Cherry Hill Mortgage Investment Corp (NYSE:CHMI) Q4 2019 Earnings Conference Call - Final Transcript

Feb 27, 2020 • 05:00 pm ET


Cherry Hill Mortgage Investment Corp (NYSE:CHMI) Q4 2019 Earnings Conference Call - Final Transcript


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Greeting. Welcome to the Cherry Hill Mortgage Investment Corporation Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions].

I'd now like to turn the call over to your host, Rory Rumore of Cherry Hill. Please proceed.

Rory Rumore

We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's fourth quarter 2019 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

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 core 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.

Jeffrey B. Lown

Thanks Rory. And welcome everyone to today's call. We are very pleased with Cherry Hill's fourth quarter and 2019 performance. The quarter saw moderating volatility as longer term rates moved awful lows witnessed over the summer, the yield curve steepened slightly and the mortgage basis improved.

Prepayment speeds, however, remained elevated throughout the quarter as originators closed out a record year for origination volume. Despite the accelerated prepayments which caused headwinds, we successfully managed our portfolio and delivered another quarter of solid core earnings, while expanding our book value. Overall, we are confident in the current composition of our investment portfolio and our investment team's risk management capabilities and believe we are well-positioned to capture additional opportunities to extend our success into 2020.

Looking back on 2019, we encountered significant macroeconomic and geopolitical noise through much of the year. Broadly speaking, positive domestic economic data throughout the year was largely overshadowed by global trade disputes and the overhang of negative interest rates abroad, driven by tepid economic data from the EU and Asia. Largely due to the economic impact of the US-China trade dispute, the Fed ended up shifting course and cut interest rates three times in the second half of the year.

Our investment team navigated through that environment by actively managing our portfolio and utilizing a disciplined interest rate hedging strategy. As a result, we ended the year with our book value largely intact when compared to the prior year-end, which in our view was an