Why did CHMI's Q3 earnings shock investors?

Cherry Hill Mortgage Investment Corporation (CHMI) experienced a significant decline in its Q3 2024 earnings, which can be attributed to several key factors: 1. **Significant Net Loss**: CHMI reported a GAAP net loss applicable to common stockholders of $14.8 million, or $0.49 per share. This substantial loss is a stark contrast to the previous year's earnings per share (EPS) of $0.16. The negative EPS of $0.49 for Q3 2024, compared to the EPS of $0.08 for the same quarter in the previous year, indicates a sharp deterioration in profitability. |code|Ticker|Name|Date|Total Revenue|Net Income|Diluted EPS|market_code| |---|---|---|---|---|---|---|---| |CHMI|CHMI.N|Cherry Hill Mortgage|2022 Q4|-3.2508E7|-3.2753E7||169| |CHMI|CHMI.N|Cherry Hill Mortgage|2023 Q1|-1.6578E7|-1.9322E7|-0.87|169| |CHMI|CHMI.N|Cherry Hill Mortgage|2023 Q2|6536000|1626000|-0.03|169| |CHMI|CHMI.N|Cherry Hill Mortgage|2023 Q3|2.1E7|1.5885E7|0.49|169| 2. **Special Committee-Related Expenses**: The net loss was influenced by 4.5 cents per share of special committee-related expenses. These additional costs likely contributed to the overall net loss, further surprising investors who were expecting a more modest decline from the previous year's earnings. 3. **Investment Losses**: CHMI incurred a net realized loss on RMBS of $3.7 million and a net realized loss on investments in MSRs of $0.2 million. These investment losses, coupled with a net unrealized loss of $21 million, highlight the challenges CHMI faced in managing its investments during the quarter. 4. **Derivatives Losses**: The company also experienced a net realized loss of $8.0 million on derivatives. This adds to the overall negative sentiment surrounding CHMI's Q3 earnings, as investors are likely concerned about the company's risk management practices and the impact of these losses on future profitability. In summary, CHMI's Q3 2024 earnings shock can be attributed to a combination of a significant net loss, special committee-related expenses, investment losses, and derivatives losses. These factors, taken together, have likely led to investor disappointment and a negative market reaction.