Cherry Hill Mortgage Investment Corporation (NYSE: CHMI)
(“Cherry Hill” or the “Company”) today reported results for the
first quarter 2021.
First Quarter 2021 Highlights
- GAAP net income applicable to common stockholders of $18.3
million, or $1.07 per share
- Core earnings attributable to common stockholders of $3.5
million, or $0.21 per share
- Common book value per share of $10.83 at March 31, 2021
- Declared regular common dividend of $0.27 per share, annualized
common dividend yield at market close was 10.6% at May 7, 2021
- Aggregate portfolio leverage stood at 3.4x at March 31,
2021
- As of March 31, 2021, the Company had unrestricted cash of
approximately $62 million
“During the first quarter, we maintained our enhanced cash
position and continued to reposition our portfolio," said Jay Lown,
President and Chief Executive Officer of Cherry Hill Mortgage
Investment Corporation. “While elevated prepayment speeds impacted
our portfolio, we are well positioned to benefit from a rising rate
environment.”
Operating Results
Cherry Hill reported GAAP net income applicable to common
stockholders for the first quarter of 2021 of $18.3 million, or
$1.07 per basic and diluted weighted average common share
outstanding. Reported GAAP net income was determined based
primarily on the following: $5.9 million of net interest income,
$10.5 million of net servicing income, a net realized gain of $2.1
million on RMBS, a net realized loss of $4.7 million on
derivatives, a minimal net realized gain on acquired assets, a net
unrealized loss of $8.1 million on derivatives, a net unrealized
gain of $22.5 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 $3.4 million.
Core earnings attributable to common stockholders for the first
quarter of 2021 were $3.5 million, or $0.21 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 March
31,
2021
2020
(unaudited)
(unaudited)
Income
Interest income
$
5,985
$
20,249
Interest expense
112
12,291
Net interest income
5,873
7,958
Servicing fee income
13,540
19,519
Servicing costs
3,082
5,840
Net servicing income
10,458
13,679
Other income (loss)
Realized gain (loss) on RMBS,
available-for-sale, net
2,094
(17,543)
Realized loss on derivatives, net
(4,741)
(18,756)
Realized gain on acquired assets, net
5
46
Unrealized gain (loss) on derivatives,
net
(8,059)
52,200
Unrealized gain (loss) on investments in
Servicing Related Assets
22,464
(93,853)
Total Income (Loss)
28,094
(56,269)
Expenses
General and administrative expense
1,442
2,756
Management fee to affiliate
1,961
1,965
Total Expenses
3,403
4,721
Income (Loss) Before Income
Taxes
24,691
(60,990)
Provision for (Benefit from) corporate
business taxes
3,463
(12,154)
Net Income (Loss)
21,228
(48,836)
Net (income) loss allocated to
noncontrolling interests in Operating Partnership
(434)
910
Dividends on preferred stock
2,463
2,459
Net Income (Loss) Applicable to Common
Stockholders
$
18,331
$
(50,385)
Net Income (Loss) Per Share of Common
Stock
Basic
$
1.07
$
(3.03)
Diluted
$
1.07
$
(3.03)
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
17,065,735
16,611,440
Diluted
17,087,959
16,624,229
_______________
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
first quarter 2021 was approximately $19.3 million.
Three Months Ended
March 31,
2021
2020
(unaudited)
(unaudited)
Net Income (Loss)
$
21,228
$
(48,836)
Other comprehensive income (loss):
Net unrealized loss on RMBS
(17,255)
(25,174)
Reclassification of net realized gain
(loss) on RMBS included in earnings
(2,094)
17,543
Other comprehensive loss
(19,349)
(7,631)
Comprehensive income (loss)
$
1,879
$
(56,467)
Comprehensive income (loss) attributable
to noncontrolling interests in Operating Partnership
38
(1,052)
Dividends on preferred stock
2,463
2,459
Comprehensive loss attributable to common
stockholders
$
(622)
$
(57,874)
_______________
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,
2021
The Company realized servicing fee income of $13.5 million,
interest income of $6.0 million and other income of $11.8 million,
primarily related to unrealized gains on investments in Servicing
Related Assets, as well as realized gains on RMBS, partially offset
by realized and unrealized losses in derivatives. The unpaid
principal balance for the MSR portfolio stood at $21.7 billion as
of March 31, 2021 and the carrying value of the MSR portfolio ended
the quarter at $217.2 million. Net interest spread for the RMBS
portfolio stood at 1.57% and the debt-to-equity ratio on the
aggregate portfolio ended the quarter at 3.4x.
The RMBS portfolio had a book and carrying value of
approximately $1.0 billion at quarter-end March 31, 2021. The
portfolio had a weighted average coupon of 3.17% 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 March 31, 2021, the Company held interest rate swaps
with a notional amount of $1.5 billion, swaptions with a notional
amount of $50.0 million, TBAs with a notional amount of $342.0
million, Treasury futures with a notional amount of $67.0 million,
and options on Treasury futures with a notional amount of $80.0
million.
As of March 31, 2021, Cherry Hill’s GAAP book value was $10.83
per diluted share, net of the first quarter dividend.
Dividends
On March 4, 2021, the Board of Directors declared a quarterly
dividend of $0.27 per share of common stock for the first quarter
of 2021. The dividend was paid in cash on April 27, 2021 to common
stockholders of record as of the close of business on March 31,
2021. 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 first quarter of 2021. The dividends were
paid in cash on April 15, 2021 to Series A and B Preferred
stockholders of record as of the close of business on March 31,
2021.
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 March 31, 2021
and 2020:
Three Months Ended
March 31,
2021
2020
(unaudited)
(unaudited)
Net Income (Loss)
$
21,228
$
(48,836)
Realized loss (gain) on RMBS, net
(2,094)
17,543
Realized loss on derivatives, net
4,741
18,756
Realized gain on acquired assets, net
(5)
(46)
Unrealized loss (gain) on derivatives,
net
8,059
(52,200)
Unrealized loss (gain) on investments in
MSRs, net of estimated MSR amortization
(30,059)
86,763
Tax (benefit) expense on realized and
unrealized (loss) gain on MSRs
4,229
(11,550)
Total core earnings:
$
6,099
$
10,430
Core earnings attributable to
noncontrolling interests in Operating Partnership
(125)
(194)
Dividends on preferred stock
2,463
2,459
Core Earnings Attributable to Common
Stockholders
$
3,511
$
7,777
Core Earnings Attributable to Common
Stockholders, per Diluted Share
$
0.21
$
0.47
GAAP Net Income (Loss) Per Share of
Common Stock, per Diluted Share
$
1.07
$
(3.03)
_______________
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 Quarterly
Report on Form 10-Q for the quarter ended March 31, 2021 filed with
the Securities and Exchange Commission on May 10, 2021. In
addition, an investor presentation with supplemental information
regarding Cherry Hill, its business and its financial condition as
of March 31, 2021 and its results of operations for the first
quarter 2021 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 2021 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 10, 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 “13719069.”
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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version on businesswire.com: https://www.businesswire.com/news/home/20210510005840/en/
Cherry Hill Mortgage Investment Corporation Investor Relations
(877) 870-7005 InvestorRelations@chmireit.com
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