8-K: Cherry Hill Mortgage Investment Corporation Announces Fourth Quarter and Full Year 2024 Results

Cherry Hill Mortgage Investment Corporation reports GAAP net income of $9.1 million, or $0.29 per share, and earnings available for distribution of $3.3 million, or $0.10 per diluted share, for the fourth quarter of 2024.

Summary

• Cherry Hill Mortgage Investment Corporation (CHMI) announced its fourth quarter and full year 2024 results on March 6, 2025.
• For the fourth quarter, CHMI reported GAAP net income applicable to common stockholders of $9.1 million, or $0.29 per share.
• Earnings available for distribution (EAD) attributable to common stockholders were $3.3 million, or $0.10 per diluted share.
• The common book value per share was $3.82 as of December 31, 2024.
• The company declared a regular common dividend of $0.15 per share, resulting in an annualized common dividend yield of 17.5% based on the closing sale price on March 5, 2025.
• Aggregate portfolio leverage stood at 5.3x at the end of the quarter.
• As of December 31, 2024, the company had unrestricted cash of $46.3 million.
• Net servicing fee income was $8.5 million, and net interest income was $0.7 million for the quarter.
• The unpaid principal balance for the MSR portfolio was $17.3 billion, with a carrying value of $233.7 million as of December 31, 2024.
• Net interest spread for the RMBS portfolio stood at 2.90% at quarter end.
• The RMBS portfolio had a book value and carrying value of approximately $1.1 billion at quarter-end, with a weighted average coupon of 4.80% and weighted average maturity of 28 years.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company reported net income and completed a strategic internalization, the lower EAD compared to the dividend payout and unrealized losses on RMBS suggest some underlying challenges.

Positives

• The company reported a GAAP net income applicable to common stockholders of $9.1 million, or $0.29 per share.
• The company successfully completed the internalization of its management structure, which is expected to reduce operating expenses and strengthen shareholder alignment.
• The company declared a common dividend of $0.15 per share, resulting in an annualized yield of 17.5%.
• The company had $46.3 million in unrestricted cash as of December 31, 2024.

Negatives

• The company experienced a net realized loss on RMBS of $1.1 million.
• The company experienced a net unrealized loss of $31.7 million on RMBS measured at fair value through earnings.
• The company incurred $4.5 million in general and administrative expenses, compensation and benefits, and management fees paid to Cherry Hill's former external manager.

Risks

• The company's performance is subject to interest rate risk and duration risk associated with its RMBS and MSRs.
• The company's results are affected by realized and unrealized gains and losses on RMBS and derivatives, which can be volatile.
• The company's future performance is subject to the factors described under the heading 'Risk Factors' in the Company's Annual Report on Form 10-K.

Future Outlook

The company is focused on growing its business and delivering compelling returns to shareholders in 2025 and beyond.

Management Comments

• Jay Lown, President and CEO of Cherry Hill Mortgage Investment Corporation, stated that the company is pleased to have successfully completed the internalization of its management structure, which strengthens shareholder alignment and will reduce operating expenses.

Industry Context

As a mortgage REIT, Cherry Hill's performance is closely tied to interest rate movements, mortgage origination volumes, and the overall health of the housing market. The internalization of management is a trend seen in some REITs to reduce costs and align management incentives with shareholders.

Comparison to Industry Standards

• Comparing Cherry Hill to peers like Annaly Capital Management (NLY) or AGNC Investment Corp. (AGNC) in terms of leverage and dividend yield can provide context.
• The 17.5% annualized dividend yield is relatively high compared to the average mortgage REIT dividend yield, which may indicate higher risk.
• The portfolio leverage of 5.3x is within a typical range for mortgage REITs, but it's important to assess the composition and risk profile of the underlying assets.
• The net interest spread of 2.90% is a key indicator of profitability and should be compared to industry averages and competitor performance.

Stakeholder Impact

• Shareholders will be impacted by the dividend payout and the company's ability to generate sustainable returns.
• Employees may be affected by the internalization of management and any associated changes in compensation or benefits.
• The company's performance will impact its relationships with its lenders and other creditors.

Next Steps

• The company will discuss the investor presentation on a conference call today at 5:00 pm Eastern Time.
• Investors can find additional information in the company's Annual Report on Form 10-K and the investor presentation on the company's website.

Key Dates