NYSE:CHMI Cherry Hill Mortgage Investment Q4 2023 Earnings Report $2.66 -0.02 (-0.90%) As of 10:32 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Cherry Hill Mortgage Investment EPS ResultsActual EPS$0.19Consensus EPS $0.20Beat/MissMissed by -$0.01One Year Ago EPS$0.24Cherry Hill Mortgage Investment Revenue ResultsActual Revenue$12.79 millionExpected Revenue$3.11 millionBeat/MissBeat by +$9.68 millionYoY Revenue GrowthN/ACherry Hill Mortgage Investment Announcement DetailsQuarterQ4 2023Date3/7/2024TimeQ4 2023 Earnings ReleaseConference Call DateThursday, March 7, 2024Conference Call Time5:00PM ETUpcoming EarningsCherry Hill Mortgage Investment's Q1 2025 earnings is scheduled for Monday, May 5, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cherry Hill Mortgage Investment Q4 2023 Earnings Call TranscriptProvided by QuartrMarch 7, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Cherry Hill Mortgage Investment Corporation 4th Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Garrett Edson with Investor Relations. Operator00:00:37Please go ahead. Speaker 100:00:41We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's Q4 2023 conference call. In addition to this call, we have filed a press release that was distributed earlier this afternoon and posted to the Investor Relations section of our website at www.chmireit.com. On today's call, management's prepared remarks and answers to your questions may contain forward looking 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. Speaker 100:01:31We 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 Hajby, the Chief Financial Officer. Now, I will turn the call over to Jay. Speaker 200:01:55Thanks, Garrett, and welcome to our Q4 2023 earnings call. On our prior call, we talked about how we were laser focused on risk management as the 10 year crossed 5% and agency mortgage spreads significantly widened. To that end, we proactively positioned our portfolio for flat to higher rates and to mitigate the spread widening we were seeing in the summer and early fall by hedging out a portion of our basis risk in our RMBS portfolio with TBAs. By doing this, we had a strong Q3 and successfully preserved the vast majority of our shareholders' equity, while others such as Agency REITs were considerably impacted by the spread widening. Through our positioning, we were aware that should mortgage spreads compress, we would also not participate as much in any upside. Speaker 200:02:51Shortly after our Q3 call, the Fed unexpectedly pivoted towards a much more accommodative tone, all but signaling that it would consider cutting rates beginning in early to mid-twenty 24. The Fed further reinforced their tone in December despite the data continuing to support a higher for longer strategy. As a result, rates plummeted in the final 2 months of 2023. Lower coupon MBS outperformed higher coupon MBS and spreads tightened. As a result, our book value was impacted by this near term movement. Speaker 200:03:30That said, we've seen a reversal thus far in 2024 as the data continues to track and align with how we initially positioned our portfolio. Inflation remains hot with the PCE still elevated, which has compelled the Fed to telegraph a more patient posture around future rate cuts. The market has gradually followed and rates have risen in the 1st 2 months of this year. We are watching the Fed and economic indicators closely as we position our portfolio moving forward and believe our overall strategy of pairing MSRs with Agency RMBS remains the proper strategy for the current environment. For the Q4, we generated GAAP net loss applicable to common stockholders of $1.29 per diluted share and we generated earnings available for distribution or EAD, a non GAAP financial measure of $4,500,000 or $0.17 per share, which once again covered our quarterly distribution. Speaker 200:04:35As we've noted before, EAD is only one of several factors considered in setting our dividend policy. Additional factors such as the existing market environment and portfolio return potentially, our level of taxable income including hedge gain impacts and a degree of certainty regarding forward investment return economics all contribute to determining what we believe is the appropriate dividend level. Book value per common share finished the year at $4.53 down 9.2% from September 30, primarily driven by portfolio positioning combined with lower MSR marks as well as having a negative duration positioning, all of which was marginally offset by spread tightening. On an NAV basis, which includes preferred stock in the calculation, NAV would have been down approximately 4.3% relative to September 30, if we were to exclude the capital raised through the ATM. We've consistently noted that our existing mix of common to preferred equity amplified the total changes in our total equity or common book value compared to our NAV. Speaker 200:05:49We've shared in the past that creating a more stable equity profile is a top priority in terms of our overall strategy. In the Q4, we began to put that strategy to work. We raised $11,800,000 through our at the market common share program and we utilized over $6,000,000 of the funds raised early this year to repurchase some of our Series B preferred shares. We believe it is the right step for the company to put us on a much firmer footing with respect to our capital structure. This approach should benefit common shareholders as the repurchase of Series B preferred shares ultimately reduces the amount we pay for preferred dividends once the Series B transitions to a floating rate. Speaker 200:06:33As we move through 2024, we will continue focusing on similar measures to further enhance our equity profile, while remaining mindful of our balance sheet strength and our investment portfolio. At the end of the year, financial leverage reduced slightly to 4.2 times as we continue to stay prudently levered as the volatile market dynamics persist and selectively deploy capital. We ended the quarter with $53,000,000 of unrestricted cash on the balance sheet, maintaining a solid liquidity profile. Looking ahead, we continue to manage our portfolio closely and focus on risk management in these volatile times. We will continue to selectively deploy capital into additional agency RMBS, which still presents a strong risk adjusted return profile compared to MSRs. Speaker 200:07:25And we'll remain hard at work improving our equity profile for the ultimate benefit of common shareholders, while not sacrificing our strong liquidity and leverage. With that, I will turn the call over to Julian, who will cover more details regarding our investment portfolio and its performance over the 4th quarter. Speaker 300:07:46Thank you, Jay. As Jay noted, we had appropriately positioned our portfolio for the higher for longer rate environment. That economic and inflation data continued to support, and we benefited in the 3rd quarter as well as in the October from that positioning. In November, despite the data still supporting our position, we were surprised by the Fed's sudden shift in policy away from higher for longer and clearly intimating that they would be looking to cut interest rates multiple times in 2024. Interest rates rallied, the yield curve flattened and mortgage spreads tightened over the next 2 months. Speaker 300:08:25Ultimately, lower coupon RMBS outperformed the higher coupon RMBS, where we were primarily invested. Our MSRs were impacted and our portfolio's negative duration was not positioned for the rate rally, leading to our book value performance. Thus far in 2024, we've seen another pivot in the Fed's policy, partially stepping back from their aggressive language as the economic and inflation data further booster our thesis that our portfolio was appropriately positioned. We are prevailing thus far in the Q1, but continue to closely watch the Fed and will further proactively adjust our portfolio as necessary given the ongoing volatility. At year end, our MSR portfolio had a UPB of $20,000,000,000 and a market value of approximately 254,000,000 dollars The MSR and related net assets represented approximately 44% of our equity capital and approximately 28% of our investable assets, excluding cash at the end of the quarter. Speaker 300:09:30Meanwhile, our RMBS portfolio accounted for approximately 39% of our equity capital. As a percentage of investable assets, the RMBS portfolio represented approximately 72%, excluding cash at year end. Prepayment speeds for our MSR and RMES portfolios continue to remain relatively steady compared to the prior quarter given the elevated mortgage rate environment. Our MSR portfolio's net CPR averaged approximately 4.2% for the Q4, modestly down from 5.6% net CPR in the previous quarter. The portfolio's recapture rate remained consistent with low at approximately 1% as the incentive to refinance continues to be minimal. Speaker 300:10:15Moving forward, we continue to expect low recapture rates and a stable net CPR for at least the near term, which should the Fed pursue rate cuts, we'd expect both matrix to rise over time. RMBS portfolio's prepayment speeds remain low as expected, driven by a combination of new asset purchases as well as the fact that the current higher mortgage rate environment continues to compress CPRs for the existing portfolio. As of today, the majority of mortgage universe remains out of the money in terms of refinancing. We would expect prepayments to remain at low levels as long as the interest rates remain at these levels, but should there be rate cuts later this year, prepayments will begin to rise. The quarter, the RMBS portfolio's weighted average 3 month CPR was slightly higher at approximately 4.9% compared to approximately 4.4% in the 3rd quarter. Speaker 300:11:16As of December 31, the RMBS portfolio inclusive of TBAs stood at approximately $655,000,000 compared to 583,000,000 dollars at the previous quarter end. Quarter over quarter, we reduced some of our TBA hedges in the portfolio as we shifted towards given the Fed's pivot on their policy stance towards potential rate cuts. For the 4th quarter, our RMBS net interest spread was 3.82%. The increase from the prior quarter was driven by lower repo costs due to lower repo balances and improved amortization expenses. At year end, the portfolio's financial leverage remained at approximately 4.2x and the 30 year securities continued to represent 100% of the RMBS portfolio. Speaker 300:12:07Looking forward, we expect volatility remain elevated for at least the near term. Our macro growth and particularly inflation to have a significant impact on the upcoming Fed decisions. We will continue to manage our portfolio thoughtfully, while looking to shift our overall capital structure to further add value for shareholders through improved performance and earnings. I will now turn the call over to Mike for our Q4 financial discussion. Speaker 400:12:35Thank you, Julian. Our GAAP net loss applicable to common stockholders for the Q4 was $35,500,000 or $1.29 per weighted average diluted share outstanding during the quarter. While comprehensive loss applicable to common stockholders, which includes the mark to market of our available for sale RMBS, was $6,500,000 or $0.24 per weighted average diluted share. Our earnings available for distribution attributable to common stockholders were $4,500,000 or $0.17 per share. Our book value for common share as of December 31 was $4.53 compared to a book value of $4.99 as of September 30. Speaker 400:13:17We use a variety of derivative instruments to mitigate the effects of increases in interest rates on a portion of our future repurchase borrowings. At the end of the Q4, we held interest rate swaps, TBAs and treasury futures, all of which had a combined notional amount of approximately $955,000,000 You can see more details with respect to our hedging strategy in our 10 ks as well as in the Q4 presentation. For GAAP purposes, we have not elected to apply hedge accounting for our interest rate derivatives. And as a result, we record the change in estimated fair value as a component of the net gain or loss on interest rate derivatives. Operating expenses were $3,500,000 for the quarter. Speaker 400:14:02On December 8, 2023, our Board of Directors declared a dividend of $0.15 per common share for the Q4 of 2023, which was paid in cash on January 31, 20 24. We also declared a dividend of $0.5125 per share on our 8.2% Series A cumulative redeemable preferred stock and a dividend of $0.51565 on our 8.25 Percent Series B fixed to floating rate cumulative redeemable preferred stock, both of which were paid on January 16, 2024. At this time, we will open up the call for questions. Operator? Operator00:15:03And our first question comes from Mikhail Goberman with Citizens JMP. Speaker 500:15:12I hope everyone's doing well. I guess the first one I have is, what are you guys thoughts on appetite for leverage going forward, given it's kind of in the lowest level of recent memory, I guess, I could say? And I guess the second question would be perhaps an update on book value thus far in the Q1? Speaker 300:15:40Thanks. In terms of leverage, I think we will adjust that over time. Right now, we feel as if the market is still very volatile. Spreads in terms of RMBS are still attractive, but they're on the lower side of where they've been over the last year. I think the average has been about 150 basis points. Speaker 300:16:02And right now, we're trading a little bit through that, probably have some further downside to go, but could easily see given the headlines and what the Fed actually decides to do with the next couple of meetings to still see the markets be very volatile. Longer term, we do think that the Fed will ease later this year. They've moved obviously from a tightening bias to more of a neutral bias. And at some point, they will get to an easing bias once they feel that inflation has gotten to the level that they feel comfortable with. Speaker 400:16:41And Mikhail, to touch on book value for you, we see our February 29 book value per share at about flat versus year endquarter end. And that's prior to any Q1 dividend accrual as the Board has not yet met to approve it. Speaker 500:17:00Great. Thank you, Julie and Michael. And as far as the preferred stock repurchases of $6,100,000 in the last quarter. Can we expect sort of a similar pace going forward quarterly or maybe something else? Speaker 200:17:22Hey, Mikhail. I think that I can't give you a definitive answer there, but it's clear that we're trying to right size the leverage calculation here. And that Series B becomes floating in April. So it is our strong desire to do that. I think the hard part about answering their question about the pace of that is around trying to be mindful about the dilution impact and we're trying to do it with this minimal impact as we can. Speaker 200:17:57So the pace, I think, depends on a few things, but it's definitely our desire to keep going. Speaker 500:18:05Got you. Thank you. And if I can squeeze in one more, any sort of thoughts on this potential MSR sales from NYCB? Speaker 200:18:17So I don't have any color on that. We've been our conversations with Flagstar have been pretty high level and macro relative to our relationship on the servicing front. But I can't imagine that if they do that, it would be in a small block. So I imagine that others who have the ability to purchase something $10,000,000,000 or higher are probably going to get a better look at that than us. But today, we have no color relative to whether or not that's just a rumor or what. Speaker 200:18:56I think the capital they got was a huge step towards stabilizing things. And I have just have no insight into what they're thinking relative to future moves to either appease the regulators or prop up the balance sheet. Speaker 500:19:15Yes, fair enough. Thanks, guys. Best of luck going forward. Operator00:19:40And I'm showing no further questions at this time. I would now like to turn the conference back to Jay for closing remarks. Speaker 200:19:49Thank you, operator. Thank you for joining us on our Q4 2023 call. We look forward to updating you in a few months on our Q1 20 24 call. Have a good evening everyone. Operator00:20:01And this concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCherry Hill Mortgage Investment Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Cherry Hill Mortgage Investment Earnings HeadlinesSee homes sold in the Cherry Hill area, April 14 to April 20April 23 at 11:03 AM | nj.comCherry Hill Mortgage Investment Corp (CHMI) Q4 2024 Earnings Call Highlights: Navigating ...April 21, 2025 | finance.yahoo.comFeds Just Admitted It—They Can Take Your CashHere’s the cold truth: If your money is sitting idle in a bank account, it’s vulnerable. That’s why thousands of smart, forward-thinking individuals are making the move—out of the system and into real, untouchable assets. Because once your funds are frozen, it’s too late.April 25, 2025 | Priority Gold (Ad)10 most expensive homes sold in the Cherry Hill area, April 7-13April 19, 2025 | nj.comSee homes sold in the Cherry Hill area, April 7 to April 13April 16, 2025 | nj.comSee homes sold in the Cherry Hill area, March 31 to April 6April 9, 2025 | nj.comSee More Cherry Hill Mortgage Investment Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cherry Hill Mortgage Investment? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cherry Hill Mortgage Investment and other key companies, straight to your email. Email Address About Cherry Hill Mortgage InvestmentCherry Hill Mortgage Investment (NYSE:CHMI), a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. It operates through Investments in RMBS (residential mortgage-backed securities) and Investments in Servicing Related Assets segments. Cherry Hill Mortgage Investment Corporation qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. 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There are 6 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Cherry Hill Mortgage Investment Corporation 4th Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Garrett Edson with Investor Relations. Operator00:00:37Please go ahead. Speaker 100:00:41We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's Q4 2023 conference call. In addition to this call, we have filed a press release that was distributed earlier this afternoon and posted to the Investor Relations section of our website at www.chmireit.com. On today's call, management's prepared remarks and answers to your questions may contain forward looking 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. Speaker 100:01:31We 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 Hajby, the Chief Financial Officer. Now, I will turn the call over to Jay. Speaker 200:01:55Thanks, Garrett, and welcome to our Q4 2023 earnings call. On our prior call, we talked about how we were laser focused on risk management as the 10 year crossed 5% and agency mortgage spreads significantly widened. To that end, we proactively positioned our portfolio for flat to higher rates and to mitigate the spread widening we were seeing in the summer and early fall by hedging out a portion of our basis risk in our RMBS portfolio with TBAs. By doing this, we had a strong Q3 and successfully preserved the vast majority of our shareholders' equity, while others such as Agency REITs were considerably impacted by the spread widening. Through our positioning, we were aware that should mortgage spreads compress, we would also not participate as much in any upside. Speaker 200:02:51Shortly after our Q3 call, the Fed unexpectedly pivoted towards a much more accommodative tone, all but signaling that it would consider cutting rates beginning in early to mid-twenty 24. The Fed further reinforced their tone in December despite the data continuing to support a higher for longer strategy. As a result, rates plummeted in the final 2 months of 2023. Lower coupon MBS outperformed higher coupon MBS and spreads tightened. As a result, our book value was impacted by this near term movement. Speaker 200:03:30That said, we've seen a reversal thus far in 2024 as the data continues to track and align with how we initially positioned our portfolio. Inflation remains hot with the PCE still elevated, which has compelled the Fed to telegraph a more patient posture around future rate cuts. The market has gradually followed and rates have risen in the 1st 2 months of this year. We are watching the Fed and economic indicators closely as we position our portfolio moving forward and believe our overall strategy of pairing MSRs with Agency RMBS remains the proper strategy for the current environment. For the Q4, we generated GAAP net loss applicable to common stockholders of $1.29 per diluted share and we generated earnings available for distribution or EAD, a non GAAP financial measure of $4,500,000 or $0.17 per share, which once again covered our quarterly distribution. Speaker 200:04:35As we've noted before, EAD is only one of several factors considered in setting our dividend policy. Additional factors such as the existing market environment and portfolio return potentially, our level of taxable income including hedge gain impacts and a degree of certainty regarding forward investment return economics all contribute to determining what we believe is the appropriate dividend level. Book value per common share finished the year at $4.53 down 9.2% from September 30, primarily driven by portfolio positioning combined with lower MSR marks as well as having a negative duration positioning, all of which was marginally offset by spread tightening. On an NAV basis, which includes preferred stock in the calculation, NAV would have been down approximately 4.3% relative to September 30, if we were to exclude the capital raised through the ATM. We've consistently noted that our existing mix of common to preferred equity amplified the total changes in our total equity or common book value compared to our NAV. Speaker 200:05:49We've shared in the past that creating a more stable equity profile is a top priority in terms of our overall strategy. In the Q4, we began to put that strategy to work. We raised $11,800,000 through our at the market common share program and we utilized over $6,000,000 of the funds raised early this year to repurchase some of our Series B preferred shares. We believe it is the right step for the company to put us on a much firmer footing with respect to our capital structure. This approach should benefit common shareholders as the repurchase of Series B preferred shares ultimately reduces the amount we pay for preferred dividends once the Series B transitions to a floating rate. Speaker 200:06:33As we move through 2024, we will continue focusing on similar measures to further enhance our equity profile, while remaining mindful of our balance sheet strength and our investment portfolio. At the end of the year, financial leverage reduced slightly to 4.2 times as we continue to stay prudently levered as the volatile market dynamics persist and selectively deploy capital. We ended the quarter with $53,000,000 of unrestricted cash on the balance sheet, maintaining a solid liquidity profile. Looking ahead, we continue to manage our portfolio closely and focus on risk management in these volatile times. We will continue to selectively deploy capital into additional agency RMBS, which still presents a strong risk adjusted return profile compared to MSRs. Speaker 200:07:25And we'll remain hard at work improving our equity profile for the ultimate benefit of common shareholders, while not sacrificing our strong liquidity and leverage. With that, I will turn the call over to Julian, who will cover more details regarding our investment portfolio and its performance over the 4th quarter. Speaker 300:07:46Thank you, Jay. As Jay noted, we had appropriately positioned our portfolio for the higher for longer rate environment. That economic and inflation data continued to support, and we benefited in the 3rd quarter as well as in the October from that positioning. In November, despite the data still supporting our position, we were surprised by the Fed's sudden shift in policy away from higher for longer and clearly intimating that they would be looking to cut interest rates multiple times in 2024. Interest rates rallied, the yield curve flattened and mortgage spreads tightened over the next 2 months. Speaker 300:08:25Ultimately, lower coupon RMBS outperformed the higher coupon RMBS, where we were primarily invested. Our MSRs were impacted and our portfolio's negative duration was not positioned for the rate rally, leading to our book value performance. Thus far in 2024, we've seen another pivot in the Fed's policy, partially stepping back from their aggressive language as the economic and inflation data further booster our thesis that our portfolio was appropriately positioned. We are prevailing thus far in the Q1, but continue to closely watch the Fed and will further proactively adjust our portfolio as necessary given the ongoing volatility. At year end, our MSR portfolio had a UPB of $20,000,000,000 and a market value of approximately 254,000,000 dollars The MSR and related net assets represented approximately 44% of our equity capital and approximately 28% of our investable assets, excluding cash at the end of the quarter. Speaker 300:09:30Meanwhile, our RMBS portfolio accounted for approximately 39% of our equity capital. As a percentage of investable assets, the RMBS portfolio represented approximately 72%, excluding cash at year end. Prepayment speeds for our MSR and RMES portfolios continue to remain relatively steady compared to the prior quarter given the elevated mortgage rate environment. Our MSR portfolio's net CPR averaged approximately 4.2% for the Q4, modestly down from 5.6% net CPR in the previous quarter. The portfolio's recapture rate remained consistent with low at approximately 1% as the incentive to refinance continues to be minimal. Speaker 300:10:15Moving forward, we continue to expect low recapture rates and a stable net CPR for at least the near term, which should the Fed pursue rate cuts, we'd expect both matrix to rise over time. RMBS portfolio's prepayment speeds remain low as expected, driven by a combination of new asset purchases as well as the fact that the current higher mortgage rate environment continues to compress CPRs for the existing portfolio. As of today, the majority of mortgage universe remains out of the money in terms of refinancing. We would expect prepayments to remain at low levels as long as the interest rates remain at these levels, but should there be rate cuts later this year, prepayments will begin to rise. The quarter, the RMBS portfolio's weighted average 3 month CPR was slightly higher at approximately 4.9% compared to approximately 4.4% in the 3rd quarter. Speaker 300:11:16As of December 31, the RMBS portfolio inclusive of TBAs stood at approximately $655,000,000 compared to 583,000,000 dollars at the previous quarter end. Quarter over quarter, we reduced some of our TBA hedges in the portfolio as we shifted towards given the Fed's pivot on their policy stance towards potential rate cuts. For the 4th quarter, our RMBS net interest spread was 3.82%. The increase from the prior quarter was driven by lower repo costs due to lower repo balances and improved amortization expenses. At year end, the portfolio's financial leverage remained at approximately 4.2x and the 30 year securities continued to represent 100% of the RMBS portfolio. Speaker 300:12:07Looking forward, we expect volatility remain elevated for at least the near term. Our macro growth and particularly inflation to have a significant impact on the upcoming Fed decisions. We will continue to manage our portfolio thoughtfully, while looking to shift our overall capital structure to further add value for shareholders through improved performance and earnings. I will now turn the call over to Mike for our Q4 financial discussion. Speaker 400:12:35Thank you, Julian. Our GAAP net loss applicable to common stockholders for the Q4 was $35,500,000 or $1.29 per weighted average diluted share outstanding during the quarter. While comprehensive loss applicable to common stockholders, which includes the mark to market of our available for sale RMBS, was $6,500,000 or $0.24 per weighted average diluted share. Our earnings available for distribution attributable to common stockholders were $4,500,000 or $0.17 per share. Our book value for common share as of December 31 was $4.53 compared to a book value of $4.99 as of September 30. Speaker 400:13:17We use a variety of derivative instruments to mitigate the effects of increases in interest rates on a portion of our future repurchase borrowings. At the end of the Q4, we held interest rate swaps, TBAs and treasury futures, all of which had a combined notional amount of approximately $955,000,000 You can see more details with respect to our hedging strategy in our 10 ks as well as in the Q4 presentation. For GAAP purposes, we have not elected to apply hedge accounting for our interest rate derivatives. And as a result, we record the change in estimated fair value as a component of the net gain or loss on interest rate derivatives. Operating expenses were $3,500,000 for the quarter. Speaker 400:14:02On December 8, 2023, our Board of Directors declared a dividend of $0.15 per common share for the Q4 of 2023, which was paid in cash on January 31, 20 24. We also declared a dividend of $0.5125 per share on our 8.2% Series A cumulative redeemable preferred stock and a dividend of $0.51565 on our 8.25 Percent Series B fixed to floating rate cumulative redeemable preferred stock, both of which were paid on January 16, 2024. At this time, we will open up the call for questions. Operator? Operator00:15:03And our first question comes from Mikhail Goberman with Citizens JMP. Speaker 500:15:12I hope everyone's doing well. I guess the first one I have is, what are you guys thoughts on appetite for leverage going forward, given it's kind of in the lowest level of recent memory, I guess, I could say? And I guess the second question would be perhaps an update on book value thus far in the Q1? Speaker 300:15:40Thanks. In terms of leverage, I think we will adjust that over time. Right now, we feel as if the market is still very volatile. Spreads in terms of RMBS are still attractive, but they're on the lower side of where they've been over the last year. I think the average has been about 150 basis points. Speaker 300:16:02And right now, we're trading a little bit through that, probably have some further downside to go, but could easily see given the headlines and what the Fed actually decides to do with the next couple of meetings to still see the markets be very volatile. Longer term, we do think that the Fed will ease later this year. They've moved obviously from a tightening bias to more of a neutral bias. And at some point, they will get to an easing bias once they feel that inflation has gotten to the level that they feel comfortable with. Speaker 400:16:41And Mikhail, to touch on book value for you, we see our February 29 book value per share at about flat versus year endquarter end. And that's prior to any Q1 dividend accrual as the Board has not yet met to approve it. Speaker 500:17:00Great. Thank you, Julie and Michael. And as far as the preferred stock repurchases of $6,100,000 in the last quarter. Can we expect sort of a similar pace going forward quarterly or maybe something else? Speaker 200:17:22Hey, Mikhail. I think that I can't give you a definitive answer there, but it's clear that we're trying to right size the leverage calculation here. And that Series B becomes floating in April. So it is our strong desire to do that. I think the hard part about answering their question about the pace of that is around trying to be mindful about the dilution impact and we're trying to do it with this minimal impact as we can. Speaker 200:17:57So the pace, I think, depends on a few things, but it's definitely our desire to keep going. Speaker 500:18:05Got you. Thank you. And if I can squeeze in one more, any sort of thoughts on this potential MSR sales from NYCB? Speaker 200:18:17So I don't have any color on that. We've been our conversations with Flagstar have been pretty high level and macro relative to our relationship on the servicing front. But I can't imagine that if they do that, it would be in a small block. So I imagine that others who have the ability to purchase something $10,000,000,000 or higher are probably going to get a better look at that than us. But today, we have no color relative to whether or not that's just a rumor or what. Speaker 200:18:56I think the capital they got was a huge step towards stabilizing things. And I have just have no insight into what they're thinking relative to future moves to either appease the regulators or prop up the balance sheet. Speaker 500:19:15Yes, fair enough. Thanks, guys. Best of luck going forward. Operator00:19:40And I'm showing no further questions at this time. I would now like to turn the conference back to Jay for closing remarks. Speaker 200:19:49Thank you, operator. Thank you for joining us on our Q4 2023 call. We look forward to updating you in a few months on our Q1 20 24 call. Have a good evening everyone. Operator00:20:01And this concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by