Market Overview

Cherry Hill Mortgage Investment Corporation Announces Fourth Quarter 2018 Results

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Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) ("Cherry Hill"
or the "Company") today reported results for the fourth quarter of 2018.

Fourth Quarter 2018 Highlights

  • GAAP net loss applicable to common stockholders of $39.7 million, or
    $2.42 per share
  • Core earnings attributable to common stockholders of $10.8 million, or
    $0.66 per share
  • Book value of $17.58 per share at December 31, 2018, a 9.7% decline
    from September 30, 2018, net of the Company's fourth quarter dividend
    and before giving effect to the $0.15 special dividend
  • Declared regular common dividend of $0.49 per share; annualized common
    dividend yield at market close was 10.8% at March 15, 2019
  • Aggregate portfolio leverage stood at 4.8x at December 31, 2018
  • Increased UPB of MSR portfolio by approximately 10% during the quarter

"Cherry Hill had another year of strong earnings, despite a difficult
market environment in the fourth quarter. We believe our asset selection
has served our shareholders well to date," said Jay Lown, President and
Chief Executive Officer of Cherry Hill Mortgage Investment Corporation.

"In the fourth quarter, investor sentiment waned as a spike in
volatility, geopolitical concerns and revised global growth expectations
moved investors into safe-haven assets. Spread sector assets struggled
given the market volatility," said Julian Evans, Chief Investment
Officer.

Operating Results

Cherry Hill reported GAAP net loss applicable to common stockholders for
the fourth quarter of 2018 of $39.7 million, or $2.42 per basic and
diluted weighted average common share outstanding. The reported GAAP net
loss was determined based primarily on the following: $6.6 million of
net interest income, $13.0 million of net servicing income, a net
realized loss of $2.9 million on the RMBS portfolio, a net realized loss
of $3.2 million on derivatives, a net unrealized loss of $30.9 million
on derivatives, a net unrealized loss of $21.9 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 $2.6
million.

Core earnings attributable to common stockholders for the fourth quarter
of 2018 were $10.8 million, or $0.66 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

December 31,

2018     2017
(unaudited) (unaudited)
Income
Interest income $ 16,958 $ 14,037
Interest expense   10,385   7,062
Net interest income 6,573 6,975
Servicing fee income 16,574 7,660
Servicing costs   3,528   1,939
Net servicing income 13,046 5,721
Other income (loss)
Realized loss on RMBS, net (2,932) (1)
Realized loss on derivatives, net (3,162) (1,260)
Unrealized gain (loss) on derivatives, net (30,937) 8,447
Unrealized gain (loss) on investments in MSRs   (21,924)   3,688
Total Income (Loss) (39,336) 23,570
Expenses
General and administrative expense 962 849
Management fee to affiliate   1,649   1,345
Total Expenses   2,611   2,194
Income (Loss) Before Income Taxes (41,947) 21,376
Provision for corporate business taxes   (3,137)   1,143
Net Income (Loss) (38,810) 20,233
Net (income) loss allocated to noncontrolling interests in Operating
Partnership
505 (269)
Dividends on preferred stock   1,395   1,240
Net Income (Loss) Applicable to Common Stockholders $ (39,700) $ 18,724
Net Income (Loss) Per Share of Common Stock
Basic $ (2.42) $ 1.47
Diluted $ (2.42) $ 1.47
Weighted Average Number of Shares of Common Stock Outstanding
Basic 16,382,914 12,713,265
Diluted 16,391,170 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 fourth
quarter 2018 was approximately $13.9 million.

    Three Months Ended

December 31,

2018     2017
(unaudited) (unaudited)
Net Income (Loss) $ (38,810) $ 20,233
Other comprehensive income:
Net unrealized gain (loss) on RMBS 13,862 (7,683)
Reclassification of net realized gain on RMBS included in earnings   2,932   1
Other comprehensive income (loss)   16,794   (7,682)
Comprehensive income (loss) $ (22,016) $ 12,551
Comprehensive income (loss) attributable to noncontrolling interests
in Operating Partnership
(286) 161
Dividends on preferred stock   1,395   1,240
Comprehensive income (loss) attributable to common stockholders $ (23,125) $ 11,150
_______________
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, 2018

The Company realized servicing fee income of $16.6 million from its MSR
portfolio, interest income of $17.0 million from its RMBS portfolio and
other loss of $59.0 million primarily related to unrealized losses on
derivatives and investments in MSRs. The unpaid principal balance for
the MSR portfolio stood at $24.8 billion as of December 31, 2018 and the
carrying value of the MSR portfolio ended the quarter at $294.9 million.
Net interest spread for the RMBS portfolio stood at 1.31% and the
debt-to-equity ratio on the aggregate portfolio ended the quarter at
4.8x.

The RMBS portfolio had a book and carrying value of approximately $1.8
billion at year-end December 31, 2018. 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, Cherry Hill used interest rate swaps,
swaptions, TBAs and Treasury futures. At quarter end December 31, 2018,
the Company held interest rate swaps with a notional amount of $1.4
billion, swaptions with a notional amount of $110.0 million, TBAs with a
notional amount of $35.0 million, and Treasury futures with a notional
amount of $80.0 million.

As of December 31, 2018, Cherry Hill's GAAP book value was $17.58 per
diluted share, a decrease of 10.4%, net of the fourth quarter dividend
and $0.15 special dividend, from book value per share of $19.62 as of
September 30, 2018.

Dividends

On December 13, 2018, the Board of Directors declared a quarterly
dividend of $0.49 per share of common stock for the fourth quarter of
2018. The Board of Directors also declared a $0.15 per share special
cash dividend on the Company's common stock. The dividends were paid in
cash on January 29, 2019 to common stockholders of record as of the
close of business on December 31, 2018. 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 for the fourth
quarter of 2018. The dividend was paid in cash on January 15, 2019 to
preferred stockholders of record as of the close of business on December
31, 2018.

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, realized and unrealized (gain)
loss on investments in Excess MSRs and MSRs, 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.
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
Excess MSRs. Core earnings include yield maintenance payments received
in connection with the sale of the Company's Excess 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 December 31, 2018 and 2017:

    Three Months Ended December 31,
2018     2017
(unaudited) (unaudited)
Net Income (Loss) $ (38,810) $ 20,233
Realized loss on RMBS, net 2,932 1
Realized loss on derivatives, net 3,162 1,260
Unrealized loss (gain) on derivatives, net 30,937 (8,447)
Unrealized loss (gain) on investments in MSRs 21,924 (3,688)
Tax (benefit) expense on unrealized (loss) gain on MSRs (3,260) 1,487
Changes due to realization of expected cash flows (4,487) (4,935)
Yield maintenance income   -   500
Total core earnings: $ 12,398 $ 8,656
Core earnings attributable to noncontrolling interests in Operating
Partnership
(159) (113)
Dividends on preferred stock   1,395   1,240
Core Earnings Attributable to Common Stockholders $ 10,845 $ 7,303
Core Earnings Attributable to Common Stockholders, per Share $ 0.66 $ 0.57
GAAP Net Income (Loss) Per Share of Common Stock $ (2.42) $ 1.47
__________
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 December 31, 2018 and its results of
operations for the full year of 2018 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 2018 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 18, 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 access
code "13688197."

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.

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