Cherry Hill Posts $5.3M Q4 Earnings, Declares $0.10 Dividend
Cherry Hill posted Q4 GAAP net income of $5.3M ($0.14/sh) and EAD of $3.9M ($0.11), raised book value to $3.44 and held $55M cash at 5.4x leverage. Tighter mortgage spreads and a steeper yield curve boosted returns in its $15.9B MSR portfolio (value ~$215M), triggering a $0.10 dividend.
1. Q4 Financial Results
Cherry Hill reported GAAP net income of $5.3 million ($0.14 per diluted share) and earnings available for distribution of $3.9 million ($0.11 per share) in Q4. Book value per share rose to $3.44 from $3.36, financial leverage stood at 5.4x, unrestricted cash totaled $55 million and the board declared a $0.10 common dividend.
2. Portfolio Performance Drivers
Management cited tighter mortgage spreads, a steeper yield curve, falling realized and implied volatility, and 50 basis points of Fed rate cuts as key drivers of improved portfolio returns. Above-trend domestic growth and reduced tariff rhetoric also contributed to lower volatility and enhanced performance.
3. MSR and RMBS Composition
The MSR portfolio had an unpaid principal balance of $15.9 billion with a market value of approximately $215 million, representing about 40% of equity capital. The RMBS portfolio, including TBAs, accounted for 40% of equity with net CPRs at 8.5% for RMBS and 5.1% for MSRs, as management positioned towards middle-coupon pools.
4. Hedging Strategy and Expenses
Cherry Hill held roughly $422 million notional in interest rate swaps, TBAs, Treasury futures, and initiated ICE SOFR futures without electing hedge accounting. Operating expenses were $3.3 million, down 30% quarter-over-quarter after normalization, while leverage remained prudently at 5.4x and unrestricted cash stayed at $55 million.