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Ellington Residential's 14% Yield Could Be Sustainable In 2024
Seeking Alpha· 2024-03-23 06:21
marchmeena29 The central bank held short-term interest rates steady at this week’s Fed meeting and reaffirmed its desire to shoot for three rate cuts in 2024. With interest rates poised to normalize in the latter part of the year, I think that mortgage real estate investment trusts like Ellington Residential Mortgage REIT Inc. (NYSE:EARN) could make a comeback and become more compelling yield investments for passive income investors. The mortgage trust’s dividend pay-out metrics already improved in the ...
Is Ellington Residential Mortgage REIT (EARN) Stock Outpacing Its Finance Peers This Year?
Zacks Investment Research· 2024-03-20 14:41
Investors interested in Finance stocks should always be looking to find the best-performing companies in the group. Ellington Residential (EARN) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-to-date performance to find out.Ellington Residential is a member of the Finance sector. This group includes 855 individual stocks and currently holds a Zacks Sector Rank of #5. The Za ...
Ellington Residential Mortgage REIT(EARN) - 2023 Q4 - Annual Report
2024-03-11 16:00
PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Ellington Residential Mortgage REIT is a Maryland REIT formed in August 2012, specializing in acquiring, investing in, and managing residential mortgage- and real estate-related assets, with a primary objective to generate attractive current yields and risk-adjusted total returns for shareholders - Ellington Residential Mortgage REIT (EARN) is a Maryland REIT established in **August 2012**, focusing on residential mortgage- and real estate-related assets to generate **current yields and risk-adjusted total returns**[15](index=15&type=chunk) - The company's portfolio primarily consists of **Agency RMBS** and, to a lesser extent, **non-Agency RMBS and corporate CLOs**, with opportunistic investments in other mortgage- and real estate-related asset classes[15](index=15&type=chunk)[16](index=16&type=chunk) - EARN is externally managed and advised by **Ellington Residential Mortgage Management LLC**, an affiliate of Ellington Management Group, L.L.C., leveraging Ellington's **29-year history** in MBS and related derivatives[17](index=17&type=chunk)[18](index=18&type=chunk) [Our Company](index=4&type=section&id=Our%20Company) Ellington Residential Mortgage REIT, formed in August 2012, aims to provide attractive current yields and risk-adjusted total returns by investing in residential mortgage- and real estate-related assets, primarily Agency RMBS, and opportunistically in non-Agency RMBS, CLOs, and other related asset classes - Ellington Residential Mortgage REIT was formed in **August 2012** and specializes in acquiring, investing in, and managing residential mortgage- and real estate-related assets[15](index=15&type=chunk) - The company's primary objective is to generate **attractive current yields and risk-adjusted total returns** for shareholders[15](index=15&type=chunk) - The portfolio consists primarily of **Agency RMBS** and, to a lesser extent, **non-Agency RMBS, and corporate CLOs**, with opportunistic investments in other mortgage- and real estate-related asset classes[15](index=15&type=chunk)[16](index=16&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that statements in the report not historical in nature are forward-looking and involve known and unknown risks, uncertainties, and assumptions - Forward-looking statements are identified by words like 'believe,' 'expect,' 'anticipate,' and similar expressions, and are subject to **known and unknown risks, uncertainties, and assumptions**[13](index=13&type=chunk) - Key factors that could cause actual results to differ include **changes in interest rates, market value of securities, leverage dependence, changes in government regulations**, and the ability to maintain REIT qualification and Investment Company Act exclusion[14](index=14&type=chunk) - The company is not obligated to update or revise any forward-looking statements unless required by law[14](index=14&type=chunk) [Our Manager and Ellington](index=5&type=section&id=Our%20Manager%20and%20Ellington) Ellington Residential Mortgage REIT is externally managed by Ellington Residential Mortgage Management LLC, an affiliate of Ellington Management Group, L.L.C - The company is externally managed and advised by **Ellington Residential Mortgage Management LLC**, an affiliate of Ellington Management Group, L.L.C., which provides all necessary personnel and resources[18](index=18&type=chunk)[20](index=20&type=chunk) - Ellington Management Group, L.L.C. had over **170 employees** and approximately **$10.3 billion in assets under management** as of **December 31, 2023**[21](index=21&type=chunk) - The management team includes **Michael Vranos** (Co-Chief Investment Officer), **Laurence Penn** (President and CEO), **Mark Tecotzky** (Co-Chief Investment Officer), and **Christopher Smernoff** (CFO)[19](index=19&type=chunk) [Our Strategy](index=5&type=section&id=Our%20Strategy) The company's opportunistic strategy aims to generate attractive current yields and risk-adjusted total returns by actively managing a hybrid investment portfolio - The company's strategy is **opportunistic**, focusing on security selection and capital allocation to balance mortgage-related risks[22](index=22&type=chunk) - The hybrid investment portfolio primarily includes **leveraged Agency RMBS, investment grade and non-investment grade non-Agency RMBS, and corporate CLOs** (mezzanine debt and equity tranches)[22](index=22&type=chunk)[27](index=27&type=chunk) - Risk mitigation is achieved through various **hedging instruments** for interest rate, prepayment, and credit risks[27](index=27&type=chunk) - The strategy is flexible and adaptable to changing market environments, subject to maintaining REIT qualification and Investment Company Act exclusion[23](index=23&type=chunk) [Our Targeted Assets](index=7&type=section&id=Our%20Targeted%20Assets) The company targets a diverse range of assets including Agency RMBS, non-Agency RMBS, corporate CLOs, and other mortgage- and real estate-related assets - Targeted assets include **Agency RMBS** (fixed-rate, ARMs, hybrid, reverse mortgages, CMOs, TBAs), **non-Agency RMBS** (prime jumbo, Alt-A, non-QM, manufactured housing, subprime, single-family-rental mortgages), **CLOs** (debt and equity tranches), and other assets (residential mortgage loans, MSRs, CRTs, CMBS)[28](index=28&type=chunk) - Agency RMBS include **pass-through certificates and Collateralized Mortgage Obligations (CMOs)**, with TBAs used for future delivery and interest rate risk management[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - Non-Agency RMBS are debt obligations issued by private originators, often structured as **senior/subordinated or excess spread/over-collateralization**[35](index=35&type=chunk) - CLOs are structured finance securities backed by corporate loans, with investments focused on **mezzanine debt and equity tranches**[36](index=36&type=chunk) [Investment Process](index=9&type=section&id=Investment%20Process) The investment process is managed by an investment and risk management committee, comprising key officers, which sets investment policies and portfolio composition - The investment process is managed by an **investment and risk management committee**, including Mr. Vranos, Mr. Penn, and Mr. Tecotzky, which reviews and approves investment policies and portfolio composition[38](index=38&type=chunk) - Ellington has focused investment teams for each asset class, evaluating opportunities through sourcing, screening, credit analysis, due diligence, structuring, financing, and hedging[39](index=39&type=chunk) - Asset acquisitions are screened to ensure compliance with Investment Company Act exclusion and REIT qualification[39](index=39&type=chunk) [Valuation of Assets](index=9&type=section&id=Valuation%20of%20Assets) The Manager's valuation committee directs the asset valuation process, which is overseen by independent trustees - The Manager's valuation committee oversees the asset valuation process, subject to **independent trustee oversight**[40](index=40&type=chunk) - Details of the valuation process are provided in **Note 2 of the consolidated financial statements**[40](index=40&type=chunk) [Risk Management](index=9&type=section&id=Risk%20Management) Risk management is central to Ellington's portfolio management, utilizing a proprietary system (ELLiN) and comprehensive infrastructure - Ellington's risk management uses a proprietary portfolio management system, **ELLiN**, for comprehensive assessment of portfolio and operational risks[41](index=41&type=chunk) - Interest rate risk is opportunistically managed using instruments like **interest rate swaps, TBAs, CMOs, U.S. Treasury securities, and futures/forward contracts**[42](index=42&type=chunk)[46](index=46&type=chunk) - Credit risk hedging is opportunistically employed for corporate CLOs and non-Agency RMBS using derivative instruments, subject to REIT and Investment Company Act compliance[44](index=44&type=chunk) [Our Financing Strategies and Use of Leverage](index=10&type=section&id=Our%20Financing%20Strategies%20and%20Use%20of%20Leverage) The company finances its assets with a prudent amount of leverage, primarily through repurchase agreements (repos) - The company finances assets with leverage, primarily through **repurchase agreements (repos)**, which are accounted for as collateralized borrowings[45](index=45&type=chunk) Debt-to-Equity Ratio | Metric | As of December 31, 2023 | As of December 31, 2022 | | :----- | :---------------------- | :---------------------- | | Debt-to-equity ratio | **5.4 to 1** | **7.5 to 1** | - The Manager's investment and risk management committee has discretion to change overall and individual asset class leverage, with **no targeted debt-to-equity ratio**[47](index=47&type=chunk) [Management Agreement](index=11&type=section&id=Management%20Agreement) The company operates under a management agreement with its Manager, which expires in September 2024 and automatically renews annually - The management agreement with the Manager, effective since **September 2012**, governs day-to-day operations, including portfolio management, financing, and risk management[48](index=48&type=chunk) - The Manager receives a quarterly management fee equal to **1.50% per annum of shareholders' equity** (as defined in the agreement) and reimbursement for certain operating expenses and dedicated personnel costs[49](index=49&type=chunk)[50](index=50&type=chunk) - The agreement automatically renews annually, but termination by the company without cause or for unsatisfactory performance/unfair fees requires a termination fee of **5% of shareholders' equity**[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) [Conflicts of Interest; Equitable Allocation of Opportunities](index=12&type=section&id=Conflicts%20of%20Interest%3B%20Equitable%20Allocation%20of%20Opportunities) Conflicts of interest exist due to Ellington managing other accounts with similar strategies, including Ellington Financial Inc - Ellington manages other clients with similar or overlapping strategies, creating **potential conflicts of interest**[57](index=57&type=chunk) - Ellington's investment allocation policy aims for **equitable participation** across accounts, but may allow preferential allocation to 'start-up' or 'ramp-up' accounts[57](index=57&type=chunk)[58](index=58&type=chunk) - Policies are in place for **cross transactions** (requiring market prices or independent trustee approval) and **principal transactions** (requiring independent trustee approval)[59](index=59&type=chunk)[63](index=63&type=chunk) [Competition](index=14&type=section&id=Competition) The company operates in a highly competitive market, competing with various financial institutions, including other mortgage REITs, banks, and investment firms - The company competes with other mortgage REITs, specialty finance companies, banks, and institutional investors, many of whom are **larger and have greater resources**[64](index=64&type=chunk) - Competitors may have **lower cost of funds, access to government funding, or different risk tolerances**, allowing them to acquire a wider variety of assets or pay higher prices[64](index=64&type=chunk) - The company's competitive advantage stems from access to Ellington's professionals and industry expertise, but competitive risks may still hinder business goals[65](index=65&type=chunk) [Operating and Regulatory Structure](index=14&type=section&id=Operating%20and%20Regulatory%20Structure) The company has elected to be taxed as a REIT, requiring it to distribute at least 90% of its annual taxable income to shareholders to avoid federal income tax - The company has elected to be taxed as a **REIT**, requiring it to distribute at least **90% of its annual REIT taxable income** to avoid U.S. federal income tax[66](index=66&type=chunk) - Operations are structured to maintain exclusion from registration under the **Investment Company Act**, primarily through subsidiaries satisfying the **40% Test and Section 3(c)(5)(C) exclusion**[67](index=67&type=chunk)[69](index=69&type=chunk) - Changes in laws or SEC guidance regarding Investment Company Act status could require strategy adjustments, potentially limiting investments or forcing asset sales[72](index=72&type=chunk)[73](index=73&type=chunk) [Human Capital Resources](index=15&type=section&id=Human%20Capital%20Resources) The company has no direct employees - The company does not have any direct employees[75](index=75&type=chunk) - All executive officers and partially dedicated personnel are employees of Ellington or its affiliates, provided via the management agreement[75](index=75&type=chunk) [Additional Information](index=15&type=section&id=Additional%20Information) The company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Corporate Governance Guidelines, Code of Business Conduct and Ethics, and committee charters are available free of charge on its website and the SEC's website - Annual, Quarterly, and Current Reports (**10-K, 10-Q, 8-K**) are available on the company's website (**www.earnreit.com**) and the SEC's website (**www.sec.gov**)[76](index=76&type=chunk)[77](index=77&type=chunk) - Corporate Governance Guidelines, Code of Business Conduct and Ethics, and committee charters are also available on the company's website[76](index=76&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could materially and adversely affect the company's business, financial condition, results of operations, and ability to pay dividends - The company faces risks related to **federal conservatorship of Fannie Mae and Freddie Mac**, potentially affecting Agency RMBS value and financing[85](index=85&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) - **Interest rate changes**, including Federal Reserve actions, can adversely affect asset values, increase interest expense, and impact net interest margin and profitability[92](index=92&type=chunk)[93](index=93&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - Dependence on the external Manager and key Ellington personnel creates risks, including **conflicts of interest** and potential difficulties in finding replacements[213](index=213&type=chunk)[220](index=220&type=chunk) - Maintaining **REIT qualification and Investment Company Act exclusion** imposes significant limitations on operations and investment strategy, with potential adverse effects if compliance fails[238](index=238&type=chunk)[240](index=240&type=chunk) [Summary of Risk Factors](index=17&type=section&id=Summary%20of%20Risk%20Factors) This summary provides a high-level overview of the various risk categories detailed in Item 1A, including risks related to the company's business operations, CLO investments, relationship with its Manager, common shares, organizational structure, and U.S. federal income tax - Key risk categories include **business operations, CLO investments, relationship with the Manager and Ellington, common shares, organizational structure, and U.S. federal income tax**[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - The list of risks is not exhaustive, and additional unknown or immaterial risks may impair operations and performance[83](index=83&type=chunk)[84](index=84&type=chunk) [Risks Related To Our Business](index=19&type=section&id=Risks%20Related%20To%20Our%20Business) Risks to the company's business include the impact of federal conservatorship of Fannie Mae and Freddie Mac, Federal Reserve actions affecting interest rates and market volatility, and changes in prepayment rates on assets - Federal conservatorship of Fannie Mae and Freddie Mac, and related government actions, could significantly reduce their roles, impacting Agency RMBS values and the company's ability to acquire them[85](index=85&type=chunk)[89](index=89&type=chunk) - Federal Reserve's quantitative tightening and interest rate hikes have caused, and could continue to cause, **market volatility, widening yield spreads, and an inverted yield curve**, adversely affecting business and dividends[93](index=93&type=chunk) - Prepayment rates on RMBS and MSRs are influenced by interest rates and other factors; faster or slower than expected prepayments can adversely affect profitability and asset values[94](index=94&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - The company's reliance on short-term borrowings for fixed-rate assets creates **interest rate mismatch risk**, potentially compressing net interest margin during periods of rising rates[101](index=101&type=chunk) - Illiquidity in certain assets, especially privately placed or complex securities, can lead to greater price volatility and difficulties in valuation or sale, potentially forcing liquidation at depressed prices[141](index=141&type=chunk) - High dependence on Ellington's and third-party information systems exposes the company to significant disruption from **system failures, cyber-attacks, or security breaches**[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - Access to financing sources may be limited or unfavorable, with lenders potentially requiring **additional collateral (margin calls)** or increasing costs, which could force asset disposals[145](index=145&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Risks Related to our CLO Investments](index=34&type=section&id=Risks%20Related%20to%20our%20CLO%20Investments) Investments in corporate CLOs, particularly mezzanine debt and equity tranches, carry significant credit risk due to the lower-rated underlying corporate loans, which are susceptible to economic downturns and higher interest rates - Corporate CLO investments, especially **mezzanine debt and equity tranches**, are subject to significant credit risk from underlying lower-rated corporate loans, which are vulnerable to economic downturns and rising interest rates[177](index=177&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - CLOs are exposed to **prepayment and reinvestment risk**, as collateral repayments may be reinvested at lower yields, and equity holders can direct early calls or refinancings[192](index=192&type=chunk) - Lack of diversification in CLO portfolios, including concentration in specific CLOs, risk profiles, or collateral managers, increases the risk of significant loss[193](index=193&type=chunk)[195](index=195&type=chunk) - Failure of CLOs to meet collateralization or interest coverage tests can divert cash flows from mezzanine debt and equity tranches to more senior tranches[196](index=196&type=chunk) - The company is dependent on unaffiliated CLO collateral managers, who may have conflicting fiduciary duties, and CLOs are generally not registered under the Investment Company Act, limiting investor protections[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - CLO investments often have **limited liquidity**, leading to price volatility and potential difficulties in valuation or sale[205](index=205&type=chunk) - Tax implications of CLOs are complex, potentially leading to recognition of taxable income before cash distributions (**'phantom income'**) or subjecting CLOs to U.S. federal income tax or withholding requirements[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) [Risks Related to our Relationship with our Manager and Ellington](index=39&type=section&id=Risks%20Related%20to%20our%20Relationship%20with%20our%20Manager%20and%20Ellington) The company's dependence on its external Manager and key Ellington personnel creates risks, including the potential for management agreement termination or personnel departure without suitable replacement - The company is entirely dependent on its Manager and key Ellington personnel; their departure or termination of the management agreement could severely impact operations[213](index=213&type=chunk) - Management fees are based on shareholders' equity, not portfolio performance, potentially reducing the Manager's incentive to seek profitable opportunities[214](index=214&type=chunk) - Conflicts of interest exist due to overlapping investment strategies with other Ellington accounts, leading to **competition for assets and personnel**, and no preferential allocation duty[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk) - The management agreement was not negotiated at arm's-length and is **costly to terminate** (**5% of shareholders' equity** for certain terminations)[227](index=227&type=chunk)[228](index=228&type=chunk) - The Manager has broad investment guidelines and does not require Board approval for individual asset acquisitions or management decisions, increasing investment risk[215](index=215&type=chunk) [Risks Related to Our Common Shares](index=42&type=section&id=Risks%20Related%20to%20Our%20Common%20Shares) Shareholders may not receive consistent or growing dividends, as payments are at the Board's discretion and depend on earnings, liquidity, and REIT requirements - Dividend payments are at the **sole discretion of the Board of Trustees** and depend on earnings, liquidity, financial condition, and REIT distribution requirements, with no assurance of fixed or growing dividends[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) - Rising market interest rates can negatively impact the market price of common shares and the company's ability to pay dividends, as investors may seek higher-yielding alternatives[236](index=236&type=chunk) - Investment in common shares carries a **high degree of risk** due to the speculative and aggressive nature of the company's assets, including credit, prepayment, interest rate, and market risks[237](index=237&type=chunk) - Future offerings of debt securities (senior upon liquidation) or equity securities (dilutive, potentially senior for dividends) could adversely affect the market price of common shares[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) [Risks Related to Our Organization and Structure](index=43&type=section&id=Risks%20Related%20to%20Our%20Organization%20and%20Structure) Maintaining exclusion from Investment Company Act registration imposes significant limitations on operations and asset holdings, with potential adverse effects if compliance fails or SEC guidance changes - Maintaining exclusion from Investment Company Act registration (via the **40% Test and Section 3(c)(5)(C)**) significantly limits investment strategy and asset holdings, with potential adverse impacts if compliance is lost or SEC guidance changes[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - Ownership limits (**9.8% of shares**) in the declaration of trust and certain Maryland General Corporation Law provisions may deter takeovers or business combinations that could benefit shareholders[241](index=241&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - The Board of Trustees can amend investment strategies and operational policies, and issue additional shares without shareholder approval, limiting shareholder control[242](index=242&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - Liability of trustees and officers is limited under Maryland law, and removal of trustees is difficult, potentially limiting shareholder recourse for actions not in their best interest[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) [U.S. Federal Income Tax Risks](index=46&type=section&id=U.S.%20Federal%20Income%20Tax%20Risks) The company faces various U.S. federal income tax risks, primarily related to maintaining its REIT qualification - Failure to maintain REIT qualification would subject the company to U.S. federal, state, and local income taxes at corporate rates, substantially reducing cash available for shareholder distributions[255](index=255&type=chunk)[257](index=257&type=chunk) - Compliance with REIT asset and income tests may require foregoing otherwise attractive investments or liquidating assets, potentially hindering investment performance[258](index=258&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk) - The company may recognize **'phantom' income** (taxable income exceeding economic income), requiring distributions that are economically a return of capital, or forcing the use of cash reserves, debt, or asset sales to meet distribution requirements[263](index=263&type=chunk)[286](index=286&type=chunk) - Uncertainty exists regarding the treatment of TBAs as qualifying real estate assets and income for REIT tests, and the application of the Section 475(f) mark-to-market election, which could jeopardize REIT status or cause taxable income volatility[269](index=269&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) - REIT provisions limit effective hedging, as non-qualifying hedging income cannot exceed **5% of annual gross income**, potentially increasing hedging costs or risks[270](index=270&type=chunk)[271](index=271&type=chunk) - Investments in corporate CLOs may result in phantom income or subject CLOs to U.S. federal income tax or withholding requirements, reducing returns[275](index=275&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk) [General Risk Factors](index=52&type=section&id=General%20Risk%20Factors) General risks include potential adverse legislative or regulatory changes, which could impact business, strategy, or costs - Adverse legislative or regulatory changes at federal, state, local, or foreign levels could force portfolio changes, constrain strategy, or increase costs[293](index=293&type=chunk)[294](index=294&type=chunk) - Failure to secure adequate funding and capital, exacerbated by REIT distribution requirements, could negatively impact common share value and dividend payments[295](index=295&type=chunk)[296](index=296&type=chunk) - The company is subject to regulatory inquiries and legal proceedings, which could result in investigations, enforcement actions, fines, or private litigation claims[297](index=297&type=chunk)[298](index=298&type=chunk) - The market price and trading volume of common shares may be volatile due to factors like dividend variations, interest rate changes, market valuations, and economic conditions[299](index=299&type=chunk)[300](index=300&type=chunk) - Climate change poses risks through potential damage to underlying properties (e.g., natural disasters) and increased costs for remediation or insurance[304](index=304&type=chunk)[305](index=305&type=chunk) - Corporate social responsibility (**ESG**) scrutiny and evolving regulations (e.g., SEC climate-related disclosures) could damage reputation, increase costs, and impact investor relationships[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) [Item 1B. Unresolved Staff Comments](index=55&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - There are no unresolved staff comments[312](index=312&type=chunk) [Item 1C. Cybersecurity](index=55&type=section&id=Item%201C.%20Cybersecurity) The company relies on Ellington's comprehensive cybersecurity processes, which are integrated into Ellington's overall risk management program - The company relies on Ellington's information systems and cybersecurity processes, which are integrated into Ellington's risk management and oversight program[313](index=313&type=chunk)[314](index=314&type=chunk) - Ellington's cybersecurity program includes governance, a cross-functional approach to identifying and mitigating threats, technical safeguards, incident response planning, third-party risk management, and employee education[315](index=315&type=chunk)[322](index=322&type=chunk) - The Board of Trustees, via the Audit Committee, oversees cybersecurity risk management, receiving regular presentations and reports from Ellington's outsourced Chief Technology Officer[320](index=320&type=chunk)[323](index=323&type=chunk) - To date, no cybersecurity threats to Ellington have materially affected or are reasonably likely to materially affect the company, despite **two business email compromise incidents** in recent years[319](index=319&type=chunk) [Item 2. Properties](index=57&type=section&id=Item%202.%20Properties) The company does not own any properties - The company does not own any properties[324](index=324&type=chunk) - Principal offices are in leased space at **53 Forest Avenue, Old Greenwich, CT**, provided by the Manager under the management agreement[324](index=324&type=chunk) [Item 3. Legal Proceedings](index=57&type=section&id=Item%203.%20Legal%20Proceedings) Neither the company nor Ellington or its affiliates are currently subject to any material legal proceedings - Neither the company nor Ellington or its affiliates are currently subject to any material legal proceedings[325](index=325&type=chunk) - Operating in highly regulated markets, the company and its affiliates expect to receive future inquiries and requests from various regulators[325](index=325&type=chunk) - There is no assurance that future investigations, enforcement actions, fines, or litigation claims would not materially adversely affect the company[326](index=326&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[327](index=327&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=58&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares are listed on the NYSE under the symbol "EARN" since May 1, 2013 - Common shares have been listed on the NYSE under the symbol **"EARN"** since **May 1, 2013**[330](index=330&type=chunk) - As of **March 8, 2024**, there were **107 holders of record** for common shares[331](index=331&type=chunk) - On **December 14, 2023**, **14,473 restricted common shares** were granted to partially dedicated employees under the 2023 Equity Incentive Plan[332](index=332&type=chunk) - The company has an open-ended share repurchase program, approved **June 13, 2018**, authorizing repurchase of up to **1.2 million common shares**[333](index=333&type=chunk) Share Repurchase Program Status | Metric | Value | | :-------------------------------- | :------ | | Authorized shares for repurchase | **1.2 million** | | Remaining authorization (Dec 31, 2023) | **725,808 shares** | | Repurchases in Q4 2023 | **None** | [Item 6. [Reserved]](index=57&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no content [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an executive summary of Ellington Residential Mortgage REIT's business, market trends, financial condition, and results of operations for the years ended December 31, 2023 and 2022 - The company is a Maryland REIT specializing in residential mortgage- and real estate-related assets, including Agency RMBS, non-Agency RMBS, and corporate CLOs, aiming for **attractive current yields and risk-adjusted total returns**[335](index=335&type=chunk) - The company is externally managed by an Ellington affiliate and has elected to be taxed as a REIT, intending to maintain Investment Company Act exclusion[336](index=336&type=chunk)[338](index=338&type=chunk) Book Value Per Share | Metric | As of December 31, 2023 | As of December 31, 2022 | | :---------------- | :---------------------- | :---------------------- | | Book value per share | **$7.32** | **$8.40** | - Net income for 2023 was **$4.6 million**, a significant improvement from a **$(30.2) million loss** in 2022, primarily due to total other income in the current period[400](index=400&type=chunk) [Executive Summary](index=57&type=section&id=Executive%20Summary) Ellington Residential Mortgage REIT, a Maryland REIT formed in 2012, focuses on acquiring and managing residential mortgage- and real estate-related assets, including Agency and non-Agency RMBS, and corporate CLOs - Ellington Residential Mortgage REIT (EARN) specializes in acquiring, investing in, and managing residential mortgage- and real estate-related assets, including **Agency RMBS, non-Agency RMBS, and corporate CLOs**[335](index=335&type=chunk) - The company's primary objective is to generate **attractive current yields and risk-adjusted total returns** for shareholders[335](index=335&type=chunk) - EARN is externally managed by an Ellington affiliate, uses repurchase agreements for leverage, and is taxed as a REIT, aiming to distribute taxable income to shareholders[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) Book Value Per Share | Metric | As of December 31, 2023 | As of December 31, 2022 | | :---------------- | :---------------------- | :---------------------- | | Book value per share | **$7.32** | **$8.40** | [Trends and Recent Market Developments](index=59&type=section&id=Trends%20and%20Recent%20Market%20Developments) In 2023, the Federal Reserve slowed interest rate hikes, pausing in June and maintaining a 5.25%-5.50% range by year-end, with market anticipation of 2024 cuts - The Federal Reserve increased the federal funds rate to **5.25%–5.50% by July 2023**, then maintained it, with market expectations of rate cuts in 2024[339](index=339&type=chunk)[340](index=340&type=chunk) - Interest rates were highly volatile in 2023; the **2-year U.S. Treasury yield decreased by 18 basis points**, and the **10-year yield increased by 1 basis point** for the full year[341](index=341&type=chunk)[345](index=345&type=chunk) - Mortgage rates peaked at **7.79% in October 2023** before falling to **6.42% by year-end**, while U.S. home prices increased by **5.5%**[347](index=347&type=chunk) - Inflation (CPI-U) declined from **6.4% in January to 3.4% in December 2023**, remaining elevated[347](index=347&type=chunk) MBS and Corporate Bond Index Performance (Full Year 2023) | Index | Absolute Return | Excess Return | | :---------------------------------- | :-------------- | :------------ | | Bloomberg Barclays U.S. MBS Index | **5.05%** | **0.68%** | | Bloomberg Barclays U.S. Corporate Bond Index | **8.52%** | **4.55%** | | Bloomberg Barclays U.S. Corporate High Yield Bond Index | **13.45%** | **8.86%** | - The company's Agency RMBS holdings decreased by **16% to $728.0 million**, non-Agency RMBS decreased by **25% to $9.4 million**, and corporate CLO holdings totaled **$17.4 million** as of **December 31, 2023**[350](index=350&type=chunk)[351](index=351&type=chunk) [Financing](index=64&type=section&id=Financing) For 2023, the company's average repo borrowing cost significantly increased to 5.18% from 1.40% in 2022 due to rising short-term interest rates Average Repo Borrowing Cost | Period | Average Repo Borrowing Cost | | :---------------------- | :-------------------------- | | Year ended Dec 31, 2023 | **5.18%** | | Year ended Dec 31, 2022 | **1.40%** | Weighted Average Borrowing Rate on Repurchase Agreements | As of | Weighted Average Borrowing Rate | | :---------------- | :------------------------------ | | December 31, 2023 | **5.58%** | | December 31, 2022 | **3.70%** | Debt-to-Equity Ratio | As of | Debt-to-Equity Ratio (Unadjusted) | Debt-to-Equity Ratio (Adjusted) | | :---------------- | :-------------------------------- | :------------------------------- | | December 31, 2023 | **5.4:1** | **5.3:1** | | December 31, 2022 | **7.5:1** | **7.6:1** | - The decline in the debt-to-equity ratio was primarily due to decreased borrowings on the Agency RMBS portfolio and significantly higher shareholders' equity[374](index=374&type=chunk) [Critical Accounting Estimates](index=64&type=section&id=Critical%20Accounting%20Estimates) The company's financial statements are prepared under U.S. GAAP, requiring significant estimates and assumptions, particularly for valuation, interest income, and income taxes - Consolidated financial statements are prepared in conformity with **U.S. GAAP**, requiring estimates and assumptions for asset/liability amounts and revenues/expenses[375](index=375&type=chunk) - The **fair value option** is elected for most assets and liabilities, with valuation based on quoted market prices, third-party valuations, or discounted cash flow methodologies[376](index=376&type=chunk)[378](index=378&type=chunk) - Valuations are inherently uncertain, based on estimates, and may differ from market values, especially for illiquid instruments[380](index=380&type=chunk)[381](index=381&type=chunk) - Interest income accrual involves amortizing premiums and accreting discounts using the effective interest method, with quarterly **'Catch-up Amortization Adjustments'** based on prepayment assumptions[382](index=382&type=chunk)[383](index=383&type=chunk) - Income tax estimates rely on REIT qualification and legal interpretations; successful challenges by tax regulators could result in unrecorded tax liabilities[385](index=385&type=chunk) [Recent Accounting Pronouncements](index=66&type=section&id=Recent%20Accounting%20Pronouncements) The company is assessing the impact of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2023-07 (Segment Reporting—Improvements to Reportable Segment Disclosures), both effective for future fiscal years - **ASU 2023-09** (Improvements to Income Tax Disclosures) is effective for annual periods beginning after **December 15, 2024**, and is not expected to have a material impact[387](index=387&type=chunk)[342](index=342&type=chunk) - **ASU 2023-07** (Segment Reporting—Improvements to Reportable Segment Disclosures) is effective for fiscal years beginning after **December 15, 2023**, and is not expected to have a material impact[387](index=387&type=chunk)[343](index=343&type=chunk) [Financial Condition](index=66&type=section&id=Financial%20Condition) As of December 31, 2023, the company's investment portfolio was $773.5 million, with 89% allocated to mortgage-related securities (primarily Agency RMBS) and 11% to corporate CLOs Securities Portfolio Composition (Fair Value) | Asset Class | Dec 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Agency RMBS | **$727,997** | **$863,284** | | Agency IOs | **$7,415** | **$9,313** | | CLO Notes | **$14,491** | — | | CLO Equity | **$2,926** | — | | Non-Agency RMBS | **$9,409** | **$12,566** | | Non-Agency IOs | **$11,310** | **$8,138** | | Preferred equity securities | — | **$208** | | U.S. Treasury securities sold short | — | **$(498)** | | Reverse repurchase agreements | — | **$499** | | **Total** | **$773,548** | **$893,510** | - As of **December 31, 2023**, **89%** of invested capital was in mortgage-related securities and **11%** in corporate CLOs[389](index=389&type=chunk) Financial Derivatives (Net Fair Value) | As of | Total, net (in thousands) | | :---------------- | :------------------------ | | December 31, 2023 | **$66,950** | | December 31, 2022 | **$65,651** | Outstanding Repurchase Agreements | As of | Borrowings Outstanding (in thousands) | | :---------------- | :---------------------------------- | | December 31, 2023 | **$729,543** | | December 31, 2022 | **$842,455** | Shareholders' Equity | As of | Shareholders' Equity (in thousands) | | :---------------- | :-------------------------------- | | December 31, 2023 | **$136,238** | | December 31, 2022 | **$112,409** | [Results of Operations for the Years Ended December 31, 2023 and 2022](index=69&type=section&id=Results%20of%20Operations%20for%20the%20Years%20Ended%20December%2031%2C%202023%20and%202022) For the year ended December 31, 2023, the company reported a net income of $4.6 million, a significant improvement from a net loss of $(30.2) million in 2022 Net Income (Loss) and EPS | Metric | Year Ended Dec 31, 2023 (in thousands) | Year Ended Dec 31, 2022 (in thousands) | | :-------------------------- | :----------------------------------- | :----------------------------------- | | Net Income (Loss) | **$4,559** | **$(30,198)** | | Net Income (Loss) Per Common Share | **$0.31** | **$(2.29)** | - The year-over-year reversal from net loss to net income was primarily due to **total other income in 2023**, offsetting a significant increase in interest expense[400](index=400&type=chunk) Interest Income and Expense | Metric | Year Ended Dec 31, 2023 (in thousands) | Year Ended Dec 31, 2022 (in thousands) | | :---------------- | :----------------------------------- | :----------------------------------- | | Interest income | **$42,549** | **$35,006** | | Interest expense | **$(45,256)** | **$(14,820)** | | Net interest income (expense) | **$(2,707)** | **$20,186** | - Interest income increased due to **higher asset yields** on both Agency and credit portfolios, despite lower average holdings on the Agency RMBS portfolio[401](index=401&type=chunk) - Total interest expense significantly increased due to **higher financing costs** from rising short-term interest rates[403](index=403&type=chunk) Adjusted Distributable Earnings | Metric | Year Ended Dec 31, 2023 (in thousands) | Year Ended Dec 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Adjusted Distributable Earnings | **$13,000** | **$13,822** | | Adjusted Distributable Earnings Per Share | **$0.87** | **$1.05** | [Liquidity and Capital Resources](index=72&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is managed through cash on hand, investment cash flow, repurchase agreements, and equity offerings - Liquidity is generated from cash on hand, investment cash flow, repurchase agreements, and equity offerings, expected to meet short-term and long-term needs[419](index=419&type=chunk) Cash and Cash Equivalents | As of | Amount (in thousands) | | :---------------- | :-------------------- | | December 31, 2023 | **$38,533** | | December 31, 2022 | **$34,816** | Outstanding Repurchase Agreements | As of | Borrowings Outstanding (in thousands) | Number of Counterparties | | :---------------- | :---------------------------------- | :----------------------- | | December 31, 2023 | **$729,543** | **19** | | December 31, 2022 | **$842,455** | **17** | - The weighted average contractual haircut on repo collateral was **5.7%** as of **December 31, 2023** (**5.5% in 2022**)[423](index=423&type=chunk) - In 2023, **5,183,037 common shares** were issued through ATM programs, generating **$33.6 million in net proceeds**[440](index=440&type=chunk) - The Board of Trustees determines dividend distributions based on earnings, liquidity, capital requirements, and REIT rules[431](index=431&type=chunk) [Contractual Obligations and Commitments](index=76&type=section&id=Contractual%20Obligations%20and%20Commitments) The company's primary contractual obligations include management fees and expense reimbursements to its Manager, which are not fixed - Contractual obligations include management fees and expense reimbursements to the Manager, which are not fixed payments[445](index=445&type=chunk) - The company enters into repurchase agreements for financing, with **$729.5 million outstanding** as of **December 31, 2023**, with implied interest rates based on competitive market rates[446](index=446&type=chunk)[447](index=447&type=chunk) [Off-Balance Sheet Arrangements](index=76&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2023, the company had no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements - As of **December 31, 2023**, the company had no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[448](index=448&type=chunk) - The company has not guaranteed obligations of unconsolidated entities nor committed to providing them funding[448](index=448&type=chunk) [Inflation](index=76&type=section&id=Inflation) The company's performance is primarily influenced by interest rates rather than inflation, as most assets and liabilities are interest rate-sensitive - The company's performance is primarily influenced by interest rates, as virtually all assets and liabilities are interest rate-sensitive[449](index=449&type=chunk) - Elevated long-term inflation could adversely impact investment portfolio performance or asset prices, potentially reducing borrower income for non-Agency RMBS[450](index=450&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate risk, prepayment risk, and credit risk, which are actively managed - Primary market risks include **interest rate risk, prepayment risk, and credit risk**, which are actively managed[451](index=451&type=chunk) - Interest rate risk is hedged using instruments like **interest rate swaps, TBAs, and U.S. Treasury securities** to mitigate the mismatch between long-duration assets and short-term liabilities[452](index=452&type=chunk) Estimated Impact of Interest Rate Shifts on Portfolio Fair Value (Dec 31, 2023) | Category of Instruments | Estimated Change for a Decrease in Interest Rates by 50 Basis Points (Market Value) | Estimated Change for a Decrease in Interest Rates by 100 Basis Points (Market Value) | Estimated Change for an Increase in Interest Rates by 50 Basis Points (Market Value) | Estimated Change for an Increase in Interest Rates by 100 Basis Points (Market Value) | | :------------------------------------------ | :---------------------------------------------------------------- | :----------------------------------------------------------------- | :---------------------------------------------------------------- | :----------------------------------------------------------------- | | Agency RMBS, and CMBS excluding TBAs | **$14,755** | **$27,910** | **$(16,357)** | **$(34,316)** | | Long TBAs | **$1,260** | **$2,194** | **$(1,585)** | **$(3,495)** | | Short TBAs | **$(2,160)** | **$(4,228)** | **$2,252** | **$4,596** | | Non-Agency RMBS | **$(506)** | **$(1,221)** | **$296** | **$384** | | CLOs | **$21** | **$42** | **$(22)** | **$(46)** | | U.S. Treasury Securities, Interest Rate Swaps, Options, and Futures | **$(15,136)** | **$(30,959)** | **$14,451** | **$28,215** | | Corporate Securities and Derivatives on Corporate Securities | **$(7)** | **$(14)** | **$7** | **$14** | | Repurchase and Reverse Repurchase Agreements | **$(186)** | **$(372)** | **$186** | **$372** | | **Total** | **$(1,959)** | **$(6,648)** | **$(772)** | **$(4,276)** | - Prepayment risk affects RMBS and CLOs, driven by interest rates, housing turnover, and government policy, impacting different security types variably[457](index=457&type=chunk) - Credit risk for non-Agency RMBS and CLOs includes **default risk** (borrowers failing payments) and **severity risk** (loss upon default, including property value decline and foreclosure costs)[458](index=458&type=chunk)[459](index=459&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk) - Liquidity risk from financing long-term assets with short-term debt is managed by prudent leverage, interest rate hedges, long-term financing sources, and maintaining cash/unpledged securities[464](index=464&type=chunk)[465](index=465&type=chunk)[466](index=466&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=80&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for Ellington Residential Mortgage REIT and its subsidiaries as of and for the years ended December 31, 2023 and 2022 - The section includes audited consolidated financial statements for Ellington Residential Mortgage REIT and its subsidiaries for the years ended **December 31, 2023 and 2022**[470](index=470&type=chunk) - Financial statements comprise Consolidated Balance Sheets, Statements of Operations, Shareholders' Equity, and Cash Flows[467](index=467&type=chunk) - Notes to Consolidated Financial Statements provide detailed information on organization, accounting policies, investments, valuation, derivatives, borrowings, and other financial aspects[467](index=467&type=chunk) [Report of Independent Registered Public Accounting Firm](index=81&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements for Ellington Residential Mortgage REIT as of and for the years ended December 31, 2023 and 2022 - **PricewaterhouseCoopers LLP** issued an **unqualified opinion** on the consolidated financial statements for the years ended **December 31, 2023 and 2022**[470](index=470&type=chunk) - The valuation of certain **Level 3 investments in securities** was identified as a critical audit matter due to significant management judgment and the complex nature of valuation inputs[474](index=474&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk) [Consolidated Balance Sheets](index=83&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show the company's financial position as of December 31, 2023, and 2022 Consolidated Balance Sheet Summary (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | **$38,533** | **$34,816** | | Securities, at fair value | **$773,548** | **$893,509** | | Financial derivatives–assets, at fair value | **$74,279** | **$68,770** | | Total Assets | **$945,690** | **$1,053,632** | | Repurchase agreements | **$729,543** | **$842,455** | | Financial derivatives–liabilities, at fair value | **$7,329** | **$3,119** | | Total Liabilities | **$809,452** | **$941,223** | | Total Shareholders' Equity | **$136,238** | **$112,409** | - Total assets decreased by approximately **$108 million**, primarily driven by a reduction in securities held[481](index=481&type=chunk) - Shareholders' equity increased by approximately **$23.8 million**, reflecting capital raising activities and net income[481](index=481&type=chunk) [Consolidated Statements of Operations](index=84&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show a significant shift from a net loss of $(30.2) million in 2022 to a net income of $4.6 million in 2023 Consolidated Statements of Operations Summary (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------------------------------ | :---------------------- | :---------------------- | | Interest income | **$42,549** | **$35,006** | | Interest expense | **$(45,256)** | **$(14,820)** | | Total net interest income (expense) | **$(2,707)** | **$20,186** | | Total expenses | **$5,535** | **$5,128** | | Total other income (loss) | **$12,801** | **$(45,256)** | | **NET INCOME (LOSS)** | **$4,559** | **$(30,198)** | | Basic and Diluted EPS | **$0.31** | **$(2.29)** | - Net income improved significantly from a loss of **$(30.2) million in 2022** to a gain of **$4.6 million in 2023**[484](index=484&type=chunk) - The positive shift was largely driven by **$12.8 million in 'Total other income (loss)' in 2023**, primarily from financial derivatives, contrasting with a **$(45.3) million loss in 2022**[484](index=484&type=chunk) - Net interest income became negative in 2023, moving from **$20.2 million in 2022 to $(2.7) million**, due to a substantial increase in interest expense[484](index=484&type=chunk) [Consolidated Statements of Shareholders' Equity](index=85&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) The Consolidated Statements of Shareholders' Equity show an increase in total shareholders' equity from $112.4 million at December 31, 2022, to $136.2 million at December 31, 2023 Shareholders' Equity Changes (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Balance, beginning of period | **$112,409** | **$154,225** | | Common shares issued (net) | **$33,555** | **$2,028** | | Share based compensation | **$255** | **$312** | | Dividends declared | **$(14,540)** | **$(13,696)** | | Net income (loss) | **$4,559** | **$(30,198)** | | **Balance, end of period** | **$136,238** | **$112,409** | - Total shareholders' equity increased by **$23.8 million** from **December 31, 2022, to December 31, 2023**[487](index=487&type=chunk) - The increase was mainly due to **$33.6 million in net proceeds from common share issuances** and **$4.6 million in net income**, partially offset by **$14.5 million in dividends**[487](index=487&type=chunk) [Consolidated Statements of Cash Flows](index=86&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows show a net increase in cash and cash equivalents of $3.7 million in 2023, bringing the total to $38.5 million Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------------------------------ | :---------------------- | :---------------------- | | Net cash provided by (used in) operating activities | **$(10,022)** | **$22,417** | | Net cash provided by (used in) investing activities | **$85,723** | **$110,547** | | Cash provided by (used in) financing activities | **$(71,984)** | **$(167,176)** | | Net increase (decrease) in cash and cash equivalents | **$3,717** | **$(34,212)** | | Cash and cash equivalents, end of period | **$38,533** | **$34,816** | - Cash and cash equivalents increased by **$3.7 million in 2023**, reaching **$38.5 million**, compared to a **$34.2 million decrease in 2022**[491](index=491&type=chunk)[493](index=493&type=chunk) - Operating activities used **$10.0 million in 2023**, while investing activities provided **$85.7 million**[438](index=438&type=chunk) - Financing activities used **$72.0 million in 2023**, including **$33.6 million from common share issuances** and **$14.1 million for dividends paid**[438](index=438&type=chunk) [Notes to Consolidated Financial Statements](index=88&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The Notes to Consolidated Financial Statements provide detailed disclosures on the company's organization, investment objectives, significant accounting policies, investment portfolio composition, financial derivatives, borrowings under repurchase agreements, offsetting arrangements, earnings per share, related party transactions, capital structure, commitments, and subsequent events - The notes detail the company's formation as a Maryland REIT in **2012**, its external management by Ellington, and its investment focus on Agency/non-Agency RMBS and CLOs[496](index=496&type=chunk)[497](index=497&type=chunk) - Significant accounting policies include U.S. GAAP conformity, fair value election for securities and derivatives, and specific methodologies for interest income recognition and income taxes[499](index=499&type=chunk)[500](index=500&type=chunk)[509](index=509&type=chunk)[512](index=512&type=chunk)[518](index=518&type=chunk)[534](index=534&type=chunk)[540](index=540&type=chunk) - The company's investment portfolio, financial derivatives, and repurchase agreements are detailed, including fair values, notional amounts, and weighted average rates[545](index=545&type=chunk)[580](index=580&type=chunk)[597](index=597&type=chunk) - Related party transactions, including management fees and expense reimbursements to the Manager, are disclosed, along with capital structure details like common shares outstanding and share repurchase programs[610](index=610&type=chunk)[611](index=611&type=chunk)[613](index=613&type=chunk)[618](index=618&type=chunk)[621](index=621&type=chunk)[622](index=622&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=112&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - There are no changes in or disagreements with accountants on accounting and financial disclosures[629](index=629&type=chunk) [Item 9A. Controls and Procedures](index=112&type=section&id=Item%209A.%20Controls%20and%20Procedures) The company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective as of December 31, 2023 - Disclosure controls and procedures were evaluated and deemed **effective as of December 31, 2023**, by management, including the CEO and CFO[630](index=630&type=chunk)[631](index=631&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended **December 31, 2023**[632](index=632&type=chunk) - Management concluded that internal control over financial reporting was **effective as of December 31, 2023**, based on the **COSO 2013 framework**[633](index=633&type=chunk)[635](index=635&type=chunk) [Item 9B. Other Information](index=113&type=section&id=Item%209B.%20Other%20Information) This item reports that there is no other information to disclose - No other information is reported under this item[636](index=636&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=113&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[637](index=637&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=114&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual shareholders' meeting - Information on directors, executive officers, and corporate governance is incorporated by reference from the **2024 Proxy Statement**[640](index=640&type=chunk) - The company has a **Code of Business Conduct and Ethics** applicable to officers, trustees, and Manager's employees, available on **www.earnreit.com**[641](index=641&type=chunk) - Waivers of the Code for executive officers or trustees are made by the Board or its committees and disclosed on the company's website[641](index=641&type=chunk)[642](index=642&type=chunk) [Item 11. Executive Compensation](index=114&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual shareholders' meeting - Executive compensation information is incorporated by reference from the **2024 Proxy Statement**[643](index=643&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=114&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related shareholder matters, is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual shareholders' meeting - Security ownership information for certain beneficial owners and management is incorporated by reference from the **2024 Proxy Statement**[644](index=644&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=114&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual shareholders' meeting - Information on certain relationships, related transactions, and director independence is incorporated by reference from the **2024 Proxy Statement**[645](index=645&type=chunk) [Item 14. Principal Accountant Fees and Services](index=114&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual shareholders' meeting - Information on principal accountant fees and services is incorporated by reference from the **2024 Proxy Statement**[646](index=646&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=115&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the report, including financial statements, schedules, and a comprehensive list of exhibits - The section includes financial statements and schedules, with all financial statement schedules not included being omitted as inapplicable or provided in the Financial Statements and Notes[648](index=648&type=chunk) - A comprehensive list of exhibits is provided, covering corporate governance, management agreements, equity incentive plans, and various certifications[648](index=648&type=chunk)[649](index=649&type=chunk) - Certifications under **Section 302 and 906 of the Sarbanes-Oxley Act of 2002** are furnished as exhibits[649](index=649&type=chunk) [Item 16. Form 10-K Summary](index=116&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[650](index=650&type=chunk)
Ellington Residential Mortgage REIT(EARN) - 2023 Q4 - Earnings Call Presentation
2024-03-07 22:49
Financial Performance - Net income for the quarter was $124 million, or $075 per share[31] - Adjusted distributable earnings were $46 million, or $027 per share[32] - The company's economic return was 77% for the quarter[71] - Net interest margin was 219% overall, with 202% on Agency and 628% on credit[71] Portfolio Composition and Strategy - Agency RMBS holdings decreased by 8% to $7280 million as of December 31, 2023, compared to $7905 million as of September 30, 2023[73] - CLO holdings increased more than fourfold to $174 million during the fourth quarter[4] - The company's Agency RMBS portfolio turnover was 25% for the quarter[46] - Aggregate holdings of interest-only securities and non-Agency RMBS decreased by 13% over the same period[46] - The company had a net long TBA position of $367 million as of December 31, 2023[9] Capital Structure and Leverage - Shareholders' equity was $1362 million, with a book value per share of $732[72] - The company's debt-to-equity ratio was 54:1, or 53:1 adjusted for unsettled purchases and sales[72] - The net mortgage assets-to-equity ratio was 65:1[9]
Ellington Residential Mortgage REIT(EARN) - 2023 Q4 - Earnings Call Transcript
2024-03-07 21:06
Financial Data and Key Metrics Changes - In Q4 2023, the company reported net income of $0.75 per share and adjusted distributable earnings (ADE) of $0.27 per share, with a non-annualized economic return of 7.7% [19][25][28] - The overall net interest margin expanded to 2.19% from 1.34% quarter-over-quarter, driven by higher asset yields and a lower cost of funds [27] - Book value per share increased to $7.32 at year-end from $7.02 at September 30 [28] Business Line Data and Key Metrics Changes - The Agency RMBS holdings decreased by 8% sequentially to $728 million as of December 31, with a portfolio turnover of 25% for the quarter [29] - The CLO portfolio increased by $13.6 million during the quarter, with a total size of approximately $30 million by year-end, reflecting a 70% increase from the previous year [22][30] - The credit net interest margin, including CLOs and non-agency RMBS, increased to 6.28% from 4.55% [27] Market Data and Key Metrics Changes - Medium and long-term interest rates declined overall for the quarter despite earlier spikes, with the 30-year Freddie mortgage survey rate finishing lower [9][10] - Credit spreads on both high yield and investment-grade tightened significantly over the quarter, with prices on the Morningstar LSTA Leveraged Loan Index rising [11][15] Company Strategy and Development Direction - The company is focusing on diversifying its portfolio by increasing investments in CLOs, which now represent 17% of total equity, while reducing its Agency MBS holdings [68] - The management believes that the CLO strategy will stabilize and enhance returns over time, as it is expected to generate attractive returns across market cycles [74][68] - The company anticipates that the Federal Reserve's shift from a tightening to a supportive stance will benefit the Agency MBS market [63][50] Management's Comments on Operating Environment and Future Outlook - Management noted that the fourth quarter was characterized by significant market volatility, but they successfully navigated these fluctuations to maintain portfolio integrity [13][36] - The company expects continued strength in the CLO market due to declining credit market risks and anticipates further inflows into high-yield and leveraged loans [61][52] - Management expressed optimism about future performance, citing factors such as low supply relative to Treasury supply and lower volatility [65][66] Other Important Information - The company ended the quarter with $61 million in cash plus unencumbered assets, approximately 45% of total equity [28] - The debt-to-equity ratio adjusted for unsettled trades decreased to 5.3:1 from 7.3:1, primarily due to an increase in shareholders' equity [30] Q&A Session Summary Question: How do you see the equity allocation to CLOs playing out? - Management expressed enthusiasm for the CLO strategy, indicating that they would like to see it grow as much as possible, while acknowledging constraints related to REIT regulations [74][75] Question: What are your thoughts on the leverage ratio going forward? - Management indicated that leverage will be blended based on the appropriate levels for each asset class, with potential for increasing leverage in CLOs as conditions allow [89][90] Question: What interest rate environment is needed for a meaningful pickup in prepay speeds? - Management noted that while prepayment speeds have been benign, significant moves in rates would be necessary for many of the coupons held to become refinanceable [92][93]
Ellington Residential (EARN) Q4 Earnings Surpass Estimates
Zacks Investment Research· 2024-03-06 23:51
Ellington Residential (EARN) came out with quarterly earnings of $0.27 per share, beating the Zacks Consensus Estimate of $0.23 per share. This compares to earnings of $0.25 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 17.39%. A quarter ago, it was expected that this residential mortgage real estate investment trust would post earnings of $0.25 per share when it actually produced earnings of $0.21, delivering a surprise of ...
Ellington Residential Mortgage REIT Reports Fourth Quarter 2023 Results
Businesswire· 2024-03-06 21:35
OLD GREENWICH, Conn.--(BUSINESS WIRE)--Ellington Residential Mortgage REIT (NYSE: EARN) ("we", "us," or "our") today reported financial results for the quarter ended December 31, 2023. Highlights Net income (loss) of $12.4 million, or $0.75 per share. Adjusted Distributable Earnings1 of $4.6 million, or $0.27 per share. Book value of $7.32 per share as of December 31, 2023, which includes the effects of dividends of $0.24 per share for the quarter. Net interest margin2 of 2.02% on Agency, 6.28% o ...
Ellington Residential Mortgage REIT(EARN) - 2023 Q4 - Annual Results
2024-03-05 16:00
[Fourth Quarter 2023 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%202023%20Results) This section summarizes the company's strong Q4 2023 performance, including net income, economic return, and strategic shifts in its investment portfolio [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Laurence Penn reported strong Q4 2023 performance with $0.75 net income per share, 7.7% economic return, and strategic CLO rotation - **Net income of $0.75 per share** and a **7.7% non-annualized economic return** in Q4 2023[3](index=3&type=chunk) - **Adjusted Distributable Earnings grew to $0.27 per share** and **exceeded dividend coverage**[3](index=3&type=chunk) - The company avoided forced asset sales during the October market selloff, preserving earnings and enabling market recovery participation[3](index=3&type=chunk) - Agency RMBS generally **outperformed interest rate swaps and U.S. Treasury securities** in Q4, particularly lower and intermediate coupons[4](index=4&type=chunk) - The **CLO portfolio grew by $13.6 million** during Q4, contributing to strong returns and lower leverage through capital rotation[5](index=5&type=chunk) - As of March 6, 2024, the **CLO portfolio reached approximately $30 million**[5](index=5&type=chunk) [Key Financial and Operational Metrics](index=1&type=section&id=Key%20Financial%20and%20Operational%20Metrics) Q4 2023 key financial and operational metrics show strong performance, including net income, ADE, book value, and strategic portfolio shifts Fourth Quarter 2023 Key Financial Metrics | Metric | Value | | :--------------------------------- | :---------------- | | Net income (loss) | $12.4 million | | Net income (loss) per share | $0.75 | | Adjusted Distributable Earnings | $4.6 million | | Adjusted Distributable Earnings per share | $0.27 | | Book value per share (Dec 31, 2023) | $7.32 | | Dividends per share (Q4 2023) | $0.24 | | Dividend yield (March 5, 2024) | 16.0% | | Monthly dividend declared (Feb 7, 2024) | $0.08 per common share | Fourth Quarter 2023 Key Operational Metrics | Metric | Value | | :--------------------------------- | :---------------- | | Net interest margin (Agency) | 2.02% | | Net interest margin (Credit) | 6.28% | | Net interest margin (Overall) | 2.19% | | Weighted average CPR (fixed-rate Agency specified pool) | 6.8% | | Net mortgage assets-to-equity ratio (Dec 31, 2023) | 6.5:1 | | CLO portfolio (Dec 31, 2023) | $17.4 million | | Capital allocation (Dec 31, 2023) | 89% mortgage-related, 11% corporate CLOs | | Debt-to-equity ratio (Dec 31, 2023, adjusted) | 5.3:1 | | Cash and cash equivalents (Dec 31, 2023) | $38.5 million | | Other unencumbered assets (Dec 31, 2023) | $22.9 million | [Detailed Financial Results and Portfolio Overview](index=2&type=section&id=Financial%20Results) This section details Q4 2023 financial results, including portfolio composition, leverage, hedging strategies, and market performance [Portfolio Composition and Changes](index=2&type=section&id=Portfolio%20Composition%20and%20Changes) The long investment portfolio saw decreased Agency RMBS and IOs, with significant CLO growth reflecting a strategic capital rotation to credit assets [Long Investments Portfolio](index=2&type=section&id=Long%20Investments%20Portfolio) The long investments portfolio shows a decrease in Agency RMBS and an increase in CLO holdings from Q3 to Q4 2023 Portfolio of Long Investments (Fair Value, $ in thousands) | Portfolio Segment | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :---------------- | :----------- | :----------- | :--------- | :--------- | | Total Agency RMBS | $727,997 | $790,508 | $(62,511) | -7.9% | | Agency IOs | $7,415 | $7,845 | $(430) | -5.5% | | Total Agency | $735,412 | $798,353 | $(62,941) | -7.9% | | CLO Notes | $14,491 | $3,824 | $10,667 | +279.0% | | CLO Equity | $2,926 | $0 | $2,926 | N/A | | Non-Agency RMBS | $9,409 | $12,825 | $(3,416) | -26.6% | | Non-Agency IOs | $11,310 | $11,540 | $(230) | -2.0% | | Total Credit | $38,136 | $28,189 | $9,947 | +35.3% | | Total Portfolio | $773,548 | $826,542 | $(52,994) | -6.4% | [Portfolio Shifts and Turnover](index=2&type=section&id=Portfolio%20Shifts%20and%20Turnover) Portfolio shifts in Q4 2023 included an 8% decrease in Agency RMBS and a more than fourfold increase in CLO holdings - **Agency RMBS holdings decreased by 8% to $728.0 million** by December 31, 2023, due to net sales and paydowns[9](index=9&type=chunk) - Aggregate holdings of interest-only securities and non-Agency RMBS **decreased by 13%** during the quarter[9](index=9&type=chunk) - **CLO holdings increased more than fourfold to $17.4 million** by December 31, 2023, reflecting capital rotation from RMBS to CLOs[9](index=9&type=chunk) - **Agency RMBS portfolio turnover was 25%** for the quarter[9](index=9&type=chunk) - The company plans to **continue increasing allocation to corporate CLOs and/or non-Agency RMBS** based on market opportunities[14](index=14&type=chunk) [Leverage and Hedging](index=2&type=section&id=Leverage%20and%20Hedging) Leverage ratios decreased in Q4 2023 due to reduced borrowings and higher equity, with interest rate risk primarily hedged via swaps Leverage Ratios | Metric | Dec 31, 2023 | Sep 30, 2023 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Debt-to-equity ratio (adjusted) | 5.3:1 | 7.3:1 | -2.0 | | Net mortgage assets-to-equity ratio | 6.5:1 | 7.2:1 | -0.7 | - **Leverage ratios declined due to decreased borrowings** on a smaller Agency RMBS portfolio and **significantly higher shareholders' equity**[10](index=10&type=chunk) - Interest rate risk was primarily **hedged through interest rate swaps**, ending with a net long TBA notional position but a net short 10-year equivalent position[12](index=12&type=chunk) - A **small credit hedge position** was in place for corporate CLO and/or non-Agency RMBS investments as of December 31, 2023[12](index=12&type=chunk) [Market Performance and Net Interest Margin](index=2&type=section&id=Market%20Performance%20and%20Net%20Interest%20Margin) Agency RMBS and CLO markets showed strong performance with tightening spreads, while net interest margins significantly increased due to higher asset yields and lower funding costs - **Agency RMBS outperformed U.S. Treasury securities and interest rate swaps** in Q4, with lower and intermediate coupon RMBS showing pronounced outperformance[11](index=11&type=chunk) - **Net gains on Agency RMBS and positive net interest income significantly exceeded net losses on hedges**, driving strong portfolio performance[11](index=11&type=chunk) - **Corporate CLO portfolio contributed positively** through net interest income and net gains as yield spreads tightened after an October widening[13](index=13&type=chunk) - **Non-Agency RMBS and interest-only securities generated positive results**, driven by net interest income and net gains[14](index=14&type=chunk) Net Interest Margin (excluding Catch-up Amortization Adjustment) | Portfolio | Q4 2023 | Q3 2023 | Change (bps) | | :-------- | :------ | :------ | :----------- | | Agency | 2.02% | 1.26% | +76 bps | | Credit | 6.28% | 4.55% | +173 bps | - **Increased net interest margins were driven by higher asset yields and lower cost of funds**, benefiting from positive carry on interest rate swaps[15](index=15&type=chunk) [Company Information and Disclosures](index=3&type=section&id=Company%20Information) This section provides an overview of Ellington Residential Mortgage REIT, conference call details, and cautionary statements regarding forward-looking information [About Ellington Residential Mortgage REIT](index=3&type=section&id=About%20Ellington%20Residential%20Mortgage%20REIT) Ellington Residential Mortgage REIT (EARN) is a REIT focused on residential mortgage-related assets, primarily Agency RMBS and corporate CLOs, externally managed by Ellington Management Group - **Ellington Residential Mortgage REIT (EARN) is a REIT** specializing in residential mortgage-related, real estate-related, and other assets, including corporate CLOs[16](index=16&type=chunk) - Primary focus is on **residential mortgage-backed securities guaranteed by a U.S. government Agency** or government-sponsored enterprise[16](index=16&type=chunk) - EARN is **externally managed and advised by Ellington Residential Mortgage Management LLC**, an affiliate of Ellington Management Group, L.L.C[16](index=16&type=chunk) [Conference Call Details](index=3&type=section&id=Conference%20Call) A conference call on March 7, 2024, discussed Q4 2023 results, offering dial-in, webcast, and presentation access, with replays available - A conference call was held on **Thursday, March 7, 2024, at 11:00 a.m. Eastern Time** to discuss Q4 2023 financial results[17](index=17&type=chunk) - **Dial-in and live webcast options were available**, with an investor presentation posted on the company's website[17](index=17&type=chunk) - A **dial-in replay and webcast archive were available until March 14, 2024**[17](index=17&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This statement warns that forward-looking statements are subject to risks and uncertainties, advising against reliance on them as future predictions due to potential discrepancies from various market and regulatory factors - The press release contains **forward-looking statements subject to numerous risks and uncertainties**, where actual results may differ from projections[19](index=19&type=chunk) - Readers should **not rely on forward-looking statements as predictions of future events**, as they are based on current beliefs and assumptions subject to change[19](index=19&type=chunk) - Factors causing actual results to vary include **changes in interest rates, investment market value, market volatility, mortgage rates, borrowing ability, regulations, REIT qualification, and economic trends**[19](index=19&type=chunk) - The company **undertakes no obligation to update or revise any forward-looking statements**[19](index=19&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the consolidated statement of operations and balance sheet, detailing the company's financial performance and position for Q4 2023 [Consolidated Statement of Operations](index=5&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20OPERATIONS) Q4 2023 net income significantly improved to $12.4 million ($0.75 per share), driven by positive net interest income and substantial unrealized gains on securities Consolidated Statement of Operations (Three-Month Period Ended, $ in thousands) | Item | Dec 31, 2023 | Sep 30, 2023 | | :----------------------------------------- | :----------- | :----------- | | Interest income | $11,888 | $11,253 | | Interest expense | $(11,511) | $(12,349) | | Total net interest income (expense) | $377 | $(1,096) | | Total expenses | $1,374 | $1,356 | | Net realized gains (losses) on securities | $(11,825) | $(19,572) | | Net realized gains (losses) on financial derivatives | $1,440 | $1,152 | | Change in net unrealized gains (losses) on securities | $50,930 | $(15,824) | | Change in net unrealized gains (losses) on financial derivatives | $(27,109) | $25,276 | | Total other income (loss) | $13,436 | $(8,968) | | NET INCOME (LOSS) | $12,439 | $(11,420) | | Basic and Diluted Net Income (Loss) Per Common Share | $0.75 | $(0.75) | | Weighted Average Shares Outstanding | 16,662,407 | 15,199,837 | | Cash Dividends Per Share | $0.24 | $0.24 | [Consolidated Balance Sheet](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEET) As of December 31, 2023, total assets decreased to $945.7 million, while total shareholders' equity significantly increased to $136.2 million, improving book value per share to $7.32 Consolidated Balance Sheet (As of, $ in thousands) | Item | Dec 31, 2023 | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------- | :----------- | :----------- | :----------- | | Total Assets | $945,690 | $1,064,436 | $1,053,632 | | Securities, at fair value | $773,548 | $836,275 | $893,509 | | Financial derivatives–assets, at fair value | $74,279 | $100,948 | $68,770 | | Total Liabilities | $809,452 | $952,978 | $941,223 | | Repurchase agreements | $729,543 | $811,180 | $842,455 | | Financial derivatives–liabilities, at fair value | $7,329 | $8,840 | $3,119 | | Total Shareholders' Equity | $136,238 | $111,458 | $112,409 | | Book Value Per Share | $7.32 | $7.02 | $8.40 | | Common shares issued and outstanding | 18,601,464 | 15,870,141 | 13,377,840 | - **Common shares issued and outstanding at December 31, 2023, include 2,720,548 shares** issued during Q4 under the at-the-market offering program[25](index=25&type=chunk) [Adjusted Distributable Earnings (Non-GAAP)](index=7&type=section&id=Reconciliation%20of%20Adjusted%20Distributable%20Earnings%20to%20Net%20Income%20(Loss)) This section defines Adjusted Distributable Earnings (ADE), a non-GAAP measure, and reconciles it to net income, highlighting its purpose and calculation [Definition and Purpose](index=7&type=section&id=Definition%20and%20Purpose%20of%20Adjusted%20Distributable%20Earnings) Adjusted Distributable Earnings (ADE) is a non-GAAP measure excluding volatile gains/losses, used to indicate long-term performance, evaluate portfolio yield, and compare operating performance, but is not a GAAP substitute - **Adjusted Distributable Earnings (ADE) is a non-GAAP measure** excluding realized/unrealized gains/losses on securities and derivatives (except swap settlements) and Catch-up Amortization Adjustment from net income[27](index=27&type=chunk) - ADE is a **useful indicator of current and projected long-term financial performance and dividend-paying ability**, excluding volatile earnings components[28](index=28&type=chunk) - It helps **evaluate the effective net yield of the portfolio** after financial leverage and **compares operating performance to residential mortgage REIT peers**[28](index=28&type=chunk) - ADE is **supplementary to, not a substitute for, GAAP net income**, differing from REIT taxable income, so distribution requirements are not based on ADE[29](index=29&type=chunk)[30](index=30&type=chunk) - The Board of Trustees considers **earnings, liquidity, financial condition, REIT distribution requirements, and financial covenants** when setting dividends[31](index=31&type=chunk) [Reconciliation to Net Income (Loss)](index=7&type=section&id=Reconciliation%20to%20Net%20Income%20(Loss)) Q4 2023 Adjusted Distributable Earnings increased to $4.6 million ($0.27 per share), up from $3.2 million in Q3, primarily due to adjustments for realized and unrealized gains/losses Reconciliation of Adjusted Distributable Earnings to Net Income (Loss) ($ in thousands) | Item | Dec 31, 2023 | Sep 30, 2023 | | :-------------------------------------------------------------------------------- | :----------- | :----------- | | Net Income (Loss) | $12,439 | $(11,420) | | Net realized (gains) losses on securities | $11,825 | $19,572 | | Change in net unrealized (gains) losses on securities | $(50,930) | $15,824 | | Net realized (gains) losses on financial derivatives | $(1,440) | $(1,152) | | Change in net unrealized (gains) losses on financial derivatives | $27,109 | $(25,276) | | Net realized gains (losses) on periodic settlements of interest rate swaps | $880 | $796 | | Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps | $5,228 | $4,913 | | Non-recurring expenses | $13 | $28 | | Negative (positive) component of interest income represented by Catch-up Amortization Adjustment | $(566) | $(46) | | Subtotal (Adjustments) | $(7,881) | $14,659 | | Adjusted Distributable Earnings | $4,558 | $3,239 | | Weighted Average Shares Outstanding | 16,662,407 | 15,199,837 | | Adjusted Distributable Earnings Per Share | $0.27 | $0.21 |
Ellington Residential Mortgage REIT Announces Release Date of Fourth Quarter 2023 Earnings, Conference Call, and Investor Presentation
Businesswire· 2024-02-16 13:30
OLD GREENWICH, Conn.--(BUSINESS WIRE)--Ellington Residential Mortgage REIT (NYSE: EARN) (the "Company") today announced that it will release financial results for the quarter ended December 31, 2023 after market close on Wednesday, March 6, 2024. The Company will host a conference call to discuss its financial results at 11:00 a.m. Eastern Time on Thursday, March 7, 2024. To participate in the event by telephone, please dial (800) 579-2543 at least 10 minutes prior to the start time and reference the confer ...
Ellington Residential Declares Monthly Common Dividend
Businesswire· 2024-02-07 22:26
OLD GREENWICH, Conn.--(BUSINESS WIRE)--Ellington Residential Mortgage REIT (NYSE: EARN) (the "Company") today announced that its Board of Trustees has declared a monthly common dividend of $0.08 per share, payable on March 25, 2024 to shareholders of record as of February 29, 2024. Cautionary Statement Regarding Forward-Looking Statements This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward- ...