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): March 25, 2014
CHERRY HILL MORTGAGE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number: 001-36099
| Delaware | 461315605 | |
| (State or other jurisdiction of incorporation) |
(IRS Employer Identification No.) |
301 Harper Drive, Suite 110
Moorestown, NJ 08057
(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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On March 25, 2014, Cherry Hill Mortgage Investment Corporation (the “Company”) reported its results of operations for the period from October 9, 2013 (commencement of operations) through December 31, 2013. 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.
| (d) | Exhibits: |
| 99.1 | Press release, dated March 25, 2014. |
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.
| CHERRY HILL MORTGAGE INVESTMENT CORPORATION | ||||||
| By: | /s/ Martin J. Levine | |||||
| Martin J. Levine | ||||||
| Date: March 25, 2014 | Chief Financial Officer | |||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press release, dated March 25, 2014 | |
Exhibit 99.1
CHERRY HILL MORTGAGE INVESTMENT CORPORATION
ANNOUNCES FOURTH QUARTER 2013 RESULTS
– Completed Successful IPO and Concurrent Private Placement Raising Gross Proceeds of $150 Million –
– Acquired Excess MSRs on $20.7 Billion of UPB of Mortgage Loans –
– Acquired $287 Million of Agency RMBS –
– Recorded GAAP Net Income of $21.2 Million –
– Declared Dividend of $0.50 per Share for First Quarter 2014 –
MOORESTOWN, NJ, March 25, 2014 — Cherry Hill Mortgage Investment Corporation (NYSE: CHMI) (“Cherry Hill” or the “Company”), which commenced operations on October 9, 2013, today reported results for the fourth quarter of 2013.
Highlights
| • | GAAP net income, for the fourth quarter, of $21.2 million, or $3.14 per diluted weighted average common share outstanding |
| • | Invested approximately $138 million of capital |
| • | Acquired two pools of Excess MSRs on mortgage loans with an unpaid principal balance (“UPB”) of approximately $20.7 billion |
| • | Acquired approximately $287 million of Agency RMBS targeted for favorable prepayment characteristics |
| • | Declared a first quarter 2014 dividend on March 18, 2014 in the amount of $0.50 per share, resulting in total dividends declared and paid or to be paid of $0.95 per share since completion of the Company’s IPO on October 9, 2013. |
Jay Lown, Cherry Hill Mortgage Investment Corporation’s President and Chief Investment Officer, stated, “We are pleased with what we have accomplished at Cherry Hill since our inception. We are in the early stages of a major industry shift in the mortgage marketplace, one that should present significant opportunities for Cherry Hill. We are confident that our capital deployment strategy will, over the long term, generate attractive yields and risk-adjusted returns for our shareholders.”
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Operating Results
Cherry Hill reported GAAP net income for the fourth quarter of 2013 of $21.2 million, or $3.14 per diluted weighted average common share outstanding. Cherry Hill’s reported GAAP net income consisted of the following: $4.6 million of net interest income, a realized net loss of $0.5 million on the Agency RMBS portfolio, net realized and unrealized gains on derivatives of $2.8 million, a $15.6 million change in fair value of the Excess MSR portfolio, offset by general and administrative expenses and management fees paid to Cherry Hill’s external manager in the aggregate amount of approximately $1.2 million. Additional detail is provided in the table below.
| Three Months Ended December 31, 20131 |
||||
| Income |
||||
| Interest income |
$ | 5,475 | ||
| Interest expense |
867 | |||
|
|
|
|||
| Net interest income |
4,608 | |||
| Other income (loss) |
||||
| Realized gain (loss) on Agency RMBS, net |
(527 | ) | ||
| Realized gain on derivatives, net |
59 | |||
| Unrealized gain (loss) on derivatives, net |
2,747 | |||
| Change in fair value of investments in excess mortgage servicing rights |
15,647 | |||
|
|
|
|||
| Total Income |
22,534 | |||
|
|
|
|||
| Expenses |
||||
| General and administrative expense |
609 | |||
| Management fee to affiliate |
616 | |||
|
|
|
|||
| Total Expenses |
1,225 | |||
|
|
|
|||
| Net Income (Loss) |
21,309 | |||
|
|
|
|||
| Net income allocated to LTIP-OP Units |
(107 | ) | ||
|
|
|
|||
| Income Applicable to Common Stockholders |
$ | 21,202 | ||
|
|
|
|||
| Income (Loss) Per Share of Common Stock |
||||
| Basic |
$ | 3.14 | ||
| Diluted |
$ | 3.14 | ||
| Weighted Average Number of Shares of Common Stock Outstanding |
||||
| Basic |
6,750,100 | |||
| Diluted |
6,750,100 | |||
| 1 | Unaudited; from commencement of operations on October 9, 2013 |
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Investment Highlights for the Quarter Ended December 31, 2013
Excess MSR Investments – Invested approximately $99 million, to acquire:
| • | An 85% interest in Excess MSRs related to $10.0 billion UPB of fixed rate FHA and VA loans for approximately $61 million. |
| • | A 50% interest in Excess MSRs related to $10.7 billion UPB of 3/1 ARM VA loans for approximately $38 million. |
The $15.6 million increase in the fair value of the Excess MSR pools during the fourth quarter was related, in part, to the difference between the prices at the time the prices were negotiated and the fair value of the Excess MSRs on the acquisition closing date. The purchase prices for the pools were negotiated by Cherry Hill and Freedom Mortgage Corporation in the mid-third quarter of 2013 and the acquisitions closed concurrent with the IPO on October 9, 2013.
Agency RMBS Investment – Acquired approximately $293 million of Agency RMBS, including TBAs, with the following characteristics at year end 2013:
| • | Book value of approximately $292 million |
| • | Carrying value of approximately $287 million |
| • | Weighted average coupon of 3.77% |
| • | Weighted average yield of 3.46% |
| • | Weighted average maturity of 24 years |
In order to help mitigate duration risk and interest rate risk associated with the Company’s Agency RMBS, Cherry Hill used interest rate swaps, swaptions, and TBAs. At year end 2013, the Company held a notional amount of interest rate swaps of approximately $172 million, a notional amount of swaptions of approximately $125 million and a net amount of TBAs of approximately $5.5 million.
As of December 31, 2013, Cherry Hill’s GAAP book value was $21.44 per share.
Initial Public Offering and Concurrent Private Placement
On October 9, 2013, the Company completed its initial public offering and concurrent private placement. The Company sold 6,500,000 shares of common stock at $20.00 per share. Concurrent with the closing of the IPO, the Company sold 1,000,000 shares of common stock at $20.00 per share to the Company’s Chairman of the Board, Stanley Middleman. The Company received gross proceeds from the sale of common stock in the IPO and the concurrent private placement of $150 million.
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Dividend
On March 18, 2014, the Board of Directors declared a quarterly dividend of $0.50 per share of common stock, for the first quarter of 2014. The dividend will be payable in cash on April 29, 2014 to stockholders of record as of the close of business on April 2, 2014.
Additional Information
An investor presentation with supplemental information regarding Cherry Hill and its business 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 videocast and conference call on Tuesday, March 25, 2014 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 1-877-407-0784 (from within the U.S.) or 1-201-689-8560 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Cherry Hill Fourth Quarter 2013 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 Saturday, April 19, 2014 by dialing 1-877-870-5176 (from within the U.S.) or 1-858-384-5517 (from outside of the U.S.); please reference access code “13579038.”
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. Cherry Hill Mortgage Investment Corporation is externally managed and advised by Cherry Hill Mortgage Management, LLC, which is an affiliate of Freedom Mortgage Corporation.
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. These forward looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur. For example, these forward-looking statements include statements related to the payment of the Company’s quarterly dividend. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-
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looking statements, please review the information under the heading “Risk Factors” included in the Company’s registration statement on Form S-11, and other documents filed by the Company with the Securities and Exchange Commission.
Contact:
Investor Relations
(877) 870-7005
InvestorRelations@CHMIreit.com