Cherry Hill Mortgage Investment Corporation Announces Fourth Quarter and Full Year 2024 Results

Rhea-AI Summary

Cherry Hill Mortgage Investment (NYSE: CHMI) has released its Q4 and full-year 2024 results. Key Q4 highlights include:

- GAAP net income of $9.1 million ($0.29 per share)
- Earnings available for distribution (EAD) of $3.3 million ($0.10 per share)
- Common book value per share of $3.82
- Declared regular common dividend of $0.15 per share (17.5% annualized yield)
- Unrestricted cash of $46.3 million

The company reported $0.7 million in net interest income, $8.5 million in net servicing income, and completed management internalization in November 2024. The MSR portfolio's unpaid principal balance was $17.3 billion, with a carrying value of $233.7 million. The RMBS portfolio had a book value of $1.1 billion with a 4.80% weighted average coupon. Portfolio leverage stood at 5.3x at quarter-end.

Positive

• Management internalization completed to reduce operating expenses
• Strong net servicing income of $8.5 million
• Healthy unrestricted cash position of $46.3 million
• High dividend yield of 17.5%

Negative

• Low EAD of $0.10 per share vs $0.15 dividend payout
• Net interest income declined to only $0.7 million
• Net realized loss of $1.1 million on RMBS
• High leverage ratio at 5.3x

Insights

Financial Analyst

Cherry Hill Mortgage's Q4 2024 results reveal concerning dividend coverage dynamics amid strategic restructuring. The REIT reported $0.10 in earnings available for distribution (EAD) per share while maintaining a $0.15 quarterly dividend, creating a significant coverage gap that raises sustainability questions. This 150% payout ratio suggests the current 17.5% yield may be difficult to maintain without improvement in core earnings.

The company's internalization of management represents an important strategic shift that should ultimately reduce operating expenses, though the $0.5 million in special committee expenses ($0.02 per share) created a short-term drag on results. Book value stands at $3.82 per share, positioning the stock at a 10.2% discount to book value based on the current $3.43 share price.

Portfolio metrics show reasonable stability with leverage at 5.3x and $46.3 million in unrestricted cash. The $17.3 billion MSR portfolio (carrying value: $233.7 million) and $1.1 billion RMBS portfolio are being actively hedged through interest rate swaps, TBAs and Treasury futures, though the $10.8 million unrealized loss in accumulated comprehensive income reflects ongoing interest rate sensitivity challenges.

The substantial difference between GAAP earnings ($0.29 per share) and EAD ($0.10 per share) stems primarily from unrealized gains on derivatives and servicing assets that aren't sustainable components of recurring income. Investors should focus on the EAD figure as the more reliable indicator of dividend-supporting capacity.

Portfolio Manager

Cherry Hill's results exemplify the classic mREIT dilemma - attractive headline yield with underlying sustainability concerns. The 17.5% dividend yield stands out in today's market, but the $0.10 EAD versus $0.15 dividend creates a 33% shortfall that cannot persist indefinitely without earnings improvement or eventual dividend reduction.

The recently completed management internalization should be viewed as a long-term positive as it enhances shareholder alignment and eliminates external management fees. However, the immediate benefits remain quantitatively undefined in the release, making it difficult to project when the cost savings might close the current dividend coverage gap.

From a valuation perspective, trading at 89.8% of book value ($3.43 vs. $3.82) suggests the market has already incorporated these dividend sustainability concerns. The net interest spread of 2.90% on the RMBS portfolio demonstrates reasonable earning power, but remains insufficient to fully support the current distribution level.

Cherry Hill's $46.3 million unrestricted cash position provides near-term flexibility, but doesn't solve the fundamental earnings challenge. The complex hedging strategy using swaps, TBAs, and futures indicates active interest rate risk management, though the $10.8 million unrealized loss in the RMBS portfolio suggests continuing vulnerability to rate movements.

Investors attracted to the high yield should recognize they're accepting elevated risk, as the market is clearly signaling skepticism about long-term dividend sustainability through both the high current yield and the discount to book value.

TINTON FALLS, N.J.--(BUSINESS WIRE)-- Cherry Hill Mortgage Investment Corporation (NYSE: CHMI) (“Cherry Hill” or the “Company”) today reported results for the fourth quarter and full year 2024.

Fourth Quarter 2024 Highlights

• 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 of $3.3 million, or $0.10 per diluted share.
• Common book value per share of $3.82 at December 31, 2024.
• GAAP net income applicable to common stockholders, EAD attributable to common stockholders and common book value per share were each impacted by $0.02 per share of special committee-related expenses.
  • The special committee concluded its work in November 2024 after the internalization of management.
• Declared regular common dividend of $0.15 per share; annualized common dividend yield was 17.5% based on the closing sale price of the Company’s common stock as reported by the NYSE on March 5, 2025.
• Aggregate portfolio leverage stood at 5.3x at December 31, 2024.
• As of December 31, 2024, the Company had unrestricted cash of $46.3 million.

“Reflecting on 2024, we are pleased to have successfully completed the internalization of our management structure, which strengthens shareholder alignment and will reduce our operating expenses,” said Jay Lown, President and CEO of Cherry Hill Mortgage Investment Corporation. “We are excited to focus on growing our business and delivering compelling returns to shareholders in 2025 and beyond.”

Operating Results

Cherry Hill reported GAAP net income applicable to common stockholders for the fourth quarter of 2024 of $9.1 million, or $0.29 per basic and diluted weighted average common share outstanding. Reported GAAP net income was determined based primarily on the following: $0.7 million of net interest income, $8.5 million of net servicing income, a net realized loss on RMBS of $1.1 million, a net realized gain of $13.6 million on derivatives, a net unrealized loss of $31.7 million on RMBS measured at fair value through earnings, a net unrealized gain of $21.8 million on derivatives, a net unrealized gain of $6.9 million on investments in Servicing Related Assets, and general and administrative expenses, compensation and benefits and management fees paid to Cherry Hill’s former external manager in the aggregate amount of $4.5 million (which includes special committee-related expenses of $0.5 million).

Earnings available for distribution attributable to common stockholders for the fourth quarter of 2024 were $3.3 million, or $0.10 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.

		Three Months Ended
		December 31, 2024			September 30, 2024
		(unaudited)			(unaudited)
Income
Interest income		$	15,053		$	14,327
Interest expense			14,393			14,218
Net interest income			660			109
Servicing fee income			11,606			11,681
Servicing costs			3,123			3,206
Net servicing income			8,483			8,475
Other income (loss)
Realized loss on RMBS, net			(1,085)			(3,651)
Realized loss on investments in MSRs, net			-			(237)
Realized gain (loss) on derivatives, net			13,627			(7,987)
Realized gain on acquired assets, net			-			2
Unrealized gain (loss) on RMBS, measured at fair value through earnings, net			(31,674)			24,990
Unrealized gain (loss) on derivatives, net			21,838			(21,311)
Unrealized gain (loss) on investments in Servicing Related Assets			6,876			(7,467)
Total Income (Loss)			18,725			(7,077)
Expenses
General and administrative expense			2,507			3,233
Compensation and benefits			1,096			178
Management fee to affiliate			858			1,671
Total Expenses			4,461			5,082
Income (Loss) Before Income Taxes			14,264			(12,159)
Provision for corporate business taxes			2,450			285
Net Income (Loss)			11,814			(12,444)
Net (income) loss allocated to noncontrolling interests in Operating Partnership			(232)			246
Dividends on preferred stock			(2,513)			(2,594)
Net Income (Loss) Applicable to Common Stockholders		$	9,069		$	(14,792)
Net Income (Loss) Per Share of Common Stock
Basic		$	0.29		$	(0.49)
Diluted		$	0.29		$	(0.49)
Weighted Average Number of Shares of Common Stock Outstanding
Basic			31,569,065			30,216,341
Diluted			31,578,138			30,216,341

_______________

Dollar amounts in thousands, except per share amounts.

Net unrealized loss on the Company’s RMBS portfolio classified as available-for-sale that are reported in accumulated other comprehensive income was approximately $10.8 million.

		Three Months Ended
		December 31, 2024			September 30, 2024
		(unaudited)			(unaudited)
Net Income (Loss)		$	11,814		$	(12,444)
Other comprehensive income (loss):
Unrealized gain (loss) on RMBS, available-for-sale, net			(10,795)			16,400
Net other comprehensive income (loss)			(10,795)			16,400
Comprehensive income		$	1,019		$	3,956
Comprehensive loss attributable to noncontrolling interests in Operating Partnership			(19)			(79)
Dividends on preferred stock			(2,513)			(2,594)
Comprehensive income (loss) attributable to common stockholders		$	(1,513)		$	1,283

_____________

Dollar amounts in thousands.

Portfolio Highlights for the Quarter Ended December 31, 2024

The Company realized net servicing fee income of $8.5 million, net interest income of $0.7 million and other income of $9.6 million, primarily related to realized and unrealized gains on derivatives and an unrealized gain on investments in Servicing Related Assets, partially offset by realized and unrealized losses on the RMBS portfolio. The unpaid principal balance for the MSR portfolio stood at $17.3 billion as of December 31, 2024 and the carrying value of the MSR portfolio ended the quarter at $233.7 million. Net interest spread for the RMBS portfolio stood at 2.90% and the debt-to-equity ratio on the aggregate portfolio ended the quarter at 5.3x.

The RMBS portfolio had a book value and carrying value of approximately $1.1 billion at quarter-end December 31, 2024. The portfolio had a weighted average coupon of 4.80% 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 December 31, 2024, the Company held interest rate swaps with a notional amount of $1.2 billion, TBAs with a notional amount of ($435.6) million, and Treasury futures with a notional amount of $73.1 million.

As of December 31, 2024, Cherry Hill’s GAAP book value was $3.82 per diluted share, net of the fourth quarter dividend.

Dividends

On December 12, 2024, the Board of Directors declared a quarterly dividend of $0.15 per share of common stock for the fourth quarter of 2024. The dividend was paid in cash on January 31, 2025 to common stockholders of record as of the close of business on December 31, 2024. 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 $0.6739 per share on the Company’s 8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock for the fourth quarter 2024. The dividends were paid in cash on January 15, 2025 to Series A and B Preferred stockholders of record as of the close of business on December 31, 2024.

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 indication 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.

The following table provides a reconciliation of net income (loss) to EAD for the three months ended December 31, 2024 and September 30, 2024:

		Three Months Ended
		December 31, 2024			September 30, 2024
		(unaudited)			(unaudited)
Net Income (Loss)		$	11,814		$	(12,444)
Realized loss on RMBS, net			1,085			3,651
Realized loss (gain) on derivatives, net ¹			(5,502)			17,588
Realized loss on investments in MSRs, net			-			237
Realized gain on acquired assets, net			-			(2)
Unrealized loss (gain) on RMBS, measured at fair value through earnings, net			31,674			(24,990)
Unrealized loss (gain) on derivatives, net			(21,838)			21,311
Unrealized gain on investments in MSRs, net of estimated MSR amortization			(14,550)			(1,062)
Tax expense on realized and unrealized gain on MSRs			3,235			957
Total EAD:		$	5,918		$	5,246
EAD attributable to noncontrolling interests in Operating Partnership			(113)			(105)
Dividends on preferred stock			(2,513)			(2,594)
EAD Attributable to Common Stockholders		$	3,292		$	2,547
EAD Attributable to Common Stockholders, per Diluted Share		$	0.10		$	0.08
GAAP Net Income (Loss) Per Share of Common Stock, per Diluted Share		$	0.29		$	(0.49)

_________
Dollar amounts in thousands, except per share amounts.
	1.	Excludes drop income on TBA dollar rolls of $310,000 and $757,000 and interest rate swap periodic interest income of $7.8 million and $8.8 million for the three-month periods ended December 31, 2024 and September 30, 2024, 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-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on March 6, 2025. In addition, an investor presentation with supplemental information regarding Cherry Hill, its business and its financial condition as of December 31, 2024 and its results of operations for the full year 2024 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.

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 and the Company’s ability to 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, 2024, and other documents filed by the Company with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250306267875/en/

Cherry Hill Mortgage Investment Corporation

Investor Relations

(877) 870-7005

InvestorRelations@chmireit.com

Source: Cherry Hill Mortgage Investment Corporation

FAQ

What were Cherry Hill Mortgage's (CHMI) key financial metrics for Q4 2024?

CHMI reported Q4 2024 GAAP net income of $9.1 million ($0.29 per share), EAD of $3.3 million ($0.10 per share), and book value per share of $3.82.

What is CHMI's current dividend yield and payment for Q4 2024?

CHMI declared a Q4 2024 dividend of $0.15 per share, representing a 17.5% annualized yield based on March 5, 2025 closing price.

How large is Cherry Hill Mortgage's MSR portfolio as of Q4 2024?

The MSR portfolio had an unpaid principal balance of $17.3 billion and a carrying value of $233.7 million as of December 31, 2024.

What was the impact of CHMI's management internalization in Q4 2024?

The management internalization, completed in November 2024, is expected to strengthen shareholder alignment and reduce operating expenses.