Ellington Residential Mortgage REIT(EARN) - 2025 Q2 - Quarterly Results

Financial Highlights and Management Commentary Key Financial Highlights Ellington Credit Company reported a NAV of $6.12 per share and GAAP net income of $10.2 million for Q1 FY2026, with its CLO portfolio growing 27% to $316.9 million Key Financial Metrics | Metric | Q1 FY2026 (ended June 30, 2025) | Q4 FY2025 (ended March 31, 2025) | | :--- | :--- | :--- | | NAV per Share | $6.12 | $6.08 | | GAAP Net Income | $10.2 million ($0.27/share) | N/A | | Net Investment Income (NII) | $6.5 million ($0.17/share) | N/A | | Adjusted NII | $6.6 million ($0.18/share) | N/A | | Total CLO Portfolio | $316.9 million | $249.9 million | | CLO Debt Investments | $148.9 million | $85.5 million | | CLO Equity Investments | $168.0 million | $164.4 million | - The company achieved a weighted average GAAP yield of 15.6% on its total CLO portfolio for the quarter[8] - Received $15.9 million in recurring cash distributions from the investment portfolio, equivalent to $0.42 per share[8] Management Commentary Management highlighted a 19.7% annualized return for the quarter, driven by strong CLO performance and successful disposition of legacy mortgage investments, projecting NII to cover distributions by September - Generated a strong annualized return of 19.7% in the first quarter of the new fiscal year[3] - Successfully completed the disposition of legacy mortgage-related investments with minimal impact on NAV[3] - Capitalized on market volatility early in the quarter to make compelling investments and later added credit hedges at attractive entry points as spreads tightened[4][5] - Management projects that Net Investment Income (NII) will cover the monthly distribution beginning in September, following a period of capital rotation[6] Distributions The Board of Trustees declared consistent monthly distributions of $0.08 per common share for April through August 2025 Monthly Distributions | Declaration Date | Record Date | Payment Date | Distribution Per Share | | :--- | :--- | :--- | :--- | | April 3, 2025 | April 30, 2025 | May 27, 2025 | $0.08 | | May 7, 2025 | May 30, 2025 | June 30, 2025 | $0.08 | | June 9, 2025 | June 30, 2025 | July 31, 2025 | $0.08 | | July 8, 2025 | July 31, 2025 | August 29, 2025 | $0.08 | | August 7, 2025 | August 29, 2025 | September 30, 2025 | $0.08 | Financial Performance Analysis Investment Portfolio Composition As of June 30, 2025, the total investment portfolio had a fair value of $317.3 million, predominantly in CLO investments with 52.9% in CLO equity Investment Portfolio by Type (as of June 30, 2025) | Investment Type | Amortized Cost (In thousands) | Fair Value (In thousands) | % of Total Investments | | :--- | :--- | :--- | :--- | | Total CLO debt | $144,917 | $148,868 | 47.0% | | U.S. CLO debt | $116,246 | $117,930 | 37.2% | | European CLO debt | $28,671 | $30,938 | 9.8% | | Total CLO equity | $164,955 | $167,990 | 52.9% | | U.S. CLO equity | $152,729 | $155,235 | 48.9% | | European CLO equity | $12,226 | $12,755 | 4.0% | | Total investments | $310,308 | $317,279 | 100.0% | Results of Operations The company reported total investment income of $11.7 million and net income of $10.2 million for the quarter, with U.S. CLO equity as the largest contributor Condensed Statement of Operations (Quarter Ended June 30, 2025) | (In thousands, except per share amounts) | Quarter Ended June 30, 2025 | Per Share | | :--- | :--- | :--- | | Total investment income | $11,670 | $0.31 | | Total expenses | ($5,149) | ($0.14) | | Net investment income | $6,521 | $0.17 | | Net realized gain on investments | $229 | $0.01 | | Change in net unrealized gain on investments | $3,777 | $0.10 | | Net income | $10,205 | $0.27 | - The largest contributors to net income were U.S. CLO Equity ($8.6 million) and U.S. CLO Debt ($4.5 million)[11] Net Asset Value (NAV) Summary As of June 30, 2025, the company's total assets were $363.9 million, resulting in a net asset value of $229.7 million or $6.12 per common share Net Asset Value (as of June 30, 2025) | (In thousands, except per share amounts) | June 30, 2025 | | :--- | :--- | | Total assets | $363,946 | | Total liabilities | $134,213 | | Net asset value | $229,733 | | Common shares outstanding | 37,559,195 | | Net asset value per common share | $6.12 | CLO Market and Strategy Performance Market and Strategy Overview The quarter saw initial market volatility followed by a rebound, with U.S. CLOs outperforming, and the company's strategy delivering excellent results, ending with a $316.9 million CLO portfolio - The quarter started with high volatility and widening credit spreads in April, followed by a market rebound in May and June as tariff concerns eased[13] - U.S. CLOs outperformed European CLOs, with U.S. leveraged loan prices rebounding more strongly and U.S. CLO equity benefiting from strong investor demand and lower volatility[14][16] - The company's performance was enhanced by active trading, deal calls of two mezzanine positions, and a beneficial reset of a CLO equity position[17] - The CLO portfolio ended the quarter at $316.9 million with a weighted average expected yield of 15.0% based on fair market value[17] Supplemental Information Reconciliation of Non-GAAP Measures GAAP Net Investment Income of $6.521 million was adjusted for non-recurring costs, resulting in an Adjusted NII of $6.596 million or $0.18 per share Reconciliation of Net Investment Income to Adjusted Net Investment Income (Quarter Ended June 30, 2025) | (In thousands except per share amounts) | Quarter Ended June 30, 2025 | | :--- | :--- | | Net Investment Income (GAAP) | $6,521 | | Adjustment: Non-recurring expenses | $75 | | Adjusted Net Investment Income (Non-GAAP) | $6,596 | | Adjusted Net Investment Income Per Share | $0.18 | - Adjusted Net Investment Income is presented because management believes it is a useful indicator of long-term financial performance and distribution-paying ability by excluding certain non-recurring expenses[23] Company Overview, Conference Call, and Forward-Looking Statements This section provides corporate information, details for the Q1 2026 earnings call, and a cautionary statement regarding forward-looking statements and associated risks - The company is a non-diversified closed-end fund primarily investing in CLO mezzanine debt and equity tranches[19] - A conference call to discuss the financial results was scheduled for 11:00 a.m. Eastern Time on Wednesday, August 20, 2025[20] - The report contains forward-looking statements that are subject to numerous risks and uncertainties, including changes in interest rates, market volatility, and default rates[21]