Ellington Residential Mortgage REIT Reports Second Quarter 2014 Results
Summary of Financial Results
- Net income for the quarter was
$11.1 million , or$1.21 per share. - Core Earnings1 for the quarter were
$6.8 million , or$0.75 per share, as compared to$7.0 million , or$0.77 per share, in the first quarter of 2014. - Book value increased 3.7% to
$18.71 per share as ofJune 30, 2014 from$18.05 per share as ofMarch 31, 2014 , after giving effect to a second quarter dividend of$0.55 per share; economic return on book value was 6.7% during the second quarter. - Net interest margin was 2.33%, as compared to 2.34% for the first quarter of 2014.
- Weighted average prepayment speed for the Agency RMBS portfolio was 4.0% CPR for the quarter, as compared to 2.2% in the first quarter.
- Dividend yield of 13.2% based on
August 8, 2014 closing stock price of$16.64 . - Debt-to-equity ratio was approximately 7.5:1 as of
June 30, 2014 , as compared to 7.8:1 as ofMarch 31, 2014 .
Second Quarter 2014 Results
For the quarter ended
"We are pleased to report strong earnings for the second quarter," said
As of
Agency RMBS rallied in the second quarter, continuing the first quarter trend. As anticipated, the Federal Reserve continued to "taper" its monthly purchases of Agency RMBS and U.S. Treasury securities. While the Federal Reserve will likely cease its monthly bond purchases by the fall of this year, it has stated that it will continue to reinvest paydown proceeds from its held portfolio into additional Agency RMBS and U.S. Treasury securities. Similar to the first quarter, the additional supply of Agency RMBS that resulted from the taper was readily absorbed during the second quarter by other market participants. As the Federal Reserve continues to reduce its purchases, its market dominance will further wane, which we believe will create additional opportunities for us and other private investors.
1 Core Earnings is a non-GAAP financial measure. See "Reconciliation of Core Earnings to Net Income (Loss)" below for an explanation regarding the calculation of Core Earnings.
During the second quarter, our Agency RMBS purchasing activity continued to be focused primarily on higher coupon specified pools. As in the first quarter, pay-ups (price premiums for specified pools relative to their generic pool "TBA" counterparts) increased during the second quarter, thus continuing the reversal of last year's pay-up declines. Notwithstanding these increases of the past two quarters, pay-ups for many specified pool sectors remain well below their previous highs. Yield spreads on fixed rate reverse mortgage pools, which had tightened about 30 basis points during the first quarter, continued this trend and tightened an additional 10-15 basis points in the second quarter, as issuance of reverse mortgage pools continued to slow. In light of this yield spread tightening, we sold some of our holdings of reverse mortgage pools during the second quarter, thereby monetizing gains.
Prepayment rates increased only marginally in the second quarter, and they remain low by historical standards relative to the current level of mortgage rates. However, based on observations in the beginning of the third quarter, we believe that prepayments may soon begin to increase. As a result, we are still finding it attractive to buy pools with prepayment protection, particularly in those sectors that are more susceptible to increased prepayments. During the second quarter, we slightly reduced our holdings of pools backed by 30-year mortgages in favor of those backed by 15-year mortgages and those backed by adjustable rate mortgages. For the second consecutive quarter, and despite an approximate 25 basis point drop in mortgage rates during April and May, our Agency interest only securities performed well, as prepayments increased but remained relatively low.
While Agency RMBS prices generally increased in the second quarter, over the near term we believe that the combined effects of continued Federal Reserve tapering and a potential rise in mortgage originations may ultimately put pressure on valuations of Agency RMBS. We also think it is unlikely that interest rate volatility will remain as subdued as it was in the first and second quarters. While both of these factors may weigh on the performance of Agency RMBS relative to U.S. Treasury securities, we believe that each of these factors should weigh more heavily on TBAs as compared to specified pools, so they should actually support specified pool pay-ups. As the Federal Reserve continues to taper its Agency RMBS purchases, which are concentrated in purchases of TBAs, specified pools should outperform TBAs. The effects of the taper can already be observed in the TBA roll market: TBA roll prices in early July were noticeably weaker than they were at the beginning of the second quarter. We have also noted that as dealer balance sheets contract in light of regulatory changes and risk appetite decreases, the depth of the Agency RMBS market has weakened somewhat. Essentially, this means that the amount of a particular asset that can be bought or sold without materially impacting its price has declined. At the same time, however, the decline in competition from dealers is helping us to find attractive opportunities to purchase assets.
Over the course of the second quarter and consistent with our strategy, we continued to hedge against the risk of rising interest rates, primarily with interest rate swaps and TBAs. Since long-term interest rates declined during the quarter, our interest rate hedges generated net losses, thereby partially reducing the impact of increasing asset prices. Notwithstanding the recent trend of declining interest rates and the relatively muted level of volatility, we believe the risk of higher near-term volatility in the Agency RMBS market remains. This reinforces the importance of our ability to hedge our risks using a variety of tools, including TBAs. Active trading of assets and management of hedges has, and continues to be, a key element of our Agency RMBS strategy.
One metric that we use to measure our overall prepayment risk is our net Agency premium as a percentage of our long Agency RMBS holdings.
In the non-Agency RMBS market, credit spreads continued to tighten over the course of the second quarter, as strong investor appetite, propelled in large part by retail bond fund inflows, has fueled demand for higher yielding assets among fixed income products. While non-Agency RMBS credit spreads have tightened, we are still finding attractive buying opportunities, for example in sectors where we believe defaults have finally "burned out," but where market prices have yet to reflect much default burnout. At the same time, we have taken advantage of the spread tightening by opportunistically selling assets that we believe have become overvalued, since we continue to believe that certain non-Agency RMBS sectors may now have limited remaining upside potential. For example, we believe that the recent increases in home prices have led the market to ascribe too much value to certain later vintage sub-prime RMBS securities. In fact, we believe that the combination of longer resolution timelines and adverse selection of the remaining delinquent loans within these securities implies that loss severities may not come down at all. As yields continue to compress in the non-Agency RMBS market, factors such as these make prudent and careful security selection, based on loan level analysis performed on a security by security basis, of paramount importance.
While we believe that fundamental factors, such as home price appreciation and a declining foreclosure inventory, remain relatively positive for non-Agency RMBS, we believe that, on the technical side the non-Agency MBS market remains vulnerable, especially to a resumption of increases in long-term interest rates. The non-Agency MBS market has become dominated by large bond mutual funds, and is therefore now driven indirectly by the large-scale behavior of retail investors. This behavior tends to be much more momentum-driven, as evidenced in mid-2013 when the increase in U.S. Treasury yields was followed by substantial retail bond fund outflows, thereby putting downward pressure on prices as redemptions forced bond mutual fund managers to sell assets. This technical vulnerability has been heightened further by the fact that dealers, faced with regulatory requirements such as Basel III and the Volcker Rule, are no longer willing to hold large inventories of non-Agency MBS, and thus are no longer able to absorb large-scale selling by bond funds into their inventories. In the meantime, however, demand for non-Agency MBS assets remains strong. As of
For the quarter ended
For the quarter ended
After giving effect to a second quarter dividend of
For the quarter ended
Mortgage-backed securities
The following table summarizes our portfolio of mortgage-backed securities as of
June 30, 2014 |
March 31, 2014 |
||||||||||||||||||||||||||||||||||||||
Current |
Average |
Average |
Current |
Average |
Average |
||||||||||||||||||||||||||||||||||
(In thousands) |
Principal |
Fair Value |
Price(1) |
Cost |
Cost(1) |
Principal |
Fair Value |
Price(1) |
Cost |
Cost(1) |
|||||||||||||||||||||||||||||
Agency RMBS(2) |
|||||||||||||||||||||||||||||||||||||||
15-year fixed rate mortgages |
$ |
166,910 |
$ |
175,583 |
$ |
105.20 |
$ |
174,726 |
$ |
104.68 |
$ |
144,422 |
$ |
149,429 |
$ |
103.47 |
$ |
150,184 |
$ |
103.99 |
|||||||||||||||||||
20-year fixed rate mortgages |
10,158 |
10,936 |
107.66 |
10,762 |
105.95 |
10,347 |
10,908 |
105.42 |
10,980 |
106.12 |
|||||||||||||||||||||||||||||
30-year fixed rate mortgages |
957,162 |
1,020,084 |
106.57 |
1,009,739 |
105.49 |
1,004,293 |
1,040,012 |
103.56 |
1,052,115 |
104.76 |
|||||||||||||||||||||||||||||
ARMs |
66,864 |
70,540 |
105.50 |
70,586 |
105.57 |
46,804 |
49,840 |
106.49 |
49,869 |
106.55 |
|||||||||||||||||||||||||||||
Reverse mortgages |
15,824 |
17,357 |
109.69 |
17,108 |
108.11 |
27,081 |
29,471 |
108.83 |
29,299 |
108.19 |
|||||||||||||||||||||||||||||
Total Agency RMBS |
1,216,918 |
1,294,500 |
106.38 |
1,282,921 |
105.42 |
1,232,947 |
1,279,660 |
103.79 |
1,292,447 |
104.83 |
|||||||||||||||||||||||||||||
Non-Agency RMBS |
55,395 |
35,668 |
64.39 |
32,088 |
57.93 |
54,115 |
32,045 |
59.22 |
30,409 |
56.19 |
|||||||||||||||||||||||||||||
Total RMBS(2) |
1,272,313 |
1,330,168 |
104.55 |
1,315,009 |
103.36 |
1,287,062 |
1,311,705 |
101.91 |
1,322,856 |
102.78 |
|||||||||||||||||||||||||||||
Agency IOs |
n/a |
14,276 |
n/a |
12,469 |
n/a |
n/a |
15,924 |
n/a |
13,232 |
n/a |
|||||||||||||||||||||||||||||
Total mortgage-backed securities |
$ |
1,344,444 |
$ |
1,327,478 |
$ |
1,327,629 |
$ |
1,336,088 |
(1) Represents the dollar amount (not shown in thousands) per
(2) Excludes Agency IOs.
Our weighted average holdings based on amortized cost was
Financial Derivatives Portfolio
The following table summarizes fair value of our financial derivatives as of
June 30, 2014 |
March 31, 2014 |
|||||||
Financial derivatives–assets, at fair value: |
(In thousands) |
|||||||
TBA securities purchase contracts |
$ |
385 |
$ |
— |
||||
TBA securities sale contracts |
— |
898 |
||||||
Fixed payer interest rate swaps |
9,730 |
17,219 |
||||||
Total financial derivatives–assets, at fair value: |
10,115 |
18,117 |
||||||
Financial derivatives–liabilities, at fair value: |
||||||||
TBA securities purchase contracts |
— |
(4) |
||||||
TBA securities sale contracts |
(3,347) |
(170) |
||||||
Fixed payer interest rate swaps |
(2,536) |
(1,123) |
||||||
Swaptions |
(924) |
(723) |
||||||
Total financial derivatives–liabilities, at fair value: |
(6,807) |
(2,020) |
||||||
Total |
$ |
3,308 |
$ |
16,097 |
Interest Rate Swaps
The following tables provide details about our interest rate swaps as of
June 30, 2014 |
|||||||||||||||||
Maturity |
Notional Amount |
Fair Value |
Weighted Average Pay Rate |
Weighted Average Receive Rate |
Weighted Average Remaining Years to Maturity |
||||||||||||
(In thousands) |
|||||||||||||||||
2016 |
$ |
48,000 |
$ |
(197) |
0.80 |
% |
0.23 |
% |
2.28 |
||||||||
2017 |
93,750 |
(874) |
1.23 |
0.23 |
3.11 |
||||||||||||
2018 |
61,500 |
967 |
0.88 |
0.22 |
3.87 |
||||||||||||
2020 |
52,600 |
1,380 |
1.43 |
0.23 |
5.88 |
||||||||||||
2023 |
210,600 |
5,344 |
2.13 |
0.23 |
8.90 |
||||||||||||
2024 |
14,200 |
(409) |
2.84 |
0.23 |
9.80 |
||||||||||||
2043 |
54,500 |
1,428 |
3.15 |
0.23 |
28.93 |
||||||||||||
2044 |
5,000 |
(445) |
3.69 |
0.23 |
29.72 |
||||||||||||
Total |
$ |
540,150 |
$ |
7,194 |
1.78 |
% |
0.23 |
% |
8.68 |
March 31, 2014 |
|||||||||||||||||
Maturity |
Notional Amount |
Fair Value |
Weighted Average Pay Rate |
Weighted Average Receive Rate |
Weighted Average Remaining Years to Maturity |
||||||||||||
(In thousands) |
|||||||||||||||||
2016 |
$ |
48,000 |
$ |
(101) |
0.80 |
% |
0.24 |
% |
2.52 |
||||||||
2017 |
113,750 |
(403) |
1.20 |
0.23 |
3.34 |
||||||||||||
2018 |
81,500 |
1,685 |
0.89 |
0.24 |
4.12 |
||||||||||||
2020 |
70,500 |
2,499 |
1.44 |
0.24 |
6.13 |
||||||||||||
2023 |
210,600 |
9,087 |
2.13 |
0.24 |
9.15 |
||||||||||||
2024 |
22,500 |
(105) |
2.88 |
0.23 |
9.98 |
||||||||||||
2043 |
59,600 |
3,684 |
3.17 |
0.23 |
29.19 |
||||||||||||
2044 |
8,000 |
(250) |
3.69 |
0.23 |
29.97 |
||||||||||||
Total |
$ |
614,450 |
$ |
16,096 |
1.76 |
% |
0.24 |
% |
8.79 |
Interest Rate Swaptions
The following table provides information about our swaptions as of
June 30, 2014 |
||||||||||||||
Option |
Underlying Swap |
|||||||||||||
Type |
Fair Value |
Months to Expiration |
Notional Amount |
Term (Years) |
Fixed Rate |
|||||||||
($ in thousands) |
||||||||||||||
Fixed Payer |
$ |
(723) |
2.9 |
$ |
22,000 |
10.0 |
3.31% |
|||||||
Straddle |
$ |
(201) |
3.9 |
$ |
8,000 |
10.0 |
3.08% |
March 31, 2014 |
||||||||||||||
Option |
Underlying Swap |
|||||||||||||
Type |
Fair Value |
Months to Expiration |
Notional Amount |
Term (Years) |
Fixed Rate |
|||||||||
($ in thousands) |
||||||||||||||
Fixed Payer |
$ |
(535) |
5.9 |
$ |
22,000 |
10.0 |
3.31% |
|||||||
Straddle |
$ |
(188) |
6.9 |
$ |
8,000 |
10.0 |
3.08% |
TBAs
The following table provides information about our TBAs as of
June 30, 2014 |
March 31, 2014 |
|||||||||||||||||||||||||||||||
TBA Securities |
Notional Amount (1) |
Cost |
Market Value (3) |
Net Carrying Value (4) |
Notional Amount (1) |
Cost Basis (2) |
Market Value (3) |
Net Carrying Value (4) |
||||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||||||
Purchase contracts: |
||||||||||||||||||||||||||||||||
Assets |
$ |
47,040 |
$ |
46,385 |
$ |
46,770 |
$ |
385 |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
||||||||||||||||
Liabilities |
— |
— |
— |
— |
8,450 |
8,162 |
8,158 |
(4) |
||||||||||||||||||||||||
Sale contracts: |
||||||||||||||||||||||||||||||||
Assets |
— |
— |
— |
— |
(275,308) |
(289,532) |
(288,634) |
898 |
||||||||||||||||||||||||
Liabilities |
(534,527) |
(566,897) |
(570,244) |
(3,347) |
(154,669) |
(161,989) |
(162,159) |
(170) |
||||||||||||||||||||||||
Total TBA securities, net |
$ |
(487,487) |
$ |
(520,512) |
$ |
(523,474) |
$ |
(2,962) |
$ |
(421,527) |
$ |
(443,359) |
$ |
(442,635) |
$ |
724 |
(1) Notional amount represents the principal balance of the underlying Agency RMBS.
(2) Cost basis represents the forward price to be paid for the underlying Agency RMBS.
(3) Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of the respective period end.
(4) Net carrying value represents the difference between the market value of the TBA contract as of the respective period end and the cost basis, and is reported in Financial derivatives-assets, at fair value and Financial derivatives-liabilities, at fair value on the Consolidated Balance Sheet, for each respective period end.
We primarily use TBAs to hedge interest rate risk, typically in the form of short positions. However, from time to time we also invest in TBAs as a means of acquiring exposure to Agency RMBS, or for speculative purposes, including holding long positions. Overall, we typically hold a net short position.
The following tables detail gains and losses on our financial derivatives for the three month periods ended
Three Month Period Ended June 30, 2014 |
||||||||||||||||||||||||
Derivative Type |
Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps |
Net Realized Gains (Losses) Other Than Periodic Settlements of Interest Rate Swaps |
Net Realized Gains (Losses) on Financial Derivatives |
Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps |
Change in Net Unrealized Gains (Losses) Other Than on Accrued Periodic Settlements of Interest Rate Swaps |
Change in Net Unrealized Gains (Losses) on Financial Derivatives |
||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||
Fixed payer interest rate swaps |
$ |
(4,102) |
$ |
80 |
$ |
(4,022) |
$ |
1,744 |
$ |
(10,646) |
$ |
(8,902) |
||||||||||||
Swaptions |
— |
— |
(201) |
(201) |
||||||||||||||||||||
TBAs |
(7,133) |
(7,133) |
(3,686) |
(3,686) |
||||||||||||||||||||
Total |
$ |
(4,102) |
$ |
(7,053) |
$ |
(11,155) |
$ |
1,744 |
$ |
(14,533) |
$ |
(12,789) |
Three Month Period Ended March 31, 2014 |
||||||||||||||||||||||||
Derivative Type |
Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps |
Net Realized Gains (Losses) Other Than Periodic Settlements of Interest Rate Swaps |
Net Realized Gains (Losses) on Financial Derivatives |
Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps |
Change in Net Unrealized Gains (Losses) Other Than on Accrued Periodic Settlements of Interest Rate Swaps |
Change in Net Unrealized Gains (Losses) on Financial Derivatives |
||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||
Fixed payer interest rate swaps |
$ |
(795) |
$ |
3,431 |
$ |
2,636 |
$ |
(1,583) |
$ |
(14,064) |
$ |
(15,647) |
||||||||||||
Swaptions |
— |
— |
(638) |
(638) |
||||||||||||||||||||
TBAs |
(6,065) |
(6,065) |
(1,511) |
(1,511) |
||||||||||||||||||||
Futures |
20 |
20 |
— |
— |
||||||||||||||||||||
Total |
$ |
(795) |
$ |
(2,614) |
$ |
(3,409) |
$ |
(1,583) |
$ |
(16,213) |
$ |
(17,796) |
Interest Rate Sensitivity
The following table summarizes, as of
Estimated Change in Fair Value(1) |
||||||||
(In thousands) |
50 Basis Point Decline in Interest Rates |
50 Basis Point Increase in Interest Rates |
||||||
Agency RMBS - ARM Pools |
$ |
1,164 |
$ |
(1,329) |
||||
Agency RMBS - Fixed Pools and IOs |
22,856 |
(31,121) |
||||||
TBAs |
(7,896) |
11,161 |
||||||
Non-Agency RMBS |
516 |
(493) |
||||||
Interest Rate Swaps |
(19,387) |
18,218 |
||||||
Swaptions |
354 |
(32) |
||||||
Repurchase Agreements |
(584) |
857 |
||||||
Total |
$ |
(2,977) |
$ |
(2,739) |
(1) Based on the market environment as of
Repo Borrowings
The following table details our outstanding borrowings under repo agreements as of
June 30, 2014 |
March 31, 2014 |
|||||||||||||||||||
Weighted Average |
Weighted Average |
|||||||||||||||||||
Remaining Days to Maturity |
Borrowings Outstanding |
Interest Rate |
Remaining Days to Maturity |
Borrowings Outstanding |
Interest Rate |
Remaining Days to Maturity |
||||||||||||||
(In thousands) |
(In thousands) |
|||||||||||||||||||
30 days or less |
$ |
397,482 |
0.33 |
% |
15 |
$ |
355,198 |
0.36 |
% |
11 |
||||||||||
31-60 days |
469,254 |
0.32 |
44 |
369,220 |
0.35 |
43 |
||||||||||||||
61-90 days |
327,111 |
0.35 |
74 |
414,722 |
0.32 |
74 |
||||||||||||||
91-120 days |
29,512 |
0.38 |
106 |
2,940 |
0.39 |
108 |
||||||||||||||
121-150 days |
23,005 |
0.35 |
136 |
47,945 |
0.39 |
134 |
||||||||||||||
151-180 days |
39,229 |
0.36 |
169 |
91,445 |
0.38 |
164 |
||||||||||||||
Total |
$ |
1,285,593 |
0.33 |
% |
50 |
$ |
1,281,470 |
0.35 |
% |
56 |
As of
Other
We incur an annual base management fee, payable quarterly in arrears, in an amount equal to 1.50% of shareholders' equity (as defined in our management agreement). For the quarter ended
Dividends
On
Share Repurchase Program
On
Reconciliation of Core Earnings to Net Income (Loss)
Core Earnings consists of net income (loss), excluding realized and unrealized gains and losses on mortgage-backed securities and financial derivatives, and, if applicable, items of income or loss that are of a non-recurring nature. Core Earnings includes net realized and unrealized gains (losses) associated with payments and accruals of periodic payments on interest rate swaps. Core Earnings is a supplemental non-GAAP financial measure. We believe that Core Earnings provides information useful to investors because it is a metric that we use to assess our performance and to evaluate the effective net yield provided by the portfolio. Moreover, one of our objectives is to generate income from the net interest margin on the portfolio, and Core Earnings is used to help measure the extent to which this objective is being achieved. However, because Core Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with GAAP, it should be considered as supplementary to, and not as a substitute for, net income (loss) computed in accordance with GAAP.
The following table reconciles, for the three month periods ended
(In thousands except share amounts) |
Three Month Period Ended June 30, 2014 |
Three Month March 31, 2014 |
||||||
Net Income |
$ |
11,050 |
$ |
2,761 |
||||
Less: |
||||||||
Net realized gains (losses) on mortgage-backed securities |
382 |
(3,025) |
||||||
Net realized gains (losses) on financial derivatives, excluding periodic payments(1) |
(7,053) |
(2,614) |
||||||
Change in net unrealized gains (losses) on mortgage-backed securities |
25,424 |
17,581 |
||||||
Change in net unrealized gains (losses) on financial derivatives, excluding accrued periodic payments(2) |
(14,533) |
(16,213) |
||||||
Subtotal |
4,220 |
(4,271) |
||||||
Core Earnings |
$ |
6,830 |
$ |
7,032 |
||||
Weighted Average Shares Outstanding |
9,139,842 |
9,139,842 |
||||||
Core Earnings Per Share |
$ |
0.75 |
$ |
0.77 |
(1) For the three month period ended
(2) For the three month period ended
About
Conference Call
We will host a conference call at
A dial-in replay of the conference call will be available on Tuesday, August 12, 2014, at approximately
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek," or similar expressions or their negative forms, or by references to strategy, plans, or intentions. Examples of forward-looking statements in this press release include, without limitation, our beliefs regarding the current economic and investment environment, our ability to implement our investment and hedging strategies, our future prospects and the protection of our net interest margin from prepayments, volatility and its impact on us, the performance of our investment and hedging strategies, our exposure to prepayment risk in our Agency portfolio, estimated effects on the fair value of our MBS and interest rate derivative holdings of a hypothetical change in interest rates, statements regarding our share repurchase program, and statements regarding the drivers of our returns. Our results can fluctuate from month to month and from quarter to quarter depending on a variety of factors, some of which are beyond our control and/or are difficult to predict, including, without limitation, changes in interest rates and the market value of our securities, changes in mortgage default rates and prepayment rates, our ability to borrow to finance our assets, changes in government regulations affecting our business, our ability to maintain our exemption from registration under the Investment Company Act of 1940 and other changes in market conditions and economic trends. Furthermore, forward-looking statements are subject to risks and uncertainties, including, among other things, those described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended
ELLINGTON RESIDENTIAL MORTGAGE REIT |
||||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS |
||||||||||||
(UNAUDITED) |
||||||||||||
Three Month Period Ended |
Six Month Period Ended |
|||||||||||
June 30, 2014 |
March 31, 2014 |
June 30, 2014 |
||||||||||
(In thousands except share amounts) |
||||||||||||
INTEREST INCOME (EXPENSE) |
||||||||||||
Interest income |
$ |
11,575 |
$ |
11,959 |
$ |
23,534 |
||||||
Interest expense |
(1,070) |
(1,155) |
(2,225) |
|||||||||
Total net interest income |
10,505 |
10,804 |
21,309 |
|||||||||
EXPENSES |
||||||||||||
Management fees |
567 |
592 |
1,159 |
|||||||||
Professional fees |
137 |
139 |
276 |
|||||||||
Other operating expenses |
613 |
663 |
1,276 |
|||||||||
Total expenses |
1,317 |
1,394 |
2,711 |
|||||||||
OTHER INCOME (LOSS) |
||||||||||||
Net realized gains (losses) on mortgage-backed securities |
382 |
(3,025) |
(2,643) |
|||||||||
Net realized losses on financial derivatives |
(11,155) |
(3,409) |
(14,564) |
|||||||||
Change in net unrealized gains (losses) on mortgage-backed securities |
25,424 |
17,581 |
43,005 |
|||||||||
Change in net unrealized gains (losses) on financial derivatives |
(12,789) |
(17,796) |
(30,585) |
|||||||||
Total other income (loss) |
1,862 |
(6,649) |
(4,787) |
|||||||||
NET INCOME |
$ |
11,050 |
$ |
2,761 |
$ |
13,811 |
||||||
NET INCOME PER COMMON SHARE: |
||||||||||||
Basic |
$ |
1.21 |
$ |
0.30 |
$ |
1.51 |
||||||
WEIGHTED AVERAGE SHARES OUTSTANDING |
9,139,842 |
9,139,842 |
9,139,842 |
|||||||||
CASH DIVIDENDS PER SHARE: |
||||||||||||
Dividends declared |
$ |
0.55 |
$ |
0.55 |
$ |
1.10 |
ELLINGTON RESIDENTIAL MORTGAGE REIT |
||||||||||||
CONSOLIDATED BALANCE SHEET |
||||||||||||
(UNAUDITED) |
||||||||||||
As of |
||||||||||||
June 30, 2014 |
March 31, 2014 |
December 31, 2013(1) |
||||||||||
(In thousands except share amounts) |
||||||||||||
ASSETS |
||||||||||||
Cash and cash equivalents |
$ |
49,908 |
$ |
51,106 |
$ |
50,112 |
||||||
Mortgage-backed securities, at fair value |
1,344,444 |
1,327,629 |
1,326,036 |
|||||||||
Due from brokers |
13,338 |
10,725 |
18,347 |
|||||||||
Financial derivatives–assets, at fair value |
10,115 |
18,117 |
34,963 |
|||||||||
Receivable for securities sold |
100,267 |
119,887 |
76,692 |
|||||||||
Interest receivable |
5,769 |
5,522 |
4,766 |
|||||||||
Other assets |
468 |
112 |
174 |
|||||||||
Total Assets |
$ |
1,524,309 |
$ |
1,533,098 |
$ |
1,511,090 |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
LIABILITIES |
||||||||||||
Repurchase agreements |
$ |
1,285,593 |
$ |
1,281,470 |
$ |
1,310,347 |
||||||
Payable for securities purchased |
46,467 |
65,812 |
2,776 |
|||||||||
Due to brokers |
7,320 |
11,764 |
22,788 |
|||||||||
Financial derivatives–liabilities, at fair value |
6,807 |
2,020 |
1,069 |
|||||||||
Dividend payable |
5,027 |
5,027 |
4,570 |
|||||||||
Accrued expenses |
930 |
874 |
996 |
|||||||||
Management fee payable |
567 |
592 |
600 |
|||||||||
Interest payable |
605 |
584 |
764 |
|||||||||
Total Liabilities |
1,353,316 |
1,368,143 |
1,343,910 |
|||||||||
SHAREHOLDERS' EQUITY |
||||||||||||
Preferred shares, par value $0.01 per share, 100,000,000 shares authorized; (0 shares issued and outstanding, respectively) |
— |
— |
— |
|||||||||
Common shares, par value $0.01 per share, 500,000,000 shares authorized; (9,139,842 shares issued and outstanding, respectively) |
91 |
91 |
91 |
|||||||||
Additional paid-in-capital |
181,203 |
181,188 |
181,147 |
|||||||||
Accumulated deficit |
(10,301) |
(16,324) |
(14,058) |
|||||||||
Total Shareholders' Equity |
170,993 |
164,955 |
167,180 |
|||||||||
Total Liabilities and Shareholders' Equity |
$ |
1,524,309 |
$ |
1,533,098 |
$ |
1,511,090 |
(1) Derived from audited financial statements as of
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