Cherry Hill Mortgage Investment (US:CHMI)2021-05-11 01:43Financial Data and Key Metrics Changes - In Q1 2021, the company generated core earnings of $0.21 per share, with GAAP net income applicable to common stockholders at approximately $18.3 million or $1.07 per share [9][30] - Book value per common share decreased to $10.83 as of March 31, 2021, down from $11.16 at the end of 2020 [30] - The company maintained a strong liquidity position with $62 million in unrestricted cash on the balance sheet [11] Business Line Data and Key Metrics Changes - The servicing-related investments comprised full MSRs at a UPB of approximately $22 billion, with a market value of approximately $217 million [22] - The MSR portfolio saw a recapture rate of 24.5% for the quarter, with the portion serviced by RoundPoint achieving approximately 30% [18] - The RMBS portfolio accounted for approximately 35% of equity, with a weighted average three-month CPR rising to approximately 21% in Q1 from 20% in the previous quarter [23][24] Market Data and Key Metrics Changes - As of April 27, 2021, borrowers in active forbearance were at 3.6%, a decline of approximately 2.3% from year-end [15] - The current mortgage market is approximately 42% refinanceable, with mortgage volumes expected to remain elevated despite recent rate increases [28] Company Strategy and Development Direction - The company is repositioning its portfolio to adapt to a higher interest rate environment, focusing on pairing RMBS with MSRs [8][12] - The strategy includes increasing TBA positions while reducing whole loan pools to manage exposure to spread duration [13][25] - The company plans to continue investing in MSRs to capitalize on potential rate increases and generate value for shareholders [19] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the near-term sustainability of dividends, anticipating core earnings to realign with distribution levels as prepayments slow [10] - The economic recovery, supported by stimulus and vaccination efforts, is expected to lead to higher rates in the coming quarters [8][20] - Management noted that the mortgage rates did not keep pace with broader rate movements, impacting portfolio performance [7] Other Important Information - The company reduced leverage to 3.4 times from four times at the end of the prior quarter, with expectations to return to historical levels [14] - Operating expenses for the quarter were reported at $3.4 million [32] Q&A Session Summary Question: Expected prepay speeds in Q2 and thoughts on leverage - Management noted that prepay speeds have slowed, with April showing a net CPR in the low 30s, and they expect this trend to continue [36] - On leverage, management indicated it would drift back to historical levels, influenced by asset allocation decisions [42]