Cherry Hill Mortgage Investment Corporation (NYSE: CHMI)
(“Cherry Hill” or the “Company”) today reported results for the
second quarter 2024.
Second Quarter 2024 and Other Recent Highlights
- In July 2024, the Company’s Board of Directors, based on the
recommendation of a special committee comprised of independent and
disinterested directors, authorized and approved internalizing
management of the Company and directed the Company's officers to
take all actions necessary to effect the internalization.
- GAAP net loss applicable to common stockholders of $1.9
million, or $0.06 per share.
- Earnings available for distribution (“EAD”) attributable to
common stockholders of $2.3 million, or $0.08 per diluted
share.
- Common book value per share of $4.15 at June 30, 2024.
- GAAP net loss applicable to common stockholders, EAD
attributable to common stockholders and common book value per share
were each impacted by $0.06 per share of special committee-related
expenses.
- Declared regular common dividend of $0.15 per share, annualized
common dividend yield was 16.4% based on the closing sale price of
the Company’s common stock as reported by the NYSE on August 7,
2024.
- As of August 7, 2024, 395,897 shares of 8.250% Series B
Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock had
been repurchased, totaling $9.4 million. There is $40.6 million of
availability left in the program.
- Aggregate portfolio leverage stood at 4.9x at June 30,
2024.
- As of June 30, 2024, the Company had unrestricted cash of $52.4
million.
“We continue to proactively manage our portfolio, navigating
spread and volatility risks,” said Jay Lown, President and CEO of
Cherry Hill Mortgage Investment Corporation. “Notably, we sold
approximately $1.2 billion of UPB of low-balance MSRs this quarter,
which should enhance our portfolio’s efficiency and reduce
servicing costs. Looking ahead, we look forward to completing our
internalization, which we anticipate will reduce our expenses and
further align us with stockholders.”
Operating Results
Cherry Hill reported GAAP net loss applicable to common
stockholders for the second quarter of 2024 of $1.9 million, or
$0.06 per basic and diluted weighted average common share
outstanding. Reported GAAP net loss was determined based primarily
on the following: $0.2 million of net interest income, $8.9 million
of net servicing income, a net realized loss on RMBS of $1.9
million, a net realized gain on investments in MSRs of $0.7
million, a net realized gain of $9.4 million on derivatives, a net
unrealized loss of $4.4 million on RMBS measured at fair value
through earnings, a net unrealized loss of $3.0 million on
derivatives, a net unrealized loss of $3.3 million on investments
in Servicing Related Assets, and general and administrative
expenses and management fees paid to Cherry Hill’s external manager
in the aggregate amount of $5.1 million (which includes special
committee-related expenses of $1.7 million).
Earnings available for distribution attributable to common
stockholders for the second quarter of 2024 were $2.3 million, or
$0.08 per basic and diluted weighted average common share
outstanding. For a reconciliation of GAAP net loss to non-GAAP
earnings available for distribution, please refer to the
reconciliation table accompanying this release.
Three Months Ended
June 30, 2024
March 31, 2024
(unaudited)
(unaudited)
Income
Interest income
$
13,677
$
12,741
Interest expense
13,510
13,648
Net interest income (expense)
167
(907)
Servicing fee income
12,349
12,891
Servicing costs
3,455
2,634
Net servicing income
8,894
10,257
Other income (loss)
Realized loss on RMBS, net
(1,859)
-
Realized gain on investments in MSRs,
net
741
-
Realized gain on derivatives, net
9,430
6,252
Unrealized loss on RMBS, measured at fair
value through earnings, net
(4,440)
(8,321)
Unrealized gain (loss) on derivatives,
net
(3,042)
12,324
Unrealized loss on investments in
Servicing Related Assets
(3,312)
(3,257)
Total Income
6,579
16,348
Expenses
General and administrative expense
3,371
1,841
Management fee to affiliate
1,760
1,748
Total Expenses
5,131
3,589
Income Before Income Taxes
1,448
12,759
Provision for corporate business taxes
664
703
Net Income
784
12,056
Net income allocated to noncontrolling
interests in Operating Partnership
(19)
(235)
Dividends on preferred stock
(2,555)
(2,307)
Gain (loss) on repurchase and retirement
of preferred stock
(74)
152
Net Income (Loss) Applicable to Common
Stockholders
$
(1,864)
$
9,666
Net Income (Loss) Per Share of Common
Stock
Basic
$
(0.06)
$
0.32
Diluted
$
(0.06)
$
0.32
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
29,978,791
29,978,134
Diluted
30,029,960
30,019,969
_______________
Dollar amounts in thousands, except per
share amounts.
Net unrealized loss on the Company’s RMBS portfolio classified
as available-for-sale that are reported in accumulated other
comprehensive loss was approximately $3.7 million.
Three Months Ended
June 30, 2024
March 31, 2024
(unaudited)
(unaudited)
Net Income
$
784
$
12,056
Other comprehensive loss:
Unrealized loss on RMBS,
available-for-sale, net
(3,734)
(6,596)
Net other comprehensive loss
(3,734)
(6,596)
Comprehensive income (loss)
$
(2,950)
$
5,460
Comprehensive (income) loss attributable
to noncontrolling interests in Operating Partnership
57
(106)
Dividends on preferred stock
(2,555)
(2,307)
Gain (loss) on repurchase and retirement
of preferred stock
(74)
152
Comprehensive income (loss)
attributable to common stockholders
$
(5,522)
$
3,199
_____________
Dollar amounts in thousands.
Portfolio Highlights for the Quarter Ended June 30,
2024
The Company realized net servicing fee income of $8.9 million,
net interest income of $0.2 million and other loss of $2.5 million,
primarily related to realized and unrealized losses on RMBS, as
well as unrealized losses on derivatives and investments in
servicing related assets, partially offset by realized gains on
derivatives and investments in MSRs. The unpaid principal balance
for the MSR portfolio stood at $18.0 billion as of June 30, 2024
and the carrying value of the MSR portfolio ended the quarter at
$234.3 million. Net interest spread for the RMBS portfolio stood at
3.23% and the debt-to-equity ratio on the aggregate portfolio ended
the quarter at 4.9x.
The RMBS portfolio had a book value and carrying value of
approximately $1.1 billion at quarter-end June 30, 2024. The
portfolio had a weighted average coupon of 4.76% and weighted
average maturity of 28 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, TBAs and Treasury futures. At quarter end June
30, 2024, the Company held interest rate swaps with a notional
amount of $1.1 billion, TBAs with a notional amount of ($427.0)
million, and Treasury futures with a notional amount of $232.4
million.
As of June 30, 2024, Cherry Hill’s GAAP book value was $4.15 per
diluted share, net of the second quarter dividend.
Dividends
On June 13, 2024, the Board of Directors declared a quarterly
dividend of $0.15 per share of common stock for the second quarter
of 2024. The dividend was paid in cash on July 31, 2024 to common
stockholders of record as of the close of business on June 28,
2024. 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 a dividend of $0.6995 per share on
the Company’s 8.250% Series B Fixed-to-Floating Rate Cumulative
Redeemable Preferred Stock for the second quarter 2024. The
dividends were paid in cash on July 15, 2024 to Series A and B
Preferred stockholders of record as of the close of business on
June 28, 2024.
Earnings Available for Distribution
Earnings available for distribution (“EAD”) is a non-GAAP
financial measure that we define as GAAP net income (loss),
excluding realized gain (loss) on RMBS, unrealized gain (loss) on
RMBS measured at fair value through earnings, realized and
unrealized gain (loss) on derivatives, realized gain (loss) on
acquired assets, realized and unrealized gain (loss) on investments
in MSRs (net of any estimated MSR amortization) and any tax expense
(benefit) on realized and unrealized gain (loss) on MSRs. MSR
amortization refers to the portion of the change in fair value of
the MSR that is primarily due to the realization of cashflows,
runoff resulting from prepayments and an adjustment for any gain or
loss on the capital used to purchase the MSR. EAD also includes
interest rate swap periodic interest income (expense) and drop
income on TBA dollar roll transactions, which are included in
“Realized gain (loss) on derivatives, net” on the consolidated
statements of income (loss). EAD is adjusted to exclude outstanding
LTIP-OP Units in our Operating Partnership and dividends paid on
our preferred stock.
EAD is provided for purposes of potential comparability to other
issuers that invest in residential mortgage-related assets. The
Company believes providing investors with EAD, in addition to
related GAAP financial measures, may provide investors some insight
into the Company’s ongoing operational performance. However, the
concept of EAD 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 EAD, it may not be comparable to similarly titled measures
of other issuers, which define EAD differently from us and each
other. As a result, EAD should not be considered a substitute for
the Company’s GAAP net income (loss) or as a measure of the
Company’s liquidity. While EAD is one indicia of the Company’s
earnings capacity, it is not the only factor considered in setting
a dividend and is not the same as REIT taxable income which is
calculated in accordance with the rules of the IRS.
The following table provides a reconciliation of net income to
EAD for the three months ended June 30, 2024 and March 31,
2024:
Three Months Ended
June 30, 2024
March 31, 2024
(unaudited)
(unaudited)
Net Income
$
784
$
12,056
Realized loss on RMBS, net
1,859
-
Realized loss (gain) on derivatives, net
¹
(508)
3,109
Realized gain on investments in MSRs,
net
(741)
-
Unrealized loss on RMBS, measured at fair
value through earnings, net
4,440
8,321
Unrealized loss (gain) on derivatives,
net
3,042
(12,324)
Unrealized gain on investments in MSRs,
net of estimated MSR amortization
(5,247)
(5,937)
Tax expense on realized and unrealized
gain on MSRs
1,325
1,199
Total EAD:
$
4,954
$
6,424
EAD attributable to noncontrolling
interests in Operating Partnership
(100)
(125)
Dividends on preferred stock
(2,555)
(2,307)
EAD Attributable to Common
Stockholders
$
2,299
$
3,992
EAD Attributable to Common
Stockholders, per Diluted Share
$
0.08
$
0.13
GAAP Net Income (Loss) Per Share of
Common Stock, per Diluted Share
$
(0.06)
$
0.32
_________
Dollar amounts in thousands, except per
share amounts.
- Excludes drop income on TBA dollar rolls of $638,000 and
$682,000 and interest rate swap periodic interest income of $8.3
million and $8.7 million for the three-month periods ended June 30,
2024 and March 31, 2024, respectively.
Additional Information
Additional information regarding Cherry Hill’s financial
condition and results of operations can be found in its Annual
Report on Form 10-Q for the quarter ended June 30, 2024 filed with
the Securities and Exchange Commission on August 8, 2024. In
addition, an investor presentation with supplemental information
regarding Cherry Hill, its business and its financial condition as
of June 30, 2024 and its results of operations for the second
quarter 2024 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 pm 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 live webcast of the conference call will be available in the
investor relations section of the Company’s website at
www.chmireit.com. To listen to the live broadcast, go to the site
at least 15 minutes prior to the scheduled start time in order to
register, download and install any necessary audio software. An
online archive of the webcast will be available on the Company’s
website for one year following the call.
Participants may register for the conference call here. Once
registered, dial-in information for the call will be made
available.
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, the Company's ability to complete the
internalization and achieve cost savings resulting from being an
internally managed company, the Company's ability to 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, 2023, 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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