☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland
|
46-1315605
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
|
301 Harper Drive, Suite 110
Moorestown, New Jersey
|
08057
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☒
|
Non-accelerated filer
|
☐ (Do not check if a smaller reporting company)
|
Smaller reporting company
|
☐
|
Page
|
||
2
|
||
PART I.
|
4
|
|
Item 1.
|
4
|
|
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
9
|
||
Item 2.
|
44
|
|
Item 3.
|
67
|
|
Item 4.
|
72
|
|
PART II.
|
73
|
|
Item 1.
|
73
|
|
Item 1A.
|
73
|
|
Item 2.
|
73
|
|
Item 3.
|
73
|
|
Item 4.
|
73
|
|
Item 5.
|
73
|
|
Item 6.
|
73
|
• | the Company’s investment objectives and business strategy; |
• | the Company’s ability to raise capital through the sale of its equity and debt securities; |
• | 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; |
• | the Company’s ability to execute its prime mortgage loan strategy and its ability to finance this asset class; |
• | the Company’s ability to acquire Servicing Related Assets; |
• | estimates or statements relating to, and the Company’s ability to make, future distributions; |
• | the Company’s ability to compete in the marketplace; |
• | market, industry and economic trends; |
• | recent market developments and actions taken and to be taken by the U.S. Government, the U.S. Treasury and 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 Company’s ability to maintain its qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”); |
• | the Company’s ability to maintain its exclusion from registration as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”); |
• | projected capital and operating expenditures; |
• | availability of investment opportunities in mortgage-related, real estate-related and other securities; |
• | availability of qualified personnel; |
• | prepayment rates; and |
• | projected default rates. |
• | the factors discussed under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015; |
• | general volatility of the capital markets; |
• | changes in the Company’s investment objectives and business strategy; |
• | availability, terms and deployment of capital; |
• | availability of suitable investment opportunities; |
• | the Company’s dependence on its external manager, Cherry Hill Mortgage Management, LLC (“the Manager”), and the Company’s ability to find a suitable replacement if the Company or the Manager were to terminate 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; |
• | 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 its exclusion from registration as an investment company under the Investment Company Act; and |
• | the degree and nature of the Company’s competition, including competition for its targeted assets. |
June 30, 2016
|
December 31, 2015
|
|||||||
Assets
|
||||||||
RMBS, available-for-sale
|
$
|
522,151
|
$
|
508,242
|
||||
Investments in Servicing Related Assets at fair value
|
97,342
|
97,803
|
||||||
Cash and cash equivalents
|
9,820
|
10,603
|
||||||
Restricted cash
|
15,851
|
9,942
|
||||||
Derivative assets
|
313
|
422
|
||||||
Receivables and other assets
|
9,924
|
9,328
|
||||||
Total Assets
|
$
|
655,401
|
$
|
636,340
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Liabilities
|
||||||||
Repurchase agreements
|
$
|
456,075
|
$
|
385,560
|
||||
Federal Home Loan Bank advances
|
-
|
62,250
|
||||||
Derivative liabilities
|
10,666
|
4,595
|
||||||
Notes payable
|
22,853
|
24,313
|
||||||
Dividends payable
|
3,689
|
3,684
|
||||||
Due to affiliates
|
1,132
|
998
|
||||||
Payables for unsettled trades
|
4,421
|
-
|
||||||
Accrued expenses and other liabilities
|
6,393
|
2,603
|
||||||
Total Liabilities
|
$
|
505,229
|
$
|
484,003
|
||||
Stockholders’ Equity
|
||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding as of June 30, 2016 and December 31, 2015
|
$
|
-
|
$
|
-
|
||||
Common stock, $0.01 par value, 500,000,000 shares authorized, and 7,528,503 shares issued and outstanding as of June 30, 2016, and 500,000,000 shares authorized, and 7,519,038 shares issued and outstanding as of December 31, 2015
|
75
|
75
|
||||||
Additional paid-in capital
|
148,407
|
148,332
|
||||||
Retained earnings (deficit)
|
(11,016
|
)
|
3,133
|
|||||
Accumulated other comprehensive income (loss)
|
11,630
|
(197
|
)
|
|||||
Total CHMI Stockholders’ Equity
|
$
|
149,096
|
$
|
151,343
|
||||
Non-controlling interests in operating partnership
|
1,076
|
994
|
||||||
Total Stockholders’ Equity
|
$
|
150,172
|
$
|
152,337
|
||||
Total Liabilities and Stockholders’ Equity
|
$
|
655,401
|
$
|
636,340
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Income
|
||||||||||||||||
Interest income
|
$
|
7,135
|
$
|
8,088
|
$
|
12,323
|
$
|
13,915
|
||||||||
Interest expense
|
1,885
|
1,346
|
3,542
|
2,581
|
||||||||||||
Net interest income
|
5,250
|
6,742
|
8,781
|
11,334
|
||||||||||||
Servicing fee income
|
1,574
|
156
|
3,069
|
156
|
||||||||||||
Servicing costs
|
501
|
94
|
903
|
94
|
||||||||||||
Net servicing income (loss)
|
1,073
|
62
|
2,166
|
62
|
||||||||||||
Other income (loss)
|
||||||||||||||||
Realized gain (loss) on RMBS, net
|
235
|
(115
|
)
|
555
|
192
|
|||||||||||
Realized gain (loss) on derivatives, net
|
(299
|
)
|
(52
|
)
|
(1,760
|
)
|
(1,294
|
)
|
||||||||
Realized gain (loss) on acquired assets, net
|
-
|
174
|
-
|
174
|
||||||||||||
Unrealized gain (loss) on derivatives, net
|
(1,228
|
)
|
2,835
|
(6,426
|
)
|
293
|
||||||||||
Unrealized gain (loss) on investments in Excess MSRs
|
(149
|
)
|
2,938
|
(2,456
|
)
|
821
|
||||||||||
Unrealized gain (loss) on investments in MSRs
|
(3,076
|
)
|
(22
|
)
|
(5,308
|
)
|
(22
|
)
|
||||||||
Total Income
|
1,806
|
12,562
|
(4,448
|
)
|
11,560
|
|||||||||||
Expenses
|
||||||||||||||||
General and administrative expense
|
822
|
634
|
1,630
|
1,376
|
||||||||||||
Management fee to affiliate
|
690
|
690
|
1,380
|
1,380
|
||||||||||||
Total Expenses
|
1,512
|
1,324
|
3,010
|
2,756
|
||||||||||||
Income (Loss) Before Income Taxes
|
294
|
11,238
|
(7,458
|
)
|
8,804
|
|||||||||||
Provision for corporate business taxes
|
10
|
(70
|
)
|
(580
|
)
|
(70
|
)
|
|||||||||
Net Income (Loss)
|
284
|
11,308
|
(6,878
|
)
|
8,874
|
|||||||||||
Net (income) loss allocated to noncontrolling interests
|
(1
|
)
|
(103
|
)
|
98
|
(81
|
)
|
|||||||||
Net Income (Loss) Applicable to Common Stockholders
|
$
|
283
|
$
|
11,205
|
$
|
(6,780
|
)
|
$
|
8,793
|
|||||||
Net income (Loss) Per Share of Common Stock
|
||||||||||||||||
Basic
|
$
|
0.04
|
$
|
1.49
|
$
|
(0.90
|
)
|
$
|
1.17
|
|||||||
Diluted
|
$
|
0.04
|
$
|
1.49
|
$
|
(0.90
|
)
|
$
|
1.17
|
|||||||
Weighted Average Number of Shares of Common Stock Outstanding
|
||||||||||||||||
Basic
|
7,509,543
|
7,509,543
|
7,509,543
|
7,509,543
|
||||||||||||
Diluted
|
7,520,616
|
7,509,543
|
7,519,827
|
7,509,543
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net income (loss)
|
$
|
284
|
$
|
11,308
|
$
|
(6,878
|
)
|
$
|
8,874
|
|||||||
Other comprehensive income (loss):
|
||||||||||||||||
Net unrealized gain (loss) on RMBS
|
4,730
|
(6,280
|
)
|
12,382
|
(3,489
|
)
|
||||||||||
Reclassification of net realized (gain) loss on RMBS in earnings
|
(235
|
)
|
115
|
(555
|
)
|
(192
|
)
|
|||||||||
Other comprehensive income (loss)
|
4,495
|
(6,165
|
)
|
11,827
|
(3,681
|
)
|
||||||||||
Comprehensive income (loss)
|
$
|
4,779
|
$
|
5,143
|
$
|
4,949
|
$
|
5,193
|
||||||||
Comprehensive income (loss) attributable to noncontrolling interests
|
68
|
47
|
70
|
48
|
||||||||||||
Comprehensive income (loss) attributable to common stockholders
|
$
|
4,711
|
$
|
5,096
|
$
|
4,879
|
$
|
5,145
|
Common
Stock Shares |
Common
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, 2014
|
7,509,543
|
$
|
75
|
$
|
148,258
|
$
|
6,641
|
$
|
4,799
|
$
|
545
|
$
|
160,318
|
|||||||||||||||
Issuance of common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
8,793
|
81
|
8,874
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
(3,681
|
)
|
-
|
-
|
(3,681
|
)
|
|||||||||||||||||||
LTIP-OP Unit awards
|
-
|
-
|
-
|
-
|
-
|
204
|
204
|
|||||||||||||||||||||
Distribution paid on LTIP-OP Units
|
-
|
-
|
-
|
-
|
-
|
(70
|
)
|
(70
|
)
|
|||||||||||||||||||
Common dividends declared, $1.00 per share
|
-
|
-
|
-
|
-
|
(7,511
|
)
|
-
|
(7,511
|
)
|
|||||||||||||||||||
Balance, June 30, 2015
|
7,509,543
|
$
|
75
|
$
|
148,258
|
$
|
2,960
|
$
|
6,081
|
$
|
760
|
$
|
158,134
|
|||||||||||||||
Balance, December 31, 2015
|
7,519,038
|
$
|
75
|
$
|
148,332
|
$
|
(197
|
)
|
$
|
3,133
|
$
|
994
|
$
|
152,337
|
||||||||||||||
Issuance of common stock
|
9,465
|
-
|
(A)
|
75
|
-
|
-
|
-
|
75
|
||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
(6,780
|
)
|
(98
|
)
|
(6,878
|
)
|
||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
11,827
|
-
|
-
|
11,827
|
|||||||||||||||||||||
LTIP-OP Unit awards
|
-
|
-
|
-
|
-
|
-
|
282
|
282
|
|||||||||||||||||||||
Distribution paid on LTIP-OP Units
|
-
|
-
|
-
|
-
|
-
|
(102
|
)
|
(102
|
)
|
|||||||||||||||||||
Common dividends declared, $0.98 per share
|
-
|
-
|
-
|
-
|
(7,369
|
)
|
-
|
(7,369
|
)
|
|||||||||||||||||||
Balance, June 30, 2016
|
7,528,503
|
$
|
75
|
$
|
148,407
|
$
|
11,630
|
$
|
(11,016
|
)
|
$
|
1,076
|
$
|
150,172
|
(A) | de minimis ($95.00 rounds to $0.00). |
Six Months Ended June 30,
|
||||||||
2016
|
2015
|
|||||||
Cash Flows From Operating Activities
|
||||||||
Net income (loss)
|
$
|
(6,878
|
)
|
$
|
8,874
|
|||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
Realized (gain) loss on RMBS, net
|
(555
|
)
|
(192
|
)
|
||||
Realized gain on bargain purchase
|
-
|
(174
|
)
|
|||||
Accretion of premium and other amortization
|
1,851
|
1,518
|
||||||
Change in fair value of investments in Servicing Related Assets
|
7,764
|
(799
|
)
|
|||||
Unrealized (gain) loss on derivatives, net
|
6,426
|
(293
|
)
|
|||||
Realized (gain) loss on derivatives, net
|
1,760
|
1,294
|
||||||
LTIP-OP Unit awards
|
282
|
204
|
||||||
Changes in:
|
||||||||
Receivables from unsettled trades
|
-
|
(4,668
|
)
|
|||||
Receivables and other assets
|
(596
|
)
|
915
|
|||||
Due to affiliate
|
134
|
98
|
||||||
Payables for unsettled trades
|
4,421
|
-
|
||||||
Accrued expenses and other liabilities
|
3,795
|
(740
|
)
|
|||||
Net cash provided by (used in) operating activities
|
$
|
18,404
|
$
|
6,037
|
||||
Cash Flows From Investing Activities
|
||||||||
Purchase of RMBS
|
(73,393
|
)
|
(100,752
|
)
|
||||
Principal paydown of RMBS
|
24,514
|
19,575
|
||||||
Proceeds from sale of RMBS
|
45,501
|
59,127
|
||||||
Acquisition of Excess MSRs
|
-
|
-
|
||||||
Principal paydown of Excess MSRs
|
7,994
|
6,623
|
||||||
Aurora acquisition, net of cash received
|
-
|
(3,839
|
)
|
|||||
Acquisition of MSRs
|
(15,297
|
)
|
-
|
|||||
Purchase of derivatives
|
(2,006
|
)
|
(1,449
|
)
|
||||
Sale of derivatives
|
-
|
206
|
||||||
Net cash provided by (used in) investing activities
|
$
|
(12,687
|
)
|
$
|
(20,509
|
)
|
||
Cash Flows From Financing Activities
|
||||||||
Changes in restricted cash
|
(5,909
|
)
|
(4,137
|
)
|
||||
Borrowings under repurchase agreements
|
1,049,585
|
761,630
|
||||||
Repayments of repurchase agreements
|
(979,070
|
)
|
(739,365
|
)
|
||||
Proceeds from Federal Home Loan Bank advances
|
7,000
|
-
|
||||||
Repayments of Federal Home Loan Bank advances
|
(69,250
|
)
|
-
|
|||||
Proceeds from bank loans
|
-
|
6,732
|
||||||
Principal paydown of bank loans
|
(1,460
|
)
|
-
|
|||||
Dividends paid
|
(7,369
|
)
|
(7,660
|
)
|
||||
LTIP-OP Units distributions paid
|
(102
|
)
|
(70
|
)
|
||||
Issuance of common stock, net of offering costs
|
75
|
-
|
||||||
Net cash provided by (used in) financing activities
|
$
|
(6,500
|
)
|
$
|
17,130
|
|||
Net Increase (Decrease) in Cash and Cash Equivalents
|
$
|
(783
|
)
|
$
|
2,658
|
|||
Cash and Cash Equivalents, Beginning of Period
|
10,603
|
12,447
|
||||||
Cash and Cash Equivalents, End of Period
|
$
|
9,820
|
$
|
15,105
|
||||
Supplemental Disclosure of Cash Flow Information
|
||||||||
Cash paid during the period for interest expense
|
$
|
3,653
|
$
|
2,325
|
||||
Dividends declared but not paid
|
$
|
3,689
|
$
|
3,680
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Realized gain (loss) on RMBS, net
|
||||||||||||||||
Gain on RMBS
|
$
|
235
|
$
|
16
|
$
|
555
|
$
|
323
|
||||||||
Loss on RMBS
|
-
|
(131
|
)
|
-
|
(131
|
)
|
||||||||||
Net realized gain (loss) on RMBS
|
235
|
(115
|
)
|
555
|
192
|
|||||||||||
Realized gain (loss) on derivatives, net
|
(299
|
)
|
(52
|
)
|
(1,760
|
)
|
(1,294
|
)
|
||||||||
Unrealized gain (loss) on derivatives, net
|
(1,228
|
)
|
2,835
|
(6,426
|
)
|
293
|
||||||||||
Total
|
$
|
(1,292
|
)
|
$
|
2,668
|
$
|
(7,631
|
)
|
$
|
(809
|
)
|
Servicing
Related Assets
|
RMBS
|
All Other
|
Total
|
|||||||||||||
Income Statement
|
||||||||||||||||
Three Months Ended June 30, 2016
|
||||||||||||||||
Interest income
|
$
|
3,085
|
$
|
4,050
|
$
|
-
|
$
|
7,135
|
||||||||
Interest expense
|
333
|
1,552
|
-
|
1,885
|
||||||||||||
Net interest income
|
2,752
|
2,498
|
-
|
5,250
|
||||||||||||
Servicing fee income
|
1,574
|
-
|
-
|
1,574
|
||||||||||||
Servicing costs
|
501
|
-
|
-
|
501
|
||||||||||||
Net servicing income
|
1,073
|
-
|
-
|
1,073
|
||||||||||||
Other income
|
(3,225
|
)
|
(1,292
|
)
|
-
|
(4,517
|
)
|
|||||||||
Other operating expenses
|
-
|
-
|
1,512
|
1,512
|
||||||||||||
(Benefit from) provision for corporate business taxes
|
10
|
|
-
|
-
|
10
|
|||||||||||
Net income (loss)
|
$
|
590
|
$
|
1,206
|
$
|
(1,512
|
)
|
$
|
284
|
|||||||
Three Months Ended June 30, 2015
|
||||||||||||||||
Interest income
|
$
|
4,935
|
$
|
3,153
|
$
|
-
|
$
|
8,088
|
||||||||
Interest expense
|
19
|
1,327
|
-
|
1,346
|
||||||||||||
Net interest income
|
4,916
|
1,826
|
-
|
6,742
|
||||||||||||
Servicing fee income
|
156
|
-
|
-
|
156
|
||||||||||||
Servicing costs
|
94
|
-
|
-
|
94
|
||||||||||||
Net servicing income
|
62
|
-
|
-
|
62
|
||||||||||||
Other income
|
3,090
|
2,668
|
-
|
5,758
|
||||||||||||
Other operating expenses
|
-
|
-
|
1,324
|
1,324
|
||||||||||||
(Benefit from) provision for corporate business taxes
|
(70
|
)
|
-
|
-
|
(70
|
)
|
||||||||||
Net income (loss)
|
$
|
8,138
|
$
|
4,494
|
$
|
(1,324
|
)
|
$
|
11,308
|
|||||||
Six Months Ended June 30, 2016
|
||||||||||||||||
Interest income
|
$
|
4,529
|
$
|
7,794
|
$
|
-
|
$
|
12,323
|
||||||||
Interest expense
|
673
|
2,869
|
-
|
3,542
|
||||||||||||
Net interest income
|
3,856
|
4,925
|
-
|
8,781
|
||||||||||||
Servicing fee income
|
3,069
|
-
|
-
|
3,069
|
||||||||||||
Servicing costs
|
903
|
-
|
-
|
903
|
||||||||||||
Net servicing income
|
2,166
|
-
|
-
|
2,166
|
||||||||||||
Other income
|
(7,764
|
)
|
(7,631
|
)
|
-
|
(15,395
|
)
|
|||||||||
Other operating expenses
|
-
|
-
|
3,010
|
3,010
|
||||||||||||
(Benefit from) provision for corporate business taxes
|
(580
|
)
|
-
|
-
|
(580
|
)
|
||||||||||
Net income (loss)
|
$
|
(1,162
|
)
|
$
|
(2,706
|
)
|
$
|
(3,010
|
)
|
$
|
(6,878
|
)
|
||||
Six Months Ended June 30, 2015
|
||||||||||||||||
Interest income
|
$
|
7,510
|
$
|
6,405
|
$
|
-
|
$
|
13,915
|
||||||||
Interest expense
|
19
|
2,562
|
-
|
2,581
|
||||||||||||
Net interest income
|
7,491
|
3,843
|
-
|
11,334
|
||||||||||||
Servicing fee income
|
156
|
-
|
-
|
156
|
||||||||||||
Servicing costs
|
94
|
-
|
-
|
94
|
||||||||||||
Net servicing income
|
62
|
-
|
-
|
62
|
||||||||||||
Other income
|
973
|
(809
|
)
|
-
|
164
|
|||||||||||
Other operating expenses
|
-
|
-
|
2,756
|
2,756
|
||||||||||||
(Benefit from) provision for corporate business taxes
|
(70
|
)
|
-
|
-
|
(70
|
)
|
||||||||||
Net income (loss)
|
$
|
8,596
|
$
|
3,034
|
$
|
(2,756
|
)
|
$
|
8,874
|
Balance Sheet
|
||||||||||||||||
June 30, 2016
|
||||||||||||||||
Investments
|
$
|
97,342
|
$
|
522,151
|
$
|
-
|
$
|
619,493
|
||||||||
Other assets
|
4,476
|
19,794
|
11,638
|
35,908
|
||||||||||||
Total assets
|
101,818
|
541,945
|
11,638
|
655,401
|
||||||||||||
Debt
|
22,853
|
456,075
|
-
|
478,928
|
||||||||||||
Other liabilities
|
5,811
|
15,381
|
5,109
|
26,301
|
||||||||||||
Total liabilities
|
28,664
|
471,456
|
5,109
|
505,229
|
||||||||||||
GAAP book value
|
$
|
73,154
|
$
|
70,489
|
$
|
6,529
|
$
|
150,172
|
December 31, 2015
|
||||||||||||||||
Investments
|
$
|
97,803
|
$
|
508,242
|
$
|
-
|
$
|
606,045
|
||||||||
Other assets
|
3,562
|
13,984
|
12,749
|
30,295
|
||||||||||||
Total assets
|
101,365
|
522,226
|
12,749
|
636,340
|
||||||||||||
Debt
|
24,313
|
447,810
|
-
|
472,123
|
||||||||||||
Other liabilities
|
1,883
|
4,903
|
5,094
|
11,880
|
||||||||||||
Total liabilities
|
26,196
|
452,713
|
5,094
|
484,003
|
||||||||||||
GAAP book value
|
$
|
75,169
|
$
|
69,513
|
$
|
7,655
|
$
|
152,337
|
Original |
Gross Unrealized
|
Number
|
Weighted Average
|
||||||||||||||||||||||||||||||||||
Asset Type
|
Face
Value |
Book
Value |
Gains
|
Losses
|
Carrying
Value(A)
|
of
Securities
|
Rating
|
Coupon
|
Yield(C)
|
Maturity
(Years)(D)
|
|||||||||||||||||||||||||||
RMBS
|
|
||||||||||||||||||||||||||||||||||||
Fannie Mae
|
$
|
349,283
|
$
|
314,051
|
$
|
7,280
|
$
|
(22
|
)
|
$
|
321,309
|
49
|
(B)
|
3.73
|
%
|
3.44
|
%
|
23
|
|||||||||||||||||||
Freddie Mac
|
202,601
|
186,823
|
4,594
|
-
|
191,417
|
24
|
(B)
|
3.61
|
%
|
3.25
|
%
|
25
|
|||||||||||||||||||||||||
CMOs
|
19,896
|
9,614
|
66
|
(255
|
)
|
9,425
|
5
|
Unrated
|
4.55
|
%
|
4.14
|
%
|
11
|
||||||||||||||||||||||||
Total/Weighted Average
|
$
|
571,780
|
$
|
510,488
|
$
|
11,940
|
$
|
(277
|
)
|
$
|
522,151
|
78
|
|
3.70
|
%
|
3.39
|
%
|
24
|
Original |
Gross Unrealized
|
Number |
Weighted Average
|
||||||||||||||||||||||||||||||||||
Asset Type
|
Face
Value |
Book
Value |
Gains
|
Losses
|
Carrying
Value(A)
|
of
Securities
|
Rating
|
Coupon
|
Yield(C)
|
Maturity
(Years)(D)
|
|||||||||||||||||||||||||||
RMBS
|
|
||||||||||||||||||||||||||||||||||||
Fannie Mae
|
$
|
329,767
|
$
|
308,367
|
$
|
1,961
|
$
|
(1,556
|
)
|
$
|
308,772
|
44
|
(B)
|
3.77
|
%
|
3.59
|
%
|
24
|
|||||||||||||||||||
Freddie Mac
|
208,154
|
193,567
|
821
|
(977
|
)
|
193,411
|
24
|
(B)
|
3.61
|
%
|
3.48
|
%
|
24
|
||||||||||||||||||||||||
CMOs
|
16,646
|
6,493
|
-
|
(434
|
)
|
6,059
|
4
|
Unrated
|
4.55
|
%
|
7.39
|
%
|
10
|
||||||||||||||||||||||||
Total/Weighted Average
|
$
|
554,567
|
$
|
508,427
|
$
|
2,782
|
$
|
(2,967
|
)
|
$
|
508,242
|
72
|
|
3.72
|
%
|
3.60
|
%
|
23
|
(A) | See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. |
(B) | The Company used an implied AAA rating for the Fannie Mae and Freddie Mac securities. |
(C) | The weighted average yield is based on the most recent annualized monthly interest income, divided by the Book Value. Prior period amounts have been reclassified to conform to current period presentation. |
(D) | The weighted average stated maturity. |
Original |
Gross Unrealized
|
Number
|
Weighted Average
|
||||||||||||||||||||||||||||||||||
Asset Type
|
Face
Value |
Book
Value |
Gains
|
Losses
|
Carrying
Value(A)
|
of
Securities
|
Rating
|
Coupon
|
Yield(C)
|
Maturity
(Years)(D)
|
|||||||||||||||||||||||||||
Less than 1 Year
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
|
-
|
%
|
-
|
%
|
-
|
||||||||||||||||||||
1-5 Years
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
%
|
-
|
%
|
-
|
||||||||||||||||||||||||||
5-10 Years
|
3,500
|
3,500
|
34
|
(6
|
)
|
3,528
|
2
|
(B)
|
4.69
|
%
|
5.00
|
%
|
9
|
||||||||||||||||||||||||
Over 10 Years
|
568,280
|
506,988
|
11,906
|
(271
|
)
|
518,623
|
76
|
(B)
|
3.69
|
%
|
3.38
|
%
|
24
|
||||||||||||||||||||||||
Total/Weighted Average
|
$
|
571,780
|
$
|
510,488
|
$
|
11,940
|
$
|
(277
|
)
|
$
|
522,151
|
78
|
|
3.70
|
%
|
3.39
|
%
|
24
|
Original |
Gross Unrealized
|
Number |
Weighted Average
|
||||||||||||||||||||||||||||||||||
Asset Type
|
Face
Value |
Book
Value |
Gains
|
Losses
|
Carrying
Value(A)
|
of
Securities
|
Rating
|
Coupon
|
Yield(C)
|
Maturity
(Years)(D)
|
|||||||||||||||||||||||||||
Less than 1 Year
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
|
-
|
-
|
-
|
||||||||||||||||||||||
1-5 Years
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
5-10 Years
|
5,500
|
5,553
|
-
|
(216
|
)
|
5,337
|
3
|
(B)
|
4.76
|
%
|
4.96
|
%
|
9
|
||||||||||||||||||||||||
Over 10 Years
|
549,067
|
502,874
|
2,782
|
(2,751
|
)
|
502,905
|
69
|
(B)
|
3.71
|
%
|
3.59
|
%
|
24
|
||||||||||||||||||||||||
Total/Weighted Average
|
$
|
554,567
|
$
|
508,427
|
$
|
2,782
|
$
|
(2,967
|
)
|
$
|
508,242
|
72
|
|
3.72
|
%
|
3.60
|
%
|
23
|
(A) | See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. |
(B) | The Company used an implied AAA rating for the Fannie Mae and Freddie Mac securities. |
(C) | The weighted average yield is based on the most recent annualized monthly interest income, divided by the Book Value. Prior period amounts have been reclassified to conform to current period presentation. |
(D) | The weighted average stated maturity. |
Original |
Gross
|
Weighted Average
|
|||||||||||||||||||||||||||||||
Asset Type
|
Face
Value |
Book
Value |
Unrealized
Losses
|
Carrying
Value(A)
|
Number of
Securities
|
Rating
|
Coupon
|
Yield(C)
|
Maturity
(Years)(D)
|
||||||||||||||||||||||||
Less than Twelve Months
|
$
|
8,132
|
$
|
8,408
|
$
|
(92
|
)
|
$
|
8,316
|
2
|
(B)
|
4.25
|
%
|
1.72
|
%
|
22
|
|||||||||||||||||
Twelve or More Months
|
13,146
|
2,877
|
(185
|
)
|
2,692
|
2
|
(B)
|
4.07
|
%
|
10.93
|
%
|
11
|
|||||||||||||||||||||
Total/Weighted Average
|
$
|
21,278
|
$
|
11,285
|
$
|
(277
|
)
|
$
|
11,008
|
4
|
|
4.21
|
%
|
4.07
|
%
|
19
|
Original |
Gross
|
Weighted Average
|
|||||||||||||||||||||||||||||||
Asset Type
|
Face
Value |
Book
Value |
Unrealized
Losses
|
Carrying
Value(A)
|
Number of
Securities
|
Rating
|
Coupon
|
Yield(C)
|
|
Maturity
(Years)(D)
|
|||||||||||||||||||||||
Less than Twelve Months
|
$
|
271,585
|
$
|
274,996
|
$
|
(2,749
|
)
|
$
|
272,247
|
39
|
(B)
|
3.65
|
%
|
3.48
|
%
|
24
|
|||||||||||||||||
Twelve or More Months
|
11,146
|
940
|
(218
|
)
|
722
|
1
|
(B)
|
3.00
|
%
|
25.37
|
%
|
17
|
|||||||||||||||||||||
Total/Weighted Average
|
$
|
282,731
|
$
|
275,936
|
$
|
(2,967
|
)
|
$
|
272,969
|
40
|
|
3.65
|
%
|
3.55
|
%
|
24
|
(A) | See Note 9 regarding the estimation of fair value, which is equal to carrying value for all securities. |
(B) | The Company used an implied AAA rating for the Fannie Mae and Freddie Mac securities, other than CMOs, which are unrated. |
(C) | The weighted average yield is based on the most recent annualized monthly interest income, divided by the Book Value. Prior period amounts have been reclassified to conform to current period presentation. |
(D) | The weighted average stated maturity. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases which may be maturity. |
Unpaid
Principal
Balance
|
Amortized
Cost Basis(A)
|
Carrying
Value(B)
|
Weighted
Average
Coupon
|
Weighted
Average
Maturity
(Years)(C)
|
Changes in
Fair Value
Recorded in
Other Income
(Loss)(D)
|
|||||||||||||||||||
Excess MSR Pool 1
|
$
|
6,807,065
|
$
|
34,550
|
$
|
34,721
|
3.51
|
%
|
25.6
|
$
|
(3,183
|
)
|
||||||||||||
Excess MSR Pool 1 - Recapture Agreement
|
-
|
1,841
|
1,744
|
1,467
|
||||||||||||||||||||
Excess MSR Pool 2
|
6,661,764
|
20,964
|
28,958
|
2.84
|
%
|
26.6
|
(1,228
|
)
|
||||||||||||||||
Excess MSR Pool 2 - Recapture Agreement
|
-
|
1,484
|
973
|
553
|
||||||||||||||||||||
Excess MSR Pool 2014
|
238,805
|
1,440
|
1,196
|
3.63
|
%
|
26.9
|
(65
|
)
|
||||||||||||||||
Excess MSR Pool 2014 - Recapture Agreement
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
MSRs (E)
|
3,600,130
|
35,058
|
29,750
|
3.82
|
24.1
|
(5,308
|
)
|
|||||||||||||||||
Total
|
$
|
17,307,764
|
$
|
95,337
|
$
|
97,342
|
3.32
|
%
|
25.7
|
$
|
(7,764
|
)
|
Unpaid
Principal
Balance
|
Amortized
Cost Basis(A)
|
Carrying
Value(B)
|
Weighted
Average
Coupon
|
Weighted
Average
Maturity
(Years)(C)
|
Changes in
Fair Value
Recorded in
Other Income
(Loss)(D)
|
|||||||||||||||||||
Excess MSR Pool 1
|
$
|
7,416,465
|
$
|
39,483
|
$
|
42,837
|
3.51
|
%
|
26.0
|
$
|
(2,822
|
)
|
||||||||||||
Excess MSR Pool 1 - Recapture Agreement
|
-
|
2,209
|
645
|
-
|
-
|
331
|
||||||||||||||||||
Excess MSR Pool 2
|
7,279,706
|
23,116
|
32,338
|
2.78
|
%
|
27.1
|
2,626
|
|||||||||||||||||
Excess MSR Pool 2 - Recapture Agreement
|
-
|
1,780
|
716
|
-
|
-
|
(324
|
)
|
|||||||||||||||||
Excess MSR Pool 2014
|
265,890
|
1,685
|
1,506
|
3.65
|
%
|
27.4
|
170
|
|||||||||||||||||
Excess MSR Pool 2014 - Recapture Agreement
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
MSRs (E)
|
2,016,351
|
20,884
|
19,761
|
3.76
|
%
|
22.7
|
(1,123
|
)
|
||||||||||||||||
Total
|
$
|
16,978,412
|
$
|
89,157
|
$
|
97,803
|
3.23
|
%
|
26.1
|
$
|
(1,142
|
)
|
(A) | The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired. |
(B) | Carrying value represents the fair value of the pools or recapture agreements, as applicable (see Note 9). |
(C) | The weighted average maturity represents the weighted average expected timing of the receipt of cash flows of each investment. |
(D) | The portion of the change in fair value of the recapture agreement relating to loans recaptured as of June 30, 2016 and December 31, 2015 is reflected in the respective pool. |
(E) | MSR cost basis consists of the carrying value of the prior period, adjusted for any acquisitions made during the current period. |
Percentage of Total Outstanding
Unpaid Principal Balance |
||||
California
|
11.5
|
%
|
||
Texas
|
8.8
|
%
|
||
Florida
|
6.4
|
%
|
||
Virginia
|
5.5
|
%
|
||
All other
|
67.8
|
%
|
||
Total
|
100.0
|
%
|
Percentage of Total Outstanding
Unpaid Principal Balance |
||||
California
|
12.3
|
%
|
||
Texas
|
9.4
|
%
|
||
Florida
|
6.5
|
%
|
||
Virginia
|
6.0
|
%
|
||
North Carolina
|
5.2
|
%
|
||
Washington
|
5.1
|
%
|
||
Georgia
|
5.0
|
%
|
||
All other
|
50.5
|
%
|
||
Total
|
100.0
|
%
|
Number of Securities Issued
or to be Issued Upon
Exercise
|
Number of Securities
Remaining Available For
Future Issuance Under
Equity Compensation Plans
|
|||||||
Equity compensation Plans Approved By Shareholders
|
1,332,063
|
|||||||
LTIP-OP Units
|
140,350
|
|||||||
Forfeited LTIP-OP Units
|
(916
|
)
|
||||||
Shares of Common Stock
|
28,503
|
|||||||
Equity Compensation Plans Not Approved By Shareholders
|
-
|
Number of Securities Issued
or to be Issued Upon
Exercise
|
Number of Securities
Remaining Available For
Future Issuance Under
Equity Compensation Plans
|
|||||||
Equity compensation Plans Approved By Shareholders
|
1,377,112
|
|||||||
LTIP-OP Units
|
103,850
|
|||||||
Shares of Common Stock
|
19,038
|
|||||||
Equity Compensation Plans Not Approved By Shareholders
|
-
|
Grant Date
|
Number of Grantees
|
Stock Price on Grant Date
|
Number of Units Granted
|
Aggregate Fair Market Value
|
||||||||||||
June 15, 2016
|
14
|
$
|
15.85
|
36,500
|
$
|
579
|
||||||||||
September 9, 2015
|
12
|
$
|
15.80
|
35,000
|
$
|
553
|
||||||||||
June 10, 2014
|
10
|
$
|
19.33
|
31,350
|
$
|
606
|
||||||||||
October 9, 2013
|
11
|
$
|
20.00
|
37,500
|
$
|
750
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net income attributable to common stockholders and participating securities
|
$
|
284
|
$
|
11,308
|
$
|
(6,878
|
)
|
$
|
8,874
|
|||||||
Net income allocable to common stockholders
|
$
|
283
|
$
|
11,205
|
$
|
(6,780
|
)
|
$
|
8,793
|
|||||||
Denominator:
|
||||||||||||||||
Weighted average common shares outstanding
|
7,509,543
|
7,509,543
|
7,509,543
|
7,509,543
|
||||||||||||
Weighted average diluted shares outstanding
|
7,520,616
|
7,509,543
|
7,519,827
|
7,509,543
|
||||||||||||
Basic and Dilutive:
|
||||||||||||||||
Basic earnings per share
|
$
|
0.04
|
$
|
1.49
|
$
|
(0.90
|
)
|
$
|
1.17
|
|||||||
Diluted earnings per share
|
$
|
0.04
|
$
|
1.49
|
$
|
(0.90
|
)
|
$
|
1.17
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Management fees
|
$
|
560
|
$
|
560
|
$
|
1,120
|
$
|
1,120
|
||||||||
Expense reimbursement
|
130
|
130
|
260
|
260
|
||||||||||||
Total
|
$
|
690
|
$
|
690
|
$
|
1,380
|
$
|
1,380
|
Non-hedge derivatives
|
June 30, 2016
|
December 31, 2015
|
||||||
Notional amount of interest rate swaps
|
$
|
321,250
|
$
|
300,300
|
||||
Notional amount of swaptions
|
85,000
|
85,000
|
||||||
Notional amount of TBAs, net
|
1,000
|
-
|
||||||
Notional amount of Treasury Futures
|
45,600
|
-
|
||||||
Total notional amount
|
$
|
452,850
|
$
|
385,300
|
Notional
Amount
|
Weighted
Average Pay
Rate
|
Weighted
Average
Receive Rate
|
Weighted
Average Years
to Maturity
|
|||||||||||||
June 30, 2016
|
$
|
321,250
|
1.53
|
%
|
0.64
|
%
|
3.4
|
|||||||||
December 31, 2015
|
$
|
300,300
|
1.71
|
%
|
0.37
|
%
|
4.3
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||
Non-Hedge Derivatives
|
Income Statement Location
|
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Interest rate swaps
|
Realized gain/(loss) on derivative assets
|
$
|
(398
|
)
|
$
|
(149
|
)
|
$
|
(1,748
|
)
|
$
|
(937
|
)
|
|||||
Swaptions
|
Realized gain/(loss) on derivative assets
|
(140
|
)
|
64
|
(140
|
)
|
64
|
|||||||||||
TBAs
|
Realized gain/(loss) on derivative assets
|
56
|
33
|
(26
|
)
|
(76
|
)
|
|||||||||||
Treasury futures
|
Realized gain/(loss) on derivative assets
|
183
|
-
|
154
|
(345
|
)
|
||||||||||||
Total
|
$
|
(299
|
)
|
$
|
(52
|
)
|
$
|
(1,760
|
)
|
$
|
(1,294
|
)
|
Gross
|
Gross
Amounts
|
Net Amounts
of Assets
Presented in
|
Gross Amounts Not Offset in
the Consolidated Balance
Sheet
|
|||||||||||||||||||||
Amounts of
Recognized
Assets or
Liabilities
|
Offset in the
Consolidated
Balance
Sheet
|
the
Consolidated
Balance
Sheet
|
Financial
Instruments
|
Cash
Collateral
Received
(Pledged)
|
Net Amount
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest rate swaps
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|