Ellington Residential Mortgage REIT(US:EARN)2023-11-13 16:00Financial Performance - As of September 30, 2023, the company's book value per share was $7.02, down from $8.12 as of June 30, 2023, and $8.40 as of December 31, 2022[167]. - The company faced significant headwinds in the third quarter due to elevated market volatility and rising long-term interest rates, resulting in net losses on Agency RMBS[175]. - The company experienced total net realized and unrealized losses on Agency securities of $(35.4) million, or $(2.33) per share, for the three-month period ended September 30, 2023[187]. - For the three-month period ended September 30, 2023, net income was $(11.4) million, an improvement from $(13.7) million in the same period of 2022[226]. - The net income (loss) for the nine-month period ended September 30, 2023, was $(7.9) million, an improvement from $(41.9) million in the same period in 2022[240]. Portfolio and Investment Strategy - The Agency RMBS portfolio decreased by 11% to $790.5 million as of September 30, 2023, compared to $889.0 million as of June 30, 2023[171]. - The company’s investment portfolio primarily consists of Agency RMBS, with plans to increase allocation to non-Agency RMBS and/or CLOs based on market opportunities[207]. - The company aims to target specified pools that generate attractive yields and have less prepayment sensitivity to government policy shocks[182]. - The company’s portfolio management strategy is adaptive to current market conditions, focusing on interest rate risk, prepayment risk, and regulatory changes[191]. Debt and Liabilities - The company's outstanding borrowings under repurchase agreements amounted to $811.2 million, with 97% collateralized by Agency RMBS[166]. - The debt-to-equity ratio decreased to 7.3:1 as of September 30, 2023, from 7.6:1 as of June 30, 2023[173]. - The total liabilities under repurchase agreements amounted to $811.2 million as of September 30, 2023, with a weighted average interest rate of 5.50%, up from 3.70% as of December 31, 2022[216]. - The weighted average contractual haircut applicable to the assets serving as collateral for outstanding repo borrowings was 5.4% as of September 30, 2023[255]. Cash and Liquidity - Cash and cash equivalents were $40.0 million as of September 30, 2023, down from $43.7 million as of June 30, 2023[174]. - The company had cash and cash equivalents of $40.0 million as of September 30, 2023[261]. - The company believes its capital resources will be sufficient to meet anticipated short-term and long-term liquidity requirements based on its current portfolio and debt-to-equity ratio[271]. Interest Income and Expenses - Interest income for the three-month period ended September 30, 2023, was $11.3 million, up from $9.5 million in 2022, driven by higher asset yields[219]. - Total interest expense increased to $12.3 million for the three-month period ended September 30, 2023, compared to $4.3 million in 2022, mainly due to higher financing costs[229]. - The average cost of funds on repurchase agreements increased to 5.48% for the three-month period ended September 30, 2023, from 1.79% in 2022[230]. Dividends and Shareholder Equity - The company declared a monthly dividend of $0.08 per share, with a total dividend amount of $1,270,000 for the period ending September 30, 2023[262]. - Shareholders' equity decreased to $111.5 million from $112.4 million, primarily due to a net loss of $(7.9) million and dividends declared of $10.4 million[217]. - The company issued 2,462,489 common shares under the ATM program during the nine-month period ended September 30, 2023, generating net proceeds of $17.1 million after agent commissions and offering costs[269]. Market Conditions and Risks - The company experienced a decrease in cash holdings from $69.0 million as of December 31, 2021, to $25.4 million as of September 30, 2022, reflecting a decrease of $43.6 million[268]. - Elevated long-term inflation could adversely impact the performance of the investment portfolio, particularly if it is not matched by an increase in wages[278]. - The company is not materially exposed to market, credit, liquidity, or financing risk from off-balance sheet arrangements as of September 30, 2023[276].