Cherry Hill Mortgage Investment ((CHMI)) has held its Q1 earnings call. Read on for the main highlights of the call.
Cherry Hill Mortgage Investment’s recent earnings call painted a mixed picture of the company’s current standing and future prospects. While the company showcased strong liquidity and a reduction in operating expenses, it also reported a GAAP net loss and a decline in book value per share. The anticipation of lower future earnings adds a layer of caution to the outlook.
Solid Liquidity Profile
Cherry Hill Mortgage Investment ended the quarter with a robust liquidity position, boasting $47 million of unrestricted cash on the balance sheet. This solid liquidity profile is a positive indicator of the company’s ability to manage its financial obligations and seize potential investment opportunities.
Reduced Operating Expenses
The company successfully reduced its operating expenses quarter-over-quarter, primarily due to the elimination of the management fee. This strategic move is part of Cherry Hill’s broader plan to improve its expense ratio and enhance its capital structure over time.
RMBS Portfolio Performance
The performance of the RMBS portfolio was a highlight, with a weighted average three-month CPR of approximately 5.8% and a net interest spread of 3.55%, marking an improvement from the previous quarter. This indicates a healthy return on the portfolio, contributing positively to the company’s financials.
GAAP Net Loss
Despite some positive aspects, Cherry Hill reported a GAAP net loss applicable to common stockholders of $0.29 per diluted share for the first quarter. This loss reflects challenges that the company faces in the current economic environment.
Book Value Decline
The book value per common share decreased to $3.58 from $3.82 at the end of December, signaling a decline in the company’s equity value. This drop is a concern for investors as it impacts the overall valuation of their holdings.
Decline in NAV
The net asset value (NAV) also saw a decline, down approximately $7.5 million or 3.2% relative to December 31. This reduction further underscores the financial challenges the company is navigating.
Anticipated Lower EAD
Looking ahead, Cherry Hill anticipates lower earnings available for distribution (EAD) due to the maturity of a larger hedge. This projection suggests potential challenges in maintaining current levels of profitability.
Forward-Looking Guidance
In the face of a volatile market environment, Cherry Hill’s management provided guidance that highlights a cautious approach. The company plans to focus on deploying capital into Agency RMBS and select MSRs while maintaining strong liquidity and prudent leverage. This strategy aims to navigate economic uncertainties and policy changes effectively.
In conclusion, Cherry Hill Mortgage Investment’s earnings call reflects a balanced sentiment with both positive strides in liquidity and expense management, and challenges such as net losses and declining book values. The company’s forward-looking guidance suggests a cautious yet strategic approach to future investments, aiming to mitigate risks and capitalize on market opportunities.