On August 8, 2024, Cherry Hill Mortgage Investment Corp (NYSE: CHMI) released its 8-K filing for the second quarter of 2024. Cherry Hill Mortgage Investment Corp operates as a real estate investment trust (REIT) in the United States, focusing on residential mortgage assets to generate current yields and risk-adjusted total returns for its stockholders. The company's reportable segments include investments in Residential Mortgage-Backed Securities (RMBS), Investments in Servicing Related Assets, and All Others, with the RMBS segment generating the maximum revenue.
Performance and Challenges
Cherry Hill Mortgage Investment Corp reported a GAAP net loss applicable to common stockholders for Q2 2024 of $1.9 million, or $0.06 per basic and diluted weighted average common share outstanding. This performance fell short of analyst estimates, which projected earnings per share (EPS) of $0.30 and revenue of $14.70 million. The company’s net interest income was $0.2 million, while net servicing income stood at $8.9 million. However, the company faced significant challenges, including a net realized loss on RMBS of $1.9 million and a net unrealized loss of $4.4 million on RMBS measured at fair value through earnings.
Financial Achievements
Despite the challenges, Cherry Hill Mortgage Investment Corp achieved some notable financial milestones. The company realized a net gain of $9.4 million on derivatives and a net realized gain of $0.7 million on investments in MSRs. Additionally, the company sold approximately $1.2 billion of unpaid principal balance (UPB) of low-balance MSRs, which is expected to enhance portfolio efficiency and reduce servicing costs. According to Jay Lown, President and CEO of Cherry Hill Mortgage Investment Corp, “We continue to proactively manage our portfolio, navigating spread and volatility risks.”
Income Statement Highlights
| Three Months Ended | June 30, 2024 | March 31, 2024 |
|---|---|---|
| Interest income | $13,677 | $12,741 |
| Interest expense | $13,510 | $13,648 |
| Net interest income (expense) | $167 | $(907) |
| Net servicing income | $8,894 | $10,257 |
| Net income (loss) applicable to common stockholders | $(1,864) | $9,666 |
| Net income (loss) per share of common stock | $(0.06) | $0.32 |
Analysis and Outlook
Cherry Hill Mortgage Investment Corp's performance in Q2 2024 highlights the volatility and spread risks inherent in the mortgage investment sector. The company's proactive measures, such as selling low-balance MSRs and focusing on internalization to reduce expenses, are steps towards stabilizing its financial position. However, the significant unrealized losses on RMBS and derivatives indicate ongoing challenges. The company's ability to navigate these risks and achieve cost efficiencies will be crucial for its long-term performance.
For more detailed information, readers can access the full earnings report and additional financial data on the 8-K filing.
Explore the complete 8-K earnings release (here) from Cherry Hill Mortgage Investment Corp for further details.
