8-K: Cherry Hill Mortgage Investment Corporation Announces First Quarter 2025 Results

Cherry Hill Mortgage Investment Corporation reports a GAAP net loss of $9.3 million for Q1 2025, but highlights earnings available for distribution of $5.4 million.

Summary

• Cherry Hill Mortgage Investment Corporation (CHMI) reported its Q1 2025 results on May 6, 2025.
• The company posted a GAAP net loss applicable to common stockholders of $9.3 million, or $0.29 per share.
• However, earnings available for distribution (EAD) attributable to common stockholders were $5.4 million, or $0.17 per diluted share.
• The common book value per share was $3.58 as of March 31, 2025.
• CHMI declared a regular common dividend of $0.15 per share, resulting in an annualized dividend yield of 20.1% based on the May 5, 2025 closing price.
• Aggregate portfolio leverage stood at 5.2x at the end of Q1 2025.
• The company had unrestricted cash of $47.3 million as of March 31, 2025.
• Net servicing fee income was $8.4 million, and net interest income was $2.2 million.
• The unpaid principal balance for the MSR portfolio was $17.0 billion as of March 31, 2025, with a carrying value of $227.3 million.
• The RMBS portfolio had a book value and carrying value of approximately $1.1 billion at quarter-end.
• The company used interest rate swaps, TBAs, and Treasury futures to mitigate risk, holding $804.3 million in interest rate swaps, ($406.7) million in TBAs, and $91.7 million in Treasury futures.

Sentiment

Score: 5

Explanation: The sentiment is neutral due to the mix of positive (high dividend yield, EAD) and negative (net loss) factors; the company's focus on risk management and growth provides a slightly positive outlook.

Positives

• The company reported earnings available for distribution (EAD) of $5.4 million, or $0.17 per diluted share.
• A common dividend of $0.15 per share was declared, resulting in a high annualized yield of 20.1%.
• The company had a substantial amount of unrestricted cash, totaling $47.3 million.
• Net servicing fee income was $8.4 million for the quarter.
• Net interest spread for the RMBS portfolio stood at 3.55%.

Negatives

• The company reported a GAAP net loss of $9.3 million, or $0.29 per share.
• The company experienced a net realized loss on RMBS of $4.0 million.
• The company experienced a net unrealized loss of $22.7 million on derivatives.
• The company experienced a net unrealized loss of $6.3 million on investments in Servicing Related Assets.

Risks

• The company is exposed to risks associated with interest rate fluctuations, which are mitigated using interest rate swaps, TBAs, and Treasury futures.
• The company's performance is subject to the macro environment, which management is closely monitoring.
• The company's forward-looking statements are subject to risks and uncertainties detailed in its SEC filings, including the Annual Report on Form 10-K.

Future Outlook

The company is focused on growing its portfolio responsibly to deliver strong risk-adjusted returns and maximize shareholder value while closely monitoring the macro environment.

Management Comments

• Jay Lown, President and CEO, stated that the company completed its first full quarter as an internally managed mortgage REIT.
• Jay Lown, President and CEO, stated that the company is focused on growing its portfolio responsibly as it seeks to deliver strong risk-adjusted returns and maximize shareholder value.

Industry Context

As a mortgage REIT, Cherry Hill's performance is closely tied to interest rate movements, mortgage-backed security spreads, and the overall health of the housing market; the company's internal management structure is a notable shift, potentially impacting operational efficiency and cost structure.

Comparison to Industry Standards

• Comparing Cherry Hill's 20.1% annualized dividend yield to other mortgage REITs like Annaly Capital Management (NLY) or AGNC Investment Corp. (AGNC) would provide context on its relative attractiveness to investors seeking income.
• Benchmarking the company's 5.2x leverage ratio against peers such as Invesco Mortgage Capital Inc. (IVR) or MFA Financial, Inc. (MFA) would indicate its risk profile relative to the industry.
• Comparing the net interest spread of 3.55% to industry averages and specific competitors would provide insight into the company's ability to generate income from its RMBS portfolio.

Stakeholder Impact

• Shareholders are impacted by the net loss, but also benefit from the high dividend yield.
• Employees are affected by the company's overall financial performance and strategic direction.
• The company's performance impacts its ability to acquire and manage residential mortgage assets, affecting the broader real estate finance market.

Next Steps

• Management will host a conference call to discuss the results and investor presentation.
• The company will continue to monitor the macro environment and focus on growing its portfolio responsibly.

Key Dates

Keywords

mortgage REIT, RMBS, MSR, dividends, earnings, Cherry Hill Mortgage Investment Corporation, CHMI