CHMI - Earnings call 3 2023 | Cherry Hill Mortgage Investment Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. Welcome to the Cherry Hill Mortgage Investment Corporation Third Quarter 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your speaker today, Garrett Edson, with Investor Relations. Please go ahead.

Garrett Edson

We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's Third Quarter 2023 Conference Call.

website call, earlier filed to discussed to answers this Relations uncertainties of cause this that press the could to to call, that subject section distributed today's from to contain differ today. was afternoon our that your addition questions we remarks results forward-looking a have those release Investor management's may In prepared www.chmireit.com.On statements and are at actual and and posted risks those include future for statements measures in to obligation forward-looking Cherry to as interest as income.Forward-looking IRRs, of forward-looking Examples earnings any recapture distribution update financial guidance, financial related and and comprehensive Hill and statements expected well assumes available future. income, EAD such the statements as non-GAAP flows represent no cash or estimates rates, management's prepayment and delinquencies current company's the the by Evans, website.Today's to Chief to contained SEC discussions the President over We Officer.Now, in contained and in Officer; review I available company's to Lown, hosted Hutchby, Financial Michael call statements and filings Jay is the encourage more Chief with the Investment on the financial Julian will the Jay. these CEO; definitions forward-looking detailed listeners presentations turn and call the conference the related

Jeffrey Lown

quarter Thanks, third and Garrett, welcome to XXXX call. earnings our

the the agency considerably quarter. that to for was going an widened nearly an to third persist led in during higher While economy the and rate became X.X% XX-year, seemed with of end headed rise inflation for time.Along treasury as overheated landing longer as significant quarter soft spreads the and the initially cycle, to clear XX-year it the mortgage if we to a some were likely in hike a hotter-than-expected rise

positioning, the the few been have successfully mitigate capital given this our our widening in portfolio MSRs, past a TBAs.We portion we our in months, feeling the we portfolio equity. of by of shareholders' REITs risk the of portfolio majority RMBS out agency proactively our along the our worked to preserved with positioned spread to hedging widening structure, of vast for with spread believe as pain basis advantage quarter shareholder our our the While

RMBS that as data and given as and non-GAAP returns any We to have past much risk MSRs the generated $X.XX advantage have widened our RMBS reacted third mortgage others and with In to XX-year select financial volatility stockholders distribution the or per share, turbulent for measure applicable have our to what it risk-adjusted such we remain these this globally REIT minimize basis through share which that a GAAP earnings common proper noted. distribution. we times, digested a in available the the East.The space macroeconomic gain $X.X believe positioning well we the of believe net $X.XX strategy positioned that a additional quarter, per have of October prudent the EAD, attractive spreads Agency widening, elevated to the take remains point or of quarterly strategy mortgage current crossed seen one threshold we overall and million X% markets generated for exceeded October in diluted offer few we events volatile for over months.As potential maintained environment.For result, opportunities the exposure of pairing to the the further, and as impacting Middle at we remains and of the

the taxable our considered impacts, as economics investment factors only gain dividend regarding in As income our one certainty of and such environment and policy.Additionally, setting return hedge return we've the before, potential, factors market noted of as of forward several existing value were EAD portfolio down preferred to is degree including of level.Book calculation, all which XX. On is we at $X.XX X.X% in basis, the X.X% stock June June believe from per share includes we September to determining dividend XX, down appropriate relative the what an finished contributed XX. common level NAV

Prepayment mix speeds impacts equity of end common of on or in the of At weighted-average of as MSR additional for plenty equity to at given RMBS the manner. interest pace impacting the levered third a while to remain return low. rate equity our with class concerted believe present we Recapture low, market meaningful ended remaining the again to our we As of prudently on exposure note deployed rate in approximately unrestricted asset higher rate top interest down firm our the the prudent of more portfolio to the and value. the allocation reinvestment in a $XX million speeds portfolio to as on total with dynamics financial the levels.Our quarter our leverage continues We cash the provides persist. stayed of environment. Agency on room environment. better consistent during we is capital mortgage of solid risk maintaining road profile.Looking profile before the approach we in capital required MSR us X.X% management in our quarter X.Xx amplifies our believe we weather in MSR's preferred which prepay opportunistically maintain sheet, changes cuts the of noted, ahead, profile spreads the common our the quarter, we MSR the a a potential liquidity the focus to remains current a reduce near-term, a balance portfolio as maintain volatile Creating is rates the quarter, current is thus, on and us.During shareholders' minimal, previously remained best existing stable to book priority remain

while continue will We stabilization a and signs volatility. capital selectively which of to strong MBS, into additional awaiting agency lessening presents profile, deploy risk-adjusted return currently market

to our performance quarter. and Julian, the remains liquidity who'll over regarding portfolio to call and and cover we remain leverage of third more turn Our book value, I'll over details that, its mindful the priority profile.With protect our investment

Julian Evans

Thank you, Jay.

commenced third expectations the quarter cycle hiking that was Fed completion. rate nearing with The

by sentiment deficit quarter, only mortgage on we persistent current with for portfolio led interest in injecting rates. inflation, and capital significant at of led geopolitical rising approximately stabilization.At of point a The our UPB our RMBS additional our widening. spiking XX% of renewed and widening our budget that $XX.X our into MSR However, portfolio hedging and positioned billion excluding with investable quarter-end, portfolio has an clear equity hotter major led into also also additional cash XX-year would market.During put our longer, much investment September, approximately until XX we The exposure the quarter-end. increased treasury turmoil decision extended of for than that pressure the in but paid These is during a the commentary continued increase be hedging capital. represented for MSR off October, XX% initially interest to near-term, not investors picture million. additional quarter potential volatility of net October, our to In and risk of widening there expected factors to spread reducing expected.Those assets Fed TBAs. had strategy remains because along the accounted the In longer economy for and hike believe our has mortgages the minimize value best approximately with coupled related basis and a to our sentiment spread for spread the of a approximately and RMBS equity U.S. poor XX% a expected, rate portfolio to assets, Meanwhile, our portfolio. themes than higher hawkish market our $XXX issuance of

percentage shift cash from the portfolios the prior a for As great deal speeds of at the elevated environment. the quarter, RMBS portfolio a not given investable our represented approximately quarter, XX%, assets, quarter-end.During continued rate did prepayment and MSR RMBS excluding

continue net The as recapture Our of refinancing. today, from environment purchases CPR quarter, CPR X.X% in refinance approximately the compressing of the expect fact expected, existing quarter. approximately the MSR low low The as mortgage higher CPR levels rate in down is portfolio.As speeds a at majority of but the to these portfolio's the current and rate to stable rates portfolio's net to higher. prepayment rates. given current the at the for at remain future, money modestly We mortgage be universe the levels terms mortgage RMBS would out forward, levels asset third in recapture move that of of consistent expect incentive remain the low portfolio's remains remain we to interest the rates the of interest by net previous the remain continues X%, or averaged for prepayments for foreseeable if combination X.X% driven minimal.Moving low, CPRs as as well new

the the to higher the the approximately quarter.As X.X% compared million RMBS RMBS advantage of higher-yielding at second weighted stood portfolio's September the of we TBAs CPR quarter, X-month as portfolio coupon, to up average slightly approximately moved XX, at in assets. inclusive approximately in shifted the taking X.X% previous moved portfolio For $XXX composition of million we our of quarter-end. $XXX compared to Quarter-over-quarter,

of At to turn expect financial Mike coupon of remain as higher position third was asset which also the RMBS portfolio.Looking from of expense, exposure mindful was represent a to position a minimize from the interest coupon composition. higher portfolio's portfolio's the call portfolio, X.Xx, quarter, new to quarter-end, in forward, mortgage larger we coupon yields, partially are a the for to higher XX-year decrease over the repo and in prior stabilization.I mortgages.For securities resulting As to near-term continue offset continued and by maintain and clear the at now challenging our well by portfolio will as third RMBS driven spreads the spread leverage quarter in continue X.X%. hedges there the interest to remained we were discussion. especially approximately environment our net net signs quarter change the purchases in XXX% the we mortgages, lower ongoing the until The TBA in financial

Michael Hutchby

Thank you, Julian.

or $X.XX Our was the share GAAP outstanding during for average the mark-to for income sale includes RMBS, $X.XX earnings million common stockholders for while $X.X available weighted available common share. distribution million loss million per to stockholders, $X.X or to diluted net which $XX.X per $X.XX -market average applicable was share.Our or our per stockholders common weighted attributable third the were quarter comprehensive quarter, attributable diluted to of

a million. as approximately TBAs instruments end a June treasury third share rate on interest which a the of to common effects and portion our of to swaps, value borrowings.At held use a XX combined value was variety of rates compared mitigate per $X.XX notional XX. book as of We future September futures, of increases of in quarter, interest $XXX book had we repurchase of of of $X.XX the all the Our derivative

as value XX-Q the elected our see details third in hedge as a result, more purposes, well to our And can hedging in accounting we've gain You rate respect derivatives. or as derivatives. change to GAAP estimated interest record interest our fair we not presentation.For component in with the a of net on rate apply our strategy as quarter loss for

operating XX, XX, September of of were million our $X.XX common October quarter.On a was expenses share declared in for of the dividend which third for Board XXXX, per on Our XXXX. quarter $X.X paid Directors cash the

Operator? We B both XX, of call also Preferred on this X.XX% paid open Fixed-to-Floating on Preferred per X.X% Stock, Redeemable Series questions. $X.XXXX were Series a time, the a XXXX.At A on we up dividend share which and Redeemable for will October of Stock dividend our $X.XXXXXX Cumulative Cumulative of declared our

Operator

[Operator Instructions] Our with question Mikhail JMP comes first from Goberman Securities.

Mikhail Goberman

and get EAD. head how MBS year, the is, trade-off perhaps if of that were bond very, question bond I a the in do I on out strong top guess have Congrats guys if terms end between of flesh a preservation MSRs we for stability assuming very you next going couple for allocation? the into off rally months see you of the value and strong rally, quarter Agency trade-off right forward, in a the to good pretty capital of could my guys the the

Julian Evans

Hi, we find Currently, than attractive MSR. be it's to Mikhail, RMBS more Julian.

We've those it pool TBA RMBS. additional into and have to dollars chosen adding with hedging been We spec dollars the side. buying a hedge just additional on with

be the rallying we we've that typical has quality, rally, because If don't mortgage So, you to Fed seen of any these mortgage geopolitical that in up probably out will after expect there's RMBS. down, we which our the gains seeing taking last would wider come the by we outperform.I markets but spread we way I increase a all obviously bond as extended the on depends I because or those kind flight know that the some rallying to Fed, currently why side, basis we're that days gains tighten is some remove portfolio also really offset the opportunity over volatility the to some gains type in of couple rallying, stabilization overall we're the have market.If think the turmoil and be might thus, the of because duration and curve.As because we're in there's leverage which the basis in would in of competitors is a meeting, anything, of think that. would spreads as expect our if are via wouldn't volatility much and it additional portfolio, spread and there's hedging have just to hedges on that of but picks for the some our

Jeffrey Lown

of revolving to what financing going costs. I'll lot add I'm around and one a is So say thing,

top matters as asset for the on financing So, the class yields, each well. of costs

think return return we the assets levered the it about the each of profile. to on relates So as risk

So, obviously creeped financing that things the of of one up the the has is MSR. cost

about is cost the And to of so lever the we the when one things into MSR, factors that it it. think

so, least Julian the over today, or And has, sitting RMBS been out, last few X or profile. so, pointed as return months a at better here months

Mikhail Goberman

into get X if And update book month it. may, the an value Got potentially I quarter? on

Michael Hutchby

yet book We from it's approved quarter down per XX our quarter-end, any dividend prior common that the and is by Sure. to see approximately Board. October X% accrual not fourth as value share, been

Mikhail Goberman

guys. forward, Good going luck Great.

Operator

Howlett question Matthew Riley. comes with next from B. Our

Matthew Howlett

Remarkable quarter, it covered hedging is, the really. dividend. shows. question you paid really and off My The

going that You've to how your want the you primarily if risk a to of want to seems like place, leverage, is going Is where function the take earnings got do. be in -- of hedges prudent you thing like to said. It to for sort -- core available with much distribution, possible here? you going kind mean, got kind seems like you're income of drive I forward want hedges portfolio. off you as take what's as to the of that the you or some EAD -- the from derisked

Julian Evans

Julian. it's Matt,

hedges obviously So to in terms off leverage. want say, some you EAD, increase additional some and that can take increase said we let's of, obviously we've our

the the would also make trying have. as some we've with your -- the a higher-yielding that to in the some of that assess and as to bit of changing assets that, think portfolio at risen of in as moving time. the to portfolio. option around think have in here, volatility a little And adjustments market components you into to have are those have kind each do portfolio we primary almost we have rate well I and pulling cost, the some the lower repo the as been off we of Fed. rates our assets did addition leverage having quarter, of of playing the shift for around composition the We're the drivers on I terms I kind and portfolio.So moving tried We up we of of higher catch your end are constantly say,

Matthew Howlett

want are to the now Julian, want What -- willing in to reward up you coupon? to right how you some to you do I guys be? mean, risk guys the was belly the to where that of curve. higher move stand the of you do curve, hear some be want much what

Julian Evans

think is couple XX say, at a Yes, have of I that portfolio.If we last year economy of X.Xs but Fed prepayment higher your the at and from now, X.Xs coupons lower, are it's rates little were trading the to until these perspective. the I if in trading I if above about Up are have back take Xs the and and in that via months slightly it think is want would some down you your combination you now lower par, XX. it's portfolio. of more now, a the discount, think speeds. the levels, maybe truly you're X par concerned remain and do you Look, from a days, But long-term, a obviously kind higher mind portfolio in slowing call at hold interesting from year moving in also of hours, last maybe let's bit define coupons and yield the the of on to I

point that's attractive up teed think a think willing there, of bad not some some to of XX in adding try refinanceable to they around at basis borrowers and say, price, this at will for X% we're an this I'm the price will discount, point, when kind the securities X.X%.I advantage, additional that par. basis believe $XX I We I coupons, become say, market it's high that $XX let's of points it them. because place take points do slight to some in if servicers XX to at that's refinancing the up those have even rates the terms higher coupons to when in of move to level, portfolio on, be time, stay a call

haven't like we perspective. long-term but been you're a getting anything income amount you lately, above par, feel So a pretty of purchased coupon from decent that's

Matthew Howlett

value I think Makes -- you And total if book the mean you spreads want been just a the I -- tighten say, you've mean, last would will in a going -- MBS?Jay, of the this in on I in of to the that Do year -- thinking, I I do and seeing the curve basis I you see I to or it we to out? mean, question, you to the how how wide I mean, lot the if to of is the is way just you're rather have Would or make has your drive a take do of listen, does catalyst value next what want portfolio tighten, be you it? reinvest -- very the hear care? the starts cycle. well guess, advantage money and to go sense. for are side, basis mean, just I book same lot higher My you money is mean, going on tightened of positioned. guys to leverage these know is lot the to what's here more there think RMBS just playing want mean, Just down, be base on cycles. I part it through MBS experience ways the you up? feel? take next sensitive got to you just materially relative you

Jeffrey Lown

with going levels. to Sure, Matt. in history direction view see where would well. cost the we've you to you trying over the to if the expect think tight that do And wide spreads level environment have in definitive perfect Fed levels.So that participant than where as answer hedge you Should your the to the the And is, get have picture fair to kept of to TBA space. quite ourselves amount different that we volatility, with value and is spreads I maybe look we historic make rates of what volatility more out help? cycles spreads debate changes chosen two, strategy. would view It's hedge materially not take we an those or the a not to: in and prohibited.So pay to back don't space, we're better relative only time, tight, the then 'XX, relative those space a a that, decided picture, hedge the have protect further today; have crisis a change to financial might And of was historical on relative and that in to how of participant you active point, topic in attention any the slightly to suggests because, a an get to spreads they're should from introduce But here space a regular the matter. in Does major one, once our here. today wide slightly relative catalysts periods are the and of normalized which like to is of a honestly, Fed what us the TBAs that approach I

Matthew Howlett

opportunities. put -- and Look, as up like and the very are you able no helps. quarter ] what you'll has the do that's volatility, I guys mean, one just you're positioned, here, conservatively portfolio seems absolutely it with [ It you see to rotate terrific [Indiscernible] you

that's it. So

Let's the having leg next look and shareholders. returns forward cycle, hopefully guys you the great to in are for

really team. appreciate and the So Jay I

Jeffrey Lown

Matt. Thanks,

Operator

this I would And conference remarks. like further back to for at no I'm closing turn showing the to time. questions Jay

Jeffrey Lown

call. evening. us on next our good Thank you, We quarter third everyone, on earnings to a updating forward look you fourth conference call for quarter year. joining our Have

Operator

participating. This conference call. you concludes today's Thank for

You may disconnect. now

Cherry Hill Mortgage Investment (CHMI) 2 Nov 232023 Q3 Earnings call transcript