Cherry Hill Mortgage Investment Corporation

Hello, everyone, and welcome to Cherry Hill Mortgage Investment Corporation fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. please be advised that today's conference is being recorded. Now it's my pleasure to turn the call over to Garrett Edson with ICR. Please proceed.

We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's fourth quarter 2024 conference call. In addition to this call, we have issued a press release that was distributed earlier this afternoon and posted that press release in the fourth quarter 2024 investor presentation to the investor relations section of our website at www.chmirink.com. On today's call, management's prepared remarks and answers to your questions may contain forelooking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to interest income, financial guidance, IRRs, future expected cash flows, as well as prepayment and recapture rates, delinquencies, and non-GAAP financial measures, such as earnings available for distribution or EAD and comprehensive income. Forward-looking statements represent management's current estimates, and Cherry Hill assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC and the definitions contained in the financial presentations available on the company's website. Today's conference call is hosted by Jay Lown, President and CEO, Julian Evans, the Chief Investment Officer, and Michael Hutchby, the Chief Financial Officer. Now, I will turn the call over to Jay.

Thanks, Garrett, and welcome to our fourth quarter 2024 earnings call. On our last call, we had just completed the election and were watching market and economic reaction closely. While sentiment was broadly bullish for the new administration to come in and open up the economy, what was a bit unexpected was the stubbornness of inflation. Despite a number of indicators and the market hinting to a Fed pause to the rate cut cycle, the Fed went ahead and cut rates a third time in mid-December. As a result, investors concerned about stubborn inflation drove up long-term yields to seven-month highs, with the 10-year ending at 2024 at 4.57%, nearly 80 basis points higher quarter over quarter. Concerns over persistent inflation and uncertainty about economic growth due to the fast pace of policy changes by the new administration has shifted both Terry Hill's and Market's sentiment toward a position that additional rate cuts in 2025 will be fewer than expected last year and continue to remain data dependent. The relationship between short and longer data rates has been and will continue to be highly reactive to both political agendas globally and domestic economic data. Our RMBS portfolio was impacted in the fourth quarter by higher rates, increased volatility and spread widening, mitigated by our MSR portfolio, which saw nice gains quarter over quarter. Julian will discuss this in more detail shortly. Looking forward, we remain thoughtful of the macro and geopolitical environment and expect to maintain our current investment strategy. In November, In concert with the conclusion of the company's special committee review, we were very pleased to complete the internalization of management and officially commence operations as a fully integrated, internally managed mortgage REIT. This was the right decision for shareholders for several reasons. First, internalizing management more strongly aligns management and shareholders by a direct ownership by our internally managed structure. Second, it also eliminates potential conflicts of interest inherent in an external management structure and improves our overall transparency. Third, management now has a much more streamlined and efficient decision-making process with direct control. Thanks to the elimination of external management fees, as well as some operational synergies inherent through internalizing, We expect the internalization will reduce our operating expenses in 2025 by 1.1 to 1.6 million, or 3 to 5 cents per common share. I'm proud of our team for their relentless work through the summer and the fall of last year to get the process completed. For the fourth quarter, we generated GAAP net income applicable to common stockholders of 29 cents per diluted share. and we generated Earnings Available for Distribution, or EAD, a non-GAAP financial measure of 3.3 million, or 10 cents per share. EAD for the quarter was impacted by approximately 2 cents per share of expenses related to the Special Committee's efforts. The Special Committee concluded in November, and therefore it will not impact results going forward. As we have stated consistently for a few quarters, EAD is not the only barometer our board utilizes for setting our dividend. Book value per common share finished the year at $3.82, compared to $4.02 on September 30th. On an NAV basis, which includes preferred stock and excluding special committee expenses, NAV was down approximately 5.5 million, or 2.3%, relative to September 30. Financial leverage at the end of the quarter remained consistent at 5.3 times as we continued to stay prudently levered. We ended the quarter with $46 million of unrestricted cash on the balance sheet, maintaining a solid liquidity profile. Looking ahead, we will continue to monitor the macro environment closely and are positioning our portfolio in the near term back toward higher for longer. We will continue to deploy capital as appropriate into agency RMBS and select MSRs, which still present strong risk adjusted return profiles, while maintaining strong liquidity and prudent leverage. With that, I'll turn the call over to Julian, who will cover more details regarding our investment portfolio and its performance over the fourth quarter. Thank you, Jay.