Ellington Residential Mortgage REIT Reports Fourth Quarter 2015 Results
Summary of Financial Results
- Net income for the quarter was
$1.0 million , or$0.11 per share, as compared to net loss of$(4.8) million , or$(0.53) per share, in the third quarter of 2015. - Core Earnings1 for the quarter was
$4.5 million , or$0.49 per share, as compared to$6.3 million , or$0.69 per share, in the third quarter of 2015. Excluding "Catch-up Premium Amortization Adjustments," Core Earnings for the fourth quarter was$5.6 million or$0.61 per share, as compared to$5.4 million or$0.59 per share in the third quarter. - Book value decreased to
$15.86 per share as of December 31, 2015 from$16.20 per share as of September 30, 2015, after giving effect to a fourth quarter dividend of$0.45 per share. - Net interest margin was 1.67%, as compared to 2.19% for the third quarter of 2015. Excluding Catch-up Premium Amortization Adjustments, net interest margin was 2.01% for the fourth quarter of 2015 as compared to 1.93% for the third quarter of 2015.
- Weighted average prepayment speed for the Agency RMBS portfolio was 7.5% CPR for the quarter, as compared to 7.1% in the third quarter of 2015.
- Dividend yield of 16.5% based on
February 9, 2016 closing stock price of$10.89 . - Debt-to-equity ratio was 8.4:1 as of December 31, 2015, as compared to 8.3:1 as of September 30, 2015. Adjusted for unsettled purchases and sales, the debt-to-equity ratio was 8.1:1 as of
December 31, 2015 andSeptember 30, 2015 .
Fourth Quarter 2015 Results
"In the fourth quarter, despite a weak Agency RMBS market and a flattening yield curve, EARN generated positive net income of
"We believe that given recent significant weakness in the credit markets, it may soon be appropriate to increase our allocation to non-Agency RMBS. Meanwhile, we believe that Agency RMBS are currently trading at highly attractive levels, and that our specified pool portfolio is positioned to perform well whether interest rates rise or fall. While 2015 was a difficult year, given the highly liquid nature of our portfolio with only a very modest current allocation to credit-sensitive securities, we believe that we are entering an extremely favorable investment environment for the Company. As always, we expect to continue to actively trade the portfolio to enhance its composition. During the fourth quarter, we turned over 40% of our Agency RMBS portfolio. Notwithstanding the increase in the cost of repo funding as a result of higher short-term interest rates, and the recent developments impacting the ability of certain mortgage REITs to access
As of December 31, 2015, our mortgage-backed securities portfolio consisted of
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 fourth quarter, fixed-income markets continued to be impacted by concerns over the health of the Chinese economy and the decline in commodity prices. In December, for the first time since
During the fourth quarter, yield spreads on Agency RMBS continued to widen relative to interest rate swaps. In addition, the 10-year interest rate swap spread to U.S. Treasury securities became even more negative during the fourth quarter than it had been in the third quarter, when this spread had become negative for the first time since 2010. These swap spread movements exacerbated the widening in yield spreads between Agency RMBS and interest rate swaps, and negatively impacted our results for the quarter. Specifically, for the quarter ended
During the fourth quarter, we continued to use short positions in TBAs to hedge interest rate risk, and these positions generated net gains. However, TBAs generally outperformed specified pools during the quarter, and as a result, the net gains from our short TBAs were outweighed by the net unrealized losses on our specified pools. We actively traded our Agency RMBS portfolio during the fourth quarter in order to take advantage of volatility and to harvest modest gains. Our portfolio turnover for the quarter was 40% (as measured by sales and excluding paydowns), and we captured net realized gains of
During the fourth 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.
In the aftermath of the significant fourth quarter yield spread widening, and with prepayments remaining relatively muted despite continued low levels of mortgage rates, we believe that Agency RMBS currently offer very attractive net interest margins and overall relative value.
Yield spreads on non-Agency RMBS were generally not immune to the fourth quarter broad market widening, although as in the third quarter this sector was somewhat less impacted than other credit sectors. A stable housing market continues to support the non-Agency RMBS sector. During the quarter, our non-Agency RMBS generated a positive return and in light of more attractive opportunities in the market, we slightly increased our portfolio. As of
For the quarter ended December 31, 2015, the weighted average yield of our portfolio of Agency and non-Agency RMBS was 2.84%, while our average cost of funds including interest rate swaps and U.S. Treasuries was 1.17%, resulting in a net interest margin for the quarter of 1.67%. In comparison, for the quarter ended September 30, 2015, the annualized weighted average yield of our Agency and non-Agency RMBS was 3.40%, while the average cost of funds including interest rate swaps and U.S. Treasuries was 1.21%, resulting in a net interest margin of 2.19%. 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 fourth quarter, we had a negative Catch-up Premium Amortization Adjustment in the amount of
While on a quarter-over-quarter basis our annualized cost of funds decreased to 1.17% from 1.21%, our cost of repo funding increased and our cost of hedging with interest rate swaps and short positions in U.S. Treasury securities decreased. As mentioned above, market participants had widely anticipated that the Federal Reserve would raise its target interest rate at the December meeting, which, in fact, did occur. This put upward pressure on repo funding costs. Leading up to year end, we shortened the average term of our repo borrowings, but following year end we have generally sought to lengthen the term of our repo borrowings. In light of the FHFA's decision to proceed with its ban of captive insurance company memberships in the Federal Home Loan Bank System, or "FHLB," the need for current member companies to find alternative financing could put additional upward pressure on repo rates for Agency RMBS over the next several months. However, we believe the impact of this development should be mitigated by the abundance of Agency RMBS repo lenders currently active in the market. Over the course of the fourth quarter, our interest rate swaps decreased in notional size as well as in weighted average years remaining to maturity, thereby leading to a decline in this component of our cost of funds. This was generally consistent with the fact that we held a slightly smaller portfolio of Agency RMBS in the fourth quarter as compared to that of the third quarter.
After giving effect to a fourth quarter dividend of
For the quarter ended December 31, 2015, Core Earnings was
Securities Portfolio
The following table summarizes our portfolio of securities as of December 31, 2015 and September 30, 2015:
December 31, 2015 |
September 30, 2015 |
||||||||||||||||||||||||||||||||||||||
(In thousands) |
Current |
Fair Value |
Average |
Cost |
Average |
Current |
Fair Value |
Average |
Cost |
Average |
|||||||||||||||||||||||||||||
Agency RMBS(2) |
|||||||||||||||||||||||||||||||||||||||
15-year fixed rate mortgages |
$ |
162,546 |
$ |
170,261 |
$ |
104.75 |
$ |
170,385 |
$ |
104.82 |
$ |
162,453 |
$ |
171,824 |
$ |
105.77 |
$ |
170,327 |
$ |
104.85 |
|||||||||||||||||||
20-year fixed rate mortgages |
18,477 |
19,830 |
107.32 |
19,754 |
106.91 |
9,094 |
9,837 |
108.17 |
9,602 |
105.59 |
|||||||||||||||||||||||||||||
30-year fixed rate mortgages |
842,524 |
900,794 |
106.92 |
896,356 |
106.39 |
894,774 |
964,391 |
107.78 |
950,696 |
106.25 |
|||||||||||||||||||||||||||||
ARMs |
36,433 |
38,530 |
105.76 |
38,629 |
106.03 |
36,782 |
39,130 |
106.38 |
39,197 |
106.57 |
|||||||||||||||||||||||||||||
Reverse mortgages |
68,690 |
73,692 |
107.28 |
75,205 |
109.48 |
53,986 |
59,541 |
110.29 |
59,683 |
110.55 |
|||||||||||||||||||||||||||||
Total Agency RMBS |
1,128,670 |
1,203,107 |
106.60 |
1,200,329 |
106.35 |
1,157,089 |
1,244,723 |
107.57 |
1,229,505 |
106.26 |
|||||||||||||||||||||||||||||
Non-Agency RMBS |
48,408 |
31,401 |
64.87 |
30,395 |
62.79 |
42,978 |
28,895 |
67.23 |
27,791 |
64.66 |
|||||||||||||||||||||||||||||
Total RMBS(2) |
1,177,078 |
1,234,508 |
104.88 |
1,230,724 |
104.56 |
1,200,067 |
1,273,618 |
106.13 |
1,257,296 |
104.77 |
|||||||||||||||||||||||||||||
Agency IOs |
n/a |
7,758 |
n/a |
8,491 |
n/a |
n/a |
7,274 |
n/a |
8,229 |
n/a |
|||||||||||||||||||||||||||||
Total mortgage-backed securities |
1,242,266 |
1,239,215 |
1,280,892 |
1,265,525 |
|||||||||||||||||||||||||||||||||||
U.S. Treasury securities sold short |
(79,550) |
(78,447) |
98.61 |
(79,003) |
99.31 |
(70,020) |
(70,671) |
100.93 |
(70,142) |
100.17 |
|||||||||||||||||||||||||||||
Reverse repurchase agreements |
78,632 |
78,632 |
100.00 |
78,632 |
100.00 |
76,610 |
76,610 |
100.00 |
76,610 |
100.00 |
|||||||||||||||||||||||||||||
Total |
$ |
1,242,451 |
$ |
1,238,844 |
$ |
1,286,831 |
$ |
1,271,993 |
(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 December 31, 2015 and September 30, 2015:
December 31, 2015 |
September 30, 2015 |
|||||||
Financial derivatives–assets, at fair value: |
(In thousands) |
|||||||
TBA securities purchase contracts |
$ |
115 |
$ |
558 |
||||
TBA securities sale contracts |
302 |
17 |
||||||
Fixed payer interest rate swaps |
891 |
5 |
||||||
Fixed receiver interest rate swaps |
857 |
947 |
||||||
Futures |
18 |
— |
||||||
Total financial derivatives–assets, at fair value: |
2,183 |
1,527 |
||||||
Financial derivatives–liabilities, at fair value: |
||||||||
TBA securities purchase contracts |
(49) |
(1) |
||||||
TBA securities sale contracts |
(315) |
(1,158) |
||||||
Fixed payer interest rate swaps |
(4,361) |
(15,255) |
||||||
Total financial derivatives–liabilities, at fair value: |
(4,725) |
(16,414) |
||||||
Total |
$ |
(2,542) |
$ |
(14,887) |
Interest Rate Swaps
The following tables provide details about our fixed payer interest rate swaps as of December 31, 2015 and September 30, 2015:
December 31, 2015 |
||||||||||||||||
Maturity |
Notional |
Fair Value |
Weighted Pay Rate |
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 |
September 30, 2015 |
||||||||||||||||
Maturity |
Notional |
Fair Value |
Weighted Pay Rate |
Weighted |
Weighted Average |
|||||||||||
(In thousands) |
||||||||||||||||
2016 |
$ |
48,000 |
$ |
(214) |
0.80 |
% |
0.31 |
% |
1.02 |
|||||||
2017 |
74,750 |
(815) |
1.21 |
0.32 |
1.84 |
|||||||||||
2018 |
71,529 |
(620) |
1.11 |
0.30 |
2.54 |
|||||||||||
2020 |
134,620 |
(2,402) |
1.65 |
0.31 |
4.64 |
|||||||||||
2022 |
27,700 |
(828) |
2.04 |
0.33 |
6.57 |
|||||||||||
2023 |
131,164 |
(4,222) |
2.13 |
0.32 |
7.64 |
|||||||||||
2024 |
12,900 |
(977) |
2.73 |
0.31 |
8.70 |
|||||||||||
2025 |
83,740 |
(2,021) |
2.17 |
0.31 |
9.54 |
|||||||||||
2043 |
26,000 |
(3,151) |
3.04 |
0.32 |
27.65 |
|||||||||||
Total |
$ |
610,403 |
$ |
(15,250) |
1.74 |
% |
0.31 |
% |
6.24 |
The following tables provide details about our fixed receiver interest rate swaps as of
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 |
September 30, 2015 |
||||||||||||||||
Maturity |
Notional |
Fair Value |
Weighted |
Weighted |
Weighted Average |
|||||||||||
(In thousands) |
||||||||||||||||
2025 |
$ |
9,700 |
$ |
947 |
0.29 |
% |
3.00 |
% |
9.80 |
|||||||
Total |
$ |
9,700 |
$ |
947 |
0.29 |
% |
3.00 |
% |
9.80 |
Eurodollar Futures
The following table provides information about our Eurodollar futures as of December 31, 2015. We had no Eurodollar futures outstanding as of
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 December 31, 2015 and September 30, 2015:
December 31, 2015 |
September 30, 2015 |
|||||||||||||||||||||||||||||||
TBA Securities |
Notional |
Cost |
Market |
Net |
Notional |
Cost |
Market |
Net |
||||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||||||
Purchase contracts: |
||||||||||||||||||||||||||||||||
Assets |
$ |
60,291 |
$ |
61,638 |
$ |
61,753 |
$ |
115 |
$ |
78,601 |
$ |
80,367 |
$ |
80,925 |
$ |
558 |
||||||||||||||||
Liabilities |
23,418 |
24,208 |
24,159 |
(49) |
2,908 |
3,046 |
3,045 |
(1) |
||||||||||||||||||||||||
83,709 |
85,846 |
85,912 |
66 |
81,509 |
83,413 |
83,970 |
557 |
|||||||||||||||||||||||||
Sale contracts: |
||||||||||||||||||||||||||||||||
Assets |
(170,800) |
(181,476) |
(181,174) |
302 |
(33,420) |
(36,220) |
(36,203) |
17 |
||||||||||||||||||||||||
Liabilities |
(252,746) |
(268,973) |
(269,288) |
(315) |
(402,026) |
(429,041) |
(430,199) |
(1,158) |
||||||||||||||||||||||||
(423,546) |
(450,449) |
(450,462) |
(13) |
(435,446) |
(465,261) |
(466,402) |
(1,141) |
|||||||||||||||||||||||||
Total TBA securities, net |
$ |
(339,837) |
$ |
(364,603) |
$ |
(364,550) |
$ |
53 |
$ |
(353,937) |
$ |
(381,848) |
$ |
(382,432) |
$ |
(584) |
(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 December 31, 2015 and September 30, 2015:
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 |
Three Month Period Ended September 30, 2015 |
||||||||||||||||||||||||
Derivative Type |
Net Realized |
Net Realized |
Net Realized |
Change in Net |
Change in Net |
Change in Net |
||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||
Interest rate swaps |
$ |
(1,044) |
$ |
(19) |
$ |
(1,063) |
$ |
(1,066) |
$ |
(13,559) |
$ |
(14,625) |
||||||||||||
Swaptions |
(500) |
(500) |
17 |
17 |
||||||||||||||||||||
TBAs |
(1,689) |
(1,689) |
(813) |
(813) |
||||||||||||||||||||
Total |
$ |
(1,044) |
$ |
(2,208) |
$ |
(3,252) |
$ |
(1,066) |
$ |
(14,355) |
$ |
(15,421) |
Interest Rate Sensitivity
The following table summarizes, as of December 31, 2015, the estimated effects on the value of our portfolio, both overall and by category, of immediate downward and upward parallel shifts of 50 basis points in interest rates.
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 |
$ |
307 |
$ |
(385) |
||||
Agency RMBS - Fixed Pools and IOs |
18,194 |
(23,830) |
||||||
TBAs |
(3,488) |
5,949 |
||||||
Non-Agency RMBS |
282 |
(271) |
||||||
Interest Rate Swaps |
(14,016) |
13,383 |
||||||
U.S. Treasury Securities |
(2,184) |
2,106 |
||||||
Eurodollar Futures |
(26) |
26 |
||||||
Repurchase and Reverse Repurchase Agreements |
(624) |
634 |
||||||
Total |
$ |
(1,555) |
$ |
(2,388) |
(1) |
Based on the market environment as of December 31, 2015. 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 December 31, 2015 and September 30, 2015:
December 31, 2015 |
September 30, 2015 |
|||||||||||||||||
Weighted Average |
Weighted Average |
|||||||||||||||||
Remaining Days to Maturity |
Borrowings |
Interest Rate |
Remaining |
Borrowings |
Interest Rate |
Remaining |
||||||||||||
(In thousands) |
(In thousands) |
|||||||||||||||||
30 days or less |
$ |
666,124 |
0.52 |
% |
14 |
$ |
472,278 |
0.43 |
% |
15 |
||||||||
31-60 days |
336,350 |
0.53 |
45 |
371,885 |
0.46 |
44 |
||||||||||||
61-90 days |
89,142 |
0.70 |
74 |
169,786 |
0.47 |
74 |
||||||||||||
91-120 days |
131,103 |
0.53 |
106 |
211,956 |
0.57 |
107 |
||||||||||||
Total |
$ |
1,222,719 |
0.54 |
% |
37 |
$ |
1,225,905 |
0.47 |
% |
48 |
As of December 31, 2015, we had no outstanding borrowings other than under repo agreements. Our repo borrowings were with thirteen counterparties as of December 31, 2015. The above figures are as of the respective quarter ends; over the course of the quarters ended
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 December 31, 2015, our expense ratio, defined as management fees and operating expenses as a percentage of shareholders' equity, was 3.2% on an annualized basis.
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 Adjustments consists of Core Earnings but excludes the effect of Catch-up Premium Amortization Adjustments on interest income. Core Earnings and Core Earnings excluding Catch-up Premium Amortization Adjustments are supplemental non-GAAP financial measures. We believe that Core Earnings and Core Earnings excluding Catch-up Premium Amortization Adjustments 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 Adjustments 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 Adjustments 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 December 31, 2015 and September 30, 2015, our Core Earnings and Core Earnings excluding Catch-up Premium Amortization Adjustments on a consolidated basis to the line on our Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable GAAP measure on our Consolidated Statement of Operations to Core Earnings:
(In thousands except share amounts) |
Three Month |
Three Month |
||||||
Net Income (Loss) |
$ |
980 |
$ |
(4,817) |
||||
Less: |
||||||||
Net realized gains (losses) on securities |
817 |
596 |
||||||
Net realized gains (losses) on financial derivatives, excluding periodic payments(1) |
(4,467) |
(2,208) |
||||||
Change in net unrealized gains (losses) on securities |
(11,230) |
4,862 |
||||||
Change in net unrealized gains (losses) on financial derivatives, excluding accrued periodic payments(2) |
11,380 |
(14,355) |
||||||
Subtotal |
(3,500) |
(11,105) |
||||||
Core Earnings |
$ |
4,480 |
$ |
6,288 |
||||
Catch-up Premium Amortization Adjustments |
(1,087) |
895 |
||||||
Core Earnings excluding Catch-up Premium Amortization Adjustments |
$ |
5,567 |
$ |
5,393 |
||||
Weighted Average Shares Outstanding |
9,135,219 |
9,140,452 |
||||||
Core Earnings Per Share |
$ |
0.49 |
$ |
0.69 |
||||
Core Earnings Per Share excluding Catch-up Premium Amortization Adjustments |
$ |
0.61 |
$ |
0.59 |
(1) |
For the three month period ended December 31, 2015, represents Net realized gains (losses) on financial derivatives of $(7,595) less Net realized gains (losses) on periodic settlements of interest rate swaps of $(3,128). For the three month period ended September 30, 2015, represents Net realized gains (losses) on financial derivatives of $(3,252) less Net realized gains (losses) on periodic settlements of interest rate swaps of $(1,044). |
(2) |
For the three month period ended December 31, 2015, represents Change in net unrealized gains (losses) on financial derivatives of $12,678 less Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps of $1,298. For the three month period ended September 30, 2015, represents Change in net unrealized gains (losses) on financial derivatives of $(15,421) less Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps of $(1,066). |
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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 |
Year Ended |
|||||||||||
December 31, 2015 |
September 30, 2015 |
December 31, 2015 |
||||||||||
(In thousands except share amounts) |
||||||||||||
INTEREST INCOME (EXPENSE) |
||||||||||||
Interest income |
$ |
9,315 |
$ |
11,315 |
$ |
40,751 |
||||||
Interest expense |
(1,816) |
(1,642) |
(6,236) |
|||||||||
Total net interest income |
7,499 |
9,673 |
34,515 |
|||||||||
EXPENSES |
||||||||||||
Management fees |
545 |
557 |
2,304 |
|||||||||
Professional fees |
152 |
144 |
574 |
|||||||||
Compensation expense (1) |
87 |
168 |
621 |
|||||||||
Other operating expenses(1) |
405 |
406 |
1,646 |
|||||||||
Total expenses |
1,189 |
1,275 |
5,145 |
|||||||||
OTHER INCOME (LOSS) |
||||||||||||
Net realized gains (losses) on securities |
817 |
596 |
9,577 |
|||||||||
Net realized gains (losses) on financial derivatives |
(7,595) |
(3,252) |
(23,432) |
|||||||||
Change in net unrealized gains (losses) on securities |
(11,230) |
4,862 |
(18,904) |
|||||||||
Change in net unrealized gains (losses) on financial derivatives |
12,678 |
(15,421) |
3,419 |
|||||||||
Total other income (loss) |
(5,330) |
(13,215) |
(29,340) |
|||||||||
NET INCOME (LOSS) |
$ |
980 |
$ |
(4,817) |
$ |
30 |
||||||
NET INCOME (LOSS) PER COMMON SHARE: |
||||||||||||
Basic and Diluted |
$ |
0.11 |
$ |
(0.53) |
$ |
— |
||||||
WEIGHTED AVERAGE SHARES OUTSTANDING |
9,135,219 |
9,140,452 |
9,143,508 |
|||||||||
CASH DIVIDENDS PER SHARE: |
||||||||||||
Dividends declared |
$ |
0.45 |
$ |
0.45 |
$ |
2.00 |
(1) |
Conformed to current period presentation. |
ELLINGTON RESIDENTIAL MORTGAGE REIT CONSOLIDATED BALANCE SHEET (UNAUDITED) |
||||||||||||
As of |
||||||||||||
December 31, 2015 |
September 30, 2015 |
December 31, 2014(1) |
||||||||||
(In thousands except share amounts) |
||||||||||||
ASSETS |
||||||||||||
Cash and cash equivalents |
$ |
40,166 |
$ |
40,482 |
$ |
45,237 |
||||||
Mortgage-backed securities, at fair value |
1,242,266 |
1,280,892 |
1,393,303 |
|||||||||
Due from brokers |
33,297 |
41,068 |
18,531 |
|||||||||
Financial derivatives–assets, at fair value |
2,183 |
1,527 |
3,072 |
|||||||||
Reverse repurchase agreements |
78,632 |
76,610 |
13,987 |
|||||||||
Receivable for securities sold |
155,526 |
70,087 |
41,834 |
|||||||||
Interest receivable |
4,325 |
4,784 |
4,793 |
|||||||||
Other assets |
289 |
407 |
317 |
|||||||||
Total Assets |
$ |
1,556,684 |
$ |
1,515,857 |
$ |
1,521,074 |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
LIABILITIES |
||||||||||||
Repurchase agreements |
$ |
1,222,719 |
$ |
1,225,905 |
$ |
1,323,080 |
||||||
Payable for securities purchased |
98,949 |
45,333 |
4,227 |
|||||||||
Due to brokers |
439 |
2,654 |
583 |
|||||||||
Financial derivatives–liabilities, at fair value |
4,725 |
16,414 |
8,700 |
|||||||||
U.S. Treasury securities sold short, at fair value |
78,447 |
70,671 |
13,959 |
|||||||||
Dividend payable |
4,111 |
4,111 |
5,032 |
|||||||||
Accrued expenses |
533 |
771 |
890 |
|||||||||
Management fee payable |
545 |
557 |
551 |
|||||||||
Interest payable |
1,361 |
1,416 |
687 |
|||||||||
Total Liabilities |
1,411,829 |
1,367,832 |
1,357,709 |
|||||||||
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; (9,135,103, 9,135,021, and 9,149,274 shares issued and outstanding, respectively) |
92 |
91 |
91 |
|||||||||
Additional paid-in-capital |
181,027 |
181,066 |
181,282 |
|||||||||
Accumulated deficit |
(36,264) |
(33,132) |
(18,008) |
|||||||||
Total Shareholders' Equity |
144,855 |
148,025 |
163,365 |
|||||||||
Total Liabilities and Shareholders' Equity |
$ |
1,556,684 |
$ |
1,515,857 |
$ |
1,521,074 |
||||||
PER SHARE INFORMATION |
||||||||||||
Common shares, par value $0.01 per share |
$ |
15.86 |
$ |
16.20 |
$ |
17.86 |
(1) |
Derived from audited financial statements as of December 31, 2014. |
Investor Contact: Ania Pritchard, Investor Relations, or Lisa Mumford, Chief Financial Officer, Ellington Residential Mortgage REIT, (203) 409-3773;
Media Contact: Steve Bruce or Taylor Ingraham, ASC Advisors, for Ellington Residential Mortgage REIT, (203) 992-1230
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