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spk_0: the conference will begin shortly to raise and lower your hand during una you can dial star one one
spk_1: fair and
spk_2: take the ferry by a welcome to the cough call the cherry hill mortgage a definite corporations fourth quarter twenty two earnings call at this time arbiters once i was lonely mode to speak his presentation they'll be a question and answer session the as the question that time please or star one one when your telephone as reminds that call is a record it out on the cops are the hosts mr garrett edson of as the are please go ahead the like to thank you for joining us today for cherry hill mortgage investment corporations fourth quarter tweet we do conference call in addition to the called me a file the press release that was distributed early this afternoon he posted in industrial industrialized section of overstated have used to be w that ch am i read that car and they've called mansions repair march and answers to questions they can people looking statements they're subject to western cities that could cause actual results that are put those scripts today examples of forward looking statements include those really to interesting income financial guidance are ours you should expect cashless as well container recapture rate delinquencies nine get financial measures such as earnings available for distribution or he eighty and conference of income for the fitness represent mentioned current estimates and cherry hill seems no obligation of the any forward looking statements in the future
spk_3: we encourage listeners to have you more detailed sketches really to be forward looking statements in the company's phones with the se si and the definition contain and financial presentations available on the company's website they can't because her departure lounge president ceo fill the nevins the chief investment officer michael hutch beat the chief financial officer now i will turn the called over to check thanks gas welcome to our fourth quarter twenty twenty two earnings call our efforts were effective in the fourth quarter to protect book value as investment markets remained and a challenging economic environment high inflation and a well supported us employment market led the fed your hike rates hundred and twenty five basis points during the fourth quarter and had appeared that the fed was making headway with his efforts to lower inflation back to it's target level volatility subsided during the quarter and spread sector assets recovered some of the losses experienced in a third quarter as many of our peers have noted the mortgage basis improved throughout the quarter as well the us treasury yield curve however remained inverted and has shown no signs of steepening thus far this year which has significantly impacted the earnings power of many companies and our sector given the most recent economic data markets are bracing for a higher for longer scenario and the potential for a recession later this year the combination of our efforts to refine our investment and having strategies has enabled us to be successful a stabilizing and protecting book value and recent course given the expectation of continued interest rate hikes and the evolving macro environment we remain positioned for additional rate hikes to that point we continue to utilize tbs to partially offset spread widening risk as we await the fed to convey when it expects to and it's tightening cycle at which point we could look to increase our risk fell foul for the fourth quarter while we generated a gap net loss applicable to common stock holders of a dollar fifty nine cents per diluted share we generated earnings available for distribution or a a day and non gap financial measure of five point three million or twenty four cents per share it bears repeating that he id is only one of several factors considered and setting or dividend policy thus while not align this quarter are board continues to monitor our earnings capabilities to ensure our dividend is at an appropriate level value for common share finished at six dollars and six cents has to december thirty first up a penny from the prior quarter we believe creating a more stable booked our your profile is in our share hope the best interest and remains a top priority for us when you consider that i preferred stock makes up a significant portion of our overall equity profile we were pleased that on and any basis and before taking into account any assurances of equity to our common stock a and program we posted a stable and a be relative to the third quarter as such during the second half of twenty twenty two and a v was off approximately five point one percent which we believe compares favorably to the performance of many others in our industry and speaks well to our ability to navigate a very challenging macro environment and the unprecedented speed of said rate hikes during the fourth quarter we acquired approximately seven hundred and eighty million u p b fannie and freddie ama sars by a flow in bulk purchases prepayments based on our and miss our portfolio remain low and thus the pace of reinvestment to maintain the allocation of capital to the afa class has the salaries we capture rates on in a sars also slowed to the low single digits as expected given a higher interest rate levels our strategy of pairing msr with agency aren't vs along with pro active portfolio management and hedging has continued to benefit shareholders at the end it a year financial leverage improve modestly to three point eight times as we took a more targeted and disciplined approach in the fourth quarter with respect to deploying capital given the ongoing market volatility we believe we remain prudently levered and expect to be opportunistic and deploying capital and increasing our leverage and twenty twenty three we ended the year with fifty seven million and unrestricted cash on the balance sheet maintaining a solid liquidity profile as we look forward and twenty twenty three we expect to maintain our conservative and proactive approach to portfolio management were there a risk adjusted opportunities to selectively deploy capital we will take advantage additionally we anticipate our heads ratio will likely remain elevated given our expectations of ongoing fed rate hikes to further combat stubborn inflation
spk_4: our priority remains to protect book value and we will remain mindful of i liquidity and leverage profile given the environment
spk_5: with that outrun the call already joins who will cover more details regarding our investment portfolio and it's performance over the fourth quarter thank again investment themes that were prominent in the third quarter rolled over into the fourth quarter high volatility only liquid investment markets widely spread sectors and a weakening equity markets were all influenced by a third determined to reduce inflation all charles after the october november cp i report as the reported inflationary numbers suggested that inflation was moderating faster than expected post the inflationary numbers spread sector an equity markets title an interest rate markets files as investor sentiment changed the cell phones was driven by a perception that the fed might end up doing fewer fed funds rate increases they were initially expected with that said most inflationary measures have moderated but remained elevated above the feds two percent target for the first few months at twenty twenty three stubbornly high inflation has led to renewed predictions of the fed having to increase the fed funds rate greater than what the market and had initially proceed the market is currently expecting a terminal fed funds rate level between five and a quarter and five seventy five as a result we continue employ a thoughtful hedging strategy in the fourth quarter to protect our book value and will believe those efforts have largely been working as intended this investment strategy has carried over into the first quarter of twenty twenty three at year end or msr polio had a u p b a twenty one point seven billion in a market value of approximately two hundred and eighty million during a quarter we purchased approximately seven hundred and eighty million u p b of new him as ours through our bulk and flow programs
spk_6: iran's the emus ours and related assets represented approximately thirty eight percent of our equity capital and approximately thirty percent of our investable assets excluding cash
spk_5: meanwhile our rmbs portfolio accounted for approximately forty five percent of our equity capital of the percentage of investable assets the rbs for folio represented proximity seventy percent excluding cash year end during the quarter we continue to experience cpr improvements in both our msr and rvs purple years or amazon for fully as net cpr average approximately five percent for the fourth quarter down from approximately seven percent and that cpr in the previous quarter the decline was mainly driven by seasonality and the change in movies production coupons with slower prepayments speeds in the quarter the purple years recapture rate with lower and upper
spk_2: absolutely two percent versus approximately seven percent in the third quarter
spk_5: as expected with mortgage rates rising as the incentive to refinance has left him moving forward we continue to expect low recapture rate and stable that cpr for the foreseeable future given the current levels of interest in mortgage rates the army as prepayments speeds remain love lower cpr was driven by a combination of new asset purchases as well as the fact that the current higher mortgage rate environment is compressing cpr as for the existing portfolio as a today the majority of the mortgage universe remains out of the money in terms of refinancing we would expect prepayments to remain at low levels of love interest rates day and the levels are move higher for the quarter the arm the as portfolio weighted average three months cpr used to approximately three point eight percent compare to approximately four point seven percent in the third quarter as of december thirty first the rvs are fully of cliff of the v a's stood at approximately six hundred and forty six million compared to seven hundred fifty nine million and the previous quarter and quarter over quarter the spec pool portion of the purple you'll continue to grow as we opportunistically took advantage of higher interest rate levels and lower price premiums by putting new cast to work as well as converting a few dollars in the pools is dollar rules weekend further the rbs for folio numbers lower as we further utilize to be a security to has your portion of the poor folio we also continue to proactively change the purple as composition moving into higher coupons and reducing spread duration for the polio at the end of the fourth quarter the thirty year securities position represented the entire army as for folio up from ninety six percent of the end of third quarter for the fourth quarter we saw an increase in rbs net interest spread the three point seven seven percent as compared to three point four nine percent net interest spread reported for the third quarter be improved nim was driven by previously mentioned factors why we took advantage of wider mortgage spread and higher yield levels by putting new money to work throughout the quarter to we rotated out for fully of swapping out of low yielding assets and purchasing higher cooper mortgages with better yields overall expenses were greater but we're more than offset by increased income which was driven by the previously mentioned reasons at year end the proposed financial leverage at approximately three point eight times at the aggregate portfolio and the prefer leo was manage with a negative duration yeah
spk_7: looking forward we remain mindful of the current environment as we expect the investment markets to remain choppy until there's a clear sense that the fed is reaching it's terminal rate
spk_8: i will now trying to call over to my for fourth quarter financial discussion thank you julian or gotten that of support for the common stock holders for the fourth quarter was thirty four point five million dollars or dollar fifty nine for weighted average diluted share outstanding during the quarter or comprehensive income attributable to common stock holders which includes the mark to market of are held for sale rmbs was six point two million dollars or twenty nine cents per weighted average diluted show air our earnings available for distribution attributable to common stock holders were five point three million dollars or twenty four cents per share our books i for common share as of december thirty first twenty twenty two was six dollars and six cents compared to a book i have six hours and five cents as of september thirtieth twenty twenty two we use a variety of derivative instruments to mitigate the effects of increases in interest rates on a portion of our future reapers borrowings at the end of the fourth quarter we held interest rate swaps tbs treasury futures and options and treasury futures all of which had a combined notional amount of nine hundred and thirty million dollars you can see more details with respect to are hedging strategy and or ten k as well is in our fourth quarter presentation forget purposes we've not a letter to apply has accounting for interest rate derivatives and as a result we record the change and estimate of fair value as a component of the net gain or loss on interest rate derivative operating expenses were three point two million dollars for the quarter
spk_1: on december fifteenth twenty twenty two the board of directors directors declared a dividend of twenty seven cents per common share for the fourth quarter twenty twenty two which was paid in cash on january thirty first twenty twenty three we also declared a dividend a fifty one point two five cents per share on or eight point two percent series a
spk_9: a cumulative redeemable preferred stock and a dividend of fifty one point five six two five cents on our a point two five percent series be fixed the floating rate cumulative redeemable preferred stock both of which were paid on january seventeenth twenty twenty three
spk_1: at this time we will open up the call for questions operator
spk_10: thank you again can generally like ask a question please post ah one one on your telephone have a question please post star one one one moment place thank you i'm honest
spk_8: at first question comes from the line of miguel golem of jmp security line of helping
spk_3: hey good afternoon gentlemen ah thanks for taking the question
spk_11: could you perhaps expound a little bit further on them comment about the viability of the devon and versus what sort of a sustainable level of quarter earnings you are you might see going toward given the specially given pals comments today and our rates are headed and also i don't know if i heard you guys correctly but did you say that term books are you was down five percent this for this quarter
spk_2: i am macau how are you said anthony the second question is no we didn't we didn't say that at all
spk_3: okay the end of february prior to the dividend is flat threat okay thank you parties for no worse with respect to the dividend guy i think you know you've heard on this before and we'll continue to hear that we we consider a ideas a measure and i think we're limited to that in in in the in the script by to know
spk_10: we we look at total return you know we obviously think about where rates may go and how sustainable the dividend is overtime and broadly speaking is the board meets every quarter and you will continue to evaluate
spk_2: strength and the dividend relative to earnings power and and and the requirements the market relatives or space and know we expect to provide more information on that later this week
spk_10: right thank you
spk_12: and
spk_5: just going forward to how do you guys think about trade off between building the portfolio toes agency rmbs and same as ours if interest rates to keep sort of breaking through the five and a quarter to five and three quarter expected rated if we start going into a six handle had he started thinking about your portfolio than thanks ah i'm i'm account a look i think the early read is that we have preferred our agency rmbs at these particular levels which we would say is kind of in the mid mid teens that we kind of either returns we have also aiding i think some of that some of the performance you know we have a a large rather large swap for folio which is kind of moved again cannot coincided with a repo rate rising ah almost on a one to one basis for us so that is also had some of the rising repo cost that we've seen so that that is move
spk_10: and higher that for folio has kind of benefited us
spk_13: in terms of msr in the power of the returns that we're seeing right now in terms of the portfolio
spk_9: the alec i would say kind of low to mid teens is kind of what we're seeing for those type of returns by the in general we're evaluating that constantly over times but i would say just from a spread widening perspective
spk_1: the agency rbs looks rather attractive
spk_14: i thank you gentlemen appreciated the lot going for
spk_2: thanks mika thank you one moment please
spk_15: our next question comes from the line of matter how it as be a rally a lot of something matthew how it
spk_14: oh hey guys he get a free kick my question
spk_16: i wouldn't be here from a team have he characterized to risk profile the company today we clearly leverage is low from struggle basis it went down in the fourth quarter i look at your sensitivity is and six yards cause interest rates nothing one way the of the book doesn't change all that much europe the over hedged
spk_5: and what what what he characterized didn't you know without asking artificial look what's it gonna take it the begin you know taking a critical everything image of yielded these on your post market these days are cheap mbs value and so will add you put the here he put it in the context in terms of were way the company is vs historically where it's operated it's julian again
spk_17: you know look i think we sit here and they let the market looks very attractive but i think you need that better clarity from the fed
spk_14: clearly you know paul had statements to today and in the statements is kind of alluded to interest rates and fed funds rate moving can have a higher the marketed kind of projecting it at this point time to be five and a quarter somewhere between five the quarter five seventy five i would say you know we just take a month
spk_5: the go outside of the more improve data that we got from january the market was probably expecting the fed the stop somewhere between five and five and a quarter at that point time i think if we get greater clarity from the fed in terms of the direct family or how high they want to take rates i think that becomes your your opportunity time that guy take ah probably increase leverage and take a more advantage of the market it in terms to the said with at the what they do it the balance sheet and how much
spk_2: any sort of thoughts regarding their mdf holding them or what are your thoughts there i think the missile receptor the they're basically that the fed would not sell in the as they've had multiple opportunities to kind of fell mbs through throughout this time period that they've been actually raising the fed funds rate i think that they're most effective tool at least on their perception is that they'd like to continue to read the fed fun rates to level they perceive that will kind of slow down the economy and retain the balance sheet
spk_3: he can allude to that at some point is continuing to raise the fed funds rate proves to be ineffective that they might try to do something on the balance sheet it's a possibility but it wouldn't be ah
spk_2: in my mind at a high percentage of that's what they would like to give
spk_3: gotcha my sinuses isn't he look moving the survey thing and it's been a great academically strategy for you have you made me look at it point where and the surveys are today him he raise your rates in a low couponing underlying couponing the we think the what would you look they have it is a scenario where ya to figure out some are forgetting the fed the kind at some point maybe later next two years later the hero nation would just look to reallocate more mbs there were things are run its course like you know that profile with your recaptures still looking to be a core acid it's in a lab going forward with your interface like of those changes secure how out you look at everything you know love this year yes sir matt so that the portfolio has a
spk_18: a no rate of was scored three and a half right and from the current interest rate on mortgages was just round at six in so you know from the perspective of that portfolio the the way we look at their portfolio is there's a lot of runway in terms of having pretty strong cash cashflows
spk_3: before you that portfolio is in danger of and refinancing outside of in a normal in a life events and so we really feel good about
spk_2: the strength of the cash flows in their portfolio despite the rates and the or at this point given the duration and a conductor the that portfolio which is and this nonexistent at this point we we think there's a lot of room to run on that portfolio should should the fed cut rates at some point in time before we have to even start thinking about recapture and and things around in a the degradation and output by a so we feel really good about the profile up that portfolio today because of that the reality is speeds are your enemy in a you can see you can has a lot of things rate was but speeds are your worst enemy and from our vantage point given the club our characteristics and her hair in a portfolio today
spk_3: we think that acid it is gonna continue to perform pretty strong the it look at the speed that and what were they under five of i've never seen him this lowered my in my lifetime my career and or if you see how much lower the go buy them it's been just an incredible see the speed fall by the on it and i ask i know your peep we pretend protected on the on the of the epa i just curious on the ceramic a lot of sense with with with the yes with different cash what they would er on that unnecessary are you see him he would you be more active and bull market with somebody small originators that are selling area are going and it is i just a may i think they again this is the dice treatment up a little bit early to share it with you look at go that portray okay given them you know given up for what looks like the be a lot of sellers
spk_2: out there he was a big sellers so we look at portfolios every every day and for the small originators you know it's our expectation that there's a concession price
spk_19: which is favorable to us in terms of yield and so we we absolutely look and see look at and see in a lot of those poor boys and regular basis if you're asked me if we're seeing a lot of small guy so i wouldn't say we're seeing get out of small that film we're seeing you know a decent steady flow of volume away from where i recall
spk_1: the wells dynamic going on today but erm
spk_3: there there is no need to acquire the asset in a at levels that i would say word that are slightly lower than a year the craziness in the fourth quarter
spk_1: yeah right that that yet to as what i might be an opportunity that you all of the senate the performance been terrific when the yield curve and bird it and use as you generate ya this positive economic return that the debt looks just terrific under
spk_0: the really congratulate some great results are now you don't have a very strong twenty three thanks a lot
spk_1: thanks man thank you i'm so i know questions at this time i'm at santa call back over to my funny closing remarks
spk_2: pedro operator thank you everybody for joining us and our fourth quarter twenty twenty two earnings call we look forward to of the dating you on her first quarter results sometime in may have agreed thank you ladies is i'm just as includes like conference thank you off because a painting may now disconnect have a great there the conference will begin shortly to raise and lower your hand during una you can dying star one one reykjavik any by a welcome to the cough across the cherry hill mortgage investment corporation sport quarter twenty two earnings call at this time arbiters was originally mode the speak his presentation they'll be a question and answer session the as the question that time please or star one one on your telephone as realize that a call is the america
spk_3: sort it out and the comfort of your hosts miss the garrett edson of as the are please go ahead the like to thank you for joining us today for cherry hill mortgage and corporations fourth quarter tweet we do conference call in addition to the called me a file the press release that was distributed early this afternoon he posted in industrial a section of over faith of used to be interviewed that see hm i read that cop until they've called mentions repair march and answers to questions think people looking statements they're subject to western uncertainties that could cause actual results it up with no script today examples of for looking statements include those really to interesting come financial guidance are ours you should expect a cashless as well prepayment recalculate delinquencies nine get financial measures such as earnings available for distribution or the eighty and conference of income or looking things represent mentioned current estimates and cherry hill seems no obligation of the any forward looking statements in the future we encourage listeners to viewed more detailed sketches really to be forward looking statements contained in the company's fans with the fcc and the definition contain and financial presentations available on the company's website they can't call so departure lounge president ceo fill evans the chief investment officer michael hutch beat the chief financial officer now i will turn the call pj thank god welcome to our fourth quarter twenty twenty two earnings call our efforts were effective in the fourth quarter to protect book value as investment markets remained in a challenging economic environment high inflation and a well supported us employment market led the fed to hike rates hundred and twenty five basis points during the fourth quarter and it appeared that the fed was making headway with it's efforts to lower inflation back to it's target level volatility subsided during the quarter and spread sector assets recovered some of the losses experienced in the third quarter as many of our peers have noted the mortgage basis improved throughout the quarter as well the us treasury yield curve however remained inverted and has shown no signs of steepening thus far this year which has significantly impacted the earnings power of many companies in our sector given the most recent economic data markets are bracing for a higher for longer scenario and the potential for a recession later this year the combination of our efforts to refine our investment and hedging strategies has enabled us to be successful and stabilizing and protecting book value in recent course given the expectation of continued interest rate hikes and the evolving macro environment we remain positioned for additional rate hikes to that point we continue to utilize a is to partially offset spread widening risk as we await the fed to convey when it expects to and it's tightening cycle at which point we could look to increase our risk fill file for the fourth quarter while we generated a gap net loss applicable to common stock holders of a dollar fifty nine cents per diluted share we generated earnings available for distribution or a a day and non gap financial measure of five point three million or twenty four cents per share it bears repeating that he d is only one of several factors considered and setting or dividend policy thus while not align this quarter are board continues to monitor our earnings capabilities to ensure our dividend is at an appropriate level of value for common share finished at six dollars and six cents has to december thirty first up a penny from the prior quarter we believe creating a more stable book value your profile is in our share hoped best interest and remains a top priority for us when you consider that i preferred stock makes up a significant portion of our overall equity profile we were pleased that on and any be basis and before taking into account any issuances of equity to our common stock eighty and program we posted a stable and a be relative to the third quarter as such during the second half of twenty twenty two and a v was off approximately five point one percent which we believe compares favorably to the performance of many others in our industry and speaks well to our ability to navigate a very challenging macro environment and the unprecedented speed of said rate hikes during the fourth quarter we acquired approximately seven hundred and eighty million u p b fannie and freddie a sars by a flow in bulk purchases prepayments speed on our and miss our portfolio remain low and thus the pace of reinvestment to maintain the allocation of capital to the asset class has accelerated we capture rates on him as ours also slowed to the low single digits as expected given a higher interest rate levels our strategy of pairing emissaries with agency aren't vs along with pro active portfolio management and hedging has continued to benefit shareholders at the end of the year financial leverage improve modestly to three point eight times as we took a more targeted and disciplined approach in the fourth quarter with respect to deploying capital given the ongoing market volatility we believe we remain prudently levered and expect to be opportunistic and deploying capital and increasing our leverage and twenty twenty three
spk_4: we ended the year with fifty seven million and unrestricted cash on the balance sheet maintaining a solid liquidity profile
spk_5: as we look forward and twenty twenty three we expect to maintain our conservative and proactive approach to portfolio management were there a risk adjusted opportunities to selectively deploy capital we will take advantage additionally we anticipate our heads ratio will likely remain elevated given our expectations of ongoing fed rate hikes to further combat stubborn inflation our priority remains to protect book value and we will remain mindful of i liquidity and leverage profile given the environment with that outrun the call already to who will cover more details regarding our investment portfolio and it's performance over the fourth quarter thanks again that themes that were prominent in the third quarter rolled over into the fourth quarter idol volatility family liquid investment markets widely spread sectors and a weakening equity markets were all influenced by a third determined to reduce inflation all sales after the october november cp i reports as a reported inflationary numbers suggested that inflation was moderating faster than expected post the inflationary numbers spread sector and equity markets title on interest rate markets files as investor sentiment changed the same change was driven by a perception that the fed might end up doing fewer fed funds rate increases they were initially expected
spk_6: with that said most inflationary measures have moderated but remained elevated above the fed to percent target for the first few months at twenty twenty three
spk_5: stubbornly high inflation has led to renewed predictions of the fed having to increase the fed funds rate greater than what the market had initially proceed the market is currently expecting a terminal feds fun rate level between five and a quarter and five seventy five as a result we continue employ a thoughtful hedging strategy in the fourth quarter to protect a book value and will believe those efforts have largely been working as intended this investment strategy has carried over into the first quarter of twenty twenty three at year end or msr purple ill had a u p b of twenty one point seven billion and a market value of approximately two hundred and eighty million during the quarter we purchased approximately seven hundred and eighty million u p b of knew him as ours to a bulk and flow programs and year and the emus ours and really dated assets represented approximately thirty eight percent of our equity capital and approximately thirty percent of our investable assets excluding cash meanwhile our rbs portfolio accounted for approximately forty five percent of our equity capital of the percentage of investable assets the rbs for folio represented proximity seventy percent excluding cash at year end during the quarter we continue to experience cpr improvements in both our msr and rbs as powerful years or msr fully as net cpr average approximately five percent for the fourth quarter down from approximately seven percent and that cpr in the previous quarter the decline with mainly driven by seasonality and the change in movies production coupons with drove slower prepayments speeds in the quarter the for four years recapture rate with lower and upper roxanne only two percent versus approximately seven percent in the third quarter as expected with mortgage rates rising as the incentive to refinance has left and moving forward we continue to expect low recapture rate and stabler net cpr for the foreseeable future given the current levels of interest in mortgage rates the rbs prepayments speeds remain love the lower cpr was driven by a combination of new asset purchases as well as the fact that the current higher mortgage rate environment is compressing cpr as for the existing portfolio as of today the majority of the mortgage universe remains out of the money in terms of refinancing we would expect free payments to remain at low levels and love interest rates day at the levels are move higher for the quarter the arm the as portfolio weighted average three months cpr with used to approximately three point eight percent
spk_2: compare to approximately four point seven percent in the third quarter
spk_5: as of december thirty first the rvs for fully of cliff of the tv a's stood at approximately six hundred and forty six million compared to seven hundred fifty nine million and the previous quarter and quarter over quarter respect pool portion of the polio continue to grow as we opportunistically took advantage of higher interest rate levels and lower price premiums by putting new cast work as well as converting a few dollars in the pools is dollar bills weekend further the rbs for folio numbers lower as we further utilized to be a security to have your porsche the poor folio we also continue to proactively change the purple as composition moving into higher coupons and reducing spread duration for the polio at the end of the fourth quarter the thirty year securities position represented the entire army as for folio up from ninety six percent at the end of third quarter
spk_7: for the fourth quarter we saw an increase in our rbs net interest spread the three point seven seven percent as compared to three point four nine percent net interest spread reported for the third quarter be improved nim was driven by previously mentioned factors why we took advantage of wider mortgage spread
spk_8: and higher yield levels by putting new money to work throughout the quarter who we rotated out for fully of swapping out of low yielding assets and purchasing higher cooper mortgages with better yields overall expenses were greater but we're more than offset by increased income which was driven by the previously mentioned reasons at year end the polio financial leverage stood at approximately three point eight times at the aggregate for fully of and the prefer leo was managed with a negative duration go
spk_5: looking forward we remain mindful of the current environment as we expect the investment markets remain choppy until there's a clear sense that the fed is reaching it's terminal rate
spk_8: i will now trying to call over to my for fourth quarter financial discussion thank you julian our governor loss of blood for the common stock holders for the fourth quarter was thirty four point five million dollars or dollar fifty nine for weighted average diluted share outstanding during the quarter or comprehensive income attributable to common stock holders which includes the market market of are held for sale rmbs with six point two million dollars or twenty nine cents per weighted average deluded share earnings available for distribution attributable to common stock holders were five point three million dollars or twenty four cents per share our book zipper common share as of december thirty first twenty twenty two with six dollars and six cents compared to the five six thousand and five cents as of september thirtieth twenty twenty two
spk_1: we use a variety of derivative instruments and mitigate the effects of increases in interest rates on a portion of our future repurchase borrowings at the end of the fourth quarter we held interest rate swaps a's treasury futures and options and treasury futures all of which had a combined notional amount of nine hundred and thirty million dollars
spk_10: you can see more details with respect to are heading strategy and our ten k as well is in our fourth quarter presentation forget purposes we've not a to apply has accounting for interest rate derivative and as a result we record the change and estimate of fair value as a component of the net gain or loss on interest rate derivative
spk_2: operating expenses were three point two million dollars for the quarter
spk_8: on december fifteenth twenty twenty two the board of directors directors declared a dividend of twenty seven cents per common share for the fourth quarter twenty twenty two which was paid in cash on january thirty first twenty twenty three we also declared a dividend a fifty one point two five cents per share on or eight point two percent series
spk_3: a cumulative redeemable preferred stock and a dividend of fifty one point five six two five cents on our a point two five percent series be fixed the floating rate cumulative redeemable preferred stock both of which were paid on january seventeenth twenty twenty three
spk_11: at this time we will open up the call for questions operator thank you again leaving generally like ask a question please post ah one one on your telephone half a question please post star one one one moment please are first question comes from the line of miguel gone of jmp security line of helping
spk_2: hey good afternoon gentlemen thanks for taking the question
spk_3: could you perhaps expound a little bit further on the comment about the viability of the devon and vs what sort of a sustainable level of quarter earnings you are you might see going toward given the specially given pals and today and our rates are headed and also i don't know if i heard you guys correctly but did you say that some books are you was down five percent thus for this quarter i am how how are you said the second question is no we didn't we didn't say that at all
spk_10: okay the end of february
spk_12: prior to the dividend is flat threat okay thank you parties for
spk_5: no worse with respect to the devon and okay i think you know you've heard from this before and we'll continue to hear that we we consider a ideas a measure and i think related to that in in in in the script by yeah know we we look at total return you know we obviously think about where rates may go and how sustainable the dividend his overtime and broadly speaking is the board meets every quarter and you will continue to evaluate the strength to the dividend relative to earnings power and and and the requirements the market relatives or space and know we expect to provide more information on that later this week right thank you i'm just going forward how how do you guys think about trade off between building the portfolio toes agency rmbs and same as ours if interest rates to keep sort of breaking through the five and a quarter to five and three quarter expected rate if we start going into a sex scandal have you started thinking about your portfolio that thanks ah i'm i'm account
spk_10: in a look i think the early read is that
spk_13: we have preferred our agency arm the at these particular levels which we would say is kind of in the mid mid teens that we can have either returns
spk_9: ah we have also aiding i think some of that some of the performance you know we have a a large rather large swap for folio which is kind of moved again cannot coincided with a repo rates rising ah almost and have one to one basis for us to that is asked had some of the rising repo cost that we've seen so that that is
spk_1: moving higher that for folio has kind of benefited us
spk_14: the in terms of msr and the kind of the returns that we're seeing right now in terms of the portfolio
spk_2: the alec i would say of low to mid teens is kind of what we're seeing for those type of returns by the in general we're evaluating they're constantly over times but i would say just from spread widening perspective the agency rbs looks rather attractive
spk_15: i thank you gentlemen appreciated the lot going for
spk_2: a smoker
spk_16: thank you for one moment please
spk_5: our next question comes from the line and matter how it as be a rally a lot of something matthew how it oh hey guys he gave a free kick my question and that the here from the team have he characterized to risk profile the company today me clearly leverage is low from stroke basis it went down in the fourth quarter i look at your sensitivity is and gil it's cause infiltrated nothing one lady of the book doesn't change all that much you're out the over hedged what what what he can after i didn't it out without asking artificial look what's it gonna take it
spk_17: to begin you know taking a creaking everything in asia yielded these and your post market these days that see them be as values and so will add you put the here he put it in the context in terms were way the company is vs is directly where it's operated
spk_5: it's julian again you know look i think we sit here and they let the market looks very attractive but i think you need that better clarity from the fed clearly you know paul had statements to today and in the statements is kind of alluded to interest rates and fed funds rate moving kind of a higher the marketed kind of projecting it at this point time to be five and a quarter somewhere between five a quarter five seventy five i would say you know we just take a month
spk_17: go outside of the more improve data that we got from january the market was probably expecting the fed the stop somewhere between five and five and a quarter at that point time i think if we get greater clarity from the fed in terms of the direction alley or how high they want to take rates i think that becomes your your opportunity time that gonna take
spk_2: ah i'm probably increase leverage and take a more advantage of the market it didn't have the same with at the what they do it the balance sheet and how much any kind of started guarding their mdf holding them or what are your thoughts there
spk_3: i think the missile receptor the that basically that the fed would not sell in the as they've had multiple opportunities to kind of fell mbs through throughout this time period that they've been actually raising the fed funds rate i think that they're most effective tool at least from their perception is that they'd like to continue to raise the fed funds rates to level they perceive that will kind of slow down the economy and retain the balance sheet ah he can allude to that at some point if continuing to raise the fed funds rate proves to be an effective that they might try to do something on the ballot she is a possibility but it wouldn't be ah in my mind a high percentage of that's what they would like to give
spk_20: gotcha so i listen to them
spk_3: he looked moving the survey thing and gets been a great asset a strategy for you have you made me look at it point where and the surveys are today i'm happy raise your rates in a local coupon and underlying could buy the servicing the what would you look they if it is a scenario where the other that yell at them are forgetting the fed the kind of some point maybe later next sixty years later the here only nation would just look to reallocate more mbs the incur one it's its course be like yo that profile with your recaptures still still going to be a core acid if you know i'm going for it up their interface cycle those changes how you look at everything you know lab this year yes sir matt so that the portfolio has a a
spk_2: a know rate of was scott three and a half right and in the current interest rate on mortgages was just round at six in math so you know from the perspective of that portfolio though the way we look at their portfolio is there's a lot of runway and terms of having pretty strong cash was before you that portfolio is in danger of and refinancing out outside of in a normal in a life events and so we really feel good about the strength to the cash flows in their portfolio despite the rates at this point given the duration and the conductor a that portfolio and which is almost nonexistent at this point in a we we think there's a lot of room to run on that portfolios
spk_17: should should the fed cut rates at some point in time before we have to even start thinking about we capture and and and things around in the degradation and output by so we feel really good about the profile up that portfolio today because that the reality is
spk_2: speeds are your enemy in a you can see you can has a lot of things rate wise but speeds are your worst enemy and from our vantage point given the choir characteristics and her hair in a portfolio today
spk_3: we think that acid it in a is gonna continue to perform pretty strong it look at a happy that i bought where the under five and i've never seen him
spk_2: disallow it my in my lifetime my career and or if you see how much lower the go by them inches death incredible see the speeds fall palm the on it and after me a peep you pretend protected on the on the and the epa i just curious on the or a lot of sense with or with with the yes
spk_19: with the some cash know which are unnecessary are you see him he would it be more active and above market with somebody small originator is that are selling or buying and it is that get me i see they can this is the days cheap and up a little bit early to share it with look at whether portray okay given them you know given out what looks like the be a lot of seller
spk_1: it's out there he was a big sellers
spk_3: so we look at portfolios every in every day and for the smaller originators you know it's our expectation that there's a concession and price you know which is favorable to us and terms a yield and so we we absolutely look and see look and see in a lot of as put those and regular basis if you ask me if we're seeing a lot of smog i sell i wouldn't say we're seeing get out of small that film were saying you know a decent steady flow of volume away from where we call you the wells dynamic going on today but
spk_1: there there is an the me he acquired the asset in a at levels that i would say words that are slightly lower than the craziness in the fourth quarter
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