DEF 14A: Cherry Hill Mortgage Investment Corporation Sets Date for 2024 Annual Stockholders Meeting, Proposes Charter Amendment

Cherry Hill Mortgage Investment Corporation will hold its annual stockholders meeting virtually on June 13, 2024, to vote on director elections, executive compensation, auditor ratification, and a proposed charter amendment.

Summary

• Cherry Hill Mortgage Investment Corporation will hold its 2024 Annual Meeting of Stockholders on June 13, 2024, in a virtual format.
• Stockholders will vote on the election of four director nominees, an advisory vote on executive compensation, ratification of Ernst & Young LLP as the independent auditor, and a proposed amendment to the company's charter.
• The proposed charter amendment aims to remove the board of directors' exclusive power to amend the company's bylaws, giving stockholders concurrent power.
• The company has engaged Morrow Sodali LLC to solicit proxies at an estimated cost of $50,000 plus expenses.
• The proxy statement and annual report are available online at www.envisionreports.com/CHMI.
• As of April 8, 2024, there were 30,019,969 shares of common stock outstanding and entitled to vote.

Sentiment

Score: 5

Explanation: The document presents a mix of positive governance initiatives and concerning financial results, leading to a neutral sentiment score. The proposed charter amendment and ESG efforts are positive, but the net loss and declining book value are significant negatives.

Positives

• The company is committed to good corporate governance, as evidenced by the proposed charter amendment to empower stockholders.
• The board consists of a majority of independent directors.
• The company has implemented a clawback policy for incentive compensation.
• The company publishes an annual ESG report and has a Human Rights Policy.
• The company is committed to diversity and inclusion.

Negatives

• The company experienced a net loss allocable to common stockholders of $44.647 million in 2023, compared to a net income of $11.886 million in 2022.
• Earnings available for distribution (EAD) to common stockholders decreased from $21.827 million in 2022 to $18.423 million in 2023.
• The company's return on equity was -28.0% in 2023, compared to 7.0% in 2022.
• The company's GAAP book value per share of common stock decreased from $6.06 to $4.53.
• Approximately 61% of the votes cast on last year's say-on-pay proposal were voted in favor of the proposal, down from approximately 86% in the prior year.

Risks

• Climate change could have a material adverse effect on the company's operations and financial performance.
• The company's reliance on its Manager and Freedom Mortgage for personnel and services poses a risk if those relationships are disrupted.
• Cybersecurity incidents could pose a risk to the company's financial reporting and controls.
• The company's business is subject to various legal and regulatory requirements, and non-compliance could result in penalties.
• The company's performance is subject to market volatility and changes in interest rates.

Future Outlook

The company aims to generate attractive current yields and risk-adjusted total returns for its stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation.

Management Comments

• The Board believes that a virtual meeting format will provide the opportunity for full and equal participation by all stockholders, from any location around the world.
• The Board and management value the opportunity to engage with our stockholders so as to better understand and focus on the priorities that matter most to them, and to foster consistent and constructive dialogue.

Industry Context

As a mortgage REIT, Cherry Hill operates in a sector sensitive to interest rate changes, housing market conditions, and regulatory policies. The company's performance is influenced by factors affecting the broader mortgage and financial services industries.

Comparison to Industry Standards

• The company compares its total economic return on NAV and GAAP BVPS to a peer group of externally and internally managed public mortgage REITs, including Two Harbors Investment Corp., Ellington Residential Mortgage REIT, and Annaly Capital Management, Inc.
• The company's price to book ratio is also compared to the average price to book ratio of its peer group.

Related Party Transactions

• The company has a management agreement with Cherry Hill Mortgage Management, LLC, under which the Manager provides day-to-day management of the company's operations.
• The company reimburses its Manager for the costs of the salary paid to Michael Hutchby, its Chief Financial Officer, Treasurer and Secretary.
• Prior to April 18, 2024, the Manager's sole member was the CHMM Blind Trust, a grantor trust established for the benefit of, but not controlled by, Mr. Middleman.
• On April 26, 2024, Mr. Middleman notified the company that, effective April 18, 2024, the CHMM Blind Trust transferred its sole membership interest in the Manager to Mr. Middleman and Mr. Middleman became the sole member and sole owner of the Manager.
• The Manager is a party to a services agreement with Freedom Mortgage, pursuant to which Freedom Mortgage provides to the Manager personnel, including the company's executive officers, and payroll and benefits administration services.
• Any transaction between the company and Freedom Mortgage or its affiliates requires the approval of the Nominating and Corporate Governance Committee, regardless of the dollar amount of the transaction.

Stakeholder Impact

• The proposed charter amendment could impact shareholders by giving them more power to amend the bylaws.
• The company's financial performance impacts shareholders through dividend distributions and stock value.
• The company's ESG initiatives and human rights policy could impact employees, customers, and suppliers.
• The company's related party transactions could impact shareholders by affecting the company's financial performance and governance.

Next Steps

• Stockholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will hold its Annual Meeting of Stockholders on June 13, 2024.
• The company will file Articles of Amendment with the State Department of Assessments and Taxation in Maryland if the proposed charter amendment is approved.

Key Dates

Keywords

proxy statement, annual meeting, corporate governance, executive compensation, director election, charter amendment, mortgage REIT, related party transactions, audit committee, risk management, ESG, LTIP Units