The year has been marked by ups and downs for mortgage REITs that provide real estate financing through the purchase of mortgages and mortgage-backed securities (MBS). Volatile markets have been triggered by global growth worries and seesawing oil prices.

During the first half of the second quarter, chances of a rate hike kept the mREIT industry on tenterhooks. However, with the dismal jobs report in early June, followed by disappointing GDP data and weaker-than-expected manufacturing data, chances of a hike diminished substantially.

A low interest rate environment is expected to benefit the performance of mortgage REITs. These REITs finance their investments with equity and debt capital and generate profits through the spread between interest income on mortgage assets and funding costs. Lower interest rates would certainly aid their borrowing cost, pushing earnings and dividends higher. Meanwhile, these companies are buying back shares and diversifying their businesses to beat market woes.

Below we have highlighted the earnings of some of the major players in the mortgage REIT sector.

Earnings in Detail

American Capital Agency Corp. (AGNC - Analyst Report) saw second-quarter 2016 net spread and dollar roll income of 56 cents per share (excluding the estimated “catch-up” premium amortization benefit),in which was ahead of the Zacks Consensus Estimate of 51 cents. The reported figure also came in higher than 52 cents in the prior-year quarter. However, the company’s net interest income (“NII”) of $217 million missed the Zacks Consensus Estimate of $232 million but was higher than $196 million in the prior-year quarter.

As of June 30, 2016, the company’s net book value per share was $22.22, up from $22.09 as of March 31, 2016.

Another key player, Annaly Capital Management, Inc. (NLY - Analyst Report) saw second-quarter 2016 normalized core earnings per share of 29 cents, down from 41 cents earned a year ago butin line with the Zacks Consensus Estimate. NNI totaled $294 million, down 42.5% year over year but a head of the Zacks Consensus Estimate of $211 million.

Annaly’s book value per share came in at $11.50 as of June 30, 2016, compared with $11.61 as of March 31, 2016. At the end of the quarter, the company’s capital ratio (representing the ratio of stockholders’ equity to total assets) was 13.2%, down from 14.6% in the prior-year quarter.

ETFs to Watch

Despite mixed second-quarter results, these mREITs have managed to hold on to modest gains, which are expected to translate into decent performance of REIT ETFs with significant exposure to them. Below, we have highlighted two of these ETFs that are likely to remain in focus in the upcoming days.

iShares Mortgage Real Estate Capped ETF (REM - ETF report)

REM tracks the FTSE NAREIT All Mortgage Capped Index, measuring the performance of the residential and commercial mREIT market in the U.S. The fund consists of 38 securities in its basket while it charges investors 48 bps a year. American Capital and Annaly Capital are the top two holdings in the fund with a combined allocation of almost 30%. The product has amassed around $1.2 billion in its asset base and trades in an average volume of 1.5 million shares per day. It has a solid yield of 10.24%. REM gained 1.9% in the last 10 days and has a Zacks ETF Rank #2 or ‘Buy’ rating with a Medium risk outlook.

VanEck Vectors Mortgage REIT Income ETF (MORT - ETF report)

The ETF tracks the MVIS Global Mortgage REITs Index. The fund consists of 25 stocks and charges 41 bps in investor fees per year. Like REM, American Capital and Annaly Capital also occupy the top two spots in MORT, having a combined exposure of more than 25%. The fund is relatively less popular with an asset base of $106.3 million and an average volume of roughly 23,000 shares per day. It has a dividend yield of 8.25%, comparable to that of REM. MORT also gained 1.9% in the last 10 days. The fund has a Zacks ETF Rank #3 or ‘Hold’ rating with a Medium risk outlook.