CHMI - Earnings call transcript Q1 2024 | Cherry Hill Mortgage Investment Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Cherry Hill Mortgage Investment Corporation First Quarter 2024 Earnings Conference 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, Peter Sceusa, Investor Relations. Please go ahead.

Peter Sceusa

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

addition this we that call, of our the to a www.chmireit.com. section In release at press Investor have Relations was and afternoon filed earlier website posted to distributed this

from prepared Examples include and cause to those income, are and forward-looking that could your to today's and subject non-GAAP may contain EAD, available interest rates, prepayment to expected On earnings cash risks today. financial or and remarks call, future questions related and comprehensive results those guidance, income. to flows financial delinquencies statements differ as as distribution, actual management's IRRs, of that measures such as well answers for discussed recapture forward-looking statements uncertainties

these Cherry the management's financial Forward-looking to listeners any and forward-looking statements presentations represent We with in the detailed in website. the estimates, more available the to the discussions statements update SEC definitions the company's current encourage assumes obligation contained future. to contained the in forward-looking statements company's review filings on no Hill and related

the Chief by conference Julian Financial the Today's President Michael Investment Chief Hutchby, and Officer; hosted Lown, Officer. Evans, and CEO; call Jay is

the I Jay. Now turn call will to over

Jeffrey Lown

quarter Thanks, first And Peter. welcome to XXXX call. earnings our

see multiple fourth XXXX. evaporate On forecast of expecting the we cuts rate end X only that were noted first quarter markets from to call, in of our that towards over XXXX, the months Fed the XXXX,

prior increased any Fed's important believed rate Markets our the remained quarter. be strategy, As quarter the Fed during the of walked impacted around the the to and back cuts. elevated, its near inflation to end to economic sector the first significantly progressed considerably volatility the reacted data and quarter rhetoric

as widened sticky. quarter, remained in the spreads inflation Early

However, ease tightened policy reconfirmed quarter to progressed, as the monetary likelihood the in spreads Fed its the later year. as

in our RMBS higher the offset favor, yield respect impact role a and helping flattening investing of played with pivotal MSRs to in the to positioning coupon Our curve.

believe the maintain its the of current As positively curve do need shorter maturity we the strong we look sloped the along rates in out in due will eventually to Fed resulting the and data, expect expect remainder numbers. We year, twist than a employment that yield are positioned posture curve. markets longer persistent inflationary move with towards to to lower, for

the the MSRs of and that primarily intently strategy is market will to overall RMBS believe Fed we continue with Given pairing driving watch economic current our environment. well in Agency sentiment, works indicators

we $X.XX per generated to GAAP distribution, share, income net stockholders or we million share. $X For quarter, a or earnings $X.XX common of the financial of for and applicable non-GAAP first generated EAD, measure, per available diluted

is consider our EAD in policy. dividend factor just setting one we

sustainably potential; we factors including cover can the forward continue economics. investment whether our return near may are our the dividend environment; consider gain term, remain in of and considering we under also degree a portfolio hedge return of to when Thus, our EAD level market income, dividend. believe taxable existing impacts; We level important certainty other regarding while

flattening value Book RMBS, coupon as and from offset $X.XX, quarter finished portfolio impact per our helped modestly at the particularly MSRs higher respect share the of down common to curve. with December positioning, the XX, yield

XX. was preferred approximately down On NAV an in calculation, includes relative NAV basis, which the December X.X% stock to

at X.Xx as prudently leverage of stay continue slightly dynamics persist. rose to volatile given that the to quarter end we Financial the levered market

a balance of profile. sheet, We ended cash solid maintaining unrestricted quarter the with the on $XX liquidity million

how mix As changes preferred our equity while consisting or we've impacts per common leverage equity stayed NAV leverage has financial capital our our value to book of amplifies share. discussed relatively in our total previously, our structure low, common of

of creating preferred stable shares. priorities began to we a equity of quarter, Series by repurchasing profile the During a on portion B our more top act of our one

As of approximately we expect shares, million $X.X the X, that and B will months preferred Series of days we repurchased and have ahead. May continue in

shares amount now Series that by we in floating The capital peers. ultimately common B preferred benefits it to B putting dividends the rate well for reducing as preferred pay shareholders the transitioned with and has as structure line rightsizing repurchase our of a Series more

to and remaining while equity balance our work strength We investment profile will continue portfolio. sheet of towards our our mindful stabilizing

that discuss share Board to special to I did committee any completed or Directors want strategic do of been or quarterly our a not value. appropriate strategic moment developments take We that any or until explore a alternatives special the is on to established recently, process maximize this announced its information disclosure call stockholder committee subsequent the intend earnings determines legally committee to we alternatives required. special has the call or of relating to or evaluation to

risk continue we ahead, further management. Looking on to ever to evolving attention and pay focus the macro environment close

RMBS, We profile structure into still presents greater common of shareholders benefit and return stability Agency the ultimate sacrificing profile, to for deploy provide we'll equity preferred the to our capital strong risk-adjusted our liquidity which will in strong selectively of capital to additional of leverage. and while reduce continue continue not our a portion equity

details over portfolio call first the who With investment its Julian, to I'll over our will and more that, regarding turn performance quarter. the cover

Julian Evans

Thank you, Jay.

higher-for-longer a some now. environment been time for positioned have We for

position at have the While economic and we we interest data relatively seeing end thesis. were supported that that in rally inflationary held of rate XXXX impacted our given value, the our firm the book

towards the begin language. to Throughout remained and, has Fed from its data cuts, the the the as compelled back that inflation quickly aggressive dialing quarter, first just elevated recent tone as shifted Fed rate

RMBS rates to and respect us the and quarter, coupon rose, positioning fluctuated higher enabled with MSR preserve value. spreads the book to our In

requires the attention watch optimally to data that significantly us to ensure continue We volatility reacts is to how the pay macro close as to portfolio ongoing positioned. Fed

will as our move portfolio We further adjust as forward. we proactively necessary

$XX.X related represented MSR XX% approximately the and of a equity portfolio our approximately quarter. our investable At of a of cash at XX% UPB of the market capital excluding $XXX The approximately end had of billion quarter assets end, and and assets, value our million. MSR

approximately XX% RMBS portfolio of our accounted Meanwhile, capital. equity our for

of As assets, represented RMBS the XX%, year-end. at a portfolio cash investable approximately excluding percentage

Prepayment portfolios RMBS MSR elevated quarter given relatively rate and compared prior continue for the the remain to mortgage our environment. steady to speeds

MSR to The portfolio's approximately be but net the CPR at CPR remained the Our minimal. net consistent from averaged for recapture quarter, modestly continues approximately down quarter. X.X% rate as to low the X% incentive refinance X.X% previous first in portfolio's

we term. expect Moving and the a to near at recapture rates least forward, net continue in low CPR stable

of current higher mortgage low driven well environment as the portfolio. new for prepayment portfolio's RMBS expected continuing as existing as purchases speeds The remained asset compress rate CPR the to by combination the

terms As the out levels. of of the of money to long refinancing. the remains We prepays low universe expect would as interest at as of majority in remain today, rates these mortgage remain

approximately the weighted approximately quarter. higher edged CPR compared to X.X% RMBS portfolio's in quarter, X-month X.X% the fourth slightly average the For to

approximately the relatively we the of and As quarter spread of compared as portfolio March widening. XX, we previous end. to the TBA additional to stood acquired RMBS Quarter-over-quarter, RMBS $XXX in the portfolio, protect some remain against increased positioned TBA, hedges million, mortgages inclusive our flat at of coupon

spread higher driven repo a For was the higher first was The in by X.XX%. reduction roll the prior due balances. RMBS dollar interest and repo quarter our net to reduction from income quarter, costs

approximately XXX% continues financial Jay X.Xx, and portfolio's end. mentioned, leverage represent quarter to securities the at RMBS at the stood As XX-year position of the portfolio

will Moving expect manage capital volatile overall forward, earnings. while being shift our this term, near markets to volatile In decisions value and improved to remain our proactively we to inflation. upcoming the we environment, shareholders driven investment persistent through Fed in volatility portfolio add the for through structure with performance by continuing

quarter our I Mike will discussion. now call to financial turn the over for first

Michael Hutchby

Julian. you, Thank

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

share. a for expenses or special share $X.XX stockholders is Our common work. to inclusive of attributable million of related were to earnings or $X $XXX,XXX distribution $X.XX about available approximately per committee EAD

value XX, book at to as book Our compared was $X.XX a $X.XX of December XX common share of per XXXX. March value

of the notional a portion increases end held our borrowings. rate interest interest of future At TBAs on of quarter, futures, approximately repurchase amount of a swaps, effects rates We the $XXX variety treasury in a and mitigate used to combined all instruments we had of million. derivative the first which of

XX-Q can hedging in as well respect to You strategy quarter our our as in presentation. first details more see with our

derivatives. the accounting or GAAP change elected as in we record as not a loss to of for result, estimated component value fair our rate For have gain apply rate the we And interest purposes, on net derivatives. a hedge interest

million $X.X quarter. were expenses operating Our the for

for On year, per on of of XXXX. a the of first April March cash which the quarter in dividend declared Board share XXXX, XX, $X.XX was XX, the Directors paid common

also dividend We April per cumulative rate paid share a of preferred Series on both and A $X.XXXXXX redeemable of stock which declared on B cumulative preferred fixed-to-floating of X.X% X.XX% a XX, were redeemable dividend our Series our $X.XXXX stock, XXXX. on

At this time, we will for call open up questions. the Operator?

Operator

Mikhail from JMP. Citizens Our will question Instructions] first from Goberman [Operator come

Mikhail Goberman

that to your bulk of of to And has been it head we we at few get into sort over on and last seeing selling a the deeper perspective. thoughts wanted Just downward season flow drift you're UPB sort quarters? pace to as from servicing how market continue the spring the can the expect

Jeffrey Lown

speaking, question we've the in we from But of versus Mikhail, broadly like it it's answer profile RMBS some Jay. the risk-return of let biggest more the I it drift MSR. because compelling to reason I'll the market what the down a relative think is midst looks let saw Ray he's day-to-day. the

reason it's the so we lack it's into getting for for near of shareholders the return the pricing. of potential interest because the MSRs in best we've our product, excess just the not a relative MBS amortization can in given to current function capital But of that on returns of term. deployed And a

With that. let respect in to and of strength volumes of chime market, some the cetera, I'll et on Ray the

Raymond Slater

relatively and still it's a essentially, MSRs of essentially between point, year. little I we mean it's last where But a have MBS relative off volumes today. see I been year. To Sure. remain into Jay's QX high pretty volumes going mean, from value strong. this play just

Mikhail Goberman

the in the Got dividend and you. appetite driving there to little order coverage? higher maybe protect EAD any Is bit leverage for a

Jeffrey Lown

It's the it where some talk consider have year, of the and definitely possible about. could curve definitely where take the I the don't closer towards that. get We up. any plans end end we to going Fed we that up current of But of is it's something the as think shape we sense to dramatically might

Mikhail Goberman

quarter? given of update bond rally, days, I mini squeeze if little nice on say, And you. this any Got thus I'd book value can recent the one in far more, the

Jeffrey Lown

be didn't wouldn't it a Mike? conference mean I call that I if question. get

Michael Hutchby

point. a That's fair

met estimate the dividend was As has per our of X% and that value Friday, approve second accrual that from any Board we dividend. not is as yet book to X/XX, share down common before the quarter about

Mikhail Goberman

of going Best luck forward.

Jeffrey Lown

too. Thanks,

Operator

next question B. will from our And from Riley Matt come Howlett Securities.

Matthew Howlett

and own spreads to MBS playbook the interest on seem rates. guys You here

to So last hear followed the near-term playbook, maybe ask you year the playbook, I and CHMI say you really curve expect yield at just point, twist you think got by, to I it the cause to you, steepening. have volatility nailed I'd years. some X seem or I heard love

Julian Evans

think to just it quarters. longer we're when portfolio, trying maybe a I at we X Look, Julian. not perhaps it's over the look quarter frame, at X but time look Matt,

in of kind the for a yield positioned currently portfolio. steeper curve are We

kind We treasury we're type are of curve stack. play positioned that the of and in back at coupon time, terms front futures short end on long are whether a point the of the be some in this of derivatives via the on on how or through end

from we're So it playing both fronts.

the next like increase more so We that that will rates of play time. data curve the time, a would some adamant well at the I than cut at in perceived He leverage. how a think were as do some terms And will would play last will meeting, point to hike, but there shift. will cut Powell, was that steps Fed pretty point be at in believe the the we if as forward. out dependent. asked We in I out think he's highly how data he

bring bit affirms that to up of be this of but some here if or a mentioned, think do really longer steeper to like little got we over frame, something we that would time kind Jay a as that leverage. is see we certainty, going I our probably

Matthew Howlett

you mainly correctly room Yes. I specified guys at Did I hear pools. you of lot on? now, mean, the side, you're up in on I up to you take here leverage. have look right RMBS focused the said a what coupon When you're

Julian Evans

specified as have of We well combination a pools as TBA.

I We're And TBAs, short our Xs has we terms the and pools, the positions in X.Xs. own X.Xs. lower in and in TBAs of of mainly kind coupons. would positioning long they're specified of Xs say, Some shifted. in and on

Matthew Howlett

is that we servicing the get they're money, low far such cash so kind of And out that the even book rates. a if some coupon lower of flow,

I do put massive I right? in anywhere that them it refinanceable. to would rally close So see just right, it rate, a mean to take mortgage being

Jeffrey Lown

that have I portfolio You a like right, that rock Matt. star performing now. mean, right is

Matthew Howlett

phase well the So question. structure appoint Fed. here, is you I earnings committee? why the any now? next at Or this the got the committee. down, you coming well of the And well, even about is look I got so positioned said want special improving. Jay, here a the ask company why special really point how I to ask looks specifics to company preferred mean the it But don't the for Everything is? you at Why one given power is terrific. the capital positioned

Jeffrey Lown

Well, Matt, to shareholder on always maximize speaking, value looking any broadly day. given we're

committee, that release there it's any and do But I of tell interest might of what directly. the avenues the job our have day to talk multiple them the can suggested, But evaluate on shareholders path I the to you can forward. best press think are going from you we the Board perspective pursue. the that as given in to

in of some an something And result avenues like internalization. those

sure lot taking time. They're their to that that think share I'm feel the And diligent. with I consider. a would at They're time, being Board's compelled got markets. they'll the the to right So

Matthew Howlett

you're the way, And getting I'll letter. job Perhaps, look, doing. write But a appreciate good them you're by Series B. I that the

You're par? some buying at I below mean that of that taking it, in looking you're below par, correct?

Jeffrey Lown

That's correct. Yes.

Julian Evans

Yes, that's right.

Matthew Howlett

it. what supportive the and special Well, good of certainly work, up voice look, doing the you're committee. keep certainly Great. and there, we'll we're Appreciate to opinion our

Jeffrey Lown

Matt. Thanks,

Operator

And I closing Jay turn remarks. any am to our showing phone to over the like no further I'd for now questions conference back lines. from Lown

Jeffrey Lown

great Thank joining our Have you us to updating XXXX We a second you. months. quarter performance a earnings evening. first few Thanks for call. on look in quarter forward on our

Operator

your This participation. concludes conference today's call. for Thank you

Cherry Hill Mortgage Investment (CHMI) 6 May 242024 Q1 Earnings call transcript