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): August 10, 2015
CHERRY HILL MORTGAGE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-36099 | 461315605 | ||
| (State or other jurisdiction of incorporation) |
Commission File Number: |
(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 August 10, 2015, Cherry Hill Mortgage Investment Corporation (the “Company”) reported its results of operations for the three months ended June 30, 2015. 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 August 10, 2015.
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: August 10, 2015 | Chief Financial Officer | |||||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press release, dated August 10, 2015 | |
Exhibit 99.1
CHERRY HILL MORTGAGE INVESTMENT CORPORATION
ANNOUNCES SECOND QUARTER 2015 RESULTS
MOORESTOWN, NJ – August 10, 2015 — Cherry Hill Mortgage Investment Corporation (NYSE: CHMI) (“Cherry Hill” or the “Company”), today reported results for the second quarter of 2015.
Second Quarter 2015 Highlights
| • | Increased book value per share by 0.9% to $20.96 as of June 30, 2015 from $20.78 as of March 31, 2015 |
| • | Generated GAAP net income applicable to common stockholders of $11.2 million, or $1.49 per share for second quarter 2015 |
| • | CHMI Insurance Company, LLC, the Company’s captive insurance subsidiary was admitted as a member of the Federal Home Loan Bank of Indianapolis (the “FHLBI”) at the end of the quarter |
| • | Produced core earnings of $0.48 per share, or $3.6 million, for second quarter 20151 |
| • | Declared dividend of $0.49 per share for second quarter 2015 |
| • | 12.1% annualized dividend yield based on closing stock price on June 30, 2015 |
| • | Realized interest income of $6.2 million, $3.0 million of which was generated by the Excess MSR portfolio, for second quarter 2015, compared to realized interest income of $6.1 million for second quarter 2014 |
| • | Aggregate portfolio leverage stood at 2.5x as of June 30, 2015 |
| • | Completed acquisition of Aurora Financial Group, providing the Company with an approximate $712 million MSR portfolio as of June 30, 2015 |
“The quality of our investment portfolio contributed to the increase in our book value despite a volatile market environment,” stated Jay Lown, Cherry Hill Mortgage Investment Corporation’s President and Chief Investment Officer. “During the second quarter, we also completed the Aurora acquisition, which positions us to invest in full MSRs. In addition, at the end of the quarter, our captive insurance subsidiary became a member of the Federal Home Loan Bank of Indianapolis, which further diversifies our financing options for prime whole loan and RMBS investments. We believe we now have the foundation in place to continue our pursuit of additional opportunities that should generate sustainable attractive risk-adjusted returns for our stockholders.”
Operating Results
Cherry Hill reported GAAP net income applicable to common stockholders for the second quarter of 2015 of $11.2 million, or $1.49 per basic and diluted weighted average common share outstanding. The reported GAAP net income was determined based primarily on the following: $4.9 million of net interest income, a net realized loss of $0.1 million on the RMBS portfolio, a net realized loss of $0.1 million on derivatives, a net realized gain of $0.2 million on acquired assets, a net unrealized gain of $2.8 million on derivatives, a net unrealized gain of $4.8 million on the Excess MSR portfolio, a net unrealized gain of $0.04 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 $1.3 million.
| 1 | Core Earnings is a non-GAAP financial measure. See “Core Earnings” later in this release for an explanation of how the Company calculates this non-GAAP financial measure and for a reconciliation to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP. |
Core earnings, which excludes non-recurring unrealized and realized gains or losses and adjusts for outstanding LTIP units in the Company’s operating partnership, for the second quarter of 2015 were $3.6 million, or $0.48 per basic and diluted weighted average common share outstanding. For a reconciliation of GAAP net income to non-GAAP core earnings, please refer to the reconciliation table accompanying this release.
| Three Months Ended June 30, | ||||||||
| 2015 | 2014 | |||||||
| Income |
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| Interest income |
$ | 6,199 | $ | 6,137 | ||||
| Interest expense |
1,346 | 1,006 | ||||||
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| Net interest income |
4,853 | 5,131 | ||||||
| Servicing fee income |
156 | — | ||||||
| Servicing costs |
94 | — | ||||||
| Amortization of MSRs |
60 | — | ||||||
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| Net servicing income |
2 | — | ||||||
| Other income (loss) |
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| Realized gain (loss) on RMBS, net |
(115 | ) | 75 | |||||
| Realized gain (loss) on derivatives, net |
(52 | ) | (187 | ) | ||||
| Realized gain (loss) on acquired assets, net |
174 | — | ||||||
| Unrealized gain (loss) on derivatives, net |
2,835 | (2,705 | ) | |||||
| Unrealized gain (loss) on investments in Excess MSRs |
4,827 | (1,648 | ) | |||||
| Unrealized gain (loss) on investments in MSRs |
38 | — | ||||||
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| Total Income |
12,562 | 666 | ||||||
| Expenses |
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| General and administrative expense |
634 | 641 | ||||||
| Management fee to affiliate |
690 | 679 | ||||||
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| Total Expenses |
1,324 | 1,320 | ||||||
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| Income (Loss) Before Income Taxes |
11,238 | (654 | ) | |||||
| Provision for corporate business taxes |
(70 | ) | 1 | |||||
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| Net Income (Loss) |
11,308 | (655 | ) | |||||
| Net (income) loss allocated to noncontrolling interests |
(103 | ) | 3 | |||||
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| Net Income (Loss) Applicable to Common Stockholders |
$ | 11,205 | $ | (652 | ) | |||
| Net income (Loss) Per Share of Common Stock |
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| Basic |
$ | 1.49 | $ | (0.09 | ) | |||
| Diluted |
$ | 1.49 | $ | (0.09 | ) | |||
| Weighted Average Number of Shares of Common Stock Outstanding |
||||||||
| Basic |
7,509,543 | 7,504,572 | ||||||
| Diluted |
7,509,543 | 7,509,543 | ||||||
Unaudited. Dollar amounts in thousands, except per share amounts.
The net unrealized loss on the Company’s RMBS portfolio for the second quarter 2015 was approximately $6.3 million.
| Three Months Ended June 30, | ||||||||
| 2015 | 2014 | |||||||
| Net income (loss) |
$ | 11,308 | $ | (655 | ) | |||
| Other comprehensive income (loss): |
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| Net unrealized gain (loss) on RMBS |
(6,280 | ) | 5,670 | |||||
| Reclassification of net realized (gain) loss on RMBS in earnings |
115 | (75 | ) | |||||
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| Other comprehensive income (loss) |
(6,165 | ) | 5,595 | |||||
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| Comprehensive income (loss) |
$ | 5,143 | $ | 4,940 | ||||
| Comprehensive income (loss) attributable to noncontrolling interests |
47 | 62 | ||||||
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| Comprehensive income (loss) attributable to common stockholders |
$ | 5,096 | $ | 4,878 | ||||
Unaudited. Dollar amounts in thousands.
Portfolio Highlights for the Quarter Ended June 30, 2015
The Company realized interest income of $3.0 million from its Excess MSR portfolio and servicing fee income of $0.2 million from its MSR portfolio. Carrying value of the Servicing Related Assets portfolio ended the quarter at $92.6 million. Net interest spread for the RMBS portfolio stood at 1.46% and the debt-to-equity ratio on the aggregate portfolio remained low, ending the quarter at 2.5x.
The RMBS portfolio had a book value of $430.1 million and a carrying value of $433.0 million at quarter end June 30, 2015. The portfolio had a weighted average coupon of 3.8% and weighted average maturity of 23 years.
In order to mitigate duration risk and interest rate risk associated with the Company’s RMBS, Cherry Hill used interest rate swaps, swaptions and TBAs. At quarter end June 30, 2015, the Company held interest rate swaps with a notional amount of $262 million, swaptions with a notional amount of $115 million and TBAs with a notional amount of ($10) million.
As of June 30, 2015, Cherry Hill’s GAAP book value was $20.96 per diluted share, an increase of 0.9% from $20.78 per diluted share as of March 31, 2015.
Dividend
On June 18, 2015, the Board of Directors declared a quarterly dividend of $0.49 per share of common stock for the second quarter of 2015. The dividend was paid in cash on July 28, 2015 to stockholders of record as of the close of business on June 30, 2015.
Core Earnings
Core earnings is a non-GAAP financial measure and is defined as GAAP net income (loss) applicable to common stockholders, excluding realized gain (loss) on RMBS, realized gain (loss) on derivatives, realized gain (loss) on acquired assets, unrealized gain (loss) on derivatives, unrealized gain (loss) on investments in Excess MSRs and unrealized gain (loss) on investments in MSRs and adjusted to exclude outstanding LTIP
units in the Company’s operating partnership. 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 to core earnings for the three months ended June 30, 2015 and 2014:
| Three Months Ended June 30, | ||||||||
| 2015 | 2014 | |||||||
| Net income (loss) |
$ | 11,308 | $ | (655 | ) | |||
| Realized gain (loss) on RMBS, net |
115 | (75 | ) | |||||
| Realized gain (loss) on derivatives, net |
52 | 187 | ||||||
| Realized gain (loss) on acquired assets, net |
(174 | ) | — | |||||
| Unrealized gain (loss) on derivatives, net |
(2,835 | ) | 2,705 | |||||
| Unrealized gain (loss) on investments in Excess MSRs |
(4,827 | ) | 1,648 | |||||
| Unrealized gain (loss) on investments in MSRs |
(38 | ) | — | |||||
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| Total core earnings: |
$ | 3,601 | $ | 3,810 | ||||
| Core earnings attributable to noncontrolling interests |
(33 | ) | (22 | ) | ||||
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| Core Earnings Attributable to Common Stockholders |
$ | 3,568 | $ | 3,788 | ||||
| Core Earnings Attributable to Common Stockholders, per Share |
$ | 0.48 | $ | 0.50 | ||||
| GAAP Net income (Loss) Per Share of Common Stock |
$ | 1.49 | $ | (0.09 | ) | |||
Unaudited. Dollar amounts in thousands, except per share amounts.
Additional Information
Additional information regarding Cherry Hill’s financial condition and results of operations can be found in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 filed with the Securities and Exchange Commission on August 10, 2015. In addition, an investor presentation with supplemental information regarding Cherry Hill, its business and its financial condition as of June 30, 2015 and its results of operations for the second quarter of 2015 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 on Tuesday, August 11, 2015 at 8:30 A.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 1-877-407-3982 (from within the U.S.) or 1-201-493-6780 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Cherry Hill Second Quarter 2015 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 September 11, 2015 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 “13616667.”
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, including, among others, statements relating to the Company’s long-term growth opportunities and strategies, its ability to complete the pending Aurora transaction, its ability to execute on the anticipated strategy of purchasing full MSRs, 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, 2014, 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