Ellington Residential Mortgage REIT (NYSE:EARN) Q3 2023 Earnings Conference Call November 13, 2023 11:00 AM ET Company Participants Alaael-Deen Shilleh - Associate General Counsel Larry Penn - Chief Executive Officer Chris Smernoff - Chief Financial Officer Mark Tecotzky - Co-Chief Investment Officer Conference Call Participants Crispin Love - Piper Sandler Operator Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Residential Mortgage REIT 2023 Third Quarter Financial ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35896 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted p ...

Financial Data and Key Metrics Changes - The company generated net income of $0.09 per share and adjusted distributable earnings (ADE) of $0.17 per share for the second quarter, compared to net income of $0.17 per share and ADE of $0.21 per share in the first quarter [7][36] - Book value per share decreased to $8.12 at June 30 from $8.31 at March 31, resulting in an economic return of 60 basis points including dividends [13][36] - The net interest margin (NIM) decreased to 0.93% from 1.16% due to asset yields increasing less than borrowing rates [12] Business Line Data and Key Metrics Changes - The non-Agency and interest-only (IO) portfolios contributed positively to quarterly results, driven by net gains and strong net interest income [9] - The Agency RMBS holdings remained essentially unchanged at $889 million, with portfolio turnover at 19% for the quarter [38] Market Data and Key Metrics Changes - The MBS sector performed better than expected, with strong investor interest absorbing FDIC-directed sales [18][31] - The company raised its weighted average coupon slightly by about 15 basis points to nearly 4%, which is still below new production [20] Company Strategy and Development Direction - The company plans to maintain excess liquidity and additional borrowing capacity to capitalize on attractive investment opportunities and manage volatility [46] - The strategy includes rotating the portfolio to drive NIM and ADE while relying on dynamic hedging to protect book value [46] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for Agency MBS, citing wide nominal yield spreads and encouraging inflation data [65] - The company anticipates that bank demand for MBS will return, stabilizing spreads as deposit stability improves [80] Other Important Information - The company maintained a stable overall portfolio composition and focused on finding pools with the lowest payoffs for faster prepayments [32][33] - The company highlighted the importance of demand from other pools of capital to support the mortgage market [26][48] Q&A Session All Questions and Answers Question: Potential to add more mortgage leverage - Management indicated that a reduction in interest rate volatility would be a catalyst for increasing leverage, with bank participation expected to materialize in Q4 [66][68] Question: Trade-off of issuing stock versus share buybacks - The company plans to maintain a stable capital base, with potential moderate issuance to keep capital levels stable while considering share buybacks if the stock price approaches 80% of book value [50] Question: Opportunities in the non-Agency portfolio - Management expressed interest in credit risk transfer (CRT) assets due to significant home price appreciation and low loan-to-value ratios [52] Question: Thoughts on TBA positions - The company uses TBA shorts to manage negative convexity and will adjust exposure based on the attractiveness of mortgage basis [99]

PART I. Financial Information [**Item 1. Consolidated Financial Statements (unaudited)**](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements of Ellington Residential Mortgage REIT, including the balance sheets, statements of operations, statements of shareholders' equity, and statements of cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial instrument details for the period ended June 30, 2023 [**Consolidated Balance Sheets**](index=3&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and shareholders' equity as of June 30, 2023, and December 31, 2022 Consolidated Balance Sheets (June 30, 2023 vs. December 31, 2022) | (In thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $43,713 | $34,816 | | Mortgage-backed securities, at fair value | $920,714 | $893,301 | | Total Assets | $1,083,989 | $1,053,632 | | **LIABILITIES** | | | | Repurchase agreements | $875,030 | $842,455 | | Total Liabilities | $967,292 | $941,223 | | **SHAREHOLDERS' EQUITY** | | | | Total Shareholders' Equity | $116,697 | $112,409 | | Total Liabilities and Shareholders' Equity | $1,083,989 | $1,053,632 | - Total Assets increased by **$30.3 million** from December 31, 2022, to June 30, 2023, primarily driven by an increase in mortgage-backed securities and cash and cash equivalents[9](index=9&type=chunk) - Shareholders' Equity increased by **$4.3 million**, from **$112.4 million** to **$116.7 million**, over the six-month period[9](index=9&type=chunk) [**Consolidated Statements of Operations**](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section presents the Company's financial performance, including interest income, interest expense, net income (loss), and earnings per share for the three- and six-month periods ended June 30, 2023 and 2022 Consolidated Statements of Operations (Three-Month Period Ended June 30) | (In thousands except for per share amounts) | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Interest income | $10,070 | $9,087 | | Interest expense | $(11,686) | $(1,972) | | Total net interest income | $(1,616) | $7,115 | | Total expenses | $1,500 | $1,306 | | Total other income (loss) | $4,319 | $(16,549) | | NET INCOME (LOSS) | $1,203 | $(10,740) | | NET INCOME (LOSS) PER COMMON SHARE: Basic and Diluted | $0.09 | $(0.82) | Consolidated Statements of Operations (Six-Month Period Ended June 30) | (In thousands except for per share amounts) | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Interest income | $19,408 | $15,622 | | Interest expense | $(21,396) | $(3,075) | | Total net interest income | $(1,988) | $12,547 | | Total expenses | $2,805 | $2,627 | | Total other income (loss) | $8,333 | $(38,127) | | NET INCOME (LOSS) | $3,540 | $(28,207) | | NET INCOME (LOSS) PER COMMON SHARE: Basic and Diluted | $0.26 | $(2.15) | - The company reported a net income of **$1.2 million** (**$0.09 EPS**) for the three-month period ended June 30, 2023, a significant improvement from a net loss of **$(10.7) million** (**$(0.82) EPS**) in the prior year period[12](index=12&type=chunk) - Net interest income shifted from a positive **$7.1 million** in Q2 2022 to a negative **$(1.6) million** in Q2 2023, primarily due to a substantial increase in interest expense[12](index=12&type=chunk) [**Consolidated Statements of Shareholders' Equity**](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS'%20EQUITY) This section details changes in the Company's shareholders' equity, including common share issuances, dividends, and net income (loss) for the six-month period ended June 30, 2023 Shareholders' Equity Changes (Six-Month Period Ended June 30, 2023) | (In thousands except for share amounts) | Common Shares | Additional Paid-in-Capital | Accumulated (Deficit) Earnings | Total | | :--- | :--- | :--- | :--- | :--- | | BALANCE, December 31, 2022 | $134 | $240,940 | $(128,665) | $112,409 | | Common shares issued | $10 | $7,289 | — | $7,299 | | Share based compensation | — | $126 | — | $126 | | Forfeiture of common shares to satisfy tax withholding obligations | — | — | — | — | | Dividends declared | — | — | $(6,677) | $(6,677) | | Net income (loss) | — | — | $3,540 | $3,540 | | BALANCE, June 30, 2023 | $144 | $248,355 | $(131,802) | $116,697 | - Total Shareholders' Equity increased from **$112.4 million** at December 31, 2022, to **$116.7 million** at June 30, 2023, driven by net income and common share issuances, partially offset by dividends declared[15](index=15&type=chunk) - Dividends declared for the six-month period ended June 30, 2023, totaled **$0.48 per common share**, compared to **$0.56** in the same period of 2022[16](index=16&type=chunk) [**Consolidated Statements of Cash Flows**](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section outlines the Company's cash inflows and outflows from operating, investing, and financing activities for the six-month periods ended June 30, 2023 and 2022 Consolidated Statements of Cash Flows (Six-Month Period Ended June 30) | (In thousands) | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(4,381) | $14,030 | | Net cash provided by (used in) investing activities | $(18,546) | $39,153 | | Cash flows provided by (used in) financing activities | $31,824 | $(84,739) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $8,897 | $(31,556) | | CASH AND CASH EQUIVALENTS, END OF PERIOD | $43,713 | $37,472 | - Operating activities used **$4.4 million** in cash for the six months ended June 30, 2023, a reversal from providing **$14.0 million** in the prior year[19](index=19&type=chunk) - Financing activities provided **$31.8 million** in cash in H1 2023, a significant improvement from using **$(84.7) million** in H1 2022, primarily due to net proceeds from common share issuance and increased borrowings under repurchase agreements[22](index=22&type=chunk) [**Notes to Consolidated Financial Statements**](index=8&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations of the Company's organization, significant accounting policies, and specific financial instrument details supporting the consolidated financial statements - The Company's unaudited interim consolidated financial statements are prepared in conformity with U.S. GAAP and Regulation S-X, requiring management estimates and assumptions[28](index=28&type=chunk) - The Company applies ASC 820-10 for fair value measurements, using a three-level hierarchy based on input observability (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs)[29](index=29&type=chunk)[31](index=31&type=chunk) - The Company has elected the fair value option (FVO) for its securities portfolio and financial derivatives, recording changes in fair value in the Consolidated Statement of Operations[38](index=38&type=chunk)[57](index=57&type=chunk) [**1. Organization and Investment Objective**](index=8&type=section&id=1.%20Organization%20and%20Investment%20Objective) Ellington Residential Mortgage REIT (EARN) is a Maryland REIT formed in 2012, specializing in acquiring and managing residential mortgage-backed securities (RMBS), including Agency and non-Agency RMBS. The company aims to generate attractive current yields and risk-adjusted total returns, operating to qualify as a REIT and distributing at least 90% of its taxable income

Ellington and its Affiliated Management Companies Slide 3 – First Quarter Market Update Q1 2023 EARNINGS (1) Based on the market environment as of March 31, 2023. Results are based on forward-looking models, which are inherently imperfect, and incorporate various simplifying assumptions. Therefore, the table above is for illustrative purposes only and actual changes in interest rates would likely cause changes in the actual value of our portfolio that would differ from those presented above, and such differ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35896 Ellington Residential Mortgage REIT (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporat ...

Ellington Residential Mortgage REIT (NYSE:EARN) Q1 2023 Earnings Conference Call May 12, 2023 11:00 AM ET Company Participants Larry Penn - Chief Executive Officer Chris Smernoff - Chief Financial Officer Mark Tecotzky - Co-Chief Investment Officer Alaael-Deen Shilleh - Associate General Counsel and Secretary Conference Call Participants Douglas Harter - Credit Suisse Eric Hagen - BTIG Crispin Love - Piper Sandler Mikhail Goberman - JMP Securities Matthew Erdner - JonesTrading Operator Good morning, ladies ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35896 Ellington Residential Mortgage REIT (Exact Name of Registrant as Specified in Its Charter) Maryland 46-0687599 (State or Other Jurisdictio ...

Financial Data and Key Metrics Changes - For Q4 2022, the company reported net income of $0.88 per share and adjusted distributable earnings (ADE) of $0.25 per share, compared to a net loss of $1.04 per share and ADE of $0.23 per share in Q3 2022 [42][35][56] - The net interest margin (NIM) increased slightly to 1.37% from 1.28% quarter-over-quarter, driven by higher asset yields exceeding the increase in cost of funds [37][56] - Book value per share rose to $8.40 at December 31 from $7.78 at September 30, reflecting an economic return of 11.1% for the quarter [56][72] Business Line Data and Key Metrics Changes - Agency RMBS holdings decreased by 5% to $163.3 million, driven by net sales and principal payments of $57.9 million, which exceeded net realized and unrealized gains of $11.8 million [47] - The non-Agency RMBS portfolio increased by $4.8 million to $12.6 million, while interest-only securities remained roughly unchanged [38] Market Data and Key Metrics Changes - The yield curve is currently the most inverted since the early 1980s, with a two-year tenure yield spread now more than 90 basis points negative, impacting net interest margins industry-wide [39] - Agency RMBS prices significantly outperformed their hedges in Q4, reversing a trend of underperformance seen in the first three quarters of 2022 [51][52] Company Strategy and Development Direction - The company plans to selectively rotate capital from Agency MBS to other residential mortgage sectors, maintaining a nimble approach to adapt to market conditions [80] - The focus remains on total return over short-term ADE growth, with a disciplined hedging process and cash management allowing for opportunistic buying and selling [36][70] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation is moderating and the Federal Reserve is slowing the pace of interest rate hikes, which has positively impacted investor demand for RMBS [5][6] - The company anticipates that a mild recession could lead to increased bank demand for Agency MBS, as banks typically favor securities over loans during such periods [66][68] Other Important Information - The company hedged interest rate risk through swaps and short positions, with the size of the net short TBA position increasing quarter-over-quarter [48] - The economic return for the fourth quarter was supported by tighter Agency RMBS yield spreads and increased pay-ups, which drove significant net realized and unrealized gains [43][44] Q&A Session Summary Question: How is the company thinking about volatility in the market, especially connected to a recession? - Management expressed confidence in the resilience of repo financing and noted that they have a diverse set of repo counterparties, primarily large, well-capitalized banks [86][93] Question: What are the potential buyers of Agency MBS over the near-term? - Management indicated that money managers have driven performance in Q4 and early 2023, with banks typically buying after observing a rally [104][105] Question: What opportunities are being seen in the non-Agency space? - Management highlighted seasoned credit risk transfer bonds and legacy non-Agency market securities as attractive sectors, emphasizing a granular approach to investment [111][112]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35896 Ellington Residential Mortgage REIT (Exact Name of Registrant as Specified in Its Charter) Maryland 46-0687599 (State or Other Ju ...