Ellington Residential Mortgage REIT(EARN) - 2024 Q3 - Quarterly Report

Financial Performance and Metrics - The company's book value per share was $6.85 as of September 30, 2024, compared to$6.91 and $7.32 as of June 30, 2024, and December 31, 2023, respectively[190] - Book value per share decreased to$6.85 as of September 30, 2024, from $6.91 as of June 30, 2024, with an economic return of 2.6$7.32 in December 2023 to $6.85 in September 2024, despite the increase in total shareholders' equity[248] - Net income for the three-month period ended September 30, 2024, was$5.4 million, compared to a net loss of $11.4 million for the same period in 2023[250] - Net income for Q3 2024 was$5.4 million, a significant improvement from a net loss of $11.4 million in Q3 2023[250] - Net income (loss) for the nine-month period ended September 30, 2024 was$8.6 million, compared to $(7.9) million for the same period in 2023[267] - Net income for the nine-month period ended September 30, 2024 was$8.6 million, compared to a net loss of $7.9 million for the same period in 2023, driven by positive net interest income and total other income[267] - Net Income (Loss) for the three-month period ended September 30, 2024 was$5.445 million, compared to a loss of $11.420 million in the same period in 2023[287] - Net Income (Loss) for the nine-month period ended September 30, 2024 was$8.591 million, compared to a loss of $7.880 million in the same period in 2023[287] - Adjusted Distributable Earnings for the nine-month period ended September 30, 2024 were$19.827 million, up from $8.442 million in 2023[287] - Adjusted Distributable Earnings for the three-month period ended September 30, 2024 were$7.241 million, up from $3.239 million in the same period in 2023[287] - Adjusted Distributable Earnings for the nine-month period ended September 30, 2024 were$19.827 million, up from $8.442 million in the same period in 2023[287] - Adjusted Distributable Earnings Per Share for the three-month period ended September 30, 2024 was$0.28, up from $0.21 in the same period in 2023[287] - Adjusted Distributable Earnings Per Share for the nine-month period ended September 30, 2024 was$0.91, up from $0.59 in the same period in 2023[287] - Weighted Average Shares Outstanding increased to 25,591,607 for the three-month period ended September 30, 2024, compared to 15,199,837 in 2023[287] - Weighted Average Shares Outstanding increased to 25,591,607 for the three-month period ended September 30, 2024, compared to 15,199,837 in the same period in 2023[287] Interest Rates and Yields - The U.S. Federal Reserve reduced the federal funds rate by 50 basis points to 4.75$144.5 million as of September 30, 2024, compared to $85.1 million as of June 30, 2024[195] - The company's CLO portfolio consisted of$74.8 million in CLO equity tranches and $69.7 million in CLO mezzanine debt tranches as of September 30, 2024[194] - The U.S. CLO market saw$41 billion of new CLO issuance in Q3 2024, compared to $53 billion in Q2 2024[193] - The company's Agency RMBS holdings decreased by 13$462.1 million as of September 30, 2024, compared to $531.1 million as of June 30, 2024[197] - Aggregate holdings of interest-only securities and non-Agency RMBS decreased by 44$11.3 million[197] - The fair value of CLO Notes decreased from $63,090 thousand to$52,892 thousand, a decline of 16.2% from December 31, 2023 to September 30, 2024[234] - The fair value of Agency RMBS increased from $454,407 thousand to$462,146 thousand, a growth of 1.7% over the same period[234] - The company's total investment portfolio fair value stood at $618,797 thousand as of September 30, 2024, compared to$611,236 thousand at the end of 2023[234] - The weighted average price of 30-year fixed-rate mortgages in the Agency RMBS portfolio increased from 98.42 to 100.09, reflecting a 1.7% rise[234] - Reverse mortgages in the Agency RMBS portfolio showed a fair value decrease from $37 thousand to$34 thousand, a decline of 8.1%[234] - 58% of the company's invested capital is allocated to corporate CLOs, while 42% is allocated to mortgage-related securities as of September 30, 2024[234] - The company's credit portfolio average holdings increased from $121.7 million in Q3 2023 to$520.0 million in Q3 2024, with yields increasing from 11.24% to 15.98%[254] - Total net realized and unrealized gains on Agency securities were $15.5 million for the three-month period ended September 30, 2024[215] - Total net realized and unrealized losses on the interest rate hedging portfolio were$(18.4) million, or $(0.72) per share, driven by a decrease in interest rates quarter over quarter[216] - Net realized and unrealized gains on long TBAs held for investment were$7.2 million, or $0.28 per share[216] - Other income (loss) for the three-month period ended September 30, 2024 was$3.9 million, primarily due to net realized and unrealized gains of $14.7 million on securities, partially offset by losses on financial derivatives[263][264] - Other income (loss) for the nine-month period ended September 30, 2024 was$6.9 million, primarily from net realized and unrealized gains on financial derivatives[279] - The U.S. Agency MBS Index generated an excess return of 0.76% in the third quarter of 2024[208] - Average pay-ups on the specified pool portfolio decreased to 0.25% as of September 30, 2024, compared to 0.63% as of June 30, 2024[209] - Three-month constant prepayment rates for fixed-rate specified pools increased to 7.5% as of September 30, 2024, compared to 6.7% as of June 30, 2024[212] - The trailing-twelve-month default rate for the Morningstar LSTA U.S. Leveraged Loan Index declined to 78 basis points in August 2024[201] Debt and Leverage - The company had outstanding borrowings under repurchase agreements of $486.9 million as of September 30, 2024, with 90$486.92 million as of September 30, 2024, from $729.54 million as of December 31, 2023[246] - Total borrowings outstanding under repurchase agreements decreased from$729.5 million in December 2023 to $486.9 million in September 2024[246] - Outstanding repurchase agreements decreased to$486.9 million as of September 30, 2024, from $729.5 million as of December 31, 2023[290] - Weighted average contractual haircut on repo borrowings increased to 8.6$43.3 million as of September 30, 2024, from $50.1 million as of December 31, 2023[294] - Aggregate amount at risk under derivative contracts decreased to$23.6 million as of September 30, 2024, from $26.0 million as of December 31, 2023[296] - Aggregate amount at risk under forward settling TBA and Agency pass-through certificates increased to$2.7 million as of September 30, 2024, from $1.7 million as of December 31, 2023[298] - The weighted average lives of RMBS and CLOs are generally much longer than the short-term repos used to finance them, creating a maturity mismatch[236] - Changes in interest rates may cause financing costs for RMBS and CLOs to increase relative to the income on these assets over the investment term[236] - Fluctuations in the fair value of RMBS and CLO investments may trigger changes in margin requirements, potentially requiring additional collateral[236] - Changes in fair value of RMBS and CLO investments may trigger margin requirements, potentially requiring additional collateral for repurchase agreements[236] - The company faces interest rate risk due to the mismatch between short-term repo financing (average maturity <364 days) and longer-term RMBS/CLO investments[236] Liquidity and Capital Resources - Cash and cash equivalents were$25.7 million as of September 30, 2024, compared to $28.8 million as of June 30, 2024[200] - Cash and cash equivalents stood at$25.7 million as of September 30, 2024[299] - Shareholders' equity increased to $191.6 million as of September 30, 2024, from$136.2 million as of December 31, 2023[248] - Shareholders' equity increased from $136.2 million in December 2023 to$191.6 million in September 2024, driven by $62.5 million from share issuance and$8.6 million net gain[248] - The company's liquidity and capital resources are expected to be sufficient to meet short-term and long-term needs, including repayment of borrowings, funding assets, and paying dividends[288] - Capital resources include cash on hand, cash flow from investments, borrowings under repurchase agreements, and proceeds from equity offerings[288] - Short-term liquidity requirements include acquisition costs, management fees, margin requirements, and repayment of repurchase agreements[288] - The company believes its capital resources, including free cash on hand and current and anticipated availability of credit, will be sufficient to meet short-term and long-term liquidity requirements[310] - For the nine-month period ended September 30, 2024, the company's operating activities provided net cash of $4.7 million, while investing activities provided net cash of$190.4 million[306] - The company's repo activity used net cash of $255.3 million for the nine-month period ended September 30, 2024, resulting in a net cash usage of$60.2 million when combined with operating and investing activities[306] - The company issued 9,308,793 common shares during the nine-month period ended September 30, 2024, providing net proceeds of $62.5 million after commissions and offering costs[308] - As of September 30, 2024, the company had$22.4 million of common shares available to be issued under the 2023 ATM program[308] - The company repurchased 474,192 common shares through November 8, 2024 at an average price of $9.21 per share, with an aggregate cost of$4.4 million[309] - As of September 30, 2024, the company had $486.9 million of outstanding borrowings with 18 counterparties[315] Expenses and Costs - Total interest expense for the three-month periods ended September 30, 2024 and 2023 was$7.8 million and $12.3 million, respectively, primarily due to repo borrowings[255] - Interest expense decreased from$12.3 million in Q3 2023 to $7.8 million in Q3 2024[249] - Total interest expense for the nine-month periods ended September 30, 2024 and 2023 was$28.1 million and $33.7 million, respectively, primarily due to repo borrowings[271] - Management fee expense for the three-month periods ended September 30, 2024 and 2023 was$0.7 million and $0.4 million, respectively[261] - Management fee expense for the three-month periods ended September 30, 2024 and 2023 was$0.7 million and $0.4 million, respectively, driven by higher shareholders' equity[261] - Other operating expenses for the three-month periods ended September 30, 2024 and 2023 were$2.0 million and $0.9 million, respectively[262] - Other operating expenses for the three-month periods ended September 30, 2024 and 2023 were$2.0 million and $0.9 million, respectively, primarily due to increases in professional fees and compensation expense[262] - Management fee expense for the nine-month periods ended September 30, 2024 and 2023 was$1.8 million and $1.3 million, respectively, driven by higher shareholders' equity[277] - Other operating expenses for the nine-month periods ended September 30, 2024 and 2023 were$4.7 million and $2.9 million, respectively, due to increases in professional fees and compensation[278] - Other operating expenses for the nine-month periods ended September 30, 2024 and 2023 were approximately$4.7 million and $2.9 million, respectively, primarily due to increases in professional fees and compensation expense[278] - Income tax expense for the nine-month period ended September 30, 2024 was$0.7 million, with no such expense recorded in 2023 due