The following is a summary of the Ellington Residential Mortgage REIT (EARN) Q4 2023 Earnings Call Transcript:

Financial Performance:

• Ellington Residential reported Q4 net income of $0.75 per share and a non-annualized economic return of 7.7%.

• The adjusted distributable earnings increased to $0.27 per share, which sufficiently covered the dividend.

• The company observed a reduction in the debt-to-equity ratio adjusted for unsettled trades from 7.3:1 to 5.3:1, due to market fluctuations.

• The net interest margin experienced a growth from 1.34% to 2.19% quarter-over-quarter, leading to an increase in Adjusted Earnings per Diluted share (ADE).

• The agency NIM and credit NIM also witnessed notable increases.

• The company's cash and unencumbered assets closed at an estimated $61 million for Q4.

Business Progress:

• The company has significantly increased its investments in corporate CLOs, expanding its CLO portfolio by $13.6 million during Q4. This shift has led to the continued growth of the company's net interest margin.

• The CLO portfolio has seen an increase of an additional 70% since year-end, leading to an estimation of $30 million.

• The company envisages that CLO investments will be a driving force for earnings and adjusted distributable earnings in the future.

• The company managed to maintain its Agency MBS portfolio in volatile market conditions and capitalized on rate drops and spread tightening.

• The strategy of the company for the future involves strengthening its CLO portfolio due to declining credit market jest and continued pull to par in seasoned CLO mezzanine tranches.

• The company sees the potential for adding more leverage and has plans to attempt to further increase the Adjusted Earnings per Diluted share (ADE) with the help of CLO investments.

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