Cherry Hill Mortgage Investment Corporation (NYSE: CHMI)
(“Cherry Hill” or the “Company”) today reported results for the
fourth quarter and full year 2019.
Fourth Quarter 2019 Highlights
- GAAP net income applicable to common stockholders of $5.2
million, or $0.31 per share
- Core earnings attributable to common stockholders of $8.1
million, or $0.48 per share
- Book value of $17.35 per share at December 31, 2019, a 2.0%
increase from September 30, 2019, net of the Company’s fourth
quarter dividend
- Declared regular common dividend of $0.40 per share; annualized
common dividend yield at market close was 10.6% at February 26,
2020
- Aggregate portfolio leverage stood at 6.1x at December 31,
2019
- During the fourth quarter, the Company repurchased 235,950
shares of its common stock for approximately $3.5 million under the
Company’s $10.0 million share repurchase program
“I’m pleased with our fourth quarter results. We capped off the
year with solid core earnings while protecting book value,” said
Jay Lown, President and Chief Executive Officer of Cherry Hill
Mortgage Investment Corporation. “Our performance is a testament to
the capabilities and experience of our entire team. We look to
continue our success in 2020 by actively managing our portfolio as
the company continues to grow and evolve.”
Operating Results
Cherry Hill reported GAAP net income applicable to common
stockholders for the fourth quarter of 2019 of $5.2 million, or
$0.31 per basic and diluted weighted average common share
outstanding. The reported GAAP net income was determined based
primarily on the following: $6.3 million of net interest income,
$14.2 million of net servicing income, a net realized gain of $0.6
million on RMBS, a net realized loss of $17.1 million on
derivatives, a net unrealized gain of $3.4 million on derivatives,
a net unrealized gain of $2.0 million on Servicing Related Assets,
and general and administrative expenses and management fees paid to
Cherry Hill’s external manager in the aggregate amount of $3.4
million.
Core earnings attributable to common stockholders for the fourth
quarter of 2019 were $8.1 million, or $0.48 per basic and diluted
weighted average common share outstanding. For a reconciliation of
GAAP net loss to non-GAAP core earnings, please refer to the
reconciliation table accompanying this release.
Three Months Ended December
31,
2019
2018
(unaudited)
(unaudited)
Income
Interest income
$
19,770
$
16,958
Interest expense
13,499
10,385
Net interest income
6,271
6,573
Servicing fee income
19,318
16,574
Servicing costs
5,096
3,528
Net servicing income
14,222
13,046
Other income (loss)
Realized gain (loss) on RMBS, net
627
(2,932)
Realized loss on derivatives, net
(17,148)
(3,162)
Realized loss on acquired assets, net
(28)
-
Unrealized gain (loss) on derivatives,
net
3,357
(30,937)
Unrealized gain (loss) on investments in
MSRs
1,959
(21,924)
Total Income (Loss)
9,260
(39,336)
Expenses
General and administrative expense
1,352
962
Management fee to affiliate
1,999
1,649
Total Expenses
3,351
2,611
Income (Loss) Before Income
Taxes
5,909
(41,947)
Benefit from corporate business taxes
(1,842)
(3,137)
Net Income (Loss)
7,751
(38,810)
Net (income) loss allocated to
noncontrolling interests in Operating Partnership
(127)
505
Dividends on preferred stock
2,460
1,395
Net Income (Loss) Applicable to Common
Stockholders
$
5,164
$
(39,700)
Net Income (Loss) Per Share of Common
Stock
Basic
$
0.31
$
(2.42)
Diluted
$
0.31
$
(2.42)
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
16,797,523
16,382,914
Diluted
16,810,312
16,391,170
_______________ Dollar amounts in thousands, except per share
amounts. Certain prior period amounts have been reclassified to
conform to current period presentation.
Net unrealized gain on the Company’s RMBS portfolio for the
fourth quarter 2019 was approximately $7.4 million.
Three Months Ended December
31,
2019
2018
(unaudited)
(unaudited)
Net Income (Loss)
$
7,751
$
(38,810)
Other comprehensive income:
Net unrealized gain on RMBS
7,373
13,862
Reclassification of net realized gain
(loss) on RMBS included in earnings
(627)
2,932
Other comprehensive income
6,746
16,794
Comprehensive income (loss)
$
14,497
$
(22,016)
Comprehensive income (loss) attributable
to noncontrolling interests in Operating Partnership
234
(286)
Dividends on preferred stock
2,460
1,395
Comprehensive income (loss) attributable
to common stockholders
$
11,803
$
(23,125)
_______________ Dollar amounts in thousands. Certain prior
period amounts have been reclassified to conform to current period
presentation.
Portfolio Highlights for the Quarter Ended December 31,
2019
The Company realized servicing fee income of $19.3 million,
interest income of $19.8 million and other loss of $11.2 million
primarily related to realized losses on derivatives, partially
offset by unrealized gains on derivatives and investments in
Servicing Related Assets. The unpaid principal balance for the MSR
portfolio stood at $29.1 billion as of December 31, 2019 and the
carrying value of the MSR portfolio ended the quarter at $291.1
million. Net interest spread for the RMBS portfolio stood at 0.73%
and the debt-to-equity ratio on the aggregate portfolio ended the
quarter at 6.1x.
The RMBS portfolio had both a book and carrying value of
approximately $2.5 billion at quarter-end December 31, 2019. The
portfolio had a weighted average coupon of 3.85% and weighted
average maturity of 26 years.
In order to mitigate duration risk and interest rate risk
associated with the Company’s RMBS and MSRs, Cherry Hill used
interest rate swaps, swaptions, TBAs and Treasury futures. At
quarter end December 31, 2019, the Company held interest rate swaps
with a notional amount of $2.4 billion, swaptions with a notional
amount of $40.0 million, TBAs with a notional amount of $140.3
million and Treasury futures with a notional amount of $310.3
million.
As of December 31, 2019, Cherry Hill’s GAAP book value was
$17.35 per diluted share, an increase of 2.0%, net of the fourth
quarter dividend, from book value per share of $17.01 as of
September 30, 2019.
Dividends
On December 12, 2019, the Board of Directors declared a
quarterly dividend of $0.40 per share of common stock for the
fourth quarter of 2019. The dividends were paid in cash on January
28, 2020 to common stockholders of record as of the close of
business on December 31, 2019. Additionally, the Board of Directors
declared a dividend of $0.5125 per share on the Company’s 8.20%
Series A Cumulative Redeemable Preferred Stock and $0.515625 per
share on the Company’s 8.250% Series B Fixed-to-Floating Rate
Cumulative Redeemable Preferred Stock for the fourth quarter of
2019. The dividends were paid in cash on January 15, 2020 to Series
A and B Preferred stockholders of record as of the close of
business on December 31, 2019.
Core Earnings
Core earnings is a non-GAAP financial measure and is currently
defined by the Company as GAAP net income (loss), excluding
realized gain (loss) on RMBS, realized and unrealized gain (loss)
on investments in MSRs (net of any estimated MSR amortization),
realized and unrealized gain (loss) on derivatives and realized
(gain) loss on acquired assets. Core earnings is adjusted to
exclude outstanding LTIP-OP Units in our Operating Partnership and
dividends paid on preferred stock. Additionally, core earnings
excludes any tax (benefit) expense on unrealized gain (loss) on
MSRs. Core earnings are provided for purposes of potential
comparability to other issuers that invest in residential
mortgage-related assets. The Company believes providing investors
with core earnings, in addition to related GAAP financial measures,
may provide investors some insight into the Company’s ongoing
operational performance. However, the concept of core earnings does
have significant limitations, including the exclusion of realized
and unrealized gains (losses), and given the apparent lack of a
consistent methodology among issuers for defining core earnings, it
may not be comparable to similarly-titled measures of other
issuers, which define core earnings differently from the Company
and each other. As a result, core earnings should not be considered
a substitute for the Company’s GAAP net income (loss) or as a
measure of the Company’s liquidity.
The following table provides a reconciliation of net income
(loss) to core earnings for the three months ended December 31,
2019 and 2018:
Three Months Ended December
31,
2019
2018
(unaudited)
(unaudited)
Net Income (Loss)
$
7,751
$
(38,810)
Realized loss (gain) on RMBS, net
(627)
2,932
Realized loss on derivatives, net
17,148
3,162
Realized loss on acquired assets, net
28
-
Unrealized loss (gain) on derivatives,
net
(3,357)
30,937
Unrealized loss (gain) on investments in
MSRs, net of estimated MSR amortization
(10,068)
(1)
17,437
Tax expense on unrealized gain on MSRs
(168)
(3,260)
Total core earnings:
$
10,707
$
12,398
Core earnings attributable to
noncontrolling interests in Operating Partnership
(172)
(159)
Dividends on preferred stock
2,460
1,395
Core Earnings Attributable to Common
Stockholders
$
8,075
$
10,845
Core Earnings Attributable to Common
Stockholders, per Diluted Share
$
0.48
$
0.66
GAAP Net Income (Loss) Per Share of
Common Stock, per Diluted Share
$
0.31
$
(2.42)
_________ Dollar amounts in thousands, except per share amounts.
Certain prior period amounts have been reclassified to conform to
current period presentation.
1
Beginning with the third quarter of 2019,
the Company refined the MSR amortization method of determining the
amount of realized and unrealized gain (loss) on investments in
MSRs, used by the Company to calculate core earnings. MSR
amortization refers to the portion of the change in fair value of
the MSRs that is primarily due to the realization of cashflows or
runoff. The refined method better reflects current and expected
market conditions and includes an adjustment for any gain or loss
on the capital used to purchase the MSR. MSR amortization for
periods that ended prior to September 30, 2019 have not been
adjusted to reflect the Company’s refined MSR amortization
method.
Additional Information
Additional information regarding Cherry Hill’s financial
condition and results of operations can be found in its Annual
Report on Form 10-K for the year ended December 31, 2019 filed with
the Securities and Exchange Commission on February 27, 2020. In
addition, an investor presentation with supplemental information
regarding Cherry Hill, its business and its financial condition as
of December 31, 2019 and its results of operations for the full
year 2019 has been posted to the Investor Relations section of
Cherry Hill’s website, www.chmireit.com. Cherry Hill will discuss
the investor presentation on the conference call referenced
below.
Webcast and Conference Call
The Company’s management will host a conference call today at
5:00 P.M. Eastern Time. A copy of this earnings release and the
investor presentation referenced above will be posted to the
Investor Relations section of Cherry Hill’s website,
www.chmireit.com. All interested parties are welcome to participate
on the live call. A simultaneous webcast of the conference call
will be available to the public on a listen-only basis at
www.chmireit.com. Please allow extra time prior to the call to
visit the site and download any necessary software required to
listen to the webcast.
The conference call may be accessed by dialing 1-877-407-9716
(from within the U.S.) or 1-201-493-6779 (from outside of the U.S.)
ten minutes prior to the scheduled start of the call; please
reference “Cherry Hill Fourth Quarter and Full Year 2019 Earnings
Call.”
A telephonic replay of the conference call will also be
available two hours following the completion of the call through
11:59 P.M. Eastern Time on March 27, 2020 by dialing 1-844-512-2921
(from within the U.S.) or 1-412-317-6671 (from outside of the
U.S.); please enter replay pin number “13698403.”
About Cherry Hill Mortgage Investment Corporation
Cherry Hill Mortgage Investment Corporation is a real estate
finance company that acquires, invests in and manages residential
mortgage assets in the United States. For additional information,
visit www.chmireit.com.
Forward-Looking Statements
This press release contains forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
and other federal securities laws, including, among others,
statements relating to the Company’s long-term growth opportunities
and strategies, expand its market opportunities and create its own
Excess MSRs and its ability to generate sustainable and attractive
risk-adjusted returns for stockholders. These forward looking
statements are based upon the Company’s present expectations, but
these statements are not guaranteed to occur. For a description of
factors that may cause the Company's actual results or performance
to differ from its forward-looking statements, please review the
information under the heading “Risk Factors” included in the
Company's Annual Report on Form 10-K for the year ended December
31, 2019, and other documents filed by the Company with the
Securities and Exchange Commission.
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Cherry Hill Mortgage Investment Corporation Investor Relations
(877) 870-7005 InvestorRelations@chmireit.com
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