Ellington Residential Mortgage REIT(EARN) - 2023 Q2 - Quarterly Report

PART I. Financial Information Item 1. Consolidated Financial Statements (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 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] - Shareholders' Equity increased by $4.3 million, from $112.4 million to $116.7 million, over the six-month period[9] Consolidated Statements of Operations 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] - 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] Consolidated Statements of Shareholders' Equity 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] - 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] Consolidated Statements of Cash Flows 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] - 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] Notes to Consolidated Financial Statements 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] - 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][31] - 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][57] 1. Organization and Investment Objective 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