Ellington Residential Mortgage REIT Reports First Quarter 2015 Results
Summary of Financial Results
- Net income for the quarter was
$3.7 million , or$0.40 per share, as compared to a net loss in the fourth quarter of$1.2 million or$0.13 per share. - Core Earnings1 for the quarter was
$6.0 million , or$0.66 per share, as compared to$7.0 million , or$0.76 per share, in the fourth quarter of 2014. - Book value decreased 0.8% to
$17.71 per share as ofMarch 31, 2015 from$17.86 per share as ofDecember 31, 2014 , after giving effect to a first quarter dividend of$0.55 per share. Economic return on book value for the quarter was 2.2%. - Net interest margin was 2.21%, as compared to 2.49% for the fourth quarter of 2014.
- Weighted average prepayment speed for the Agency RMBS portfolio was 6.3% CPR for the quarter, as compared to 4.6% in the fourth quarter.
- Dividend yield of 13.3% based on
May 4, 2015 closing stock price of$16.51 . - Debt-to-equity ratio was 7.5:1 as of
March 31, 2015 , as compared to 8.1:1 as ofDecember 31, 2014 .
First Quarter 2015 Results
"We are pleased to have generated net income of
"Our Agency portfolio performed well during the quarter and continues to be predominantly comprised of specified pools that we believe will be significantly less sensitive to prepayment increases than their generic counterparts. While refinancing activity was tame last year relative to the absolute level of mortgage rates, the surge in refinancing activity in January and early February served as a stark reminder that prepayment risk should not be underestimated. This development enhanced the value of our specified pools, as evidenced by the significant increase in our average pay-ups. The recent volatility has created numerous trading opportunities for us, and as a result, we actively traded our portfolio during the first quarter, generating net realized gains of
As of March 31, 2015, our mortgage-backed securities portfolio consisted of
The first three months of 2015 were marked by significant interest rate volatility in the face of global economic weakness (especially in
The average rate for a fixed-rate 30-year conventional mortgage also declined over the course of the quarter, dropping 0.17% to 3.70% as of
The combination of increased prepayment rates and reduced Federal Reserve support led to a drop in TBA roll prices and the overall underperformance of TBAs, especially higher coupon TBAs such as 30-year 4%'s and 4.5%'s, relative to interest rate swaps. Meanwhile, many specified pool sectors performed well in the quarter, as their favorable prepayment characteristics became more valuable in a higher prepayment environment, and as they became less expensive to hedge with TBAs given lower TBA roll prices. However, increases in prepayments were not consistent across coupon and issue year vintages. Many of the more recent vintage coupons showed very sharp increases in prepayment speeds while some more seasoned vintages were less reactive. As a result, the relative price movements of specified pools were not uniform and pay-ups for certain segments of the specified pool market appreciated greatly, while others were largely unchanged. Pay-ups are price premiums for specified pools relative to their TBA counterparts. However, notwithstanding the variation in pay-up appreciation across specified pool sectors, the weighted average pay-up for our specified pools increased significantly to 1.12% as of
As interest rates declined sharply during the first quarter, our long specified pool positions generated significant gains. Market volatility generally presents us with trading opportunities, particularly given our active style of portfolio management. As a result, our portfolio turnover for the quarter was 25% (as measured by sales and excluding paydowns), and we captured net realized gains of
Over the course of the first quarter, our interest rate hedges, which were largely concentrated in interest rate swaps and short TBA positions, generated losses that more than offset net realized and unrealized gains from our long portfolio. In the case of the hedging losses generated by our short TBA positions as opposed to our interest rate swaps, these losses were partially mitigated by the underperformance of TBA prices relative to specified pools (i.e., the outperformance of specified pool pay-ups), as well as by the drop in TBA roll prices (which kept down the cost of maintaining our short TBA positions). We believe that there remains a heightened risk of substantial interest rate and prepayment volatility in the near term, thus reinforcing the importance of our ability to hedge our risks using a variety of tools, including TBAs.
During the first quarter, we continued to focus our Agency RMBS purchasing activity primarily on specified pools, especially those with higher coupons. We also continued to be active in the reverse mortgage pool sector and purchased new issue reverse mortgage pools, which we continue to believe offer attractive relative value. Our Agency RMBS portfolio also includes a small allocation to Agency IOs. Despite the increase in prepayment activity in the first quarter, the market response in this sector was relatively subdued. Option-adjusted spreads on Agency IOs widened somewhat over the quarter, but not to a significant degree. During the quarter, we reduced our holdings of Agency IOs. However, with interest rates well below year end levels and with prepayment activity potentially poised to increase materially, we remain prepared to take advantage of possible dislocations in the Agency IO market.
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) 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.
During the first quarter, non-Agency RMBS continued to exhibit price stability relative to the broader financial markets. The non-Agency RMBS market continues to be supported by favorable technical conditions, most notably the absence of a new issue market, as well as the relative dearth of higher-yielding U.S. fixed income assets generally. On the fundamental side, modestly increasing home prices and overall improvements in mortgage delinquency and foreclosure rates continue to support non-Agency RMBS valuations. Nevertheless, we believe that many non-Agency RMBS assets remain mispriced, thus highlighting the importance of careful loan-level analysis performed on a security-by-security basis. As of
For the quarter ended
For the quarter ended March 31, 2015, the annualized weighted average yield of our portfolio of Agency and non-Agency RMBS was 3.14%, while our average cost of funds including interest rate swaps was 0.93%, resulting in a net interest margin for the quarter of 2.21%. In comparison, for the quarter ended December 31, 2014, the annualized weighted average yield of our Agency and non-Agency RMBS was 3.43%, while the average cost of funds including interest rate swaps was 0.94%, resulting in a net interest margin of 2.49%. The decrease in our portfolio yield was primarily a function of the decline in yields of Agency RMBS, affecting securities held and securities purchased. Our cost of repo increased 0.02% to 0.36% for the first quarter, and the weighted average remaining maturity of our repo borrowings increased to 68 days as of
After giving effect to a first quarter dividend of
For the quarter ended March 31, 2015, Core Earnings was
Mortgage-backed securities
The following table summarizes our portfolio of mortgage-backed securities as of March 31, 2015 and December 31, 2014:
March 31, 2015 |
December 31, 2014 |
||||||||||||||||||
(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 |
$ 139,211 |
$ 148,363 |
$106.57 |
$ 146,231 |
$105.04 |
$ 130,720 |
$ 138,028 |
$ 105.59 |
$ 137,024 |
$ 104.82 |
|||||||||
20-year fixed rate |
9,505 |
10,311 |
108.48 |
10,064 |
105.88 |
9,764 |
10,568 |
108.23 |
10,341 |
105.91 |
|||||||||
30-year fixed rate |
1,018,731 |
1,105,445 |
108.51 |
1,081,925 |
106.20 |
1,042,550 |
1,122,254 |
107.65 |
1,103,639 |
105.86 |
|||||||||
ARMs |
39,458 |
42,057 |
106.59 |
42,056 |
106.58 |
41,710 |
44,283 |
106.17 |
44,523 |
106.74 |
|||||||||
Reverse mortgages |
39,630 |
44,131 |
111.36 |
43,455 |
109.65 |
31,412 |
34,425 |
109.59 |
34,153 |
108.73 |
|||||||||
Total Agency RMBS |
1,246,535 |
1,350,307 |
108.32 |
1,323,731 |
106.19 |
1,256,156 |
1,349,558 |
107.44 |
1,329,680 |
105.85 |
|||||||||
Non-Agency RMBS |
46,310 |
31,710 |
68.47 |
29,644 |
64.01 |
50,668 |
32,501 |
64.15 |
30,291 |
59.78 |
|||||||||
Total RMBS(2) |
1,292,845 |
1,382,017 |
106.90 |
1,353,375 |
104.68 |
1,306,824 |
1,382,059 |
105.76 |
1,359,971 |
104.07 |
|||||||||
Agency IOs |
n/a |
6,443 |
n/a |
7,287 |
n/a |
n/a |
11,244 |
n/a |
10,780 |
n/a |
|||||||||
Total mortgage- |
1,388,460 |
1,360,662 |
1,393,303 |
1,370,751 |
|||||||||||||||
U.S. Treasury |
(61,950) |
(62,848) |
101.45 |
(62,747) |
101.29 |
(13,860) |
(13,959) |
100.71 |
(13,917) |
100.41 |
|||||||||
Reverse repurchase |
62,973 |
62,973 |
100.00 |
62,973 |
100.00 |
13,987 |
13,987 |
100.00 |
13,987 |
100.00 |
|||||||||
Total |
$ 1,388,585 |
$ 1,360,888 |
$ 1,393,331 |
$ 1,370,821 |
|||||||||||||||
(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, 2015 and December 31, 2014:
March 31, 2015 |
December 31, 2014 |
|||||||
Financial derivatives–assets, at fair value: |
(In thousands) |
|||||||
TBA securities purchase contracts |
$ |
936 |
$ |
387 |
||||
TBA securities sale contracts |
53 |
89 |
||||||
Fixed payer interest rate swaps |
175 |
2,518 |
||||||
Swaptions |
315 |
78 |
||||||
Total financial derivatives–assets, at fair value: |
1,479 |
3,072 |
||||||
Financial derivatives–liabilities, at fair value: |
||||||||
TBA securities purchase contracts |
— |
(5) |
||||||
TBA securities sale contracts |
(2,284) |
(1,669) |
||||||
Fixed payer interest rate swaps |
(11,917) |
(7,026) |
||||||
Total financial derivatives–liabilities, at fair value: |
(14,201) |
(8,700) |
||||||
Total |
$ |
(12,722) |
$ |
(5,628) |
Interest Rate Swaps
The following tables provide details about our interest rate swaps as of March 31, 2015 and December 31, 2014:
March 31, 2015 |
||||||||||||||||
Maturity |
Notional |
Fair Value |
Weighted Pay Rate |
Weighted |
Weighted Average |
|||||||||||
(In thousands) |
||||||||||||||||
2016 |
$ |
48,000 |
$ |
(189) |
0.80 |
% |
0.26 |
% |
1.52 |
|||||||
2017 |
74,750 |
(647) |
1.21 |
0.26 |
2.35 |
|||||||||||
2018 |
25,000 |
(48) |
1.11 |
0.26 |
2.97 |
|||||||||||
2020 |
63,000 |
(427) |
1.62 |
0.26 |
5.01 |
|||||||||||
2022 |
9,000 |
(169) |
2.04 |
0.26 |
6.90 |
|||||||||||
2023 |
139,350 |
(3,907) |
2.17 |
0.26 |
8.15 |
|||||||||||
2024 |
12,900 |
(926) |
2.73 |
0.26 |
9.20 |
|||||||||||
2025 |
30,080 |
(97) |
2.03 |
0.26 |
9.85 |
|||||||||||
2043 |
33,610 |
(5,332) |
3.08 |
0.26 |
28.16 |
|||||||||||
Total |
$ |
435,690 |
$ |
(11,742) |
1.79 |
% |
0.26 |
% |
7.34 |
December 31, 2014 |
||||||||||||||||
Maturity |
Notional |
Fair Value |
Weighted Pay Rate |
Weighted |
Weighted Average |
|||||||||||
(In thousands) |
||||||||||||||||
2016 |
$ |
48,000 |
$ |
(91) |
0.80 |
% |
0.23 |
% |
1.77 |
|||||||
2017 |
74,750 |
(388) |
1.21 |
0.24 |
2.59 |
|||||||||||
2018 |
10,000 |
167 |
0.84 |
0.23 |
3.33 |
|||||||||||
2020 |
23,500 |
471 |
1.42 |
0.23 |
5.38 |
|||||||||||
2023 |
209,350 |
140 |
2.13 |
0.23 |
8.40 |
|||||||||||
2024 |
12,900 |
(605) |
2.73 |
0.23 |
9.45 |
|||||||||||
2043 |
46,320 |
(4,202) |
3.12 |
0.23 |
28.42 |
|||||||||||
Total |
$ |
424,820 |
$ |
(4,508) |
1.87 |
% |
0.23 |
% |
8.56 |
Interest Rate Swaptions
The following table provides information about our swaptions as of March 31, 2015 and December 31, 2014:
March 31, 2015 |
||||||||||||||
Option |
Underlying Swap |
|||||||||||||
Type |
Fair Value |
Months to |
Notional Amount |
Term (Years) |
Fixed Rate |
|||||||||
($ in thousands) |
||||||||||||||
Straddle |
$ |
315 |
3.5 |
$ |
9,700 |
10.0 |
3.00% |
|||||||
December 31, 2014 |
||||||||||||||
Option |
Underlying Swap |
|||||||||||||
Type |
Fair Value |
Months to |
Notional Amount |
Term (Years) |
Fixed Rate |
|||||||||
($ in thousands) |
||||||||||||||
Straddle |
$ |
78 |
6.5 |
$ |
9,700 |
10.0 |
3.00% |
|||||||
TBAs
The following table provides information about our TBAs as of March 31, 2015 and December 31, 2014:
March 31, 2015 |
December 31, 2014 |
|||||||||||||||||||||||||||||||
TBA Securities |
Notional |
Cost |
Market |
Net |
Notional |
Cost |
Market |
Net |
||||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||||||
Purchase contracts: |
||||||||||||||||||||||||||||||||
Assets |
$ |
92,898 |
$ |
94,607 |
$ |
95,543 |
$ |
936 |
$ |
53,319 |
$ |
54,757 |
$ |
55,144 |
$ |
387 |
||||||||||||||||
Liabilities |
— |
— |
— |
— |
15,000 |
15,603 |
15,598 |
(5) |
||||||||||||||||||||||||
92,898 |
94,607 |
95,543 |
936 |
68,319 |
70,360 |
70,742 |
382 |
|||||||||||||||||||||||||
Sale contracts: |
||||||||||||||||||||||||||||||||
Assets |
(72,260) |
(76,568) |
(76,515) |
53 |
(79,090) |
(85,730) |
(85,641) |
89 |
||||||||||||||||||||||||
Liabilities |
(529,475) |
(565,990) |
(568,274) |
(2,284) |
(525,986) |
(559,219) |
(560,888) |
(1,669) |
||||||||||||||||||||||||
(601,735) |
(642,558) |
(644,789) |
(2,231) |
(605,076) |
(644,949) |
(646,529) |
(1,580) |
|||||||||||||||||||||||||
Total TBA securities, net |
$ |
(508,837) |
$ |
(547,951) |
$ |
(549,246) |
$ |
(1,295) |
$ |
(536,757) |
$ |
(574,589) |
$ |
(575,787) |
$ |
(1,198) |
||||||||||||||||
(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 March 31, 2015 and December 31, 2014:
Three Month Period Ended March 31, 2015 |
||||||||||||||||||||||||
Derivative Type |
Net Realized |
Net Realized |
Net Realized |
Change in Net |
Change in Net |
Change in Net |
||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||
Fixed payer interest rate swaps |
$ |
(707) |
$ |
(3,441) |
$ |
(4,148) |
$ |
(851) |
$ |
(6,383) |
$ |
(7,234) |
||||||||||||
Swaptions |
— |
— |
237 |
237 |
||||||||||||||||||||
TBAs |
(4,595) |
(4,595) |
(97) |
(97) |
||||||||||||||||||||
Total |
$ |
(707) |
$ |
(8,036) |
$ |
(8,743) |
$ |
(851) |
$ |
(6,243) |
$ |
(7,094) |
Three Month Period Ended December 31, 2014 |
||||||||||||||||||||||||
Derivative Type |
Net Realized |
Net Realized |
Net Realized |
Change in Net |
Change in Net |
Change in Net |
||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||
Fixed payer interest rate swaps |
$ |
(3,643) |
$ |
(2,190) |
$ |
(5,833) |
$ |
1,725 |
$ |
(11,942) |
$ |
(10,217) |
||||||||||||
Swaptions |
— |
— |
104 |
104 |
||||||||||||||||||||
TBAs |
(7,090) |
(7,090) |
(1,104) |
(1,104) |
||||||||||||||||||||
Total |
$ |
(3,643) |
$ |
(9,280) |
$ |
(12,923) |
$ |
1,725 |
$ |
(12,942) |
$ |
(11,217) |
Interest Rate Sensitivity
The following table summarizes, as of March 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 |
$ |
276 |
$ |
(397) |
||||
Agency RMBS - Fixed Pools and IOs |
20,123 |
(26,714) |
||||||
TBAs |
(5,342) |
8,807 |
||||||
Non-Agency RMBS |
386 |
(370) |
||||||
Interest Rate Swaps |
(14,770) |
13,923 |
||||||
Swaptions |
474 |
(403) |
||||||
U.S. Treasury Securities |
(2,431) |
2,320 |
||||||
Repurchase and Reverse Repurchase Agreements |
(911) |
1,151 |
||||||
Total |
$ |
(2,195) |
$ |
(1,683) |
||||
(1) Based on the market environment as of March 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 March 31, 2015 and December 31, 2014:
March 31, 2015 |
December 31, 2014 |
||||||||||||||||||
Weighted Average |
Weighted Average |
||||||||||||||||||
Remaining Days to |
Borrowings |
Interest Rate |
Remaining |
Borrowings Outstanding |
Interest Rate |
Remaining Days to Maturity |
|||||||||||||
(In thousands) |
(In thousands) |
||||||||||||||||||
30 days or less |
$ |
412,648 |
0.34 |
% |
15 |
$ |
437,633 |
0.33 |
% |
15 |
|||||||||
31-60 days |
274,524 |
0.34 |
45 |
417,009 |
0.34 |
44 |
|||||||||||||
61-90 days |
269,022 |
0.36 |
74 |
333,580 |
0.36 |
72 |
|||||||||||||
91-120 days |
50,066 |
0.38 |
105 |
— |
— |
— |
|||||||||||||
151-180 days |
139,513 |
0.43 |
168 |
85,917 |
0.41 |
165 |
|||||||||||||
301-330 days |
65,337 |
0.47 |
227 |
48,941 |
0.47 |
317 |
|||||||||||||
Total |
$ |
1,211,110 |
0.36 |
% |
68 |
$ |
1,323,080 |
0.35 |
% |
60 |
As of March 31, 2015, we had no outstanding borrowings other than under repo agreements. Our repo borrowings were with nine counterparties as of March 31, 2015 and were entirely related to Agency RMBS. 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, effective
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 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 change in net 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 March 31, 2015 and December 31, 2014, our Core Earnings 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 March 31, 2015 |
Three Month |
||||||
Net Income (Loss) |
$ |
3,677 |
$ |
(1,176) |
||||
Less: |
||||||||
Net realized gains on mortgage-backed securities |
6,722 |
3,070 |
||||||
Net realized losses on financial derivatives, excluding periodic payments(1) |
(8,036) |
(9,280) |
||||||
Change in net unrealized gains (losses) on mortgage-backed securities |
5,186 |
11,000 |
||||||
Change in net unrealized gains (losses) on financial derivatives, excluding accrued periodic payments(2) |
(6,243) |
(12,942) |
||||||
Subtotal |
(2,371) |
(8,152) |
||||||
Core Earnings |
$ |
6,048 |
$ |
6,976 |
||||
Weighted Average Shares Outstanding |
9,149,274 |
9,149,274 |
||||||
Core Earnings Per Share |
$ |
0.66 |
$ |
0.76 |
||||
(1) For the three month period ended March 31, 2015, represents Net realized gains (losses) on financial derivatives of $(8,743) less Net realized gains (losses) on periodic settlements of interest rate swaps of $(707). For the three month period ended December 31, 2014, represents Net realized gains (losses) on financial derivatives of $(12,923) less Net realized gains (losses) on periodic settlements of interest rate swaps of $(3,643). |
||||||||
(2) For the three month period ended March 31, 2015, represents Change in net unrealized gains (losses) on financial derivatives of $(7,094) less Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps of $(851). For the three month period ended December 31, 2014, represents Change in net unrealized gains (losses) on financial derivatives of $(11,217) less Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps of $1,725. |
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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 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
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.
ELLINGTON RESIDENTIAL MORTGAGE REIT |
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CONSOLIDATED STATEMENT OF OPERATIONS |
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(UNAUDITED) |
||||||||
Three Month Period Ended |
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March 31, 2015 |
December 31, 2014 |
|||||||
(In thousands except share amounts) |
||||||||
INTEREST INCOME (EXPENSE) |
||||||||
Interest income |
$ |
10,280 |
$ |
11,806 |
||||
Interest expense |
(1,258) |
(1,165) |
||||||
Total net interest income |
9,022 |
10,641 |
||||||
EXPENSES |
||||||||
Management fees |
610 |
552 |
||||||
Professional fees |
143 |
587 |
||||||
Other operating expenses |
663 |
608 |
||||||
Total expenses |
1,416 |
1,747 |
||||||
OTHER INCOME (LOSS) |
||||||||
Net realized gains on mortgage-backed securities |
6,722 |
3,070 |
||||||
Net realized losses on financial derivatives |
(8,743) |
(12,923) |
||||||
Change in net unrealized gains (losses) on mortgage-backed securities |
5,186 |
11,000 |
||||||
Change in net unrealized gains (losses) on financial derivatives |
(7,094) |
(11,217) |
||||||
Total other income (loss) |
(3,929) |
(10,070) |
||||||
NET INCOME (LOSS) |
$ |
3,677 |
$ |
(1,176) |
||||
NET INCOME (LOSS) PER COMMON SHARE: |
||||||||
Basic and Diluted |
$ |
0.40 |
$ |
(0.13) |
||||
WEIGHTED AVERAGE SHARES OUTSTANDING |
9,149,274 |
9,149,274 |
||||||
CASH DIVIDENDS PER SHARE: |
||||||||
Dividends declared |
$ |
0.55 |
$ |
0.55 |
ELLINGTON RESIDENTIAL MORTGAGE REIT |
||||||||
CONSOLIDATED BALANCE SHEET |
||||||||
(UNAUDITED) |
||||||||
As of |
||||||||
March 31, 2015 |
December 31, 2014(1) |
|||||||
(In thousands except share amounts) |
||||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ |
53,340 |
$ |
45,237 |
||||
Mortgage-backed securities, at fair value |
1,388,460 |
1,393,303 |
||||||
Due from brokers |
28,740 |
18,531 |
||||||
Financial derivatives–assets, at fair value |
1,479 |
3,072 |
||||||
Reverse repurchase agreements |
62,973 |
13,987 |
||||||
Receivable for securities sold |
36,649 |
41,834 |
||||||
Interest receivable |
4,451 |
4,793 |
||||||
Other assets |
610 |
317 |
||||||
Total Assets |
$ |
1,576,702 |
$ |
1,521,074 |
||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
LIABILITIES |
||||||||
Repurchase agreements |
$ |
1,211,110 |
$ |
1,323,080 |
||||
Payable for securities purchased |
117,493 |
4,227 |
||||||
Due to brokers |
1,609 |
583 |
||||||
Financial derivatives–liabilities, at fair value |
14,201 |
8,700 |
||||||
U.S. Treasury securities sold short, at fair value |
62,848 |
13,959 |
||||||
Dividend payable |
5,032 |
5,032 |
||||||
Accrued expenses |
908 |
890 |
||||||
Management fee payable |
610 |
551 |
||||||
Interest payable |
851 |
687 |
||||||
Total Liabilities |
1,414,662 |
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; (9,149,274 and 9,149,274 shares issued and outstanding, respectively) |
91 |
91 |
||||||
Additional paid-in-capital |
181,312 |
181,282 |
||||||
Accumulated deficit |
(19,363) |
(18,008) |
||||||
Total Shareholders' Equity |
162,040 |
163,365 |
||||||
Total Liabilities and Shareholders' Equity |
$ |
1,576,702 |
$ |
1,521,074 |
||||
PER SHARE INFORMATION |
||||||||
Common shares, par value $0.01 per share |
$ |
17.71 |
$ |
17.86 |
||||
(1) Derived from audited financial statements as of December 31, 2014. |
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