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) 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 ...

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 ...

[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 |

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 ...

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- ...

Financial Data and Key Metrics Changes - The company reported a net loss of $0.75 per share for Q3 2023, compared to a net income of $0.09 per share in the previous quarter [30] - Adjusted distributable earnings (ADE) increased to $0.21 per share from $0.17 per share in Q2 2023, despite lower average holdings [18][30] - Book value decreased to $7.02 per share from $8.12 per share at the end of Q2 2023, resulting in an economic return of negative 10.6% including dividends [32] Business Line Data and Key Metrics Changes - Agency RMBS holdings declined by 11% to $791 million as of September 30, 2023, driven by principal pay downs and net losses [19] - The net interest margin (NIM) increased to 1.24% from 0.93% quarter-over-quarter due to higher asset yields from portfolio turnover [18] - The company added $3.8 million of CLOs during the final week of the quarter, with expectations for significant growth in CLO allocation [19][29] Market Data and Key Metrics Changes - The yield on the 10-year treasury rose 82 basis points between mid-July and September 30, 2023, contributing to significant pressure on Agency yield spreads [6] - The MOVE Index, which tracks expected short-term interest rate volatility, remained elevated, impacting the performance of Agency MBS [6] - The company noted that the fourth quarter typically sees a drop in Agency RMBS supply, which could enhance market conditions [8] Company Strategy and Development Direction - The company is diversifying its portfolio by allocating capital to corporate CLOs, specifically mezzanine debt and equity, to enhance returns and reduce volatility [16][25] - The management believes that CLOs will complement the Agency MBS strategy and provide higher expected returns on equity [25][37] - The company aims to maintain a strong liquidity position and additional borrowing capacity while navigating a challenging market environment [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for capital flows back into Agency MBS as interest rate volatility normalizes [41] - The company is focused on preserving value and avoiding forced selling during periods of market distress [34] - Management anticipates that the introduction of CLOs will help stabilize book value swings during times of increased interest rate volatility [25] Other Important Information - The company maintained a strong liquidity position at quarter-end, with cash and unencumbered assets representing 38% of total equity [28] - The debt to equity ratio adjusted for unsettled purchases decreased to 7.3x from 7.6x, indicating a reduction in borrowings [20] Q&A Session Summary Question: Are you putting on any leverage with CLO investments? - Management indicated that no explicit leverage has been put on CLOs yet, but modest leverage is intended to finance incremental CLO purchases [54] Question: What are the expected returns in the CLO sector? - Management projected returns on CLO investments to be over 20%, with expectations for significant returns as the allocation increases [63] Question: Can you discuss the strategy behind issuing shares at a discount to book value? - The company aims to maintain $100 million of equity and views the share issuance as a way to replace equity lost during a tough quarter [57]

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