Cherry Hill Mortgage Investment (US:CHMI)2024-03-07 23:06Financial Data and Key Metrics Changes - For the fourth quarter, the company reported a GAAP net loss applicable to common stockholders of $35.5 million or $1.29 per diluted share, while earnings available for distribution (EAD) were $4.5 million or $0.17 per share, covering the quarterly distribution [6][12] - The book value per common share decreased to $4.53 as of December 31, down 9.2% from $4.99 as of September 30, primarily due to portfolio positioning and lower MSR marks [20][12] - Financial leverage slightly reduced to 4.2 times, maintaining a solid liquidity profile with $53 million of unrestricted cash on the balance sheet [21][12] Business Line Data and Key Metrics Changes - The RMBS portfolio's weighted average three-month CPR was approximately 4.9%, up from 4.4% in the previous quarter, with the portfolio standing at approximately $655 million compared to $583 million previously [24] - The MSR portfolio's net CPR averaged approximately 4.2% for the fourth quarter, down from 5.6% in the previous quarter, with a low recapture rate of about 1% [23] Market Data and Key Metrics Changes - The company noted that the majority of the mortgage universe remains out of the money regarding refinancing, expecting prepayments to stay low unless interest rates are cut later in the year [37] - The market environment has seen a shift with the Fed signaling potential rate cuts in 2024, impacting mortgage spreads and interest rates [5][18] Company Strategy and Development Direction - The company aims to manage its portfolio thoughtfully while shifting its capital structure to enhance shareholder value through improved performance and earnings [11][21] - A strategy to create a more stable equity profile is a top priority, with actions taken to repurchase Series B preferred shares to reduce preferred dividends [34] Management's Comments on Operating Environment and Future Outlook - Management expressed that volatility is expected to remain elevated in the near term, with macro growth and inflation significantly impacting Fed decisions [11] - The company is closely monitoring the Fed and economic indicators to adjust its portfolio as necessary, believing its strategy of pairing MSRs with Agency RMBS is appropriate for the current environment [19][36] Other Important Information - Operating expenses for the quarter were reported at $3.5 million, and dividends were declared for both common and preferred shares [26] - The company raised $11.8 million through its aftermarket common share program, utilizing over $6 million to repurchase Series B preferred shares [34] Q&A Session Summary Question: What are the thoughts on appetite for leverage going forward? - Management indicated that they will adjust leverage over time, noting the current market volatility and attractive RMBS spreads, while anticipating the Fed may ease later in the year [28] Question: Any update on book value thus far in the first quarter? - The book value per share as of February 29 was reported to be flat compared to year-end, prior to any first-quarter dividend accrual [29] Question: Thoughts on potential MSR sales from NYCB? - Management did not provide specific insights but mentioned that discussions with Flagstar have been high-level and macro in nature [31]