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01/11 03:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary reveals mixed financial performance, with a GAAP net loss and a decline in book value per share. Despite a steady dividend, the lack of a share repurchase program and the expectation of declining EAD due to maturing hedges are concerning. The Q&A section highlights management's uncertainty about GSE reform and future earnings, further dampening sentiment. Although there are some positive aspects, such as improved RMBS net interest spread, the overall sentiment leans negative due to financial challenges and uncertainties.
GAAP net loss applicable to common stockholders $9.3 million or $0.29 per diluted share, compared to a loss in the previous quarter (exact figure not provided).
Comprehensive loss attributable to common stockholders $2.6 million or $0.08 per diluted share, compared to a loss in the previous quarter (exact figure not provided).
Earnings available for distribution (EAD) $5.4 million or $0.17 per share, benefiting from outsized dollar roll income and income from a larger hedge before it matured.
Book value per common share $3.58, down from $3.82 at the end of December, reflecting a decrease in net asset value.
Financial leverage 5.2x, consistent with the previous quarter.
Operating expenses $3.8 million for the quarter, down due to the elimination of the management fee.
Dividend declared on common shares $0.15 per common share, paid in cash on April 30, 2025.
Dividend on Series A Preferred Stock $0.5125 per share, paid on April 15, 2025.
Dividend on Series B Preferred Stock $0.6372 per share, paid on April 15, 2025.
MSR portfolio market value Approximately $227 million, representing 44% of equity capital.
RMBS portfolio market value Approximately $733 million, up from $723 million in the previous quarter.
RMBS net interest spread 3.55%, higher than the prior quarter, driven by improved dollar roll income.
Weighted average three month CPR for RMBS portfolio Approximately 5.8%, compared to 5.7% in the fourth quarter.
MSR portfolio's net CPR Approximately 4.1%, down modestly from the previous quarter.
MSR Portfolio: At quarter end, our MSR portfolio had a UPB of $17 billion and a market value of approximately $227 million.
RMBS Portfolio: As of March 31, the RMBS portfolio inclusive of TBA stood at approximately $733 million compared to $723 million at the previous quarter end.
Operating Expenses: Operating expenses declined quarter-over-quarter due to the elimination of the management fee.
Liquidity Profile: We ended the quarter with $47 million of unrestricted cash on the balance sheet, maintaining a solid liquidity profile.
Portfolio Positioning: We expect rates will continue to be highly reactive to both global political agendas and domestic economic data, prompting us to position the portfolio more neutral to rates.
Capital Deployment: In the near term, we plan to deploy capital as appropriate into Agency RMBS and select MSRs which still present strong risk adjusted return profiles.
Market Volatility: The first quarter of 2025 experienced aggressive market reactions due to increased uncertainty and policy changes from the new administration, leading to significant volatility in interest rates.
Economic Recession Risks: Concerns about a broader economic recession and stagflation were highlighted, particularly in relation to the upcoming tariff announcements.
Tariff Negotiations: The potential for unprecedented volatility exists as the administration negotiates trade deals, with a pause on reciprocal tariffs creating uncertainty in the market.
Interest Rate Sensitivity: The company expects interest rates to remain highly reactive to global political agendas and domestic economic data, which could impact financial performance.
Portfolio Performance: The portfolio's performance was mixed, with a need for longer duration assets to keep pace with hedges amid fluctuating interest rates.
Prepayment Risks: The company anticipates lower capture rates and a relatively low net CPR in the near term due to the characteristics of their portfolio and elevated rates.
Hedging Strategy: The company employs a hedging strategy using interest rate swaps, TBAs, and treasury futures to mitigate risks associated with interest rate increases.
Earnings Outlook: Future earnings available for distribution (EAD) are expected to decline due to the maturation of a significant hedge that previously contributed income.
Portfolio Positioning: The company is positioning the portfolio more neutral to rates to withstand daily volatility due to macroeconomic uncertainties.
Capital Deployment: Plans to deploy capital into Agency RMBS and select MSRs that present strong risk-adjusted return profiles while maintaining strong liquidity and prudent leverage.
Expense Management: Management will closely manage operating expenses to responsibly grow Cherry Hill, improving both expense ratio and capital structure over time.
Hedging Strategy: The company will continue to use a combination of swaps, TBA securities, and treasury futures to hedge the portfolio.
Earnings Available for Distribution (EAD): EAD for the first quarter was $5.4 million or $0.17 per share, but is expected to be lower moving forward due to the maturation of a larger hedge.
Book Value: Book value per common share as of March 31 was $3.58, down from $3.82 at the end of December.
Dividend Declaration: A dividend of $0.15 per common share was declared for the first quarter, reflecting the Board's consideration of market conditions and portfolio return potential.
Prepayment Speeds: Expect lower capture rates and relatively low net CPR in the near term due to portfolio characteristics and elevated rates.
Net Interest Margin (NIM): Expect NIM to normalize towards historical levels in the next quarter as dollar roll income is less special and swap income is reduced.
Common Dividend: On March 13, 2025, the Board of Directors declared a dividend of $0.15 per common share for the first quarter, paid in cash on April 30, 2025.
Preferred Stock Dividend: A dividend of $0.5125 per share on the 8.2% Series A Cumulative Redeemable Preferred Stock was declared and paid on April 15, 2025.
Preferred Stock Dividend: A dividend of $0.6372 on the 8.25% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock was declared and paid on April 15, 2025.
Share Repurchase Program: None
The earnings call presents a mixed outlook. Financial performance shows modest improvement, with a slight increase in book value per share and comprehensive income. However, concerns about rising prepayment speeds, economic uncertainties, and vague guidance on future partnerships temper optimism. Dividend adjustments indicate a cautious approach, and unclear management responses in the Q&A add uncertainty. The digital mortgage technology partnership introduces potential execution risks. These factors balance out to a neutral sentiment, suggesting limited stock price movement.
The earnings call reflects several negative aspects: a decline in book value, lower earnings available for distribution, and challenges in hedging strategies. Despite a new partnership with Real Genius, the lack of definitive plans and unclear management responses in the Q&A section contribute to uncertainties. The market volatility, high leverage, and economic uncertainties further worsen the outlook. Dividend declarations provide some support, but the overall sentiment is negative, likely leading to a stock price decline in the short term.
The earnings call summary reveals mixed financial performance, with a GAAP net loss and a decline in book value per share. Despite a steady dividend, the lack of a share repurchase program and the expectation of declining EAD due to maturing hedges are concerning. The Q&A section highlights management's uncertainty about GSE reform and future earnings, further dampening sentiment. Although there are some positive aspects, such as improved RMBS net interest spread, the overall sentiment leans negative due to financial challenges and uncertainties.
The earnings call presents a mixed outlook: the internalization of management and share repurchase program are positive, but there are concerns about inflation, interest rate volatility, and economic growth uncertainty. The RMBS portfolio faced challenges, though gains in MSR provided some balance. The Q&A session revealed unclear responses on growth expectations and interest rate management, adding uncertainty. Overall, these factors suggest a neutral sentiment, with no strong catalysts for significant stock price movement in either direction.
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