Form 8-K - Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 2, 2023

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CHERRY HILL MORTGAGE INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)

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Maryland	001-36099	46-1315605
(State or other jurisdiction of incorporation)	Commission File Number:	(IRS Employer Identification No.)

1451 Route 34, Suite 303

Farmingdale, NJ 07727

(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	CHMI	NYSE
8.20% Series A Cumulative Redeemable Preferred Stock, $0.01 par value	CHMI-PRA	NYSE
8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable	CHMI-PRB	NYSE

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Item 2.02.

Results of Operations and Financial Condition.

On November 2, 2023, Cherry Hill Mortgage Investment Corporation (the “Company”) reported its results of operations for the quarter ended September 30, 2023. 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 November 2, 2023.

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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/ Michael Hutchby
		Michael Hutchby
Date: November 2, 2023		Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number		Description
99.1		Press release, dated November 2, 2023

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Exhibit 99.1

 

CHERRY HILL MORTGAGE INVESTMENT CORPORATION

ANNOUNCES THIRD QUARTER 2023 RESULTS

 

FARMINGDALE, NJ – November 2, 2023 — Cherry Hill Mortgage Investment Corporation (NYSE: CHMI) (“Cherry Hill” or the “Company”) today reported results for the third quarter 2023.

 

Third Quarter 2023 Highlights

 

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GAAP net income applicable to common stockholders of $13.1 million, or $0.49 per share.

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Earnings available for distribution (“EAD”) attributable to common stockholders of $4.4 million, or $0.16 per diluted share.

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Common book value per share of $4.99 at September 30, 2023.

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Declared regular common dividend of $0.15 per share, annualized common dividend yield was 19.5% based on the closing sale price of the Company’s common stock as reported by the NYSE on November 1, 2023.

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Aggregate portfolio leverage stood at 4.4x at September 30, 2023.

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As of September 30, 2023, the Company had unrestricted cash of $44.7 million.

 

“Amidst a volatile macro landscape, we continue to prioritize navigating spread risk and safeguarding our shareholders’ equity,” said Jay Lown, President and Chief Executive Officer of Cherry Hill Mortgage Investment Corporation. “We are constantly and proactively managing our portfolio, remaining well positioned to take advantage of market opportunities as the environment stabilizes.”

Operating Results

 

Cherry Hill reported GAAP net income applicable to common stockholders for the third quarter of 2023 of $13.1 million, or $0.49 per basic and diluted weighted average common share outstanding. Reported GAAP net income was determined based primarily on the following: $0.5 million of net interest expense, $10.4 million of net servicing income, a net realized loss of $10.2 million on RMBS, a net realized gain of $20.7 million on derivatives, a net unrealized loss of $19.8 million on RMBS measured at fair value through earnings, a net unrealized gain of $18.3 million on derivatives, a net unrealized gain of $1.6 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.

Earnings available for distribution attributable to common stockholders for the third quarter of 2023 were $4.4 million, or $0.16 per basic and diluted weighted average common share outstanding. For a reconciliation of GAAP net income to non-GAAP earnings available for distribution, please refer to the reconciliation table accompanying this release.

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		Three Months Ended
		September 30, 2023				June 30, 2023
		(unaudited)				(unaudited)
Income
Interest income		$	12,864			$	12,534
Interest expense			13,337				13,168
Net interest expense			(473	)			(634	)
Servicing fee income			13,225				13,436
Servicing costs			2,869				2,464
Net servicing income			10,356				10,972
Other income (loss)
Realized loss on RMBS, net			(10,209	)			(10,274	)
Realized gain on derivatives, net			20,675				11,640
Realized gain on acquired assets, net			12				-
Unrealized loss on RMBS, measured at fair value through earnings, net			(19,755	)			(6,619	)
Unrealized gain on derivatives, net			18,343				6,827
Unrealized gain (loss) on investments in Servicing Related Assets			1,578				(6,010	)
Total Income			20,527				5,902
Expenses
General and administrative expense			1,626				1,995
Management fee to affiliate			1,740				1,694
Total Expenses			3,366				3,689
Income Before Income Taxes			17,161				2,213
Provision for corporate business taxes			1,276				587
Net Income			15,885				1,626
Net income allocated to noncontrolling interests in Operating Partnership			(306	)			(37	)
Dividends on preferred stock			2,462				2,465
Net Income (Loss) Applicable to Common Stockholders		$	13,117			$	(876	)
Net Income (Loss) Per Share of Common Stock
Basic		$	0.49			$	(0.03	)
Diluted		$	0.49			$	(0.03	)
Weighted Average Number of Shares of Common Stock Outstanding
Basic			26,936,242				26,014,830
Diluted			26,978,077				26,034,399

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Dollar amounts in thousands, except per share amounts.

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Net unrealized loss on the Company’s RMBS portfolio classified as available-for-sale that are reported in accumulated other comprehensive loss was approximately $14.5 million.

		Three Months Ended
		September 30, 2023				June 30, 2023
		(unaudited)				(unaudited)
Net Income		$	15,885			$	1,626
Other comprehensive loss:
Unrealized loss on RMBS, available-for-sale, net			(14,485	)			(3,122	)
Net other comprehensive loss			(14,485	)			(3,122	)
Comprehensive income (loss)		$	1,400			$	(1,496	)
Comprehensive income (loss) attributable to noncontrolling interests in Operating Partnership			29				(27	)
Dividends on preferred stock			2,462				2,465
Comprehensive loss attributable to common stockholders		$	(1,091	)		$	(3,934	)

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Dollar amounts in thousands.

Portfolio Highlights for the Quarter Ended September 30, 2023

 

The Company realized net servicing fee income of $10.4 million, net interest expense of $0.5 million and other income of $10.6 million, primarily related to realized and unrealized gains on derivatives and partially offset by realized and unrealized losses on the RMBS portfolio. The unpaid principal balance for the MSR portfolio stood at $20.3 billion as of September 30, 2023 and the carrying value of the MSR portfolio ended the quarter at $266.5 million.  Net interest spread for the RMBS portfolio stood at 3.60% and the debt-to-equity ratio on the aggregate portfolio ended the quarter at 4.4x.

The RMBS portfolio had a book value of approximately $1.08 billion and carrying value of approximately $1.02 billion at quarter-end September 30, 2023.  The portfolio had a weighted average coupon of 4.57% 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, TBAs and Treasury futures.  At quarter end September 30, 2023, the Company held interest rate swaps with a notional amount of $1.1 billion, TBAs with a notional amount of ($486.4) million, and Treasury futures with a notional amount of $145.8 million.

As of September 30, 2023, Cherry Hill’s GAAP book value was $4.99 per diluted share, net of the third quarter dividend.

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Dividends

On September 14, 2023, the Board of Directors declared a quarterly dividend of $0.15 per share of common stock for the third quarter of 2023. The dividend was paid in cash on October 31, 2023 to common stockholders of record as of the close of business on September 29, 2023. 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 a dividend of $0.515625 per share on the Company’s 8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock for the third quarter 2023. The dividends were paid in cash on October 16, 2023 to Series A and B Preferred stockholders of record as of the close of business on September 29, 2023.

Earnings Available for Distribution

Earnings available for distribution (“EAD”) is a non-GAAP financial measure that we define as GAAP net income (loss), excluding realized gain (loss) on RMBS, unrealized gain (loss) on RMBS measured at fair value through earnings, realized and unrealized gain (loss) on derivatives, realized gain (loss) on acquired assets, realized and unrealized gain (loss) on investments in MSRs (net of any estimated MSR amortization) and any tax expense (benefit) on realized and unrealized gain (loss) on MSRs. MSR amortization refers to the portion of the change in fair value of the MSR that is primarily due to the realization of cashflows, runoff resulting from prepayments and an adjustment for any gain or loss on the capital used to purchase the MSR. EAD also includes interest rate swap periodic interest income (expense) and drop income on TBA dollar roll transactions, which are included in “Realized gain (loss) on derivatives, net” on the consolidated statements of income (loss). EAD is adjusted to exclude outstanding LTIP-OP Units in our Operating Partnership and dividends paid on our preferred stock.

EAD is provided for purposes of potential comparability to other issuers that invest in residential mortgage-related assets. The Company believes providing investors with EAD, in addition to related GAAP financial measures, may provide investors some insight into the Company’s ongoing operational performance. However, the concept of EAD 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 EAD, it may not be comparable to similarly titled measures of other issuers, which define EAD differently from us and each other. As a result, EAD should not be considered a substitute for the Company’s GAAP net income (loss) or as a measure of the Company’s liquidity. While EAD is one indicia of the Company’s earnings capacity, it is not the only factor considered in setting a dividend and is not the same as REIT taxable income which is calculated in accordance with the rules of the IRS.

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The following table provides a reconciliation of net income to EAD for the three months ended September 30, 2023 and June 30, 2023:

		Three Months Ended
		September 30, 2023				June 30, 2023
		(unaudited)				(unaudited)
Net Income		$	15,885			$	1,626
Realized loss on RMBS, net			10,209				10,274
Realized gain on derivatives, net ¹			(10,565	)			(1,883	)
Realized gain on acquired assets, net			(12	)			-
Unrealized loss on RMBS, measured at fair value through earnings, net			19,755				6,619
Unrealized gain on derivatives, net			(18,343	)			(6,827	)
Unrealized gain on investments in MSRs, net of estimated MSR amortization			(11,588	)			(4,043	)
Tax expense on realized and unrealized gain on MSRs			1,684				1,065
Total EAD:		$	7,025			$	6,831
EAD attributable to noncontrolling interests in Operating Partnership			(128	)			(129	)
Dividends on preferred stock			2,462				2,465
EAD Attributable to Common Stockholders		$	4,435			$	4,237
EAD Attributable to Common Stockholders, per Diluted Share		$	0.16			$	0.16
GAAP Net Income (Loss) Per Share of Common Stock, per Diluted Share		$	0.49			$	(0.03	)

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Dollar amounts in thousands, except per share amounts.

1.

Excludes drop income on TBA dollar rolls of $893,000 and $855,000 and interest rate swap periodic interest income of $9.2 million and $8.9 million for the three-month periods ended September 30, 2023 and June 30, 2023, respectively.

Additional Information

 

Additional information regarding Cherry Hill’s financial condition and results of operations can be found in its Annual Report on Form 10-Q for the quarter ended September 30, 2023 filed with the Securities and Exchange Commission on November 2, 2023. In addition, an investor presentation with supplemental information regarding Cherry Hill, its business and its financial condition as of September 30, 2023 and its results of operations for the third quarter 2023 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 pm 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 live webcast of the conference call will be available in the investor relations section of the Company’s website at www.chmireit.com. To listen to the live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. An online archive of the webcast will be available on the Company’s website for one year following the call.

Participants may register for the conference call here. Once registered, dial-in information for the call will be made available.

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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, 2022, and other documents filed by the Company with the Securities and Exchange Commission.

 

Contact:

Cherry Hill Mortgage Investment Corporation

Investor Relations

[phone]

[e-mail]

 

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Document and Entity Information	Nov. 02, 2023
Entity Listings [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 02, 2023
Entity File Number	001-36099
Entity Registrant Name	CHERRY HILL MORTGAGE INVESTMENT CORPORATION
Entity Central Index Key	0001571776
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	46-1315605
Entity Address, Address Line One	1451 Route 34
Entity Address, Address Line Two	Suite 303
Entity Address, City or Town	Farmingdale
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07727
City Area Code	877
Local Phone Number	870.7005
Entity Emerging Growth Company	false
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Common Stock [Member]
Entity Listings [Line Items]
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	CHMI
Security Exchange Name	NYSE
8.20% Series A Cumulative Redeemable Preferred Stock, $0.01 par value [Member]
Entity Listings [Line Items]
Title of 12(b) Security	8.20% Series A Cumulative Redeemable Preferred Stock, $0.01 par value
Trading Symbol	CHMI-PRA
Security Exchange Name	NYSE
8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable [Member]
Entity Listings [Line Items]
Title of 12(b) Security	8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable
Trading Symbol	CHMI-PRB
Security Exchange Name	NYSE

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