FARMINGDALE, N.J.–(BUSINESS WIRE)–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 -
Core earnings attributable to common stockholders of $10.0 million, or
$0.60 per share -
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 -
Declared regular common dividend of $0.49 per share; annualized common
dividend yield at market close was 11.5% at May 8, 2019 - Aggregate portfolio leverage stood at 4.7x at March 31, 2019
- Increased UPB of MSR portfolio by approximately 11% during the quarter
-
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
“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.
| Three Months Ended March 31, | |||||||||
| 2019 | 2018 | ||||||||
| (unaudited) | (unaudited) | ||||||||
| Income | |||||||||
| Interest income | $ | 16,969 | $ | 13,415 | |||||
| Interest expense | 10,744 | 7,543 | |||||||
| Net interest income | 6,225 | 5,872 | |||||||
| Servicing fee income | 17,188 | 8,650 | |||||||
| Servicing costs | 3,821 | 1,712 | |||||||
| Net servicing income | 13,367 | 6,938 | |||||||
| Other income (loss) | |||||||||
| Realized loss on RMBS, net | – | (4,881) | |||||||
| Realized gain (loss) on derivatives, net | (7,476) | 13 | |||||||
| Unrealized gain (loss) on derivatives, net | (8,272) | 19,626 | |||||||
| Unrealized gain (loss) on investments in MSRs | (27,175) | 12,498 | |||||||
| Total Income (Loss) | (23,331) | 40,066 | |||||||
| Expenses | |||||||||
| General and administrative expense | 963 | 877 | |||||||
| Management fee to affiliate | 1,809 | 1,315 | |||||||
| Total Expenses | 2,772 | 2,192 | |||||||
| Income (Loss) Before Income Taxes | (26,103) | 37,874 | |||||||
| Provision for (Benefit from) corporate business taxes | (4,965) | 2,635 | |||||||
| Net Income (Loss) | (21,138) | 35,239 | |||||||
|
Net (income) loss allocated to noncontrolling interests in Operating Partnership |
349 | (456) | |||||||
| Dividends on preferred stock | 1,841 | 1,213 | |||||||
| Net Income (Loss) Applicable to Common Stockholders | $ | (22,630) | $ | 33,570 | |||||
| Net Income (Loss) Per Share of Common Stock | |||||||||
| Basic | $ | (1.36) | $ | 2.64 | |||||
| Diluted | $ | (1.36) | $ | 2.64 | |||||
| Weighted Average Number of Shares of Common Stock Outstanding | |||||||||
| Basic | 16,646,114 | 12,713,265 | |||||||
| Diluted | 16,654,370 | 12,721,464 | |||||||
|
_______________ |
|
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.
|
Three Months Ended |
|||||||||||
| 2019 | 2018 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Net Income (Loss) | $ | (21,138) | $ | 35,239 | |||||||
| Other comprehensive income: | |||||||||||
| Net unrealized gain (loss) on RMBS | 31,981 | (35,924) | |||||||||
| Reclassification of net realized gain on RMBS included in earnings | – | 4,881 | |||||||||
| Other comprehensive income (loss) | 31,981 | (31,043) | |||||||||
| Comprehensive income | $ | 10,843 | $ | 4,196 | |||||||
|
Comprehensive income attributable to noncontrolling interests in Operating Partnership |
179 | 54 | |||||||||
| Dividends on preferred stock | 1,841 | 1,213 | |||||||||
| Comprehensive income attributable to common stockholders | $ | 8,823 | $ | 2,929 | |||||||
| _______________ |
|
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:
| Three Months Ended March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| (unaudited) | (unaudited) | |||||||||
| Net Income (Loss) | $ | (21,138) | $ | 35,239 | ||||||
| Realized loss on RMBS, net | – | 4,881 | ||||||||
| Realized loss (gain) on derivatives, net | 7,476 | (13) | ||||||||
| Unrealized loss (gain) on derivatives, net | 8,272 | (19,626) | ||||||||
| Unrealized loss (gain) on investments in MSRs | 27,175 | (12,498) | ||||||||
| Tax (benefit) expense on unrealized (loss) gain on MSRs | (4,739) | 2,444 | ||||||||
| Changes due to realization of expected cash flows | (5,027) | (2,493) | ||||||||
| Total core earnings: | $ | 12,019 | $ | 7,934 | ||||||
|
Core earnings attributable to noncontrolling interests in Operating Partnership |
(198) | (103) | ||||||||
| Dividends on preferred stock | 1,841 | 1,213 | ||||||||
| Core Earnings Attributable to Common Stockholders | $ | 9,980 | $ | 6,618 | ||||||
| Core Earnings Attributable to Common Stockholders, per Share | $ | 0.60 | $ | 0.52 | ||||||
| GAAP Net Income (Loss) Per Share of Common Stock | $ | (1.36) | $ | 2.64 | ||||||
| __________ |
|
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.
Contacts
Cherry Hill Mortgage Investment Corporation
Investor Relations
(877)
870-7005
[email protected]
