Ellington Residential Mortgage REIT Reports First Quarter 2016 Results
Summary of Financial Results
- Net loss for the quarter was
$(0.2) million , or$(0.03) per share, as compared to net income of$1.0 million , or$0.11 per share, in the fourth quarter of 2015.
- Core Earnings1 for the quarter was
$4.9 million , or$0.53 per share, as compared to$4.5 million , or$0.49 per share, in the fourth quarter of 2015. Excluding "Catch-up Premium Amortization Adjustment," Core Earnings for the first quarter was$4.6 million , or$0.50 per share, as compared to$5.6 million , or$0.61 per share, in the fourth quarter of 2015.
- Book value decreased to
$15.39 per share as ofMarch 31, 2016 from$15.86 per share as ofDecember 31, 2015 , after giving effect to a first quarter dividend of$0.45 per share.
- Net interest margin was 1.92%, as compared to 1.67% for the fourth quarter of 2015. Excluding Catch-up Premium Amortization Adjustment, net interest margin was 1.83% for the first quarter of 2016 as compared to 2.01% for the fourth quarter of 2015.
- Weighted average prepayment speed for fixed rate Agency specified pools was 7.1% CPR for the quarter, as compared to 6.5% in the fourth quarter of 20152.
- Dividend yield of 14.7% based on
May 2, 2016 closing stock price of$12.25 .
- Debt-to-equity ratio was 8.1:1 as of
March 31, 2016 , as compared to 8.4:1 as ofDecember 31, 2015 . Adjusted for unsettled purchases and sales, the debt-to-equity ratio was 7.7:1 and 8.1:1 as ofMarch 31, 2016 andDecember 31, 2015 , respectively.
First Quarter 2016 Results
"For the first quarter of 2016, EARN had a net loss of
"In light of current market dynamics, including the recent run-up in the corporate credit markets, we believe that the Agency RMBS market stands out as a highly liquid market that offers spreads that still look attractive by historical standards. While prepayment risk remains heightened, our view is that strong analytics can correctly price that risk, especially as it varies by loan characteristics and by servicer. Changes in industry technology will continue to greatly influence prepayment behavior, with mortgages originated by newer, non-bank lenders continuing to prepay much faster than those originated by traditional bank lenders. We believe that our research-driven approach to prepayment risk and relative value is the best way to capitalize on the opportunities in the Agency RMBS markets. At the same time, we continue to actively hedge our portfolio against the risk of rising interest rates.
"During the first quarter, we turned over approximately 48% of our Agency RMBS portfolio. Through active trading, we believe that we can continually enhance the composition of our portfolio. Our non-Agency RMBS strategy, while currently small, contributed nicely to our results for the quarter as the overall portfolio produced strong carry and appreciated in value; we continue to consider increasing our allocation to non-Agency RMBS should more attractive entry points arise.
"In the early part of the quarter, we repurchased a modest amount of shares when our stock price declined relative to our book value. We would expect to continue to repurchase shares on an opportunistic but measured basis."
As of March 31, 2016, our mortgage-backed securities portfolio consisted of
Volatility was extremely high during the first quarter. In the first half of the quarter, credit-related fears stemming from depressed energy prices deepened, and caused a flight to quality that spilled over to many other sectors. The equity market sell-off in the early part of the quarter was one of the worst starts to a year on record, with the
Towards the middle of the quarter, energy prices stabilized, and what seemed to begin as a relief rally in the equity and credit-sensitive markets turned into an outright whipsaw. Market participants became emboldened to add risk as they increasingly became convinced that, in light of the steep market declines and renewed concerns of a global economic slowdown, the Federal Reserve would significantly delay the interest rate hikes that it had previously signaled. On
Interest rates fell sharply in the first half of the quarter in response to the flight to quality, but only rebounded slightly for the remainder of the quarter in light of the dovish signals and actions by central banks. Over the course of the entire quarter, the 10-year U.S. Treasury yield fell 50 basis points to end at 1.77%, and the 2-year U.S. Treasury yield fell 33 basis points to end at 0.72%. The average rate for a fixed rate 30-year conventional mortgage also decreased over the course of the first quarter, falling 30 basis points to end the quarter at 3.71%.
Yield spreads on Agency RMBS widened during the first quarter, as the declines in yields on Agency RMBS could not keep pace with the declines in yields on either interest rate swaps or U.S. Treasury securities. The 10-year interest rate swap spread became more negative, tightening 5 basis points to end the quarter at -13 basis points. Since the majority of our interest rate hedging portfolio is comprised of interest rate swaps, this negatively impacted our results for the quarter. While pay-ups on specified pools did increase as prepayment protection became more valuable in light of lower interest rates, the increase in pay-ups was not enough to compensate for the effects of yield spread widening.
Specifically, for the quarter ended
During the first quarter, we continued to use short positions in TBAs to hedge interest rate risk, and these positions generated net losses. However, TBAs underperformed specified pools during the quarter, and because we hold a net short position in TBAs, this underperformance benefited our results for the quarter. We actively traded our Agency RMBS portfolio during the quarter in order to take advantage of volatility and to harvest modest gains. Our portfolio turnover for the quarter was 48% (as measured by sales and excluding paydowns), and we captured net realized gains of
During the first quarter, we continued to focus our Agency RMBS purchasing activity primarily on specified pools, especially those with higher coupons. As of
We expect to continue to target specified pools that, taking into account their particular composition and based on our prepayment projections: (1) should generate attractive yields relative to other Agency RMBS and U.S. Treasury securities, (2) should have less prepayment sensitivity to government policy shocks, and/or (3) should create opportunities for trading gains once the market recognizes their value, which for newer pools may come only after several months, when actual prepayment experience can be observed. We believe that our research team, proprietary prepayment models, and extensive databases remain essential tools in our implementation of this strategy.
Our net Agency premium as a percentage of our long Agency RMBS holdings is one metric that we use to measure our overall prepayment risk.
We believe that with the drop in interest rates, prepayment concerns should continue to benefit the relative performance of specified pools, and could create opportunities in the IO markets. We believe that our adaptive and active style of portfolio management is well suited to the current MBS market environment, which continues to be shaped by shifting central bank policies, regulatory changes, and developing technologies.
The non-Agency RMBS market followed a similar path to that of most other credit-sensitive fixed income sectors, in that yield spreads widened significantly in the early part of the quarter, and then abruptly reversed course and tightened significantly in the latter part of the quarter; however non-Agency RMBS yield spreads ended the quarter noticeably wider than where they had begun. Nevertheless, the non-Agency RMBS sector performed better over the course of the quarter in comparison to many other structured product sectors, such as CMBS, in large part because the fundamentals underlying non-Agency RMBS, led by a stable housing market, continue to be strong. During the quarter, our non-Agency RMBS generated a positive return. Included in the quarter's return were strong carry and appreciation from our held positions. On a quarter-over-quarter basis, our non-Agency RMBS portfolio declined in size slightly. As of
For the quarter ended March 31, 2016, the weighted average yield of our portfolio of Agency and non-Agency RMBS was 3.13%, while our average cost of funds including interest rate swaps and U.S. Treasuries was 1.21%, resulting in a net interest margin for the quarter of 1.92%. In comparison, for the quarter ended December 31, 2015, the annualized weighted average yield of our Agency and non-Agency RMBS was 2.84%, while the average cost of funds including interest rate swaps and U.S. Treasuries was 1.17%, resulting in a net interest margin of 1.67%. Our interest income is subject to fluctuations based on adjustments to premium amortization as a result of changes in prepayments of our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses). We refer to this adjustment as a "Catch-up Premium Amortization Adjustment." The amount of this adjustment can vary significantly from quarter to quarter. During the first quarter, we had a positive Catch-up Premium Amortization Adjustment in the amount of approximately
On a quarter-over-quarter basis our annualized cost of funds, including interest rate swaps and short positions in U.S. Treasury securities, increased to 1.21% from 1.17%. This increase was primarily related to an increase in our cost of repo, which represents the largest component of our cost of funds. Coming into 2016, market expectations of rising interest rates put upward pressure on repo costs. In addition, the FHFA's
After giving effect to a first quarter dividend of
For the quarter ended March 31, 2016, Core Earnings was
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.
2 Prior period calculation methodology has been conformed to current period calculation methodology.
Securities Portfolio
The following table summarizes our portfolio of securities as of
March 31, 2016 |
December 31, 2015 |
||||||||||||||||||
(In thousands) |
Current Principal |
Fair Value |
Average Price(1) |
Cost |
Average Cost(1) |
Current Principal |
Fair Value |
Average Price(1) |
Cost |
Average Cost(1) |
|||||||||
Agency RMBS(2) |
|||||||||||||||||||
15-year fixed rate |
$ 143,705 |
$ 152,536 |
$ 106.15 |
$ 150,945 |
$ 105.04 |
$ 162,546 |
$ 170,261 |
$ 104.75 |
$ 170,385 |
$ 104.82 |
|||||||||
20-year fixed rate |
17,991 |
19,488 |
108.32 |
19,226 |
106.86 |
18,477 |
19,830 |
107.32 |
19,754 |
106.91 |
|||||||||
30-year fixed rate |
788,135 |
852,326 |
108.14 |
840,998 |
106.71 |
842,524 |
900,794 |
106.92 |
896,356 |
106.39 |
|||||||||
ARMs |
35,122 |
37,133 |
105.73 |
37,232 |
106.01 |
36,433 |
38,530 |
105.76 |
38,629 |
106.03 |
|||||||||
Reverse mortgages |
70,867 |
77,548 |
109.43 |
77,179 |
108.91 |
68,690 |
73,692 |
107.28 |
75,205 |
109.48 |
|||||||||
Total Agency RMBS |
1,055,820 |
1,139,031 |
107.88 |
1,125,580 |
106.61 |
1,128,670 |
1,203,107 |
106.60 |
1,200,329 |
106.35 |
|||||||||
Non-Agency RMBS |
42,649 |
27,631 |
64.79 |
26,175 |
61.37 |
48,408 |
31,401 |
64.87 |
30,395 |
62.79 |
|||||||||
Total RMBS(2) |
1,098,469 |
1,166,662 |
106.21 |
1,151,755 |
104.85 |
1,177,078 |
1,234,508 |
104.88 |
1,230,724 |
104.56 |
|||||||||
Agency IOs |
n/a |
6,931 |
n/a |
8,660 |
n/a |
n/a |
7,758 |
n/a |
8,491 |
n/a |
|||||||||
Total mortgage- |
1,173,593 |
1,160,415 |
1,242,266 |
1,239,215 |
|||||||||||||||
U.S. Treasury |
(68,781) |
(69,607) |
101.20 |
(68,669) |
99.84 |
(79,550) |
(78,447) |
98.61 |
(79,003) |
99.31 |
|||||||||
Reverse repurchase |
69,575 |
69,575 |
100.00 |
69,575 |
100.00 |
78,632 |
78,632 |
100.00 |
78,632 |
100.00 |
|||||||||
Total |
$ 1,173,561 |
$ 1,161,321 |
$ 1,242,451 |
$ 1,238,844 |
|||||||||||||||
(1) Represents the dollar amount (not shown in thousands) per $100 of current principal of the price or cost for the security. |
|||||||||||||||||||
(2) Excludes Agency IOs. |
Our weighted average holdings of RMBS based on amortized cost was
Financial Derivatives Portfolio
The following table summarizes fair value of our financial derivatives as of
March 31, 2016 |
December 31, 2015 |
|||
Financial derivatives–assets, at fair value: |
(In thousands) |
|||
TBA securities purchase contracts |
$ 365 |
$ 115 |
||
TBA securities sale contracts |
- |
302 |
||
Fixed payer interest rate swaps |
4 |
891 |
||
Fixed receiver interest rate swaps |
1,265 |
857 |
||
Futures |
1 |
18 |
||
Total financial derivatives–assets, at fair value |
1,635 |
2,183 |
||
Financial derivatives–liabilities, at fair value: |
||||
TBA securities purchase contracts |
- |
(49) |
||
TBA securities sale contracts |
(1,157) |
(315) |
||
Fixed payer interest rate swaps |
(17,122) |
(4,361) |
||
Futures |
(5) |
- |
||
Total financial derivatives–liabilities, at fair value |
(18,284) |
(4,725) |
||
Total |
$ (16,649) |
$ (2,542) |
||
Interest Rate Swaps
The following tables provide details about our fixed payer interest rate swaps as of
March 31, 2016 |
||||||||||
Maturity |
Notional |
Fair Value |
Weighted |
Weighted |
Weighted Average |
|||||
(In thousands) |
||||||||||
2016 |
$ 48,000 |
$ (79) |
0.80% |
0.62% |
0.52 |
|||||
2017 |
74,750 |
(546) |
1.21 |
0.63 |
1.34 |
|||||
2018 |
71,529 |
(559) |
1.11 |
0.62 |
2.03 |
|||||
2020 |
107,461 |
(2,371) |
1.50 |
0.62 |
4.08 |
|||||
2021 |
10,400 |
1 |
1.15 |
0.62 |
4.87 |
|||||
2022 |
19,444 |
(587) |
1.76 |
0.62 |
6.26 |
|||||
2023 |
131,400 |
(7,080) |
2.10 |
0.63 |
7.14 |
|||||
2024 |
9,200 |
(428) |
1.99 |
0.61 |
8.01 |
|||||
2025 |
34,022 |
(1,503) |
2.05 |
0.62 |
8.86 |
|||||
2043 |
19,047 |
(3,966) |
3.02 |
0.62 |
27.14 |
|||||
Total |
$ 525,253 |
$ (17,118) |
1.59% |
0.62% |
5.16 |
|||||
December 31, 2015 |
||||||||||
Maturity |
Notional |
Fair Value |
Weighted |
Weighted |
Weighted Average |
|||||
(In thousands) |
||||||||||
2016 |
$ 48,000 |
$ (83) |
0.80% |
0.39% |
0.77 |
|||||
2017 |
74,750 |
(445) |
1.21 |
0.41 |
1.59 |
|||||
2018 |
71,529 |
80 |
1.11 |
0.34 |
2.28 |
|||||
2020 |
119,893 |
220 |
1.51 |
0.33 |
4.36 |
|||||
2022 |
19,444 |
86 |
1.76 |
0.34 |
6.51 |
|||||
2023 |
131,400 |
(1,367) |
2.10 |
0.38 |
7.39 |
|||||
2024 |
9,200 |
11 |
1.99 |
0.32 |
8.26 |
|||||
2025 |
58,560 |
(5) |
2.06 |
0.33 |
9.32 |
|||||
2043 |
21,067 |
(1,967) |
3.03 |
0.36 |
27.39 |
|||||
Total |
$ 553,843 |
$ (3,470) |
1.63% |
0.36% |
5.67 |
|||||
The following tables provide details about our fixed receiver interest rate swaps as of
March 31, 2016 |
||||||||||
Maturity |
Notional |
Fair Value |
Weighted |
Weighted |
Weighted Average |
|||||
(In thousands) |
||||||||||
2025 |
$ 9,700 |
$ 1,255 |
0.62% |
3.00% |
9.30 |
|||||
2026 |
3,000 |
10 |
0.63% |
1.68% |
10.01 |
|||||
Total |
$ 12,700 |
$ 1,265 |
0.62% |
2.69% |
9.46 |
|||||
December 31, 2015 |
||||||||||
Maturity |
Notional |
Fair Value |
Weighted |
Weighted |
Weighted Average |
|||||
(In thousands) |
||||||||||
2025 |
$ 9,700 |
$ 857 |
0.32% |
3.00% |
9.55 |
|||||
Total |
$ 9,700 |
$ 857 |
0.32% |
3.00% |
9.55 |
|||||
Eurodollar Futures
The following table provides information about our short positions in Eurodollar futures as of
March 31, 2016 |
||||||
Remaining Maturity |
Notional Amount |
Fair Value |
Remaining Months to |
|||
($ in thousands) |
||||||
2016 |
$ (9,000) |
$ 1 |
5.66 |
|||
2017 |
(9,000) |
(5) |
14.76 |
|||
Total |
$ (18,000) |
$ (4) |
10.21 |
|||
December 31, 2015 |
||||||
Remaining Maturity |
Notional Amount |
Fair Value |
Remaining Months to |
|||
($ in thousands) |
||||||
2016 |
$ (12,000) |
$ 10 |
7.13 |
|||
2017 |
(9,000) |
8 |
17.79 |
|||
Total |
$ (21,000) |
$ 18 |
11.70 |
|||
TBAs
The following table provides information about our TBAs as of
March 31, 2016 |
December 31, 2015 |
|||||||||||||||
TBA Securities |
Notional |
Cost |
Market |
Net |
Notional |
Cost |
Market |
Net |
||||||||
(In thousands) |
||||||||||||||||
Purchase contracts: |
||||||||||||||||
Assets |
$ 76,904 |
$ 79,928 |
$ 80,293 |
$ 365 |
$ 60,291 |
$ 61,638 |
$ 61,753 |
$ 115 |
||||||||
Liabilities |
- |
- |
- |
- |
23,418 |
24,208 |
24,159 |
(49) |
||||||||
76,904 |
79,928 |
80,293 |
365 |
83,709 |
85,846 |
85,912 |
66 |
|||||||||
Sale contracts: |
||||||||||||||||
Assets |
- |
- |
- |
- |
(170,800) |
(181,476) |
(181,174) |
302 |
||||||||
Liabilities |
(311,246) |
(332,743) |
(333,900) |
(1,157) |
(252,746) |
(268,973) |
(269,288) |
(315) |
||||||||
(311,246) |
(332,743) |
(333,900) |
(1,157) |
(423,546) |
(450,449) |
(450,462) |
(13) |
|||||||||
Total TBA securities, net |
$ (234,342) |
$ (252,815) |
$ (253,607) |
$ (792) |
$ (339,837) |
$ (364,603) |
$ (364,550) |
$ 53 |
||||||||
(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 March 31, 2016 |
||||||||||||
Derivative Type |
Net Realized |
Net Realized |
Net Realized |
Change in Net |
Change in Net |
Change in Net |
||||||
(In thousands) |
||||||||||||
Interest rate swaps |
$ (672) |
$ (1,226) |
$ (1,898) |
$ (726) |
$ (12,543) |
$ (13,269) |
||||||
TBAs |
(2,099) |
(2,099) |
(844) |
(844) |
||||||||
Futures |
1 |
1 |
(22) |
(22) |
||||||||
Total |
$ (672) |
$ (3,324) |
$ (3,996) |
$ (726) |
$ (13,409) |
$ (14,135) |
||||||
Three Month Period Ended December 31, 2015 |
||||||||||||
Derivative Type |
Net Realized |
Net Realized |
Net Realized |
Change in Net |
Change in Net |
Change in Net |
||||||
(In thousands) |
||||||||||||
Interest rate swaps |
$ (3,128) |
$ (4,023) |
$ (7,151) |
$ 1,298 |
$ 10,725 |
$ 12,023 |
||||||
TBAs |
(430) |
(430) |
637 |
637 |
||||||||
Futures |
(14) |
(14) |
18 |
18 |
||||||||
Total |
$ (3,128) |
$ (4,467) |
$ (7,595) |
$ 1,298 |
$ 11,380 |
$ 12,678 |
||||||
Interest Rate Sensitivity
The following table summarizes, as of
Estimated Change in Fair Value(1) |
||||
(In thousands) |
50 Basis Point Decline |
50 Basis Point Increase |
||
Agency RMBS - ARM Pools |
$ 175 |
$ (277) |
||
Agency RMBS - Fixed Pools and IOs |
13,296 |
(19,127) |
||
TBAs |
(1,381) |
3,252 |
||
Non-Agency RMBS |
191 |
(185) |
||
Interest Rate Swaps |
(12,556) |
11,986 |
||
U.S. Treasury Securities |
(1,515) |
1,478 |
||
Eurodollar Futures |
(22) |
22 |
||
Repurchase and Reverse Repurchase Agreements |
(650) |
650 |
||
Total |
$ (2,462) |
$ (2,201) |
||
(1) Based on the market environment as of March 31, 2016. Results are based on forward-looking models, which are inherently imperfect, and incorporate various simplifying assumptions. Therefore, the table above is for illustrative purposes only and actual changes in interest rates would likely cause changes in the actual value of the overall portfolio that would differ from those presented above and such differences might be significant and adverse. |
Repo Borrowings
The following table details our outstanding borrowings under repo agreements as of
March 31, 2016 |
December 31, 2015 |
|||||||||||
Weighted Average |
Weighted Average |
|||||||||||
Remaining Days to |
Borrowings |
Interest Rate |
Remaining |
Borrowings |
Interest Rate |
Remaining |
||||||
(In thousands) |
(In thousands) |
|||||||||||
30 days or less |
$ 537,508 |
0.63% |
15 |
$ 666,124 |
0.52% |
14 |
||||||
31-60 days |
268,670 |
0.67 |
43 |
336,350 |
0.53 |
45 |
||||||
61-90 days |
292,395 |
0.71 |
74 |
89,142 |
0.70 |
74 |
||||||
91-120 days |
- |
- |
- |
131,103 |
0.53 |
106 |
||||||
151-180 days |
35,268 |
0.82 |
167 |
- |
- |
- |
||||||
Total |
$ 1,133,841 |
0.66% |
42 |
$ 1,222,719 |
0.54% |
37 |
||||||
As of March 31, 2016, we had no outstanding borrowings other than under repo agreements. Our repo borrowings were with twelve counterparties as of March 31, 2016. The above figures are as of the respective quarter ends; over the course of the quarters ended March 31, 2016 and December 31, 2015 our average cost of repo was 0.62% and 0.50%, respectively.
During the early part of the first quarter, repo borrowing rates generally trended higher across maturities. While the repo market has remained liquid, widening asset spreads and constrained lender balance sheets have put upward pressure on the cost of repo. Also likely adding upward pressure to repo rates was the FHFA's decision to proceed with its ban of captive insurance company memberships in the FHLB, forcing many of the current member companies to find alternative financing. However, in the latter part of the first quarter, and following the Federal Reserve's toned down stance on its likely pace of future interest rate increases, repo rates declined slightly.
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 March 31, 2016, our expense ratio, defined as management fees and operating expenses as a percentage of average shareholders' equity, was 3.8% on an annualized basis as compared to 3.2% 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 change in net unrealized gains and losses on 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 change in net unrealized gains (losses) associated with payments and accruals of periodic payments on interest rate swaps. Core Earnings excluding Catch-up Premium Amortization Adjustment consists of Core Earnings but excludes the effect of the Catch-up Premium Amortization Adjustment on interest income. Core Earnings and Core Earnings excluding Catch-up Premium Amortization Adjustment are supplemental non-GAAP financial measures. We believe that Core Earnings and Core Earnings excluding Catch-up Premium Amortization Adjustment provide information useful to investors because they are metrics 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 and Core Earnings excluding Catch-up Premium Amortization Adjustment are used to help measure the extent to which this objective is being achieved. However, because Core Earnings and Core Earnings excluding Catch-up Premium Amortization Adjustment are incomplete measures of our financial results and differ from net income (loss) computed in accordance with GAAP, they should be considered as supplementary to, and not as substitutes 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 |
Three Month |
||
Net Income (Loss) |
$ (239) |
$ 980 |
||
Less: |
||||
Net realized gains (losses) on securities |
3,010 |
817 |
||
Net realized gains (losses) on financial derivatives, excluding periodic |
(3,324) |
(4,467) |
||
Change in net unrealized gains (losses) on securities |
8,633 |
(11,230) |
||
Change in net unrealized gains (losses) on financial derivatives, excluding |
(13,409) |
11,380 |
||
Subtotal |
(5,090) |
(3,500) |
||
Core Earnings |
$ 4,851 |
$ 4,480 |
||
Catch-up Premium Amortization Adjustment |
258 |
(1,087) |
||
Core Earnings excluding Catch-up Premium Amortization Adjustment |
$ 4,593 |
$ 5,567 |
||
Weighted Average Shares Outstanding |
9,121,198 |
9,135,219 |
||
Core Earnings Per Share |
$ 0.53 |
$ 0.49 |
||
Core Earnings Per Share excluding Catch-up Premium Amortization |
$ 0.50 |
$ 0.61 |
||
(1) For the three month period ended March 31, 2016, represents Net realized gains (losses) on financial derivatives of $(3,996) less Net realized gains |
||||
(2) For the three month period ended March 31, 2016, represents Change in net unrealized gains (losses) on financial derivatives of $(14,135) less Change in |
About
Conference Call
We will host a conference call at
A dial-in replay of the conference call will be available on Wednesday, May 4, 2016, 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 RMBS 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 exclusion 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 |
||||
March 31, 2016 |
December 31, 2015 |
|||
(In thousands except share amounts) |
||||
INTEREST INCOME (EXPENSE) |
||||
Interest income |
$ 9,651 |
$ 9,315 |
||
Interest expense |
(2,051) |
(1,816) |
||
Total net interest income |
7,600 |
7,499 |
||
EXPENSES |
||||
Management fees |
528 |
545 |
||
Professional fees |
218 |
152 |
||
Compensation expense |
151 |
87 |
||
Other operating expenses |
454 |
405 |
||
Total expenses |
1,351 |
1,189 |
||
OTHER INCOME (LOSS) |
||||
Net realized gains (losses) on securities |
3,010 |
817 |
||
Net realized gains (losses) on financial derivatives |
(3,996) |
(7,595) |
||
Change in net unrealized gains (losses) on securities |
8,633 |
(11,230) |
||
Change in net unrealized gains (losses) on financial derivatives |
(14,135) |
12,678 |
||
Total other income (loss) |
(6,488) |
(5,330) |
||
NET INCOME (LOSS) |
$ (239) |
$ 980 |
||
NET INCOME (LOSS) PER COMMON SHARE: |
||||
Basic and Diluted |
$ (0.03) |
$ 0.11 |
||
WEIGHTED AVERAGE SHARES OUTSTANDING |
9,121,198 |
9,135,219 |
||
CASH DIVIDENDS PER SHARE: |
||||
Dividends declared |
$ 0.45 |
$ 0.45 |
||
ELLINGTON RESIDENTIAL MORTGAGE REIT |
||||
CONSOLIDATED BALANCE SHEET |
||||
(UNAUDITED) |
||||
As of |
||||
March 31, |
December 31, |
|||
(In thousands except share amounts) |
||||
ASSETS |
||||
Cash and cash equivalents |
$ 41,242 |
$ 40,166 |
||
Mortgage-backed securities, at fair value |
1,173,593 |
1,242,266 |
||
Due from brokers |
30,206 |
33,297 |
||
Financial derivatives–assets, at fair value |
1,635 |
2,183 |
||
Reverse repurchase agreements |
69,575 |
78,632 |
||
Receivable for securities sold |
64,243 |
155,526 |
||
Interest receivable |
4,092 |
4,325 |
||
Other assets |
523 |
289 |
||
Total Assets |
$ 1,385,109 |
$ 1,556,684 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||
LIABILITIES |
||||
Repurchase agreements |
$ 1,133,841 |
$ 1,222,719 |
||
Payable for securities purchased |
16,433 |
98,949 |
||
Due to brokers |
127 |
439 |
||
Financial derivatives–liabilities, at fair value |
18,284 |
4,725 |
||
U.S. Treasury securities sold short, at fair value |
69,607 |
78,447 |
||
Dividend payable |
4,103 |
4,111 |
||
Accrued expenses |
447 |
533 |
||
Management fee payable |
528 |
545 |
||
Interest payable |
1,382 |
1,361 |
||
Total Liabilities |
1,244,752 |
1,411,829 |
||
SHAREHOLDERS' EQUITY |
||||
Preferred shares, par value $0.01 per share, 100,000,000 shares authorized; (0 shares |
- |
- |
||
Common shares, par value $0.01 per share, 500,000,000 shares authorized; |
92 |
92 |
||
Additional paid-in-capital |
180,871 |
181,027 |
||
Accumulated deficit |
(40,606) |
(36,264) |
||
Total Shareholders' Equity |
140,357 |
144,855 |
||
Total Liabilities and Shareholders' Equity |
$ 1,385,109 |
$ 1,556,684 |
||
PER SHARE INFORMATION |
||||
Common shares, par value $0.01 per share |
$ 15.39 |
$ 15.86 |
||
(1) Derived from audited financial statements as of December 31, 2015. |
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