Cherry Hill Mortgage Investment Corporation (NYSE: CHMI)
(“Cherry Hill” or the “Company”) today reported results for the
fourth quarter and full year 2020.
Fourth Quarter 2020 Highlights
- GAAP net income applicable to common stockholders of $6.4
million, or $0.38 per share
- Core earnings attributable to common stockholders of $6.3
million, or $0.37 per share
- Common book value per share of $11.16 at December 31, 2020
- Declared regular common dividend of $0.27 per share, annualized
common dividend yield at market close was 10.3% at March 8,
2021
- Aggregate portfolio leverage stood at 4.0x at December 31,
2020
- As of December 31, 2020, the Company had unrestricted cash of
approximately $84 million
“We are proud of our team’s efforts in 2020 to navigate the
extremely challenging environment,” said Jay Lown, President and
Chief Executive Officer of Cherry Hill Mortgage Investment
Corporation. “In the fourth quarter, we once again generated core
earnings that exceeded our dividend, and maintained a strong
balance sheet. Moving ahead, we believe we are well positioned to
invest in MSRs and RMBS where we see opportunities that will
deliver attractive risk-adjusted returns to our shareholders.”
Operating Results
Cherry Hill reported GAAP net income applicable to common
stockholders for the fourth quarter of 2020 of $6.4 million, or
$0.38 per basic and diluted weighted average common share
outstanding. Reported GAAP net income was determined based
primarily on the following: $8.0 million of net interest income,
$9.1 million of net servicing income, a net realized gain of $8.0
million on RMBS, a net realized loss of $0.8 million on
derivatives, a net realized loss on acquired assets of $0.1
million, a net unrealized loss of $3.3 million on derivatives, a
net unrealized loss of $10.1 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 $3.1
million.
Core earnings attributable to common stockholders for the fourth
quarter of 2020 were $6.3 million, or $0.37 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
December 31,
2020
2019
(unaudited)
(unaudited)
Income
Interest income
$
8,638
$
19,770
Interest expense
619
13,499
Net interest income
8,019
6,271
Servicing fee income
14,045
19,318
Servicing costs
4,940
5,378
Net servicing income
9,105
13,940
Other income (loss)
Realized gain on RMBS, available-for-sale,
net
7,950
627
Realized loss on derivatives, net
(787)
(17,148)
Realized loss on acquired assets, net
(93)
(28)
Unrealized gain (loss) on derivatives,
net
(3,266)
3,357
Unrealized gain (loss) on investments in
Servicing Related Assets
(10,050)
1,959
Total Income
10,878
8,978
Expenses
General and administrative expense
1,209
1,352
Management fee to affiliate
1,842
1,999
Total Expenses
3,051
3,351
Income Before Income Taxes
7,827
5,627
Provision for (Benefit from) corporate
business taxes
(1,216)
1,132
Net Income
9,043
4,495
Net income allocated to noncontrolling
interests in Operating Partnership
(168)
(75)
Dividends on preferred stock
2,463
2,460
Net Income Applicable to Common
Stockholders
$
6,412
$
1,960
Net Income Per Share of Common
Stock
Basic
$
0.38
$
0.12
Diluted
$
0.38
$
0.12
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
17,054,634
16,797,523
Diluted
17,076,858
16,810,312
_______________ Dollar amounts in thousands, except per share
amounts. Certain prior period amounts have been reclassified to
conform to current period presentation.
Net unrealized loss on the Company’s RMBS portfolio for the
fourth quarter 2020 was approximately $11.9 million.
Three Months Ended
December 31,
2020
2019
(unaudited)
(unaudited)
Net Income
$
9,043
$
4,495
Other comprehensive income (loss):
Net unrealized gain (loss) on RMBS
(3,915)
7,373
Reclassification of net realized loss on
RMBS included in earnings
(7,950)
(627)
Other comprehensive income (loss)
(11,865)
6,746
Comprehensive income (loss)
$
(2,822)
$
11,241
Comprehensive income (loss) attributable
to noncontrolling interests in Operating Partnership
(50)
181
Dividends on preferred stock
2,463
2,460
Comprehensive income (loss) attributable
to common stockholders
$
(5,235)
$
8,600
_______________ 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,
2020
The Company realized servicing fee income of $14.0 million,
interest income of $8.6 million and other loss of $6.2 million,
primarily related to unrealized losses on investments in Servicing
Related Assets, as well as realized and unrealized losses in
derivatives, partially offset by realized gains on RMBS. The unpaid
principal balance for the MSR portfolio stood at $21.6 billion as
of December 31, 2020 and the carrying value of the MSR portfolio
ended the quarter at $174.4 million. Net interest spread for the
RMBS portfolio stood at 1.77% and the debt-to-equity ratio on the
aggregate portfolio ended the quarter at 4.0x.
The RMBS portfolio had a book and carrying value of
approximately $1.2 billion at quarter-end December 31, 2020. The
portfolio had a weighted average coupon of 3.18% 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, swaptions, TBAs and Treasury futures. At
quarter end December 31, 2020, the Company held interest rate swaps
with a notional amount of $1.5 billion, swaptions with a notional
amount of $70.0 million, TBAs with a notional amount of $332.0
million and Treasury futures with a notional amount of $110.0
million.
As of December 31, 2020, Cherry Hill’s GAAP book value was
$11.16 per diluted share, net of the fourth quarter dividend.
Dividends
On December 10, 2020, the Board of Directors declared a
quarterly dividend of $0.27 per share of common stock for the
fourth quarter of 2020. The dividend was paid in cash on January
26, 2021 to common stockholders of record as of the close of
business on December 31, 2020. 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
2020. The dividends were paid in cash on January 15, 2021 to Series
A and B Preferred stockholders of record as of the close of
business on December 31, 2020.
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. 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 and includes an
adjustment for any gain or loss on the capital used to purchase the
MSR. Additionally, core earnings excludes any tax (benefit) expense
on realized and 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,
2020 and 2019:
Three Months Ended December
31,
2020
2019
(unaudited)
(unaudited)
Net Income
$
9,043
$
4,495
Realized gain on RMBS, net
(7,950)
(627)
Realized loss on derivatives, net
787
17,148
Realized loss on acquired assets, net
93
28
Unrealized loss (gain) on derivatives,
net
3,266
(3,357)
Unrealized loss (gain) on investments in
MSRs, net of estimated MSR amortization
3,596
(9,786)
Tax benefit of realized and unrealized
loss on MSRs
52
2,876
Total core earnings:
$
8,887
$
10,777
Core earnings attributable to
noncontrolling interests in Operating Partnership
(162)
(173)
Dividends on preferred stock
2,463
2,460
Core Earnings Attributable to Common
Stockholders
$
6,262
$
8,144
Core Earnings Attributable to Common
Stockholders, per Diluted Share
$
0.37
$
0.48
GAAP Net Income Per Share of Common
Stock, per Diluted Share
$
0.38
$
0.12
_________ 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, 2020 filed with
the Securities and Exchange Commission on March 9, 2021. In
addition, an investor presentation with supplemental information
regarding Cherry Hill, its business and its financial condition as
of December 31, 2020 and its results of operations for the full
year 2020 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 2020 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 April 9, 2021 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 “13717027.”
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, 2020, 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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