Ellington Residential Mortgage REIT (NYSE:EARN) Q4 2023 Earnings Call Transcript

That — we don’t have that dynamic right now. So, the way the rolls work out, I think it favors in aggregate having more specified pools and less TBA. And I think broadly, that’s sort of how the industry has moved, the REIT industry.

Eric Hagen: Yes, that’s a good perspective. As far as running the portfolio, I mean, what do you guys feel like as a minimum level of liquidity you feel comfortable with having it at these spread levels? Like how much do you feel comfortable with ahead of the Fed cut versus like a cut actually taking place? Do you feel like that would be a catalyst to carry more leverage? Or is it potentially conditional on other factors?

Mark Tecotzky: We mentioned in the prepared remarks that if you look at work on Bloomberg or whatever else, people are predicting cuts this year. I think if and when they actually happen, I do think that will be a catalyst for some incremental buying, so I do think that will be supportive. In terms of how we manage our cash, we don’t — that is sort of sacrosanct in that we’re going to manage our cash according to market stresses and according to repo roll calendar, and we won’t change sort of the guardrails, we have around minimum levels of cash as a function of what the Fed is going to do that. We just — that’s how we run — that’s how we run EARN, that’s how we run EFC, that’s how we run private funds that there is a certain amount of cash we’re going to keep on hand.

And the way we determine that is it’s sort of — look at the portfolio and look at the leverage and look at where things can go in a shock. And then with the Agency stuff, you have to look at there’s a calendar to it. So, you get new factors when the prepayments come out. So, we got new factors [Technical Difficulty] repo lenders and margin call versus a lower balance, but you don’t actually get that cash to the 25th. So, there’s a calendar component to it. But — we have room to add leverage. We mentioned that in the prepared remarks, but it’s not because we’re going to change the way we manage the cash. But I’d say sort of the way we manage the cash is something that we’ve been doing for a long time, and I think it served us very well, certainly served us extremely well in stresses like during COVID.

But away from that, EARN has plenty of liquidity too. It’s been putting more capital in the CLOs we’ve spoken about, but it still has more room to leverage just the general pool strategy as well.

Eric Hagen: Yes. Hey, thank you guys so much.

Mark Tecotzky: Thank you, Eric.

Operator: And that was our final question for today. Thank you for participating in the Ellington Residential Mortgage REIT fourth quarter 2023 earnings conference call. You may disconnect your line at this time and have a wonderful day.