Ellington Residential Mortgage REIT(US:EARN)2024-11-13 00:05Financial Performance - Net income for the third quarter of 2024 was $5.4 million, or $0.21 per share, with adjusted distributable earnings of $7.2 million, or $0.28 per share[2]. - Net income for the three-month period ended September 30, 2024, was $5,445,000, a significant recovery from a loss of $815,000 in the previous quarter[32]. - Adjusted Distributable Earnings were $7,241,000, 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, 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, a decrease from $14,132,000 in the previous quarter[32]. - Total net interest income for the same period was $4,752,000, compared to $3,897,000 in the prior quarter, reflecting a 22% increase[32]. - The company declared cash dividends of $0.24 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 $145,196,000 in the previous quarter[33]. Asset and Liability Management - Total assets decreased to $752,303,000 as of September 30, 2024, down from $933,457,000 at the end of the previous quarter[33]. - Total liabilities decreased to $560,674,000, compared to $787,328,000 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 $6.91 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 $85.1 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].