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Ellington Residential Mortgage REIT(EARN) - 2024 Q3 - Quarterly Results
EARNEllington Residential Mortgage REIT(EARN)2024-11-13 00:05

Financial Performance - Net income for the third quarter of 2024 was 5.4million,or5.4 million, or 0.21 per share, with adjusted distributable earnings of 7.2million,or7.2 million, or 0.28 per share[2]. - Net income for the three-month period ended September 30, 2024, was 5,445,000,asignificantrecoveryfromalossof5,445,000, a significant recovery from a loss of 815,000 in the previous quarter[32]. - Adjusted Distributable Earnings were 7,241,000,slightlydownfrom7,241,000, slightly down from 7,273,000 in the previous quarter[40]. - The company experienced a net income (loss) before income taxes of 5,908,000,comparedtoalossof5,908,000, compared to a loss of (890,000) in the previous quarter[40]. - Interest income for the three-month period ended September 30, 2024, was 12,504,000,adecreasefrom12,504,000, a decrease from 14,132,000 in the previous quarter[32]. - Total net interest income for the same period was 4,752,000,comparedto4,752,000, compared to 3,897,000 in the prior quarter, reflecting a 22% increase[32]. - The company declared cash dividends of 0.24pershareforthethree−monthperiod,consistentwiththepreviousquarter[32].−Theaccumulateddeficitincreasedto0.24 per share for the three-month period, consistent with the previous quarter[32]. - The accumulated deficit increased to 146,174,000 as of September 30, 2024, from 145,196,000inthepreviousquarter[33].AssetandLiabilityManagement−Totalassetsdecreasedto145,196,000 in the previous quarter[33]. Asset and Liability Management - Total assets decreased to 752,303,000 as of September 30, 2024, down from 933,457,000attheendofthepreviousquarter[33].−Totalliabilitiesdecreasedto933,457,000 at the end of the previous quarter[33]. - Total liabilities decreased to 560,674,000, compared to 787,328,000inthepriorquarter,indicatingareductionofapproximately29787,328,000 in the prior quarter, indicating a reduction of approximately 29%[34]. - The book value per share was 6.85 as of September 30, 2024, down from 6.91inthepreviousquarter[33].−Weightedaveragesharesoutstandingincreasedto25,591,607asofSeptember30,2024,comparedto20,354,062inthepreviousquarter[32].InvestmentStrategyandPortfolio−TheCLOportfolioincreasedby706.91 in the previous quarter[33]. - Weighted average shares outstanding increased to 25,591,607 as of September 30, 2024, compared to 20,354,062 in the previous quarter[32]. Investment Strategy and Portfolio - The CLO portfolio increased by 70% to 144.5 million as of September 30, 2024, compared to 85.1millionasofJune30,2024[10].−ThecompanyisstrategicallytransformingitsinvestmentfocustowardscorporateCLOs,emphasizingmezzaninedebtandequitytranches[6].−ThecompanyunderwentastrategictransformationtofocusoncorporateCLOs,revokingitsREITstatuseffectiveJanuary1,2024[27].−TheCLOstrategyyieldedstrongresults,drivenbyhighernetinterestincomeandnetgainsinU.S.andEuropeanCLOdebtportfolios[23].InterestandEconomicReturns−Thenetinterestmarginwas9.6585.1 million as of June 30, 2024[10]. - The company is strategically transforming its investment focus towards corporate CLOs, emphasizing mezzanine debt and equity tranches[6]. - The company underwent a strategic transformation to focus on corporate CLOs, revoking its REIT status effective January 1, 2024[27]. - The CLO strategy yielded strong results, driven by higher net interest income and net gains in U.S. and European CLO debt portfolios[23]. Interest and Economic Returns - The net interest margin was 9.65% on credit, 3.52% on Agency, and 5.22% overall[2]. - The net interest margin (NIM) on the credit portfolio was 9.65% in Q3 2024, down from 13.41% in Q2 2024, while the NIM on the Agency portfolio increased to 3.52% from 2.85%[16]. - Overall NIM increased to 5.22% as of September 30, 2024, compared to 4.24% as of June 30, 2024, due to a higher allocation of capital to the credit strategy[16]. - The overall annualized economic return for the quarter was 10.8%[3]. Market and Economic Conditions - The trailing-twelve-month default rate for the U.S. leveraged loan index declined to 80 basis points by the end of Q3 2024, the lowest since December 2022[20]. - The U.S. Agency MBS Index generated an excess return of 0.76% in Q3 2024, supported by falling interest rates and tightening yield spreads[25]. Operational Costs - General and administrative expenses increased quarter over quarter due to costs related to the strategic transformation and higher management fees[26]. - The company incurred Strategic Transformation costs of 106,000, down from $464,000 in the previous quarter[40].