Good afternoon, and welcome to the Cherry Hill Mortgage Investment Corporation Second Quarter 2025 Earnings Call. I am Frans, and I'll be the operator assisting you today. [Operator Instructions] I would be now like to turn the call over to Peter Sceusa with ICR. Please go ahead.

We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's Second Quarter 2025 Conference Call. In addition to this call, we have issued a press release that was distributed earlier this afternoon and posted that press release and second quarter 2025 investor presentation 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. 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 Apeksha Patel, the Interim Chief Financial Officer. Now I will turn the call over to Jay.

Thanks, Peter, and welcome to our second quarter 2025 earnings call. The second quarter started out with an intense storm. But by the end of the quarter, skies were considerably clearer. The initial tariff announcements on April 2 spooked markets, resulting in an instinctive flight to quality and causing the administration to quickly pause the majority of tariffs for 90 days to reach new agreements. As the quarter progressed, investors began discounting the worst-case scenarios initially feared. In fact, inflation remained low, the economy resilient and tariff deals continue to be negotiated as we embark on a new normal. Despite the significant intra-quarter volatility, the 10-year ended the quarter at 4.23%, marginally higher quarter-over-quarter. The negative performance for those in the Agency MBS sector was primarily driven by the mortgage basis underperforming both swap and treasury hedges, which Julian will elaborate on shortly. With the macro environment still in wait-and-see mode, all eyes are on the Fed to provide any signal to the end of their pause and return to the long-awaited rate cut cycle in September. We believe we are properly positioned for this event. For the second quarter, we generated GAAP net loss applicable to common stockholders of $0.03 per diluted share. Book value per common share finished the quarter at $3.34, compared to $3.58 on March 31. On an NAV basis, which includes preferred stock and prior to any ATM capital raised in the quarter, NAV was down approximately $6.2 million or 2.7% relative to March 31. Financial leverage at the end of the quarter remained relatively consistent at 5.3x as we continue to stay prudently levered. During the quarter, we raised approximately $9 million of capital through our common ATM program and ended the quarter with $58 million of unrestricted cash on the balance sheet, maintaining a solid liquidity profile. During the quarter, we were pleased to enter into a strategic partnership and investment with Real Genius LLC, a Florida-based digital mortgage technology company. Real Genius has developed a proprietary direct-to-consumer platform, offering an efficient fully online mortgage experience, including instant prequalification, automated document process and real-time loan tracking, all of which is supported by their custom-built point-of-sale system. Partnering with and investing in Real Genius is one of the clear benefits of our internalization, which allows us the flexibility to explore unique investment opportunities we believe are accretive to strategic growth. We're excited to support Real Genius as they look to accelerate their growth moving forward. Looking ahead, we continue to also monitor the economic environment closely. And as it further stabilizes, we will look to evaluate a more risk-on approach to our investment strategy 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 second quarter.

Thank you, Jay. The second quarter was divided into 2 distinct periods. The first period, primarily April, was dominated by market anticipation surrounding Liberation Day. April set the tone for the quarter, introducing heightened volatility, increased hedging costs, wider mortgage spreads and a significant swap spread tightening. The remainder of the quarter, encompassing May and June, was spent attempting to recover from April dislocations. While volatility subsided and mortgage spreads tightened in the latter months, the improvements were insufficient to fully offset April's impact. At quarter end, our MSR portfolio had a UPB of $16.6 billion and a market value of approximately $225 million. The MSR and related net assets represented approximately 43% of our equity capital and approximately 23% of our investable assets, excluding cash at quarter end. Meanwhile, our RMBS portfolio accounted for approximately 36% of our equity capital. As a percentage of investable assets, the RMBS portfolio represented approximately 77%, excluding cash at quarter end. Our MSR portfolio's net CPR averaged approximately 6% for the second quarter, up modestly from the previous quarter. The portfolio's recapture rate remained de minimis as the incentive to refinance continues to be minimal for this portfolio, given the portfolio's loan rate. In the near term, we continue to expect a low recapture rate and a relatively low net CPR given our portfolio's characteristics. Should the Fed shift towards a rate easing stance, we could see both of these metrics begin to rise as the incentive to refinance returns. Meanwhile, the RMBS portfolio's prepayment speeds continue to remain low at 6.1 CPR with mortgage rates holding relatively steady between 6.5% and 7% for the past 9 months. As long as the Fed holds rates firm, we would expect prepayment speeds to remain moderate. However, should the Fed begin to cut rates in…

Thank you, Julian. GAAP net loss applicable to common stockholders for the second quarter was $0.9 million or $0.03 per weighted average diluted share outstanding during the quarter, while comprehensive loss attributable to common stockholders, which includes the mark-to-market of our available-for-sale RMBS was $0.6 million, or $0.02 per weighted average diluted share. Our earnings available for distribution or EAD attributable to common stockholders were $3.2 million or $0.10 per share. As we mentioned on our prior call, one of our larger hedges matured at the end of the first quarter, and thus, we no longer receive income from it, which caused the reduction in EAD. However, as we have stated consistently, EAD is not the sole barometer for setting our common dividend. Our Board also considers factors such as the prevailing market environment, portfolio return potential, our level of taxable income, including potential hedge gain impacts, and the degree of certainty regarding forward investment return economics. Our book value per common share as of June 30, 2025, was $3.34 compared to book value of $3.58 as of March 31, 2025. We 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 second quarter, we held interest rate swaps, TBAs and treasury futures, all of which had a combined notional amount of approximately $446 million. You can see more details regarding our hedging strategy in our 10-Q as well as our second quarter 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 $3.4 million for the quarter. On June 13, 2025, our Board of Directors declared a dividend of $0.15 per common share for the second quarter of 2025, which was paid in cash on July 31, 2025. We also declared a dividend of $0.5125 per share on our 8.2% Series A Cumulative Redeemable Preferred Stock and a dividend of $0.6413 on our 8.25% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, both of which were paid on July 15, 2025. At this time, we will open up the call for questions. Operator?

[Operator Instructions] And your first question comes from the line of Randy Binner from B. Riley Securities.

This is Tim D'Agostino on for Randy Binner. In terms of servicing costs, it came in lower than our estimates. We were just kind of wondering what went through that and why servicing costs were lower in the quarter?

Sure. Essentially, we had some deboarding fees that we had taken on in the prior quarter and we're able to work out of related to the whole Mr. Cooper acquisition from Flagstar. So that was a component of it. And then as the quarter has gone down, we've not added to the portfolio. So the total amount of loan count has continued to drop.

Great. And then second quick question. As we look throughout the end of '25, where should we expect leverage to go from here? Should we expect it to kind of remain flat? Or will it change?

Hi Randy? Actually, it's Tim, right? Sorry. This is Julian. I would expect -- simply just say that I would expect leverage to kind of creep up as we -- for the remainder of the year. I would say we've been running the portfolio kind of in a conservative pattern, mainly neutral on duration. And we've maintained the leverage pretty consistent over the last 3 quarters. I think it's increased kind of marginally. Obviously, the second quarter going in, we are expecting inflation to rise and volatility to remain at an elevated level. I would say that hasn't really changed as we've entered into the third and the fourth quarter, but there are some changes that have happened. Primarily, the weaker nonfarm payroll number probably brings the Fed into play sooner than we would have expected. We were expecting somewhere between 1 or 2 eases into the second half of the year. This probably pulls those eases from, let's say, October and December into September. So if the Fed is going to be accommodative and steepen out the yield curve, that does make mortgages and other spread assets very attractive. It will depend on where inflation is going, obviously. But I would say most likely, leverage should creep a little bit higher as we enter into the fall.

And your next question comes from Mikhail Goberman from Citizens JMP.

Regarding this partnership with Real Genius, are there any numbers attached to it? Any sort of projections for accretion and time line on that? And you guys mentioned, I believe, a risk on investment strategy going forward. If I could maybe pick your brain as to what kind of stuff you could potentially be looking at going forward?

So the Real Genius, there is an expectation for them to be profitable within the first 6 or 7 months. So I would expect within the first year of the investment that we should be receiving dividends off of that investment. And I think it's just a testament to our ability to sort of be more as a part of the sausage making and to be able to make an investment around things other than just MSRs in the form of either co-issue or bulk. So we're excited to work with these guys. We think it's a good solid team. They're getting back on their feet. We're giving them time to get everything going, and we expect them to be profitable in the short term. On the other front, what was the other question?

Just going past Real Genius, you guys mentioned maybe continuing a sort of risk-on investment strategy and looking at other sort of alternative investments.

So right now, no. I think that there's a desire to look at assets outside of the current investment strategy we have. But to date, we don't have anything definitive. And if we do, we'll obviously tell you guys at the right time. But today, we have nothing to report on that.

If I may squeeze in one more question.

What question would that be?

There's so many to ask, but the one that I'm really looking at right now is this one about current book value.

Okay. It's a new one.

Mikhail, it's Apeksha. We see our July 31 book value per share at about flat versus June 30, and that obviously is prior to any third quarter dividend accrual as the Board hasn't met yet to approve it.

[Operator Instructions] And there are no further questions at this time. I would now like to turn the call back over to Jay Lown for closing remarks. Please go ahead.

Thank you all for joining us on our second quarter earnings call. We look forward to updating you in a few months to give you progress on our third quarter. Have a great day.