CHMI

Cherry Hill is a small, internally-managed mortgage REIT whose headline numbers look superficially cheap — a $2.41 stock against ~$236M of stockholders' equity on 36.7M shares — but the discount exists for structural reasons, not as a free lunch. FY2025 net income fell 43% to $6.94M, and crucially diluted EPS was -$0.09: after preferred dividends on the Series A and B stock, there was nothing left for common holders. ROE of 2.9% on 5.52x liabilities/equity is thin compensation for the leverage embedded in a repo-financed Agency RMBS plus MSR book. The accumulated deficit of -$270M, worsening 8.3% YoY, is the tally of years of this dynamic.

The filing language sharpens the concern. Management runs RMBS under the fair-value option, so 'unrealized gains and losses... are reported in the consolidated statements of income' — earnings are mark-to-market and will swing hard with rates, exactly as the net-income history shows (+$22.2M, -$35.5M, +$12.2M, +$6.94M across FY2022-25). The Servicing Related Assets (MSRs) cut the other way on prepayments: 'in a declining interest rate environment, prepayment speeds tend to increase,' and faster prepays would force premium amortization and mark MSRs down, with 'a negative impact on our book value.' So the asset base is squeezed from both ends depending on rate direction.