Cherry Hill Mortgage's Q4 2024 Earnings Call: Conflicting Signals on Leverage, Portfolio Strategy, and Fed Rate Cuts

These are the key contradictions discussed in Cherry Hill Mortgage Investment's latest 2024Q4 earnings call, specifically including: Leverage Strategy and Capital Allocation, RMBS and MSR Portfolio Allocation, and Fed Rate Cuts Expectations:



Interest Rate Hikes and Market Impact:
- The 10-year Treasury yield increased to 4.57%, up 80 basis points quarter-over-quarter due to concerns about inflation and economic growth.
- The rise in long-term yields was driven by investors' concerns about persistent inflation and uncertainty about economic growth due to policy changes by the new administration.

Portfolio Performance and Strategic Adjustments:
- Cherry Hill's RMBS portfolio was impacted by higher rates and increased volatility, while the MSR portfolio saw gains, contributing to a net interest spread of 2.9%.
- The company adjusted its portfolio strategy by increasing TBA hedges and shifting to higher coupon mortgages to mitigate risks from interest rate fluctuations.

Internalization of Management and Cost Savings:
- The company completed the internalization of management, expected to reduce operating expenses by $1.1 million to $1.6 million or $0.03 to $0.05 per share in 2025.
- This move aimed to improve alliance between management and shareholders, eliminate potential conflicts of interest, and streamline decision-making processes.

Dividend and Financial Position:
- Cherry Hill declared a $0.15 per common share dividend for the fourth quarter of 2024, paid in cash on January 31, 2025.
- The company maintained a solid liquidity profile with $46 million of unrestricted cash on the balance sheet and consistent financial leverage at 5.3x.