Cherry Hill Fends Off Iran War Volatility, But Book Value Takes a 6% Hit

Iran War Shock Hits Mortgage Spreads

The first quarter of 2026 delivered a geopolitical gut punch to Iran war-driven volatility, and Cherry Hill Mortgage Investment Corporation felt it squarely. As CEO Jeffrey Lown put it,

A few days later, we were at war with Iran, oil and gas prices spiked, inflation expectations followed in concert, and the potential for future rate cuts this year quickly fell by the wayside.

Defensive Positioning Pays Off—Partly

Management's playbook was to protect book value by focusing on what they could control. "Mortgages like certainty and clarity," noted CIO Julian Evans, and until that clarity arrives, the firm kept leverage steady at 5.5x and leaned on its MSR portfolio, which appreciated as rates rose. “Mortgages like certainty and clarity and should improve as the Iran war is resolved.” — Julian Evans, Portfolio Manager · 2026-05-08 That MSR cushion — roughly 41% of equity capital — was a key reason the damage wasn't worse. On the RMBS side, the portfolio stayed positioned toward the middle of the coupon stack, with prepayment speeds easing to 8% CPR. “I think currently, mortgages from a spread and yield perspective are attractive here. I think a very simple return on a levered basis, about 15% to, let's say, mid-teens to high teens in terms of returns for RMBS.” — Julian Evans, Portfolio Manager · 2026-05-08 That return guidance is a fresh signal — earlier calls focused on the return profile without such explicit numbers.

The quarter also marked a continuation of a trend seen in prior calls: the ritual of the book value update. In Q4 2025, Apeksha Patel had reported “We're seeing our October 31 book value per share up about 1.2% from September 30.” — Apeksha Patel, CFO · 2025-11-07 This quarter, as volatility lingered, she gave a more cautious read: “our April 30 book value per share has increased nearly 2% from March 31” — Apeksha Patel, Chief Financial Officer · 2026-05-08 — a modest recovery that underscores how quickly sentiment can shift in a geopolitical storm. The increased volatility that defined the quarter has become the company's central operating assumption, with Evans noting spreads could revisit 130 or 180 depending on how the war resolves.

Financial Resilience in a Tough Quarter

Despite the book value decline, the income statement showed surprising strength. Net interest income rose to $4 million, up 106% year-over-year and 39% sequentially, driven by a reduction in interest expense from repo costs. GAAP net loss was just $0.05 per share, while EAD of $0.14 per share supported the $0.10 dividend. The company's Mortgage spread commentary — ending Q1 at 165 basis points vs. 7-year swaps and retracing to 150 post-quarter — shows the market is still pricing in uncertainty, but the hedging infrastructure (swaps, TBAs, Treasury futures, Eris SOFR futures) appears to be doing its job.

The key question now is whether this is a temporary shock or a structural shift. Management was explicit: until the conflict resolves, they expect elevated volatility, but they are searching for accretive opportunities. “We remain focused on proactively managing our portfolio through this challenging period while continuing to seek out additional investment opportunities we believe would be accretive.” — Garrett Edson, Investor Relations · 2026-05-08 That blend of defensiveness and opportunism — and the concrete return targets — makes this call a meaningful read on how a small-cap mortgage REIT weathers a macro shock without losing its footing.