10-Q 1 ef20026283_10q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to ________
Commission file number 001-36099

CHERRY HILL MORTGAGE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)

Maryland
 
46-1315605
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)

1451 Route 34, Suite 303
 
 
Farmingdale, New Jersey
 
07727
(Address of Principal Executive Offices)
 
(Zip Code)

(877) 870 – 7005
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CHMI
New York Stock Exchange
8.20% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share
CHMI-PRA
New York Stock Exchange
8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share
CHMI-PRB
New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller reporting company
 
 
 
 
Emerging growth company
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

As of May 6, 2024, there were 30,019,969 outstanding shares of common stock, $0.01 par value per share, of Cherry Hill Mortgage Investment Corporation.



CHERRY HILL MORTGAGE INVESTMENT CORPORATION
 
TABLE OF CONTENTS
 
   
Page
   
3
     
PART I.
5
     
Item 1.
5
     
  5
     
  6
     
  7
     
  8
     
  9
     
  10
     
Item 2.
44
     
Item 3.
65
     
Item 4.
69
   
PART II.
70
   
Item 1.
70
   
Item 1A.
70
     
Item 2.
70
     
Item 3.
70
     
Item 4.
70
     
Item 5.
70
     
Item 6.
71
 
GLOSSARY

This glossary defines some, but not all, of the terms that we use elsewhere in this Quarterly Report on Form 10-Q. In this Quarterly Report on Form 10-Q, unless specifically stated otherwise or the context otherwise indicates, references to “we”, “us”, “our”, the “Company” or “CHMI” refer to Cherry Hill Mortgage Investment Corporation, a Maryland corporation, together with its consolidated subsidiaries; references to the “Manager” refer to Cherry Hill Mortgage Management, LLC, a Delaware limited liability company; and references to the “Operating Partnership” refer to Cherry Hill Operating Partnership, LP, a Delaware limited partnership.
 
 “Agency” means a U.S. Government agency, such as Ginnie Mae, or a GSE.
 
 “Agency RMBS” means RMBS issued by an Agency or for which an Agency guarantees payments of principal and interest on the securities.
 
 “ASC” means an Accounting Standards Codification.
 
 “ASU” means the Accounting Standards Update issued by the FASB.
 
 “ARM” means an adjustable-rate residential mortgage loan.
 
 “CFTC” means the U.S. Commodity Futures Trading Commission.
 
 “CMO” means a collateralized mortgage obligation. CMOs are either loss share securities issued by a GSE or structured debt instruments representing interests in specified pools of mortgage loans subdivided into multiple classes, or tranches, of securities, with each tranche having different maturities or risk profiles.
 
 “Code” means the Internal Revenue Code of 1986, as amended.
 
 “credit enhancement” means techniques to improve the credit ratings of securities, including overcollateralization, creating retained spread, creating subordinated tranches and insurance.
 
 “Excess MSR” means an interest in an MSR, representing a portion of the interest payment collected from a pool of mortgage loans, net of a basic servicing fee paid to the mortgage servicer.
 
 “FASB” means the Financial Accounting Standards Board.
 
 “Fannie Mae” means the Federal National Mortgage Association.
 
 “Freddie Mac” means the Federal Home Loan Mortgage Corporation.
 
 “GAAP” means U.S. generally accepted accounting principles.
 
 “Ginnie Mae” means the Government National Mortgage Association, a wholly-owned corporate instrumentality of the United States of America within the U.S. Department of Housing and Urban Development.
 
 “GSE” means a government-sponsored enterprise. When we refer to GSEs, we mean Fannie Mae or Freddie Mac.
 
 “hybrid ARM” means a residential mortgage loan that has an interest rate that is fixed for a specified period of time (typically three, five, seven or ten years) and thereafter adjusts to an increment over a specified interest rate index.
 
 “inverse IO” means an inverse interest-only security, which is a type of stripped security. These debt securities receive no principal payments and have a coupon rate which has an inverse relationship to its reference index.
 
 “IO” means an interest-only security, which is a type of stripped security. IO strips receive a specified portion of the interest on the underlying assets.
 
 “MBS” means mortgage-backed securities.
 
 “MSR” means a mortgage servicing right. An MSR provides a mortgage servicer with the right to service a mortgage loan or a pool of mortgages in exchange for a portion of the interest payments made on the mortgage or the underlying mortgages. An MSR is made up of two components: a basic servicing fee and an Excess MSR. The basic servicing fee is the amount of compensation for the performance of servicing duties.
 
 “mortgage loan” means a loan secured by real estate together with the right to receive the payment of principal and interest on the loan (including the servicing fee).

 “non-Agency RMBS” means CMOs that either are loss share securities issued by a GSE or are not issued or guaranteed by an Agency, including investment grade (AAA through BBB rated) and non-investment grade (BB rated through unrated) classes.
 
 “REIT” means a real estate investment trust under the Code.
 
 “residential mortgage pass-through certificate” is a MBS that represents an interest in a “pool” of mortgage loans secured by residential real property where payments of both interest and principal (including principal prepayments) on the underlying residential mortgage loans are made monthly to holders of the security, in effect “passing through” monthly payments made by the individual borrowers on the mortgage loans that underlie the security, net of fees paid to the issuer/guarantor and servicer.
 
 “RMBS” means a residential Agency RMBS or a non-Agency RMBS.
 
 “Servicing Related Assets” means Excess MSRs and MSRs.
 
 “SIFMA” means the Securities Industry and Financial Markets Association.
 
 “stripped security” is an RMBS structured with two or more classes that receives different distributions of principal or interest on a pool of RMBS. Stripped securities include IOs and inverse IOs.
 
 “TBA” means a forward-settling Agency RMBS where the pool is “to-be-announced.” In a TBA, a buyer will agree to purchase, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date.
 
 “TRS” means a taxable REIT subsidiary.
 
 “UPB” means unpaid principal balance.
 
 “U.S. Treasury” means the U.S. Department of Treasury.
 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
 
          Cherry Hill Mortgage Investment Corporation (together with its consolidated subsidiaries, the “Company”, “we”, “our” or “us”) makes forward-looking statements in this Quarterly Report on Form 10-Q within the meaning of the Private Securities Litigation Reform Act of 1995 (as set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. When the Company uses the words “believe”, “expect”, “anticipate”, “estimate”, “plan”, “continue”, “intend”, “should”, “could”, “would”, “may”, “potential” or the negative of these terms or other comparable terminology, the Company intends to identify forward-looking statements. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ materially from our beliefs, expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Statements regarding the following subjects, among others, may be forward-looking:
 
the Company’s investment objectives and business strategy;
 
the Company’s ability to raise capital through the sale of its equity and debt securities and to invest the net proceeds of any such offering in the target assets, if any, identified at the time of the offering;
 
the Company’s ability to obtain future financing arrangements and refinance existing financing arrangements as they mature;
 
the Company’s expected leverage;
 
the Company’s expected investments and the timing thereof;
 
the Company’s ability to acquire Servicing Related Assets and mortgage and real estate-related securities;
 
the Company’s ability to make distributions to holders of the Company’s common and preferred stock;
 
the Company’s ability to compete in the marketplace;
 
the Company’s ability to hedge interest rate risk and prepayment risk associated with its assets;
 
market, industry and economic trends;
 
recent market developments and actions taken and to be taken by the U.S. Government, the U.S. Treasury, the Board of Governors of the Federal Reserve System, Fannie Mae, Freddie Mac, Ginnie Mae and the U.S. Securities and Exchange Commission (“SEC”);

mortgage loan modification programs and future legislative actions;
 
the Federal Reserve’s potential changes in interest rates;
 
the Company’s ability to qualify and maintain qualification as a REIT under the Code and limitations on the Company’s business due to compliance with requirements for maintaining its qualification as a REIT under the Code;
 
the Company’s ability to maintain an exception from the definitions of “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”), or otherwise not fall within those definitions;
 
projected capital and operating expenditures;
 
availability of qualified personnel; and
 
projected prepayment and/or default rates.
 
The Company’s beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to it or are within its control. If any such change occurs, the Company’s business, financial condition, liquidity and results of operations may vary materially from those expressed in, or implied by, the Company’s forward-looking statements. Important factors, among others, that may cause the Company’s actual results, performance, liquidity or achievements to differ materially from those expressed or implied by the Company’s forward-looking statements include:
 
the factors discussed under “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and “Part I, Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023;
 
general volatility of the capital markets;
 
inflationary trends could result in further interest rate increases or sustained higher interest rates for longer than expected periods of time, which could lead to increased market volatility;
 
changes in the Company’s investment objectives and business strategy;
 
availability, terms and deployment of capital;
 
availability of suitable investment opportunities;
 
the Company’s ability to operate its licensed mortgage servicing subsidiary and oversee the activities of such subsidiary;
 
the Company’s ability to manage various operational and regulatory risks associated with its business;
 
the Company’s dependence on its external manager, Cherry Hill Mortgage Management, LLC, and the Company’s ability to find a suitable replacement if the Company or the Manager were to terminate or not renew the management agreement the Company has entered into with the Manager;
 
changes in the Company’s assets, interest rates or the general economy;
 
increased rates of default and/or decreased recovery rates on the Company’s investments, including as a result of the effects of more severe weather and changes in traditional weather patterns;
 
changes in interest rates, interest rate spreads, the yield curve, prepayment rates or recapture rates;
 
limitations on the Company’s business due to compliance with requirements for maintaining its qualification as a REIT under the Code and the Company’s exception from the definitions of “investment company” under the Investment Company Act (or of otherwise not falling within those definitions);
 
the degree and nature of the Company’s competition, including competition for the residential mortgage assets in which the Company invests; and
 
other risks associated with acquiring, investing in and managing residential mortgage assets.
 
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements apply only as of the date of this Quarterly Report on Form 10-Q. Except as otherwise may be required by law, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
 
PART I. FINANCIAL INFORMATION
 
Item 1.
Consolidated Financial Statements

Cherry Hill Mortgage Investment Corporation and Subsidiaries

Consolidated Balance Sheets
(in thousands — except share and par value data)

   
(unaudited)
       
 
March 31, 2024
   
December 31, 2023
 
Assets
           
RMBS, at fair value (including pledged assets of $1,008,806 and $973,221, respectively)
 
$
1,046,649
   
$
1,012,130
 
Investments in Servicing Related Assets, at fair value (including pledged assets of $250,380 and $253,629, respectively)
   
250,380
     
253,629
 
Cash and cash equivalents
   
47,518
     
52,886
 
Restricted cash
   
5,237
     
16,441
 
Derivative assets
   
19,998
     
19,504
 
Receivables and other assets
   
36,141
     
38,402
 
Total Assets
 
$
1,405,923
   
$
1,392,992
 
Liabilities and Stockholders’ Equity
               
Liabilities
               
Repurchase agreements
 
$
965,005
   
$
903,489
 
Derivative liabilities
   
5,268
     
16,617
 
Notes payable
   
166,392
     
169,314
 
Dividends payable
   
6,500
     
6,650
 
Due to manager
   
1,797
     
1,789
 
Accrued expenses and other liabilities
   
10,822
     
36,758
 
Total Liabilities
 
$
1,155,784
   
$
1,134,617
 
Stockholders’ Equity
               
Series A Preferred stock, $0.01 par value per share, 100,000,000 shares authorized and 2,781,635 shares issued and outstanding as of March 31, 2024 and 100,000,000 shares authorized and 2,781,635 shares issued and outstanding as of December 31, 2023, liquidation preference of $69,541 as of March 31, 2024 and liquidation preference of $69,541 as of December 31, 2023
 
$
67,311
   
$
67,311
 
Series B Preferred stock, $0.01 par value per share, 100,000,000 shares authorized and 1,703,028 shares issued and outstanding as of March 31, 2024 and 100,000,000 shares authorized and 2,000,000 shares issued and outstanding as of December 31, 2023, liquidation preference of $42,576 as of March 31, 2024 and liquidation preference of $50,000 as of December 31, 2023
   
40,931
     
48,068
 
Common stock, $0.01 par value per share, 500,000,000 shares authorized and 30,019,969 shares issued and outstanding as of March 31, 2024 and 500,000,000 shares authorized and 30,019,969 shares issued and outstanding as of December 31, 2023
   
305
     
305
 
Additional paid-in capital
   
375,546
     
375,498
 
Accumulated Deficit
   
(227,997
)
   
(233,161
)
Accumulated other comprehensive loss
   
(9,141
)
   
(2,545
)
Total Cherry Hill Mortgage Investment Corporation Stockholders’ Equity
 
$
246,955
   
$
255,476
 
Non-controlling interests in Operating Partnership
   
3,184
     
2,899
 
Total Stockholders’ Equity
 
$
250,139
   
$
258,375
 
Total Liabilities and Stockholders’ Equity
 
$
1,405,923
   
$
1,392,992
 

See accompanying notes to consolidated financial statements.

Cherry Hill Mortgage Investment Corporation and Subsidiaries
Consolidated Statements of Income (Loss)
(Unaudited)
(in thousands — except share and per share data)

 
 
Three Months Ended March 31,
 
 
 
2024
   
2023
 
Income
           
Interest income
 
$
12,741
   
$
11,795
 
Interest expense
   
13,648
     
11,955
 
Net interest expense
   
(907
)
   
(160
)
Servicing fee income
   
12,891
     
13,874
 
Servicing costs
   
2,634
     
2,765
 
Net servicing income
   
10,257
     
11,109
 
Other income (loss)
               
Realized loss on RMBS, net
   
-
     
(981
)
Realized gain (loss) on derivatives, net
   
6,252
     
(5,600
)
Unrealized loss on RMBS, measured at fair value through earnings, net
   
(8,321
)
    (192 )
Unrealized gain (loss) on derivatives, net
   
12,324
     
(12,246
)
Unrealized loss on investments in Servicing Related Assets
   
(3,257
)
   
(8,668
)
Total Income (Loss)
   
16,348
     
(16,738
)
Expenses
               
General and administrative expense
   
1,841
     
1,523
 
Management fee to affiliate
   
1,748
     
1,680
 
Total Expenses
   
3,589
     
3,203
 
Income (Loss) Before Income Taxes
   
12,759
     
(19,941
)
Provision for (Benefit from) corporate business taxes
   
703
     
(619
)
Net Income (Loss)
   
12,056
     
(19,322
)
Net (income) loss allocated to noncontrolling interests in Operating Partnership
   
(235
)
   
377
 
Dividends on preferred stock
   
(2,307
)
   
(2,463
)
Gain on repurchase and retirement of preferred stock
    152       -  
Net Income (Loss) Applicable to Common Stockholders
 
$
9,666
   
$
(21,408
)
Net Income (Loss) Per Share of Common Stock
               
Basic
 
$
0.32
   
$
(0.87
)
Diluted
 
$
0.32
   
$
(0.87
)
Weighted Average Number of Shares of Common Stock Outstanding
               
Basic
   
29,978,134
     
24,662,823
 
Diluted
   
30,019,969
     
24,685,241
 

See accompanying notes to consolidated financial statements.


Cherry Hill Mortgage Investment Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands)

 
 
Three Months Ended March 31,
 
 
 
2024
   
2023
 
Net income (loss)
 
$
12,056
   
$
(19,322
)
Other comprehensive income (loss):
               
Unrealized gain (loss) on RMBS, available-for-sale, net
   
(6,596
)
   
14,639
 
Net other comprehensive income (loss)
   
(6,596
)
   
14,639
 
Comprehensive income (loss)
 
$
5,460
   
$
(4,683
)
Comprehensive (income) loss attributable to noncontrolling interests in Operating Partnership
   
(106
)
   
91
 
Dividends on preferred stock
   
(2,307
)
   
(2,463
)
Gain on repurchase and retirement of preferred stock
    152       -  
Comprehensive income (loss) attributable to common stockholders
 
$
3,199
   
$
(7,055
)

See accompanying notes to consolidated financial statements.


Cherry Hill Mortgage Investment Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in thousands — except share and per share data)

 
 
Common
Stock
Shares
   
Common
Stock
Amount
   
Preferred
Stock
Shares
   
Preferred
Stock
Amount
   
Additional
Paid-in
Capital
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Retained
Earnings
(Deficit)
   
Non-
Controlling
Interest in
Operating
Partnership
   
Total
Stockholders’
Equity
 
Balance, December 31, 2022
   
23,508,130
   
$
239
     
4,781,635
   
$
115,379
   
$
344,510
   
$
(29,104
)
 
$
(168,989
)
 
$
3,481
   
$
265,516
 
Issuance of common stock
   
2,140,000
     
22
     
-
     
-
     
12,672
     
-
     
-
     
-
     
12,694
 
Net Loss
   
-
     
-
     
-
     
-
     
-
     
-
     
(18,945
)
   
(377
)
   
(19,322
)
Net Other Comprehensive Income
   
-
     
-
     
-
     
-
     
-
     
14,639
     
-
     
-
     
14,639
 
LTIP-OP Unit awards
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
117
     
117
 
Distribution paid on LTIP-OP Units
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(109
)
   
(109
)
Common dividends declared, $0.27 per share
   
-
     
-
     
-
     
-
     
-
     
-
     
(6,927
)
   
-
     
(6,927
)
Preferred Series A dividends declared, $0.5125 per share
   
-
     
-
     
-
     
-
     
-
     
-
     
(1,432
)
   
-
     
(1,432
)
Preferred Series B dividends declared, $0.5156 per share
   
-
     
-
     
-
     
-
     
-
     
-
     
(1,031
)
   
-
     
(1,031
)
Balance, March 31, 2023
   
25,648,130
   
$
261
     
4,781,635
   
$
115,379
   
$
357,182
   
$
(14,465
)
 
$
(197,324
)
 
$
3,112
   
$
264,145
 
 
                                                                       
Balance, December 31, 2023
   
30,019,969
   
$
305
     
4,781,635
   
$
115,379
   
$
375,498
   
$
(2,545
)
 
$
(233,161
)
 
$
2,899
   
$
258,375
 
Issuance of common stock
   
-
     
-
     
-
     
-
     
48
     
-
     
-
     
-
     
48
 
Repurchase and retirement of preferred stock
    -       -       (296,972 )     (7,137 )     -       -       152       -       (6,985 )
Net Income
   
-
     
-
     
-
     
-
     
-
     
-
     
11,821
     
235
     
12,056
 
Net Other Comprehensive Loss
   
-
     
-
     
-
     
-
     
-
     
(6,596
)
   
-
     
-
     
(6,596
)
LTIP-OP Unit awards
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
124
     
124
 
Distribution paid on LTIP-OP Units
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(74
)
   
(74
)
Common dividends declared, $0.15 per share
   
-
     
-
     
-
     
-
     
-
     
-
     
(4,502
)
   
-
     
(4,502
)
Preferred Series A dividends declared, $0.5125 per share
   
-
     
-
     
-
     
-
     
-
     
-
     
(1,432
)
   
-
     
(1,432
)
Preferred Series B dividends declared, $0.5156 per share
   
-
     
-
     
-
     
-
     
-
     
-
     
(875
)
   
-
     
(875
)
Balance, March 31, 2024
   
30,019,969
   
$
305
     
4,484,663
   
$
108,242
   
$
375,546
   
$
(9,141
)
 
$
(227,997
)
 
$
3,184
   
$
250,139
 

See accompanying notes to consolidated financial statements.


Cherry Hill Mortgage Investment Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 
 
Three Months Ended March 31,
 
 
 
2024
   
2023
 
Cash Flows From Operating Activities
           
Net income (loss)
 
$
12,056
   
$
(19,322
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               
Realized loss on RMBS, net
   
-
     
981
 
Unrealized loss on investments in Servicing Related Assets
   
3,257
     
8,668
 
Realized (gain) loss on derivatives, net
   
(6,252
)
   
5,600
 
Unrealized loss on RMBS, measured at fair value through earnings, net
    8,321       192  
Unrealized (gain) loss on derivatives, net
   
(12,324
)
   
12,246
 
Amortization (accretion) of premiums on RMBS
   
(647
)
   
(380
)
Amortization of deferred financing costs
   
78
     
40
 
LTIP-OP Unit awards
   
124
     
117
 
Changes in:
               
Receivables and other assets, net
   
2,264
     
(854
)
Due to affiliates
   
8
     
33
 
Accrued expenses and other liabilities, net
   
(25,936
)
   
(3,673
)
Net cash provided by (used in) operating activities
 
$
(19,051
)
 
$
3,648
 
Cash Flows From Investing Activities
               
Purchase of RMBS
   
(65,752
)
   
(251,255
)
Principal paydown of RMBS
   
16,963
     
13,033
 
Proceeds from sale of RMBS
   
-
     
76,490
 
Acquisition of MSRs
   
(9
)
   
129
 
Payments for settlement of derivatives
   
(6,752
)
   
(1,553
)
Proceeds from settlement of derivatives
    -       5,901  
Net cash used in investing activities
 
$
(55,550
)
 
$
(157,255
)
Cash Flows From Financing Activities
               
Borrowings under repurchase agreements
   
2,433,783
     
1,922,370
 
Repayments of repurchase agreements
   
(2,372,267
)
   
(1,756,714
)
Proceeds from derivative financing
   
13,483
     
(6,014
)
Principal paydown of bank loans
    (3,000 )     (6,000 )
Dividends paid
   
(6,959
)
   
(8,806
)
LTIP-OP Units distributions paid
   
(74
)
   
(109
)
Issuance of common stock, net of offering costs
   
48
     
12,694
 
Repurchase and retirement of preferred stock
    (6,985 )     -
 
Net cash provided by financing activities
 
$
58,029
   
$
157,421
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
 
$
(16,572
)
 
$
3,814
 
Cash, Cash Equivalents and Restricted Cash, Beginning of Period
   
69,327
     
65,554
 
Cash, Cash Equivalents and Restricted Cash, End of Period
 
$
52,755
   
$
69,368
 
Supplemental Disclosure of Cash Flow Information
               
Cash paid during the period for interest expense
 
$
7,640
   
$
6,494
 
Supplemental Schedule of Non-Cash Investing and Financing Activities
               
Dividends declared but not paid
 
$
6,500
   
$
9,067
 

See accompanying notes to consolidated financial statements.

Cherry Hill Mortgage Investment Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)

Note 1 — Organization and Operations

Cherry Hill Mortgage Investment Corporation (together with its consolidated subsidiaries, the “Company”) was incorporated in Maryland on October 31, 2012 and was organized to invest in residential mortgage assets in the United States. Under the Company’s charter, the Company is authorized to issue up to 500,000,000 shares of common stock and 100,000,000 shares of preferred stock, each with a par value of $0.01 per share.

The accompanying consolidated financial statements include the accounts of the Company’s subsidiaries, Cherry Hill Operating Partnership, LP (the “Operating Partnership”), CHMI Sub-REIT, Inc. (the “Sub-REIT”), Cherry Hill QRS I, LLC, Cherry Hill QRS II, LLC, Cherry Hill QRS III, LLC (“QRS III”), Cherry Hill QRS IV, LLC (“QRS IV”), Cherry Hill QRS V, LLC (“QRS V”), CHMI Solutions, Inc. (“CHMI Solutions”) and Aurora Financial Group, Inc. (“Aurora”).

The Company is party to a management agreement (the “Management Agreement”) with Cherry Hill Mortgage Management, LLC (the “Manager”), a Delaware limited liability company established by Mr. Stanley Middleman. The Manager is a party to a services agreement (the “Services Agreement”) with Freedom Mortgage Corporation (“Freedom Mortgage”) (in such capacity, the “Services Provider”), which is owned and controlled by Mr. Middleman. Prior to April 18, 2024, the Manager was owned by a “blind trust” for the benefit of Mr. Middleman. On April 18, 2024, ownership of the Manager was transferred to Mr. Middleman. For a further discussion of the Management Agreement, see Note 7.

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with its short taxable year ended December 31, 2013. As long as the Company continues to comply with a number of requirements under federal tax law and maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income taxes to the extent that the Company distributes its taxable income to its stockholders on an annual basis and does not engage in prohibited transactions. However, certain activities that the Company may perform may cause it to earn income that will not be qualifying income for REIT purposes.

We conduct substantially all of our operations and own substantially all of our assets through our Operating Partnership. We are the sole general partner of our Operating Partnership. As of March 31, 2024, we owned 98.1% of our Operating Partnership. Our Operating Partnership, in turn, owns all of the outstanding common stock of the Sub-REIT. The Sub-REIT elected to be taxed as a REIT under the Code commencing with the taxable year ended December 31, 2020.

Note 2 — Basis of Presentation and Significant Accounting Policies

Basis of Accounting

The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company consolidates those entities in which it has an investment of 50% or more and has control over significant operating, financial and investing decisions of the entity. The consolidated financial statements reflect all necessary and recurring adjustments for fair presentation of the results for the periods presented herein.
Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make a number of significant estimates and assumptions. These include estimates of the fair value of Servicing Related Assets, RMBS and derivatives; credit losses and other estimates that affect the reported amounts of certain assets, revenues, liabilities and expenses as of the date of, and for the periods covered by, the consolidated financial statements. It is likely that changes in these estimates will occur in the near term. The Company’s estimates are inherently subjective. Actual results could differ from the Company’s estimates, and the differences may be material.

Risks and Uncertainties

In the normal course of business, the Company encounters primarily two significant types of economic risk: credit and market. Credit risk is the risk of default on the Company’s investments in RMBS, Servicing Related Assets and derivatives that results from a borrower’s or derivative counterparty’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of investments in RMBS, Servicing Related Assets and derivatives due to changes in interest rates, spreads or other market factors, including prepayment speeds on the Company’s RMBS and Servicing Related Assets. The Company is subject to the risks involved with real estate and real estate-related debt instruments. These include, among others, the risks normally associated with changes in the general economic climate, changes in the mortgage market, changes in tax laws, interest rate levels, and the availability of financing.

The Company also is subject to certain risks relating to its status as a REIT for U.S. federal income tax purposes. If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to U.S. federal income tax on its REIT income, which could be material. Unless entitled to relief under certain statutory provisions, the Company would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost.

Investments in RMBS

Classification – The Company reports all of its investments in RMBS at fair value on its consolidated balance sheets. Pursuant to Accounting Standards Codification (“ASC”) 320, Investments – Debt and Equity Securities, the Company may designate a security as held-to-maturity, available-for-sale or trading, at the time of purchase, depending on the Company’s ability and intent to hold the security to maturity. Alternatively, the Company may elect the fair value option of accounting for securities pursuant to ASC 825, Financial Instruments. Prior to January 1, 2023, the Company designated its RMBS as available-for sale. On January 1, 2023, the Company elected the fair value option of accounting for all RMBS acquired after such date. Unrealized gains and losses on securities classified as available-for sale are reported in “Other comprehensive income (loss)” within the consolidated statements of comprehensive income (loss), whereas unrealized gains and losses on securities for which the Company elected the fair value option are reported in “Unrealized loss on RMBS, measured at fair value through earnings, net” within the consolidated statements of income (loss).

Fair value is determined under the guidance of ASC 820, Fair Value Measurements and Disclosures. Management’s judgment is used to arrive at the fair value of the Company’s RMBS investments, taking into account prices obtained from third-party pricing providers and other applicable market data. The third-party pricing providers use pricing models that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset periods, issuer, prepayment speeds, credit enhancements and expected life of the security. The Company’s application of ASC 820 guidance is discussed in further detail in Note 9.

Investment securities transactions are recorded on the trade date. At disposition, the net realized gain or loss on securities is determined on the basis of the cost of the specific investment and for securities designated as available-for-sale, the unrealized gain or loss is reclassified out of accumulated other comprehensive income into earnings. All RMBS purchased and sold during the three-month period ended March 31, 2024 and the year ended December 31, 2023, were settled prior to period-end.

Revenue Recognition – Interest income from coupon payments is accrued based on the outstanding principal amount of the RMBS and their contractual terms. Premiums and discounts associated with the purchase of the RMBS are amortized and accreted, respectively, into interest income over the projected lives of the securities using the effective interest method. The Company’s policy for estimating prepayment speeds for calculating the effective yield is to evaluate historical performance, consensus on prepayment speeds, and current market conditions. Adjustments are made for actual prepayment activity. We recognized interest receivable of approximately $4.2 million and $4.0 million at March 31, 2024 and December 31, 2023, respectively. Interest income receivable has been classified within “Receivables and other assets” on the consolidated balance sheets. For further discussion of Receivables and other assets, see Note 13.

ImpairmentWhen the fair value of an available-for-sale designated security is less than its amortized cost basis as of the balance sheet date, the security’s cost basis is considered impaired. If the Company determines that it intends to sell the security or it is more likely than not that it will be required to sell before recovery, the Company recognizes the difference between the fair value and amortized cost as a loss in the consolidated statements of income (loss). If the Company determines it does not intend to sell the security or it is not more likely than not it will be required to sell the security before recovery, the Company must evaluate the decline in the fair value of the impaired security and determine whether such decline resulted from a credit loss or non-credit related factors. In its assessment of whether a credit loss exists, the Company performs a qualitative assessment around whether a credit loss exists and if necessary, it compares the present value of estimated future cash flows of the impaired security with the amortized cost basis of such security. The estimated future cash flows reflect those that a “market participant” would use and typically include assumptions related to fluctuations in interest rates, prepayment speeds, default rates, collateral performance, and the timing and amount of projected credit losses, as well as incorporating observations of current market developments and events. Cash flows are discounted at an interest rate equal to the current yield used to accrete interest income. If the present value of estimated future cash flows is less than the amortized cost basis of the security, an expected credit loss exists and is included in provision for credit losses on securities in the consolidated statements of income (loss). Since all of the Company’s available-for-sale designated securities are Agency RMBS, the Company does not have an allowance for credit losses.

Investments in MSRs

Classification – MSRs represent the contractual right to service mortgage loans. The Company has elected the fair value option to record its investments in MSRs in order to provide users of the consolidated financial statements with better information regarding the effects of prepayment risk and other market factors on the MSRs. Under this election, the Company records a valuation adjustment on its investments in MSRs on a quarterly basis to recognize the changes in fair value of its MSRs in net income as described below.

Although transactions in MSRs are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, delinquency levels, costs to service and discount rates). Changes in the fair value of MSRs are reported on the consolidated statements of income (loss). Fluctuations in the fair value of MSRs are recorded within “Unrealized gain (loss) on investments in Servicing Related Assets” on the consolidated statements of income (loss). Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the MSRs and, therefore, may differ from their effective yields. In determining the valuation of MSRs in accordance with ASC 820, management uses internally developed pricing models that are based on certain unobservable market-based inputs. The Company classifies these valuations as Level 3 in the fair value hierarchy. The Company’s application of ASC 820 guidance is discussed in further detail in Note 9.

Revenue Recognition – Mortgage servicing fee income represents revenue earned for servicing mortgage loans. The servicing fees are based on a contractual percentage of the outstanding principal balance and are recognized as revenue as the related mortgage payments are collected. Corresponding costs to service are charged to expense as incurred. Servicing fee income received and servicing expenses incurred are reported on the consolidated statements of income (loss). Float income from custodial accounts associated with MSRs is included in “Net interest income” on the consolidated statements of income (loss). Late fees and ancillary income are included in “Servicing fee income” on the consolidated statements of income (loss).

As an owner of MSRs, the Company may be obligated to fund advances of principal and interest payments due to third-party owners of the loans underlying the MSRs, but not yet received from the individual borrowers. These advances are reported as servicing advances within the “Receivables and other assets” line item on the consolidated balance sheets. Reimbursable servicing advances, other than principal and interest advances, also have been classified within “Receivables and other assets” on the consolidated balance sheets. Advances on Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) MSRs made in accordance with the relevant guidelines are generally recoverable. The Company’s servicing related assets were composed entirely of Fannie Mae and Freddie Mac MSRs as of March 31, 2024 and December 31, 2023. As a result, the Company has determined that no reserves for unrecoverable advances for the related underlying loans are necessary at March 31, 2024 and December 31, 2023. For further discussion on the Company’s receivables and other assets, including the Company’s servicing advances, see Note 13.

Derivatives and Hedging Activities

Derivative transactions include swaps, swaptions, U.S. treasury futures and “to-be-announced” securities (“TBAs”). A TBA contract is an agreement to purchase or sell, for future delivery, an Agency RMBS with a specified issuer, term and coupon. Swaps and swaptions are entered into by the Company solely for interest rate risk management purposes. TBAs and U.S. treasury futures are used to manage duration risk as well as basis risk and pricing risk on the Company’s financing facilities for MSRs. The decision as to whether or not a given transaction/position (or portion thereof) is economically hedged is made on a case-by-case basis, based on the risks involved and other factors as determined by senior management, including restrictions imposed by the Code on REITs. In determining whether to economically hedge a risk, the Company may consider whether other assets, liabilities, firm commitments and anticipated transactions already offset or reduce the risk. All transactions undertaken as economic hedges are entered into with a view towards minimizing the potential for economic losses that could be incurred by the Company. Generally, derivatives entered into are not intended to qualify as hedges under GAAP, unless specifically stated otherwise.

From time to time, the Company enters into a TBA dollar roll which represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the “drop”. The drop is a reflection of the expected net interest income from an investment in similar Agency RMBS, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, drop income on TBA dollar rolls generally represents the economic equivalent of the net interest income earned on the underlying Agency RMBS less an implied financing cost. TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions.

The Company’s bi-lateral derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. The Company reduces such risk by limiting its exposure to any one counterparty. In addition, the potential risk of loss with any one party resulting from this type of credit risk is monitored. The Company’s interest rate swaps and U.S. treasury futures are required to be cleared on an exchange, which further mitigates, but does not eliminate, credit risk. Management does not expect any material losses as a result of default by other parties to its derivative financial instruments.

Classification – All derivatives, including TBAs, are recognized as either assets or liabilities on the consolidated balance sheets and measured at fair value. The fair value of TBA derivatives is determined using methods similar to those used to value Agency RMBS. Due to the nature of these instruments, they may be in a receivable/asset position or a payable/liability position at the end of an accounting period. Derivative amounts payable to, and receivable from, the same party under a contract may be offset as long as the following conditions are met: (i) each of the two parties owes the other determinable amounts; (ii) the reporting party has the right to offset the amount owed with the amount owed by the other party; (iii) the reporting party intends to offset; and (iv) the right to offset is enforceable by law. The Company reports the fair value of derivative instruments gross of cash paid or received pursuant to credit support agreements, and fair value may be reflected on a net counterparty basis when the Company believes a legal right of offset exists under an enforceable master netting agreement. For further discussion on offsetting assets and liabilities, see Note 8.

Revenue Recognition – With respect to derivatives that have not been designated as hedges, any payments under, or fluctuations in the fair value of, such derivatives have been recognized currently in “Realized gain (loss) on derivatives, net” and “Unrealized gain (loss) on derivatives, net”, respectively, in the consolidated statements of income (loss). Interest rate swap periodic interest income (expense) is included in “Realized gain (loss) on derivatives, net” in the consolidated statements of income (loss).

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid short-term investments with maturities of 90 days or less when purchased to be cash equivalents. Substantially all amounts on deposit with major financial institutions exceed insured limits. Restricted cash represents the Company’s cash held by counterparties (i) as collateral against the Company’s derivatives (approximately $4.3 million and $16.4 million at March 31, 2024 and December 31, 2023, respectively) and (ii) as collateral for borrowings under its repurchase agreements (approximately $900,000 and $0 at March 31, 2024 and December 31, 2023, respectively).

The Company’s centrally cleared interest rate swaps require that the Company post an “initial margin” amount determined by the clearing exchange, which is generally intended to be set at a level sufficient to protect the exchange from the interest rate swap’s maximum estimated single-day price movement. The Company also exchanges “variation margin” based upon daily changes in fair value, as measured by the exchange. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is a settlement of the interest rate swap, as opposed to pledged collateral. The Company has accounted for the receipt or payment of variation margin on interest rate swaps as a direct reduction or increase to the carrying value of the interest rate swap asset or liability. At March 31, 2024 and December 31, 2023, approximately $75.7 million and $75.8 million, respectively, of variation margin was reported as a decrease to the interest rate swap asset, at fair value.

Due to Manager

The sum under “Due to manager” on the consolidated balance sheets represents amounts due to the Manager pursuant to the Management Agreement. For further information on the Management Agreement, see Note 7.

Income Taxes

The Company elected to be taxed as a REIT under Code Sections 856 through 860 beginning with its short taxable year ended December 31, 2013. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate income tax rates to the extent that it annually distributes less than 100% of its taxable income. The Company’s TRS, CHMI Solutions, as well as CHMI Solutions’ wholly-owned subsidiary, Aurora, are subject to U.S. federal income taxes on their taxable income. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its stockholder composition. In 2017, the Internal Revenue Service issued a revenue procedure permitting “publicly offered” REITs to make elective stock dividends (i.e., dividends paid in a mixture of stock and cash), with at least 20% of the total distribution being paid in cash, to satisfy their REIT distribution requirements. In December 2021, the Internal Revenue Service issued a revenue procedure that temporarily reduced the minimum amount of the total distribution that must be paid in cash to 10% for distributions declared on or after November 1, 2021, and on or before June 30, 2022, provided certain other parameters detailed in the Revenue Procedure are satisfied. Pursuant to these revenue procedures, the Company has in the past elected to make distributions of its taxable income in a mixture of stock and cash.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires the recording of deferred income taxes that reflect the net tax effect of temporary differences between the carrying amounts of the Company’s assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, including operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in earnings in the period that includes the enactment date. The Company assesses its tax positions for all open tax years and determines if it has any material unrecognized liabilities in accordance with ASC 740. The Company records these liabilities to the extent it deems them more-likely-than-not to be incurred. The Company records interest and penalties related to income taxes within the provision for income taxes in the consolidated statements of income (loss). The Company has not incurred any interest or penalties.

Realized Gain (Loss) on RMBS

The Company did not sell any RMBS during the three-month period ended March 31, 2024. The following table presents realized gains or losses on RMBS for the periods indicated (dollars in thousands):

 
 
Three Months Ended March 31,
 
 
 
2024
   
2023
 
Realized loss on RMBS, net
           
Loss on RMBS, available-for-sale, measured at fair value through OCI (A)
  $
-
    $
(981
)
Realized loss on RMBS, net
 
$
-
   
$
(981
)

(A)  Reclassified from accumulated other comprehensive income into earnings.

Repurchase Agreements and Interest Expense

The Company finances its investments in RMBS with short-term borrowings under master repurchase agreements. Borrowings under the repurchase agreements are generally short-term debt due within one year. These borrowings generally bear interest rates offered by the “lending” counterparty from time to time for the term of the proposed repurchase transaction (e.g. 30 days, 60 days etc.) of a specified margin over the overnight SOFR rate. The repurchase agreements represent uncommitted financing. Borrowings under these agreements are treated as collateralized financing transactions and are carried at their contractual amounts, as specified in the respective agreements. Interest is recorded at the contractual amount on an accrual basis.

Dividends Payable

Because the Company is organized as a REIT under the Code, it is required by law to distribute annually at least 90% of its REIT taxable income, which it does in the form of quarterly dividend payments. The Company accrues the dividend payable on outstanding shares on the accounting date, which causes an offsetting reduction in retained earnings.

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period resulting from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company’s purposes, comprehensive income represents net income (loss), as presented in the consolidated statements of income (loss), adjusted for unrealized gains or losses on RMBS, which are designated as available for sale.
Recent Accounting Pronouncements


Segment Reporting - In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires public companies to disclose information about their reportable segments’ significant expenses on an interim and annual basis to provide more transparency about the expenses they incur from revenue generating business units. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect the adoption of the new standard to have a material effect on its Consolidated Financial Statements.


Income Taxes - In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard requires entities to provide additional information about federal, state and foreign income taxes and reconciling items in the rate reconciliation table, and to disclose further disaggregation of income taxes paid (net of refunds received) by federal (national), state and foreign taxes by jurisdiction. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance should be applied prospectively, but entities have the option to apply it retrospectively for each period presented. The Company has determined this ASU will not have a material impact on its Consolidated Financial Statements.

Changes in Presentation

Certain prior period amounts have been reclassified to conform to current period presentation.

Note 3 — Segment Reporting

The Company conducts its business through the following segments: (i) investments in RMBS; (ii) investments in Servicing Related Assets; and (iii) “All Other,” which consists primarily of general and administrative expenses, including fees paid to the Company’s directors and management fees and reimbursements paid to the Manager pursuant to the Management Agreement (see Note 7). For segment reporting purposes, the Company does not allocate interest income on short-term investments or general and administrative expenses.

Summary financial data with respect to the Company’s segments is given below, together with the data for the Company as a whole (dollars in thousands):

 
 
Servicing
Related Assets
   
RMBS
   
All Other
   
Total
 
Income Statement
                       
Three Months Ended March 31, 2024
                       
Interest income
 
$
6
   
$
12,735
   
$
-
   
$
12,741
 
Interest expense
   
767
     
12,881
     
-
     
13,648
 
Net interest expense
   
(761
)
   
(146
)
   
-
     
(907
)
Servicing fee income
   
12,891
     
-
     
-
     
12,891
 
Servicing costs
   
2,634
     
-
     
-
     
2,634
 
Net servicing income
   
10,257
     
-
     
-
     
10,257
 
Other income (expense)
   
(4,238
)
   
11,236
     
-
     
6,998
 
Other operating expenses
   
(761
)
   
(158
)
   
(2,670
)
   
(3,589
)
Provision for corporate business taxes
    (703 )     -       -       (703 )
Net Income (Loss)
 
$
3,794
   
$
10,932
   
$
(2,670
)
 
$
12,056
 
                                 
Three Months Ended March 31, 2023
                       
Interest income
 
$
-
   
$
11,795
   
$
-
   
$
11,795
 
Interest expense
   
873
     
11,082
     
-
     
11,955
 
Net interest income (expense)
   
(873
)
   
713
     
-
     
(160
)
Servicing fee income
   
13,874
     
-
     
-
     
13,874
 
Servicing costs
   
2,765
     
-
     
-
     
2,765
 
Net servicing income
   
11,109
     
-
     
-
     
11,109
 
Other expense
   
(4,934
)
   
(22,753
)
   
-
     
(27,687
)
Other operating expenses
   
(563
)
   
(165
)
   
(2,475
)
   
(3,203
)
Benefit from corporate business taxes
   
619
   
-
     
-
     
619
Net Income (Loss)
 
$
5,358
   
$
(22,205
)
 
$
(2,475
)
 
$
(19,322
)

   
Servicing
Related Assets
    RMBS
    All Other
    Total
 
Balance Sheet
                       
March 31, 2024
                       
Investments
 
$
250,380
   
$
1,046,649
   
$
-
   
$
1,297,029
 
Other assets
   
31,228
     
29,474
     
48,192
     
108,894
 
Total assets
   
281,608
     
1,076,123
     
48,192
     
1,405,923
 
Debt
   
166,392
     
965,005
     
-
     
1,131,397
 
Other liabilities
   
5,143
     
9,502
     
9,742
     
24,387
 
Total liabilities
   
171,535
     
974,507
     
9,742
     
1,155,784
 
Net Assets
 
$
110,073
   
$
101,616
   
$
38,450
   
$
250,139
 
                                 
December 31, 2023
                       
Investments
 
$
253,629
   
$
1,012,130
   
$
-
   
$
1,265,759
 
Other assets
   
33,785
     
39,939
     
53,509
     
127,233
 
Total assets
   
287,414
     
1,052,069
     
53,509
     
1,392,992
 
Debt
   
169,314
     
903,489
     
-
     
1,072,803
 
Other liabilities
   
4,240
     
47,990
     
9,584
     
61,814
 
Total liabilities
   
173,554
     
951,479