, a recent turnaround from a deep 2023 loss shows signs of operational stabilization, though its margins still lag a key peer.

For a mortgage real estate investment trust (mREIT) like Cherry Hill Mortgage Investment Corporation, standard gross profit isn't the main metric. We look at the difference between their core revenue-Net Interest Income and Net Servicing Income-and the direct costs of generating that revenue. For the trailing twelve months (TTM) ending September 2025, the firm generated approximately $40.2 million in total revenue before loan losses. The calculated proxy for Gross Profit, after deducting the $19.57 million in Cost of Services Provided, stands at roughly $20.63 million. This gives us a Gross Margin proxy of about 51.3%. That's a decent spread, but the real story is what happens next.

• Gross Margin Proxy: 51.3% (TTM Sep 2025).
• Operating Margin: 37.14% (TTM Sep 2025).
• Net Profit Margin: 14.15% (TTM Nov 2025).

Operational Efficiency and Margin Trends

The Operating Profit Margin is a better gauge of management's efficiency, as it captures core operating expenses like compensation and administrative costs. Cherry Hill Mortgage Investment Corporation reported TTM Operating Income of $14.93 million on $40.2 million in revenue, resulting in an Operating Margin of 37.14%. This is a strong recovery from the prior year's deep losses. Here's the quick math on the trend:

The firm swung from a massive $34.93 million operating loss in fiscal year 2023 to $14.93 million in operating income TTM Sep 2025. That's a significant operational turnaround, but it also highlights the extreme volatility inherent in the mREIT business, which is heavily exposed to interest rate and prepayment risk. We saw this volatility in the net results, too: a GAAP net loss of $0.9 million in Q2 2025 was followed by a GAAP net profit of $4.5 million in Q3 2025. You defintely need to watch the quarterly swings.

Peer Comparison and Actionable Insight

When you stack Cherry Hill Mortgage Investment Corporation up against its peers, the margins look respectable but not industry-leading. For instance, a comparable mortgage REIT, AG Mortgage Investment Trust, has an operating margin of 63.12%. Cherry Hill Mortgage Investment Corporation's TTM Operating Margin of 37.14% suggests there is still room for improvement in cost management or, more likely, in optimizing their portfolio's net interest spread.

The TTM Net Profit Margin of 14.15% is a positive, but the broader Mortgage REIT industry has seen earnings decline by 16% per year over the last three years. This context is crucial: Cherry Hill Mortgage Investment Corporation is fighting a significant industry headwind. Your clear action is to monitor the Net Interest Spread on their Residential Mortgage-Backed Securities (RMBS) portfolio-which stood at 2.61% as of June 30, 2025-as this is the true measure of their core profitability engine. For a more comprehensive view of the company's financial standing, including its liquidity and debt structure, see the full analysis: Breaking Down Cherry Hill Mortgage Investment Corporation (CHMI) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You're looking at Cherry Hill Mortgage Investment Corporation (CHMI) and trying to figure out if their capital structure is built for the long haul. That's the right question to ask, because for a mortgage Real Estate Investment Trust (mREIT), the balance between debt and equity-or leverage-is the core of the business model. It's how they generate returns.

Cherry Hill Mortgage Investment Corporation's balance sheet as of September 30, 2025, shows a total liability, which is essentially their debt, of $1.29 billion against total stockholders' equity of $235.5 million. That's a high-leverage model, but honestly, that's just the mREIT game. They use short-term debt to buy long-term assets, which is a key risk you need to track.

Here's the quick math on their leverage and how it stacks up:

• Aggregate Portfolio Leverage: The company reported an aggregate portfolio leverage of 5.3x at the end of the third quarter of 2025. This means for every dollar of equity, they use $5.30 in debt to finance their asset portfolio.
• Industry Comparison: While a Debt-to-Equity (D/E) ratio of 5.3x looks high compared to a typical industrial company, it's closer to the norm for an mREIT, which is designed to be highly leveraged. Still, the average D/E ratio for the broader Mortgage REIT industry is around 2.475 as of early 2025, so Cherry Hill Mortgage Investment Corporation is operating at the higher end of that spectrum. This higher leverage amplifies both potential returns and potential losses.

The majority of Cherry Hill Mortgage Investment Corporation's debt is short-term repurchase agreements (repo), which are essentially short-term loans secured by their residential mortgage-backed securities (RMBS). This is how they finance their growth. Following the Federal Reserve's rate cuts in 2025, the cost to finance this debt (repo rates) was in the neighborhood of 4.80%, which is a critical factor in their net interest spread-the profit engine of the business.

To balance this high debt reliance, the company is actively managing its equity funding. They accessed their at-the-market (ATM) equity program, which is a way to sell new shares directly into the market, generating approximately $8.9 million in additional proceeds in May 2025. This is a smart, tactical move to raise capital and preserve liquidity without the cost and commitment of a large, one-time stock offering. They are using this equity to maintain a 'measured approach to risk,' which is crucial for long-term stability in a volatile interest rate environment. You can read more about their strategy in the Mission Statement, Vision, & Core Values of Cherry Hill Mortgage Investment Corporation (CHMI).

The table below summarizes the core of their capital structure and debt activity for Q3 2025:

The bottom line is that Cherry Hill Mortgage Investment Corporation is defintely a high-leverage play, but they are actively using equity raises and managing their repo costs to navigate the 2025 rate-cutting cycle. Your next step should be to monitor their quarterly repo rates and how that 5.3x leverage ratio trends over the next two quarters.

Liquidity and Solvency

You need to look past the standard liquidity ratios for a mortgage Real Estate Investment Trust (mREIT) like Cherry Hill Mortgage Investment Corporation (CHMI). The headline figures for the current and quick ratios look alarming, but they are a structural feature of the business model. The real story is the $55.4 million in unrestricted cash as of September 30, 2025, and a manageable leverage ratio of 5.3x.

The current ratio (current assets divided by current liabilities) and quick ratio (a stricter measure) for Cherry Hill Mortgage Investment Corporation are extremely low, reflecting their core strategy. The most recent quarter (MRQ) saw a current ratio of just 0.09 and a quick ratio of 0.07. This is because mREITs fund long-term assets, like residential mortgage-backed securities (RMBS), primarily with short-term repurchase agreements (repos), which are classified as current liabilities. It's a classic asset-liability mismatch by design, so don't treat these ratios like you would for a manufacturing company. It's defintely a different game.

Here's the quick math on the near-term position:

The working capital position is a massive negative, coming in at approximately ($1.11 billion) in the most recent quarter. This is the direct result of classifying repurchase agreements-the primary source of funding for the RMBS portfolio-as current liabilities. What this estimate hides is the high quality and liquidity of the underlying assets, which are largely Agency RMBS, meaning they are guaranteed by a government-sponsored enterprise like Fannie Mae or Freddie Mac. The real risk here isn't insolvency, but rather the ability to roll over those short-term repos in a credit crunch, which is a market-wide risk, not just a Cherry Hill Mortgage Investment Corporation issue.

Looking at the cash flow statements, the Trailing Twelve Months (TTM) data ending Q3 2025 shows Cash from Operations at $16.67 million and Cash from Investing at $2.01 million. This positive operating cash flow provides a steady stream of income to cover expenses and dividends. Financing cash flow, while not a single TTM number here, is dominated by the issuance and repayment of repurchase agreements, plus the payment of dividends. The company declared a common dividend of $0.10 per share for Q3 2025, a strategic adjustment that management believes is more sustainable and in line with their earnings available for distribution (EAD) of $3.3 million, or $0.09 per share, for the quarter.

The core strength is the $55.4 million in unrestricted cash, which gives them a buffer to meet margin calls or seize accretive investment opportunities. Management expects to have sufficient liquidity to meet obligations over the next twelve months. Plus, their leverage ratio has remained consistent at 5.3x, suggesting a measured approach to risk. To be fair, maintaining this liquidity and leverage is critical, especially as they integrate the Real Genius LLC strategic partnership, which is expected to benefit from a lower mortgage rate environment.

Next step: Dig deeper into the composition of their portfolio to understand the quality of the assets backing that short-term debt. Exploring Cherry Hill Mortgage Investment Corporation (CHMI) Investor Profile: Who's Buying and Why?

Valuation Analysis

You're looking at Cherry Hill Mortgage Investment Corporation (CHMI) and trying to figure out if the current price makes sense. My quick take is that, based on the most critical metric for a mortgage Real Estate Investment Trust (mREIT), the stock appears undervalued right now, but you must look past the headline earnings numbers.

The stock has had a rough 12 months, dropping about 14.47% as of November 2025, trading recently near $2.34 per share. That decline is a big part of why the valuation metrics look so compelling-or confusing, depending on your lens. The 52-week range of $2.25 to $3.68 tells you the market is still trying to find a floor after a period of high interest rate volatility.

Is Cherry Hill Mortgage Investment Corporation Overvalued or Undervalued?

For an mREIT like Cherry Hill Mortgage Investment Corporation, the Price-to-Book (P/B) ratio is the single most important valuation tool. It tells you what the market is willing to pay for the company's net assets. Here's the quick math using the latest figures:

• Book Value per Share (Q3 2025): $3.36
• Recent Stock Price: $2.34
• Price-to-Book (P/B) Ratio: $2.34 / $3.36 $\approx$ 0.70

A P/B ratio of approximately 0.70 means the stock is trading at a 30% discount to its net asset value. This is a classic indicator of being undervalued. To be fair, a discount is common for mREITs in a challenging rate environment, but a 30% gap is significant. You are essentially buying $1.00 of assets for only 70 cents.

Drilling Down on Earnings and Dividends

The other ratios paint a more complex picture, which is typical for a specialized finance company. The Price-to-Earnings (P/E) ratio is all over the map because of non-cash accounting adjustments. The trailing P/E is unhelpful, but the Forward P/E (based on estimated future earnings) sits around 6.14. This is relatively low and suggests future earnings growth. What this estimate hides, however, is the high volatility in the mortgage-backed securities market.

The dividend situation is a major risk point, but also a potential opportunity:

• Annualized Dividend Yield: A staggering 17.09% to 17.51%.
• Latest Quarterly Dividend: $0.10 per share (declared Q3 2025).
• Payout Ratio (Trailing): An unsustainable 1,833.3% to 2,000.00% of trailing earnings. This is a massive red flag, showing the dividend is not covered by recent earnings.
• Payout Ratio (Next Year's Estimates): A much more sustainable 67.80%.

The high trailing payout ratio shows why the stock price is down: the market is pricing in a likely dividend cut or reflecting past losses. But if the next year's earnings estimates hold, the dividend becomes defintely sustainable. This is the core trade-off you face.

Analyst Sentiment and Target Price

Wall Street's consensus on Cherry Hill Mortgage Investment Corporation is a cautious Hold rating. This means analysts believe you should maintain your current position but not rush to buy more. The average 12-month price target among analysts is $3.38.

Here's what that target implies:

The analyst target of $3.38 is almost exactly in line with the Q3 2025 book value of $3.36. This suggests the street believes the stock should trade at or near its book value, confirming the current price is a deep discount. For more context on who is making these moves, you should check out Exploring Cherry Hill Mortgage Investment Corporation (CHMI) Investor Profile: Who's Buying and Why?

Risk Factors

You need to know where the real dangers lie with Cherry Hill Mortgage Investment Corporation (CHMI), because the mortgage REIT (Real Estate Investment Trust) sector is defintely not for the faint of heart. The core issue is always interest rate risk, but the 2025 environment adds specific, near-term complications. Your direct takeaway is this: while management is actively hedging, the company faces significant earnings volatility and a high leverage ratio that magnifies external market shifts.

External Risks: The Rate-Cut Headwind

The Federal Reserve's rate-cutting cycle in late 2025 is a double-edged sword. On one hand, lower rates can reduce the company's funding costs. But on the other, it increases the risk of prepayment speeds for their residential mortgage-backed securities (RMBS), which are pools of mortgages. Honestly, when rates drop, more homeowners refinance, and that means the high-yielding RMBS assets are paid off early, cutting into future interest income. The company's RMBS portfolio prepayment speeds held steady at 6.1% CPR (Conditional Prepayment Rate) for the three months ended September 2025, but management expects this to increase as current mortgage rates are in the 5.75% to 6.25% range.

Plus, the stock has underperformed the broader market, declining 11% year-to-date through Q3 2025, while the S&P 500 gained 15.6%. That's a massive gap that reflects investor skepticism about their ability to fully capitalize on the lower-rate environment. Competition for attractive mortgage assets is also fierce, which pressures investment returns.

Operational and Financial Volatility

The biggest internal risk is the sheer volatility in reported earnings. For the third quarter of 2025, GAAP net income applicable to common stockholders came in at just $2.0 million, or $0.05 per diluted share, missing the analyst forecast of $0.11 per share. The reason? CHMI does not use hedge accounting for its interest rate derivatives (like swaps), so the mark-to-market swings-the paper gains and losses-flow directly through the GAAP net income.

Here's the quick math on key operational risks from Q3 2025:

• Earnings Miss: Earnings available for distribution (EAD), which is a non-GAAP measure often used to gauge dividend coverage, was $3.3 million or $0.09 per share, slightly missing consensus.
• High Leverage: The aggregate portfolio leverage stood at a consistent, and relatively high, 5.3x at the end of Q3 2025. This level of debt magnifies both gains and losses.
• Rising Costs: Operating expenses for the quarter were $3.8 million.
• Dividend Cut: The common dividend was reduced to a more sustainable $0.10 per share in September 2025, a necessary move to align with earnings power but a clear signal of financial pressure for income investors.

Another metric to watch is the Probability of Bankruptcy, which Macroaxis projects at 43.0% for CHMI in 2025, roughly in line with the Mortgage REIT sector average of 42.77%. It's a measure of financial distress, not an actual prediction, but it shows the inherent risk in the business model.

Mitigation and Strategic Actions

Management is not sitting still; they are actively working to mitigate these risks. Their primary defense against interest rate and duration risk is a comprehensive hedging strategy using derivatives.

Look at the scale of their hedge book as of June 30, 2025:

The company also ended Q3 2025 with a solid liquidity profile, holding $55.4 million in unrestricted cash. Strategically, they are repositioning their RMBS portfolio to benefit from lower funding costs and are progressing with the Real Genius LLC partnership, a digital mortgage platform, which could accelerate growth if refinancing volume picks up. You can read more about the company's long-term view here: Mission Statement, Vision, & Core Values of Cherry Hill Mortgage Investment Corporation (CHMI).

Your next step is to monitor the Q4 2025 earnings report for any change in the leverage ratio and the net interest spread, as these numbers will tell you if their hedging strategy is truly paying off in the new rate environment.

Growth Opportunities

You need to know where Cherry Hill Mortgage Investment Corporation (CHMI) is heading, not just where it's been. The immediate future is all about navigating a shifting interest rate landscape, but the long-term growth story hinges on two clear strategic moves: portfolio agility and a push into digital efficiency. They are positioning themselves to capitalize on the Federal Reserve's rate-cutting cycle, which began in September and October 2025.

The core growth driver is their proactive portfolio management. They are adjusting their Residential Mortgage-Backed Securities (RMBS) holdings to benefit from reduced borrowing costs and better prepayment speeds on higher coupon mortgages. This tactical flexibility is a key competitive advantage in a volatile market. Plus, the company has maintained a strong liquidity position, reporting $55.4 million in unrestricted cash at the end of Q3 2025, which gives them the capital to seize new investment opportunities quickly.

Here's the quick math on what analysts are projecting for the 2025 fiscal year. You can see the wide range in revenue, which reflects the high volatility and uncertainty in the mortgage REIT (mREIT) sector right now. Still, the earnings per share (EPS) forecast shows a significant rebound from prior periods.

What this estimate hides is the potential for outperformance if the rate cuts accelerate. The average EPS forecast of $0.52 for 2025 is a solid number, but the revenue decline, while steep, is largely a function of how mREIT revenue is accounted for amid market shifts. You need to focus on the strategic initiatives that will drive sustainable earnings growth, not just the top-line noise.

The most important strategic initiative is the push toward digital innovation. Cherry Hill Mortgage Investment Corporation entered into a strategic partnership with Real Genius LLC to digitize their mortgage operations. This is a long-term decision designed to enhance efficiency, lower operational costs, and prepare the company to capture a larger share of the refinancing market as interest rates decline. It's a smart move for scalability. You can learn more about who is investing in this strategy by Exploring Cherry Hill Mortgage Investment Corporation (CHMI) Investor Profile: Who's Buying and Why?

Their competitive advantages are clear, and they are defintely worth watching:

• Proactive portfolio adjustments to benefit from lower funding costs.
• Strong liquidity with $55.4 million in unrestricted cash.
• Specialized focus on a diverse portfolio of RMBS and Mortgage Servicing Rights (MSRs).
• MSR portfolio had an unpaid principal balance of $16.6 billion as of June 30, 2025.

The company's ability to manage its non-GAAP metrics effectively, particularly through RMBS portfolio adjustments, is a testament to its tactical flexibility. They are balancing near-term challenges with a long-term strategic vision. Still, the high leverage ratio of 5.3x at the end of Q3 2025 suggests a measured but real risk profile you need to keep an eye on.