UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2019
CHERRY HILL MORTGAGE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
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Maryland
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001-36099
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461315605
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(State or other jurisdiction
of incorporation)
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Commission
File Number:
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(IRS Employer
Identification No.)
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1451 Route 34, Suite 303
Farmingdale, NJ 07727
(Address of principal executive offices, including zip code)
877.870.7005
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of
this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.01 par value
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CHMI
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New York Stock Exchange
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8.20% Series A Cumulative Redeemable Preferred Stock, $0.01 par value
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CHMI-PRA
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New York Stock Exchange
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8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable
Preferred Stock, $0.01 par value
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CHMI-PRB
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New York Stock Exchange
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| Item 2.02. |
Results of Operations and Financial Condition.
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On May 9, 2019, Cherry Hill Mortgage Investment Corporation (the “Company”) reported its results of operations for the
three months ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1.
The information in this Current Report on Form 8-K, including the exhibit attached hereto, is being furnished and shall
not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended.
| Item 9.01. |
Financial Statements and Exhibits.
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(d) Exhibits:
99.1 Press release, dated May 9, 2019.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, hereunto duly authorized.
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CHERRY HILL MORTGAGE INVESTMENT CORPORATION
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By:
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/s/ Martin J. Levine
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Martin J. Levine
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Date: May 9, 2019
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Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
Number
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Description
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Press release, dated May 9, 2019
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Exhibit 99.1
CHERRY HILL MORTGAGE INVESTMENT CORPORATION
ANNOUNCES FIRST QUARTER 2019 RESULTS
FARMINGDALE, NJ – May 9, 2019 — Cherry Hill Mortgage Investment Corporation (NYSE: CHMI) (“Cherry Hill” or the “Company”) today reported results for the
first quarter of 2019.
First Quarter 2019 Highlights
| • |
GAAP net loss applicable to common stockholders of $22.6 million, or $1.36 per share
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| • |
Core earnings attributable to common stockholders of $10.0 million, or $0.60 per share
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| • |
Book value of $17.54 per share at March 31, 2019, a 0.2% decline from December 31, 2018, net of the Company’s first quarter dividend
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| • |
Declared regular common dividend of $0.49 per share; annualized common dividend yield at market close was 11.5% at May 8, 2019
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| • |
Aggregate portfolio leverage stood at 4.7x at March 31, 2019
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| • |
Increased UPB of MSR portfolio by approximately 11% during the quarter
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| • |
In February, the Company completed an offering of 2,000,000 shares of its 8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, resulting in net
proceeds of approximately $48.4 million, before offering expenses
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“We opened 2019 with another quarter of strong core earnings, driven primarily by the asset composition of our portfolio,” said Jay Lown, President and Chief
Executive Officer of Cherry Hill Mortgage Investment Corporation. “Given the Fed’s continued dovish posture, we took a more neutral stance on rates and repositioned the portfolio, which contributed to our ability to maintain book value.”
Operating Results
Cherry Hill reported GAAP net loss applicable to common stockholders for the first quarter of 2019 of $22.6 million, or $1.36 per basic and diluted weighted
average common share outstanding. The reported GAAP net loss was determined based primarily on the following: $6.2 million of net interest income, $13.4 million of net servicing income, a net realized loss of $7.5 million on derivatives, a net
unrealized loss of $8.3 million on derivatives, a net unrealized loss of $27.2 million on the MSR portfolio and general and administrative expenses and management fees paid to Cherry Hill’s external manager in the aggregate amount of $2.8 million.
Core earnings attributable to common stockholders for the first quarter of 2019 were $10.0 million, or $0.60 per basic and diluted weighted average common
share outstanding. For a reconciliation of GAAP net loss to non-GAAP core earnings, please refer to the reconciliation table accompanying this release.
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Three Months Ended March 31,
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2019
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2018
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(unaudited)
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(unaudited)
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Income
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Interest income
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$
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16,969
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$
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13,415
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Interest expense
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10,744
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7,543
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Net interest income
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6,225
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5,872
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Servicing fee income
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17,188
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8,650
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Servicing costs
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3,821
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1,712
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Net servicing income
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13,367
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6,938
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Other income (loss)
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Realized loss on RMBS, net
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-
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(4,881
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)
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Realized gain (loss) on derivatives, net
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(7,476
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)
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13
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Unrealized gain (loss) on derivatives, net
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(8,272
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)
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19,626
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Unrealized gain (loss) on investments in MSRs
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(27,175
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)
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12,498
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Total Income (Loss)
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(23,331
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)
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40,066
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Expenses
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General and administrative expense
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963
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877
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Management fee to affiliate
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1,809
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1,315
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Total Expenses
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2,772
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2,192
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Income (Loss) Before Income Taxes
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(26,103
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)
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37,874
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Provision for (Benefit from) corporate business taxes
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(4,965
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)
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2,635
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Net Income (Loss)
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(21,138
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)
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35,239
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Net (income) loss allocated to noncontrolling interests in Operating Partnership
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349
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(456
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)
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Dividends on preferred stock
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1,841
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1,213
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Net Income (Loss) Applicable to Common Stockholders
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$
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(22,630
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)
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$
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33,570
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Net Income (Loss) Per Share of Common Stock
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Basic
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$
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(1.36
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)
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$
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2.64
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Diluted
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$
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(1.36
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)
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$
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2.64
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Weighted Average Number of Shares of Common Stock Outstanding
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Basic
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16,646,114
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12,713,265
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Diluted
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16,654,370
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12,721,464
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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 first quarter 2019 was approximately $32.0 million.
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Three Months Ended
March 31,
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2019
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2018
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(unaudited)
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(unaudited)
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Net Income (Loss)
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$
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(21,138
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)
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$
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35,239
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Other comprehensive income:
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Net unrealized gain (loss) on RMBS
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31,981
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(35,924
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)
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Reclassification of net realized gain on RMBS included in earnings
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-
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4,881
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Other comprehensive income (loss)
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31,981
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(31,043
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)
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Comprehensive income
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$
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10,843
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$
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4,196
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Comprehensive income attributable to noncontrolling interests in Operating Partnership
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179
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54
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Dividends on preferred stock
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1,841
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1,213
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Comprehensive income attributable to common stockholders
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$
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8,823
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$
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2,929
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Dollar amounts in thousands. Certain prior period amounts have been reclassified to conform to current period presentation.
Portfolio Highlights for the Quarter Ended March 31, 2019
The Company realized servicing fee income of $17.2 million from its MSR portfolio, interest income of $16.7 million from its RMBS portfolio and other loss of
$42.9 million primarily related to realized and unrealized losses on derivatives and investments in MSRs. The unpaid principal balance for the MSR portfolio stood at $27.5 billion as of March 31, 2019 and the carrying value of the MSR portfolio ended
the quarter at $304.0 million. Net interest spread for the RMBS portfolio stood at 1.25% and the debt-to-equity ratio on the aggregate portfolio ended the quarter at 4.7x.
The RMBS portfolio had a book and carrying value of approximately $2.0 billion at quarter-end March 31, 2019. The portfolio had a weighted average coupon of
4.0% and weighted average maturity of 25 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 March 31, 2019, the Company held interest rate swaps with a notional amount of $1.5 billion, swaptions with a notional amount of $55.0 million, TBAs with a notional amount of $165.0 million, Treasury futures with
a notional amount of $186.2 million and options on Treasury futures with a notional amount of ($30) million.
As of March 31, 2019, Cherry Hill’s GAAP book value was $17.54 per diluted share, a decrease of 0.2%, net of the first quarter dividend, from book value per
share of $17.58 as of December 31, 2018.
Dividends
On March 5, 2019, the Board of Directors declared a quarterly dividend of $0.49 per share of common stock for the first quarter of 2019. The dividends were
paid in cash on April 30, 2019 to common stockholders of record as of the close of business on March 18, 2019. Additionally, on March 15, 2019, 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 $0.36667 per share on the Company’s 8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock for the first quarter of 2019. The dividends were paid in cash on April 15, 2019 to Series A Preferred
stockholders of record as of the close of business on March 29, 2019 and Series B Preferred stockholders of record as of the close of business on April 1, 2019.
Core Earnings
Core earnings is a non-GAAP financial measure and is defined by the Company as GAAP net income (loss) applicable to common stockholders, excluding realized
gain (loss) on RMBS, unrealized (gain) loss on investments in MSRs, and realized and unrealized gain (loss) on derivatives. Core earnings is adjusted to exclude outstanding LTIP-OP Units in our Operating Partnership and dividends paid on preferred
stock. Additionally, core earnings excludes (i) any tax (benefit) expense on unrealized (gain) loss on MSRs and (ii) any estimated catch up premium amortization (benefit) cost due to the use of current rather than historical estimates of constant
prepayment rates for amortization of the excess servicing portion of the MSRs. Core earnings are provided for purposes of 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, gives investors greater transparency into the Company’s ongoing operational performance. The concept of core earnings does have significant limitations, including the exclusion of
realized and unrealized gains (losses), and may not be comparable to similarly-titled measures of other peers, which may use different calculations. 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 March 31, 2019 and 2018:
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Three Months Ended March 31,
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||||||||
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2019
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2018
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|||||||
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(unaudited)
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(unaudited)
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|||||||
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Net Income (Loss)
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$
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(21,138
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)
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$
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35,239
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Realized loss on RMBS, net
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-
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4,881
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||||||
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Realized loss (gain) on derivatives, net
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7,476
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(13
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)
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|||||
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Unrealized loss (gain) on derivatives, net
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8,272
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(19,626
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)
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|||||
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Unrealized loss (gain) on investments in MSRs
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27,175
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(12,498
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)
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|||||
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Tax (benefit) expense on unrealized (loss) gain on MSRs
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(4,739
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)
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2,444
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|||||
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Changes due to realization of expected cash flows
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(5,027
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)
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(2,493
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)
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||||
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Total core earnings:
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$
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12,019
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$
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7,934
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||||
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Core earnings attributable to noncontrolling interests in Operating Partnership
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(198
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)
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(103
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)
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||||
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Dividends on preferred stock
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1,841
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1,213
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||||||
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Core Earnings Attributable to Common Stockholders
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$
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9,980
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$
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6,618
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||||
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Core Earnings Attributable to Common Stockholders, per Share
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$
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0.60
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$
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0.52
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||||
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GAAP Net Income (Loss) Per Share of Common Stock
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$
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(1.36
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)
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$
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2.64
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Dollar amounts in thousands, except per share amounts. Certain prior period amounts have been
reclassified to conform to current period presentation.
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, 2018 filed with the Securities and Exchange Commission on March 18, 2019. In addition, an investor presentation with supplemental information regarding Cherry Hill, its business and its financial condition as of March 31, 2019 and
its results of operations for the first quarter of 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 First Quarter 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 June 9,
2019 by dialing 1-844-512-2921 (from within the U.S.) or 1-412-317-6671 (from outside of the U.S.); please reference replay pin number “13689388.”
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, 2018, and other documents filed by the
Company with the Securities and Exchange Commission.
Contact:
Cherry Hill Mortgage Investment Corporation
Investor Relations
(877) 870-7005
InvestorRelations@chmireit.com