EFC Ellington Financial Inc

Ellington Financial Inc. (NYSE: EFC) ("we") today reported financial results for the quarter ended December 31, 2024.

Highlights

• Net income attributable to common stockholders of $22.4 million, or $0.25 per common share.1
  • $25.3 million, or $0.28 per common share, from the investment portfolio.
    • $29.3 million, or $0.32 per common share, from the credit strategy.
    • $(4.0) million, or $(0.04) per common share, from the Agency strategy.
  • $26.8 million, or $0.30 per common share, from Longbridge.
• Adjusted Distributable Earnings2 of $40.6 million, or $0.45 per common share.
• Book value per common share as of December 31, 2024 of $13.52, including the effects of dividends of $0.39 per common share for the quarter.
• Dividend yield of 11.7% based on the February 26, 2025 closing stock price of $13.33 per share, and monthly dividend of $0.13 per common share declared on February 10, 2025.
• Recourse debt-to-equity ratio3 of 1.8:1 as of December 31, 2024. Including all recourse and non-recourse borrowings, which primarily consist of securitization-related liabilities, debt-to-equity ratio of 8.8:14.
• Cash and cash equivalents of $192.4 million as of December 31, 2024, in addition to other unencumbered assets of $619.8 million.
• Redeemed Series E Preferred Stock on December 13, 2024.

Fourth Quarter 2024 Results

"Our results for the fourth quarter highlight excellent performance from our loan originator affiliates, including our reverse mortgage loan platform Longbridge Financial, as well as securitization-related gains," said Laurence Penn, Chief Executive Officer and President. "Supported by another quarter of strong performance at Longbridge, our adjusted distributable earnings increased by another $0.05 per share sequentially to $0.45, again covering our $0.39 of dividends for the quarter.

"On the asset side of the balance sheet, we grew our closed-end second/HELOC mortgage, proprietary reverse mortgage, and commercial mortgage loan portfolios by a combined 39% during the quarter, excluding the impact of securitizations. This growth continues to reflect the expansion of our proprietary loan origination businesses, where we closed on yet another mortgage originator investment in the fourth quarter, which as usual included an agreement to provide us with forward flow.

"Meanwhile, we strengthened the liability side of our balance sheet in three key ways. First, we capitalized on favorable market conditions by completing four securitization transactions across three different product lines. With each of these securitizations, we generated gains, we secured non-market-to-market term financing on the underlying assets, and we retained the highest-yielding tranches for our investment portfolio. Second, we capitalized on increased competition in the loan financing markets, both negotiating improved terms on several existing loan financing facilities and adding facilities with two new counterparties. And third, we refinanced some of our outstanding higher-cost debt and preferred stock with lower-cost debt, which were immediately accretive to earnings.

"We are committed to building on these achievements throughout 2025, including maintaining the securitization momentum we have built across multiple business lines, and further expanding our asset sourcing channels and sources of financing to drive additional portfolio and earnings growth."

Financial Results

Investment Portfolio Segment

The investment portfolio segment generated net income attributable to common stockholders of $25.3 million in the fourth quarter, consisting of $29.3 million from the credit strategy and $(4.0) million from the Agency strategy.

Credit Performance

The total adjusted long credit portfolio5 increased by 5% to $3.42 billion as of December 31, 2024, compared to $3.26 billion as of September 30, 2024. This growth was driven primarily by net purchases of closed-end second lien loans, HELOCs, commercial mortgage bridge loans and non-Agency RMBS.

A portion of the increase was offset by smaller residential transition loan and non-QM loan portfolios, driven by paydowns, and the impact of three securitizations (two of non-QM loans and one of closed-end second lien loans) that we completed during the quarter.

Key Highlights6:

• Overall positive performance driven by higher net interest income and net gains from non-Agency RMBS, HELOCs, Forward MSR-related investments, and ABS.
• Net gains on our equity investments in loan originators, driven by strong origination volumes and gain-on-sale margins.
• Net losses on non-QM loans and retained tranches, commercial mortgage loans, and consumer loans, in each case driven by a decline in credit performance, and negative operating income on REO workouts.

During the quarter, the net interest margin7 on our credit portfolio increased to 3.02% from 2.64%, driven by a lower overall cost of funds. We continued to benefit from positive carry on our interest rate swap hedges, where we overall receive a higher floating rate and pay a lower fixed rate.

Agency Performance

The long Agency RMBS portfolio decreased by 25% quarter over quarter to $296.7 million as of December 31, 2024, driven primarily by net sales.

Key Highlights6:

• Rising interest rates and intra-quarter volatility drove underperformance of Agency RMBS relative to hedging instruments.
• Net losses on Agency RMBS exceeded hedging-related gains, delivering negative results in the Agency strategy.
• Pay-ups on specified pools decreased slightly to 0.67% as of December 31, 2024, from 0.68% as of September 30, 2024.

The net interest margin7 on our Agency portfolio (excluding the Catch-up Amortization Adjustment) increased to 2.22% as of December 31, 2024 from 2.03% as of September 30, 2024.

Longbridge Segment

The Longbridge segment reported a net gain to common stockholders of $26.8 million for the fourth quarter. The Longbridge portfolio (excluding non-retained tranches of consolidated securitization trusts) decreased by 15% sequentially to $420.2 million as of December 31, 2024, as the impact of a proprietary reverse mortgage securitization completed during the quarter exceeded the impact of new originations in that sector.

Key Highlights6:

• Positive contribution from originations, driven by higher volumes and improved origination margins in HECM, and net gains related to a securitization in proprietary reverse.
• Net gain on the HMBS MSR Equivalent, driven by tighter HMBS yield spreads.
• Net gains on interest rate hedges.

Corporate/Other Summary

Results for the quarter also reflect a net unrealized loss on our unsecured borrowings, driven by tighter credit spreads and shorter duration, as well as net losses on the fixed receiver interest rate swaps used for hedging fixed payments on long-term debt and preferred equity, due to rising interest rates.

________________________ 1 Includes $(29.8) million of preferred dividends accrued and certain corporate/other income and expense items not attributed to either the investment portfolio or Longbridge segments. 2 Adjusted Distributable Earnings is a non-GAAP financial measure. See "Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings" below for an explanation regarding the calculation of Adjusted Distributable Earnings. 3 Excludes U.S. Treasury securities and repo borrowings at certain unconsolidated entities that are recourse to us. Including such borrowings, our debt-to-equity ratio, adjusted for unsettled purchases and sales, based on total recourse borrowings was 2.0:1 as of December 31, 2024. 4 Excludes U.S. Treasury securities and repo borrowings at certain unconsolidated entities. 5 Excludes non-retained tranches of consolidated securitization trusts. The adjusted long credit portfolio also includes the proceeds from financings related to the MSRs underlying our Forward MSR-related investments. Forward MSR-related investments, at fair value are presented on our Consolidated Balance Sheet net of such financings; as of December 31, 2024 and September 30, 2024, such borrowings were $93.5 million and $13.5 million, respectively. 6 Sector level results include associated financing costs and hedging gains/losses where applicable. 7 Net interest margin represents the weighted average asset yield less the weighted average secured financing cost of funds on such assets. It also includes the effect of actual and accrued periodic payments on interest rate swaps used to hedge the assets.

Credit Portfolio(1)

The following table summarizes our credit portfolio holdings as of December 31, 2024 and September 30, 2024:

 

 

December 31, 2024

 

September 30, 2024(2)

($ in thousands)

 

Fair Value

 

%

 

Fair Value

 

%

Dollar denominated:

 

 

 

 

 

 

 

 

CLOs

 

$

61,085

 

1.3

%

 

$

67,963

 

1.4

%

CMBS

 

 

39,206

 

0.8

%

 

 

38,937

 

0.8

%

Commercial mortgage loans(3)(4)

 

 

470,142

 

10.0

%

 

 

392,073

 

8.3

%

Consumer loans and ABS backed by consumer loans(5)

 

 

87,249

 

1.9

%

 

 

88,805

 

1.9

%

Corporate debt and equity and corporate loans

 

 

27,598

 

0.6

%

 

 

31,650

 

0.7

%

Debt and equity investments in loan origination-related entities(6)

 

 

61,619

 

1.3

%

 

 

42,376

 

0.9

%

Forward MSR-related investments

 

 

77,848

 

1.7

%

 

 

149,831

 

3.2

%

Home equity line of credit and closed-end second lien loans and retained RMBS(5)(7)

 

 

432,861

 

9.2

%

 

 

186,050

 

4.0

%

Non-Agency RMBS

 

 

166,587

 

3.6

%

 

 

155,423

 

3.3

%

Non-QM loans and retained RMBS(3)(5)(7)

 

 

2,007,670

 

43.0

%

 

 

2,165,375

 

46.1

%

Other investments(8)(9)

 

 

61,508

 

1.3

%

 

 

49,651

 

1.1

%

Residential transition loans and other residential mortgage loans(3)

 

 

1,127,770

 

24.1

%

 

 

1,248,001

 

26.6

%

Non-Dollar denominated:

 

 

 

 

 

 

 

 

CLOs

 

 

6,333

 

0.1

%

 

 

6,956

 

0.1

%

Corporate debt and equity

 

 

181

 

—

%

 

 

206

 

—

%

RMBS(10)

 

 

14,394

 

0.3

%

 

 

17,480

 

0.4

%

Other residential mortgage loans

 

 

39,168

 

0.8

%

 

 

55,167

 

1.2

%

Total long credit portfolio

 

$

4,681,219

 

100.0

%

 

$

4,695,944

 

100.0

%

Adjustments:

 

 

 

 

 

 

 

 

Less: Non-retained tranches of consolidated securitization trusts

 

 

1,353,055

 

 

 

 

1,445,466

 

 

Plus: Financing underlying Forward MSR-related investments(11)

 

 

93,500

 

 

 

 

13,500

 

 

Total adjusted long credit portfolio

 

$

3,421,664

 

 

 

$

3,263,978

 

 

(1)

 

This information does not include U.S. Treasury securities, securities sold short, or financial derivatives.

(2)

 

Conformed to current period presentation.

(3)

 

Includes related REO. In accordance with U.S. GAAP, REO is not considered a financial instrument and as a result is included at the lower of cost or fair value.

(4)

 

Also includes equity investments in unconsolidated entities holding commercial mortgage loans and REO.

(5)

 

Also includes equity investments in securitization-related vehicles.

(6)

 

Also includes corporate loans made to certain loan origination entities in which we hold an equity investment.

(7)

 

Retained RMBS represents RMBS issued by non-consolidated Ellington-sponsored loan securitization trusts, and interests in entities holding such RMBS.

(8)

 

Also includes equity investment in Ellington affiliate.

(9)

 

Includes equity investment in an unconsolidated entity which purchases certain other loans for eventual securitization.

(10)

 

Includes an equity investment in an unconsolidated entity holding European RMBS.

(11)

 

We participate in the economic returns of a portfolio of forward MSRs under various agreements with a licensed mortgage servicer holding such MSRs. Under such agreements, we can direct the servicer to finance the MSRs and distribute the proceeds of such financings to us. Forward MSR-related investments, at fair value are presented on our Consolidated Balance sheet net of any such financings; as of December 31, 2024 and September 30, 2024, such borrowings were $93.5 million and $13.5 million, respectively.

Agency RMBS Portfolio

The following table(1) summarizes our Agency RMBS portfolio holdings as of December 31, 2024 and September 30, 2024:

 

 

December 31, 2024

 

September 30, 2024

($ in thousands)

 

Fair Value

 

%

 

Fair Value

 

%

Long Agency RMBS:

 

 

 

 

 

 

 

 

Fixed rate

 

$

250,376

 

84.4

%

 

$

346,341

 

87.8

%

Reverse mortgages

 

 

33,124

 

11.2

%

 

 

33,723

 

8.5

%

IOs

 

 

13,217

 

4.4

%

 

 

14,579

 

3.7

%

Total long Agency RMBS

 

$

296,717

 

100.0

%

 

$

394,643

 

100.0

%

(1)

 

This information does not include U.S. Treasury securities, securities sold short, or financial derivatives.

Longbridge Portfolio

Longbridge originates reverse mortgage loans, including home equity conversion mortgage loans, or "HECMs," which are insured by the FHA and which are eligible for inclusion in GNMA-guaranteed HECM-backed MBS, or "HMBS." Upon securitization, the HECMs remain on our balance sheet under GAAP, and Longbridge retains the mortgage servicing rights associated with the HMBS, or the "HMBS MSR Equivalent." Longbridge also originates "proprietary reverse mortgage loans," which are not insured by the FHA, and Longbridge has typically retained the associated MSRs. We have securitized some of the proprietary reverse mortgage loans originated by Longbridge, and we have retained certain of the securitization tranches in compliance with credit risk retention rules. The following table summarizes loan-related assets(1) in the Longbridge segment as of December 31, 2024 and September 30, 2024:

 

 

December 31, 2024

 

September 30, 2024

 

 

(In thousands)

HMBS assets(2)

 

$

9,245,834

 

 

$

8,890,459

 

Less: HMBS liabilities

 

 

(9,150,883

)

 

 

(8,790,589

)

HMBS MSR Equivalent

 

 

94,951

 

 

 

99,870

 

Unsecuritized HECM loans(3)

 

 

140,709

 

 

 

127,625

 

Proprietary reverse mortgage loans(4)

 

 

728,959

 

 

 

597,093

 

Reverse MSRs

 

 

29,766

 

 

 

28,877

 

Unsecuritized REO

 

 

2,323

 

 

 

2,372

 

Total

 

 

996,708

 

 

 

855,837

 

Less: Non-retained tranches of consolidated securitization trusts

 

 

576,474

 

 

 

361,596

 

Total, excluding non-retained tranches of consolidated securitization trusts

 

$

420,234

 

 

$

494,241

 

(1)

 

This information does not include financial derivatives or loan commitments.

(2)

 

Includes HECM loans, related REO, and claims or other receivables.

(3)

 

As of December 31, 2024, includes $7.8 million of active HECM buyout loans, $11.1 million of inactive HECM buyout loans, and $5.0 million of other inactive HECM loans. As of September 30, 2024, includes $8.2 million of active HECM buyout loans, $10.6 million of inactive HECM buyout loans, and $4.2 million of other inactive HECM loans.

(4)

 

As of December 31, 2024, includes $606.8 million of securitized proprietary reverse mortgage loans and $15.0 million of cash held in a securitization reserve fund. As of September 30, 2024, includes $390.6 million of securitized proprietary reverse mortgage loans and $9.0 million of cash held in a securitization reserve fund.

The following table summarizes Longbridge's origination volumes by channel for the three-month periods ended December 31, 2024 and September 30, 2024:

($ In thousands)

 

December 31, 2024

 

September 30, 2024

Channel

 

Units

 

New Loan Origination Volume(1)

 

% of New Loan Origination Volume

 

Units

 

New Loan Origination Volume(1)

 

% of New Loan Origination Volume

Retail

 

613

 

$

104,917

 

25

%

 

459

 

$

83,080

 

23

%

Wholesale and correspondent

 

1,626

 

 

314,987

 

75

%

 

1,391

 

 

271,660

 

77

%

Total

 

2,239

 

$

419,904

 

100

%

 

1,850

 

$

354,740

 

100

%

(1)

 

Represents initial borrowed amounts on reverse mortgage loans.

Financing

Key Highlights:

• Recourse Debt-to-Equity ratio3 (adjusted for unsettled trades): 1.8:1 as of both December 31, 2024 and September 30, 2024, as credit portfolio growth was roughly offset by a smaller Agency portfolio and the impact of several securitizations completed during the quarter, which converted certain recourse borrowings to non-recourse borrowings.
• Overall Debt-to-Equity ratio4 (adjusted for unsettled trades): Increased to 8.8:1 from 8.3:1 during the quarter, reflecting an increase in borrowings from consolidated proprietary reverse mortgage loan securitizations.

The following table summarizes our outstanding borrowings and debt-to-equity ratios as of December 31, 2024 and September 30, 2024:

 

 

December 31, 2024

 

September 30, 2024

 

 

Outstanding Borrowings(1)

 

Debt-to-Equity Ratio(2)

 

Outstanding Borrowings(1)

 

Debt-to-Equity Ratio(2)

 

 

(In thousands)

 

 

 

(In thousands)

 

 

Recourse borrowings(3)(4)

 

$

3,135,021

 

2.0:1

 

$

3,224,630

 

2.0:1

Non-recourse borrowings(4)

 

 

11,085,192

 

7.0:1

 

 

10,604,344

 

6.5:1

Total Borrowings

 

$

14,220,213

 

8.9:1

 

$

13,828,974

 

8.5:1

Total Equity

 

$

1,590,822

 

 

 

$

1,625,649

 

 

Recourse borrowings excluding U.S. Treasury securities, adjusted for unsettled purchases and sales

 

 

 

1.8:1

 

 

 

1.8:1

Total borrowings excluding U.S. Treasury securities, adjusted for unsettled purchases and sales

 

 

 

8.8:1

 

 

 

8.3:1

(1)

 

Includes borrowings under repurchase agreements, other secured borrowings, other secured borrowings, at fair value, and unsecured debt, at par.

(2)

 

Recourse and overall debt-to-equity ratios are computed by dividing outstanding recourse and overall borrowings, respectively, by total equity. Debt-to-equity ratios do not account for liabilities other than debt financings.

(3)

 

Excludes repo borrowings at certain unconsolidated entities that are recourse to us. Including such borrowings, our debt-to-equity ratio based on total recourse borrowings is 2.1:1 and 2.1:1 as of December 31, 2024 and September 30, 2024, respectively.

(4)

 

All of our non-recourse borrowings are secured by collateral. In the event of default under a non-recourse borrowing, the lender has a claim against the collateral but not any of the other assets held by us or our consolidated subsidiaries. In the event of default under a recourse borrowing, the lender's claim is not limited to the collateral (if any).

Operating Results

The following table summarizes our operating results by strategy for the three-month period ended December 31, 2024:

 

 

Investment Portfolio

 

Longbridge

 

Corporate/Other

 

Total

 

Per Share

(In thousands except per share amounts)

 

Credit

 

Agency

 

Investment Portfolio Subtotal

 

 

 

 

Interest income and other income(1)

 

$

82,813

 

 

$

3,293

 

 

$

86,106

 

 

$

20,176

 

 

$

1,732

 

 

$

108,014

 

 

$

1.18

 

Interest expense

 

 

(43,508

)

 

 

(3,474

)

 

 

(46,982

)

 

 

(11,616

)

 

 

(4,557

)

 

 

(63,155

)

 

 

(0.69

)

Realized gain (loss), net

 

 

3,088

 

 

 

(2,504

)

 

 

584

 

 

 

(45

)

 

 

—

 

 

 

539

 

 

 

0.01

 

Unrealized gain (loss), net

 

 

(21,322

)

 

 

(8,463

)

 

 

(29,785

)

 

 

10,938

 

 

 

(3,784

)

 

 

(22,631

)

 

 

(0.25

)

Net change from reverse mortgage loans and HMBS obligations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20,080

 

 

 

—

 

 

 

20,080

 

 

 

0.22

 

Earnings in unconsolidated entities

 

 

10,895

 

 

 

—

 

 

 

10,895

 

 

 

—

 

 

 

—

 

 

 

10,895

 

 

 

0.12

 

Interest rate hedges and other activity, net(2)

 

 

11,062

 

 

 

7,142

 

 

 

18,204

 

 

 

22,554

 

 

 

(4,683

)

 

 

36,075

 

 

 

0.39

 

Credit hedges and other activities, net(3)

 

 

(6,671

)

 

 

—

 

 

 

(6,671

)

 

 

(297

)

 

 

—

 

 

 

(6,968

)

 

 

(0.08

)

Income tax (expense) benefit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(397

)

 

 

(397

)

 

 

—

 

Investment related expenses

 

 

(4,758

)

 

 

—

 

 

 

(4,758

)

 

 

(12,279

)

 

 

—

 

 

 

(17,037

)

 

 

(0.19

)

Other expenses

 

 

(1,929

)

 

 

—

 

 

 

(1,929

)

 

 

(22,679

)

 

 

(10,149

)

 

 

(34,757

)

 

 

(0.38

)

Net income (loss)

 

 

29,670

 

 

 

(4,006

)

 

 

25,664

 

 

 

26,832

 

 

 

(21,838

)

 

 

30,658

 

 

 

0.33

 

Dividends on preferred stock(4)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,720

)

 

 

(7,720

)

 

 

(0.08

)

Net (income) loss attributable to non-participating non-controlling interests

 

 

(327

)

 

 

—

 

 

 

(327

)

 

 

—

 

 

 

(4

)

 

 

(331

)

 

 

—

 

Net income (loss) attributable to common stockholders and participating non-controlling interests

 

 

29,343

 

 

 

(4,006

)

 

 

25,337

 

 

 

26,832

 

 

 

(29,562

)

 

 

22,607

 

 

 

0.25

 

Net (income) loss attributable to participating non-controlling interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(215

)

 

 

(215

)

 

 

—

 

Net income (loss) attributable to common stockholders

 

$

29,343

 

 

$

(4,006

)

 

$

25,337

 

 

$

26,832

 

 

$

(29,777

)

 

$

22,392

 

 

$

0.25

 

Net income (loss) attributable to common stockholders per share of common stock

 

$

0.32

 

 

$

(0.04

)

 

$

0.28

 

 

$

0.30

 

 

$

(0.33

)

 

$

0.25

 

 

 

Weighted average shares of common stock and convertible units(5) outstanding

 

 

 

 

 

 

 

 

 

 

 

 

91,533

 

 

 

Weighted average shares of common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

90,663

 

 

 

(1)

 

Other income primarily consists of rental income on real estate owned, loan origination fees, and servicing income.

(2)

 

Includes U.S. Treasury securities, if applicable.

(3)

 

Other activities include certain equity and other trading strategies and related hedges, and net realized and unrealized gains (losses) on foreign currency.

(4)

 

Includes $0.3 million loss on redemption of preferred stock, equal to the difference between the carrying amount and the liquidation preference.

(5)

 

Convertible units include Operating Partnership units attributable to participating non-controlling interests.

The following table summarizes our operating results by strategy for the three-month period ended September 30, 2024(1):

 

 

Investment Portfolio

 

Longbridge

 

Corporate/Other

 

Total

 

Per Share

(In thousands except per share amounts)

 

Credit

 

Agency

 

Investment Portfolio Subtotal

 

 

 

 

Interest income and other income(2)

 

$

81,758

 

 

$

5,418

 

 

$

87,176

 

 

$

16,470

 

 

$

1,523

 

 

$

105,169

 

 

$

1.20

 

Interest expense

 

 

(46,905

)

 

 

(5,132

)

 

 

(52,037

)

 

 

(12,318

)

 

 

(4,491

)

 

 

(68,846

)

 

 

(0.78

)

Realized gain (loss), net

 

 

(11,499

)

 

 

(2,172

)

 

 

(13,671

)

 

 

(19

)

 

 

—

 

 

 

(13,690

)

 

 

(0.16

)

Unrealized gain (loss), net

 

 

25,377

 

 

 

17,981

 

 

 

43,358

 

 

 

20,484

 

 

 

(9,059

)

 

 

54,783

 

 

 

0.62

 

Net change from reverse mortgage loans and HMBS obligations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

24,717

 

 

 

—

 

 

 

24,717

 

 

 

0.28

 

Earnings in unconsolidated entities

 

 

7,281

 

 

 

—

 

 

 

7,281

 

 

 

—

 

 

 

—

 

 

 

7,281

 

 

 

0.08

 

Interest rate hedges and other activity, net(3)

 

 

(8,561

)

 

 

(11,294

)

 

 

(19,855

)

 

 

(17,252

)

 

 

5,247

 

 

 

(31,860

)

 

 

(0.36

)

Credit hedges and other activities, net(4)

 

 

(2,573

)

 

 

—

 

 

 

(2,573

)

 

 

(722

)

 

 

—

 

 

 

(3,295

)

 

 

(0.04

)

Income tax (expense) benefit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(12

)

 

 

(12

)

 

 

—

 

Investment related expenses

 

 

(4,146

)

 

 

—

 

 

 

(4,146

)

 

 

(11,539

)

 

 

—

 

 

 

(15,685

)

 

 

(0.18

)

Other expenses

 

 

(1,418

)

 

 

—

 

 

 

(1,418

)

 

 

(22,272

)

 

 

(11,549

)

 

 

(35,239

)

 

 

(0.40

)

Net income (loss)

 

 

39,314

 

 

 

4,801

 

 

 

44,115

 

 

 

(2,451

)

 

 

(18,341

)

 

 

23,323

 

 

 

0.26

 

Dividends on preferred stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(6,833

)

 

 

(6,833

)

 

 

(0.07

)

Net (income) loss attributable to non-participating non-controlling interests

 

 

(116

)

 

 

—

 

 

 

(116

)

 

 

(39

)

 

 

(4

)

 

 

(159

)

 

 

—

 

Net income (loss) attributable to common stockholders and participating non-controlling interests

 

 

39,198

 

 

 

4,801

 

 

 

43,999

 

 

 

(2,490

)

 

 

(25,178

)

 

 

16,331

 

 

 

0.19

 

Net (income) loss attributable to participating non-controlling interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(156

)

 

 

(156

)

 

 

—

 

Net income (loss) attributable to common stockholders

 

$

39,198

 

 

$

4,801

 

 

$

43,999

 

 

$

(2,490

)

 

$

(25,334

)

 

$

16,175

 

 

$

0.19

 

Net income (loss) attributable to common stockholders per share of common stock

 

$

0.45

 

 

$

0.06

 

 

$

0.51

 

 

$

(0.03

)

 

$

(0.29

)

 

$

0.19

 

 

 

Weighted average shares of common stock and convertible units(5) outstanding

 

 

 

 

 

 

 

 

 

 

 

 

88,039

 

 

 

Weighted average shares of common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

87,198

 

 

 

(1)

 

Conformed to current period presentation.

(2)

 

Other income primarily consists of rental income on real estate owned, loan origination fees, and servicing income.

(3)

 

Includes U.S. Treasury securities, if applicable.

(4)

 

Other activities include certain equity and other trading strategies and related hedges, and net realized and unrealized gains (losses) on foreign currency.

(5)

 

Convertible units include Operating Partnership units attributable to participating non-controlling interests.

About Ellington Financial

Ellington Financial invests in a diverse array of financial assets, including residential and commercial mortgage loans and mortgage-backed securities, reverse mortgage loans, mortgage servicing rights and related investments, consumer loans, asset-backed securities, collateralized loan obligations, non-mortgage and mortgage-related derivatives, debt and equity investments in loan origination companies, and other strategic investments. Ellington Financial is externally managed and advised by Ellington Financial Management LLC, an affiliate of Ellington Management Group, L.L.C.

Conference Call

We will host a conference call at 11:00 a.m. Eastern Time on Friday, February 28, 2025, to discuss our financial results for the quarter ended December 31, 2024. To participate in the event by telephone, please dial (800) 445-7795 at least 10 minutes prior to the start time and reference the conference ID EFCQ424. International callers should dial (785) 424-1699 and reference the same conference ID. The conference call will also be webcast live over the Internet and can be accessed via the "For Investors" section of our web site at www.ellingtonfinancial.com. To listen to the live webcast, please visit www.ellingtonfinancial.com at least 15 minutes prior to the start of the call to register, download, and install necessary audio software. In connection with the release of these financial results, we also posted an investor presentation, that will accompany the conference call, on our website at www.ellingtonfinancial.com under "For Investors—Presentations."

A dial-in replay of the conference call will be available on Friday, February 28, 2025, at approximately 2:00 p.m. Eastern Time through Friday, March 7, 2025 at approximately 11:59 p.m. Eastern Time. To access this replay, please dial (800) 839-4514. International callers should dial (402) 220-2680. A replay of the conference call will also be archived on our web site at www.ellingtonfinancial.com.

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. Our 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. Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our investments, market volatility, 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, our ability to maintain our qualification as a real estate investment trust, or "REIT," and other changes in market conditions and economic trends, such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations. Furthermore, forward-looking statements are subject to risks and uncertainties, including, among other things, those described under Item 1A of our Annual Report on Form 10-K, which can be accessed through our website at www.ellingtonfinancial.com or at the SEC's website (www.sec.gov). Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q, 10-K and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

ELLINGTON FINANCIAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

Three-Month Period Ended

 

Year Ended

 

December 31, 2024

 

September 30, 2024

 

December 31, 2024

(In thousands, except per share amounts)

 

 

 

 

 

NET INTEREST INCOME

 

 

 

 

 

Interest income

$

106,743

 

 

$

107,281

 

 

$

416,015

 

Interest expense

 

(68,613

)

 

 

(73,654

)

 

 

(279,606

)

Total net interest income

 

38,130

 

 

 

33,627

 

 

 

136,409

 

Other Income (Loss)

 

 

 

 

 

Realized gains (losses) on securities and loans, net

 

1,436

 

 

 

(12,243

)

 

 

(50,983

)

Realized gains (losses) on financial derivatives, net

 

15,580

 

 

 

(41,564

)

 

 

(16,193

)

Realized gains (losses) on real estate owned, net

 

(1,879

)

 

 

(397

)

 

 

(5,525

)

Unrealized gains (losses) on securities and loans, net

 

(63,310

)

 

 

126,908

 

 

 

109,442

 

Unrealized gains (losses) on financial derivatives, net

 

18,316

 

 

 

356

 

 

 

56,939

 

Unrealized gains (losses) on real estate owned, net

 

1,199

 

 

 

(769

)

 

 

632

 

Unrealized gains (losses) on other secured borrowings, at fair value, net

 

34,357

 

 

 

(56,179

)

 

 

(35,861

)

Unrealized gains (losses) on unsecured borrowings, at fair value

 

(3,784

)

 

 

(9,059

)

 

 

(9,147

)

Net change from HECM reverse mortgage loans, at fair value

 

126,262

 

 

 

158,554

 

 

 

637,019

 

Net change related to HMBS obligations, at fair value

 

(106,182

)

 

 

(133,837

)

 

 

(545,673

)

Other, net

 

11,847

 

 

 

1,581

 

 

 

28,588

 

Total other income (loss)

 

33,842

 

 

 

33,351

 

 

 

169,238

 

EXPENSES

 

 

 

 

 

Base management fee to affiliate, net of rebates

 

5,888

 

 

 

6,031

 

 

 

23,460

 

Investment related expenses:

 

 

 

 

 

Servicing expense

 

6,375

 

 

 

6,334

 

 

 

24,180

 

Debt issuance costs related to Other secured borrowings, at fair value

 

2,210

 

 

 

1,991

 

 

 

7,314

 

Other

 

8,470

 

 

 

7,360

 

 

 

25,570

 

Professional fees

 

3,176

 

 

 

2,667

 

 

 

11,250

 

Compensation and benefits

 

18,748

 

 

 

18,987

 

 

 

68,731

 

Other expenses

 

6,945

 

 

 

7,554

 

 

 

28,871

 

Total expenses

 

51,812

 

 

 

50,924

 

 

 

189,376

 

Net Income (Loss) before Income Tax Expense (Benefit) and Earnings from Investments in Unconsolidated Entities

 

20,160

 

 

 

16,054

 

 

 

116,271

 

Income tax expense (benefit)

 

397

 

 

 

12

 

 

 

612

 

Earnings (losses) from investments in unconsolidated entities

 

10,895

 

 

 

7,281

 

 

 

32,445

 

Net Income (Loss)

 

30,658

 

 

 

23,323

 

 

 

148,104

 

Net Income (Loss) attributable to non-controlling interests

 

546

 

 

 

315

 

 

 

2,243

 

Dividends on preferred stock

 

7,385

 

 

 

6,833

 

 

 

27,697

 

(Gain) loss on redemption of preferred stock

 

335

 

 

 

—

 

 

 

335

 

Net Income (Loss) Attributable to Common Stockholders

$

22,392

 

 

$

16,175

 

 

$

117,829

 

Net Income (Loss) per Common Share:

 

 

 

 

 

Basic and Diluted

$

0.25

 

 

$

0.19

 

 

$

1.36

 

Weighted average shares of common stock outstanding

 

90,663

 

 

 

87,198

 

 

 

86,855

 

Weighted average shares of common stock and convertible units outstanding

 

91,533

 

 

 

88,039

 

 

 

87,692

 

ELLINGTON FINANCIAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

As of

(In thousands, except share and per share amounts)

December 31, 2024

 

September 30, 2024

 

December 31, 2023(1)

ASSETS

 

 

 

 

 

Cash and cash equivalents

$

192,387

 

 

$

217,725

 

 

$

228,927

 

Restricted cash

 

16,561

 

 

 

10,578

 

 

 

1,618

 

Securities, at fair value

 

962,254

 

 

 

1,063,774

 

 

 

1,518,377

 

Loans, at fair value

 

13,999,572

 

 

 

13,519,786

 

 

 

12,306,636

 

Loan commitments, at fair value

 

6,692

 

 

 

5,955

 

 

 

2,584

 

Forward MSR-related investments, at fair value

 

77,848

 

 

 

149,831

 

 

 

163,336

 

Mortgage servicing rights, at fair value

 

29,766

 

 

 

28,877

 

 

 

29,580

 

Investments in unconsolidated entities, at fair value

 

220,078

 

 

 

188,475

 

 

 

116,414

 

Real estate owned

 

46,661

 

 

 

29,690

 

 

 

22,085

 

Financial derivatives–assets, at fair value

 

184,395

 

 

 

149,679

 

 

 

143,996

 

Reverse repurchase agreements

 

336,743

 

 

 

331,630

 

 

 

173,145

 

Due from brokers

 

22,186

 

 

 

16,048

 

 

 

51,884

 

Investment related receivables

 

189,081

 

 

 

208,861

 

 

 

480,249

 

Other assets

 

32,804

 

 

 

32,381

 

 

 

77,099

 

Total Assets

$

16,317,028

 

 

$

15,953,290

 

 

$

15,315,930

 

LIABILITIES

 

 

 

 

 

Securities sold short, at fair value

$

293,574

 

 

$

304,918

 

 

$

154,303

 

Repurchase agreements

 

2,584,040

 

 

 

2,642,052

 

 

 

2,967,437

 

Financial derivatives–liabilities, at fair value

 

71,024

 

 

 

49,243

 

 

 

61,776

 

Due to brokers

 

55,429

 

 

 

55,529

 

 

 

62,442

 

Investment related payables

 

22,714

 

 

 

25,178

 

 

 

37,403

 

Other secured borrowings

 

253,300

 

 

 

284,897

 

 

 

245,827

 

Other secured borrowings, at fair value

 

1,934,309

 

 

 

1,813,755

 

 

 

1,424,668

 

HMBS-related obligations, at fair value

 

9,150,883

 

 

 

8,790,589

 

 

 

8,423,235

 

Unsecured borrowings, at fair value

 

281,912

 

 

 

278,128

 

 

 

272,765

 

Base management fee payable to affiliate

 

5,888

 

 

 

6,031

 

 

 

5,660

 

Dividend payable

 

16,611

 

 

 

15,892

 

 

 

11,528

 

Interest payable

 

17,956

 

 

 

21,045

 

 

 

22,933

 

Accrued expenses and other liabilities

 

38,566

 

 

 

40,384

 

 

 

90,341

 

Total Liabilities

 

14,726,206

 

 

 

14,327,641

 

 

 

13,780,318

 

EQUITY

 

 

 

 

 

Preferred stock, par value $0.001 per share, 100,000,000 shares authorized; 13,800,089, 14,757,222 and 14,757,222 shares issued and outstanding, and $345,002, $368,931 and $368,931 aggregate liquidation preference, respectively

 

331,958

 

 

 

355,551

 

 

 

355,551

 

Common stock, par value $0.001 per share, 300,000,000, 300,000,000, and 200,000,000 shares authorized, respectively; 90,678,492, 90,661,736 and 83,000,488 shares issued and outstanding, respectively(2)

 

91

 

 

 

91

 

 

 

83

 

Additional paid-in-capital

 

1,613,540

 

 

 

1,613,740

 

 

 

1,514,797

 

Retained earnings (accumulated deficit)

 

(375,113

)

 

 

(362,146

)

 

 

(353,360

)

Total Stockholders' Equity

 

1,570,476

 

 

 

1,607,236

 

 

 

1,517,071

 

Non-controlling interests

 

20,346

 

 

 

18,413

 

 

 

18,541

 

Total Equity

 

1,590,822

 

 

 

1,625,649

 

 

 

1,535,612

 

TOTAL LIABILITIES AND EQUITY

$

16,317,028

 

 

$

15,953,290

 

 

$

15,315,930

 

SUPPLEMENTAL PER SHARE INFORMATION:

 

 

 

 

 

Book Value Per Common Share (3)

$

13.52

 

 

$

13.66

 

 

$

13.83

 

(1)

 

Derived from audited financial statements as of December 31, 2023.

(2)

 

Common shares issued and outstanding at December 31, 2024 includes 16,756 shares of restricted common stock issued for the exchange of LTIP Units to restricted shares during the three-month period ended December 31, 2024.

(3)

 

Based on total stockholders' equity less the aggregate liquidation preference of our preferred stock outstanding.

Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings

We calculate Adjusted Distributable Earnings as U.S. GAAP net income (loss) as adjusted for: (i) realized and unrealized gain (loss) on securities and loans, REO, mortgage servicing rights, financial derivatives (excluding periodic settlements on interest rate swaps), any borrowings carried at fair value, and foreign currency transactions; (ii) incentive fee to affiliate; (iii) Catch-up Amortization Adjustment (as defined below); (iv) non-cash equity compensation expense; (v) provision for income taxes; (vi) certain non-capitalized transaction costs; and (vii) other income or loss items that are of a non-recurring nature. For certain investments in unconsolidated entities, we include the relevant components of net operating income in Adjusted Distributable Earnings. The Catch-up Amortization Adjustment is a quarterly adjustment to premium amortization or discount accretion triggered by changes in actual and projected prepayments on our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses). The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cashflows and prepayments, and can vary significantly from quarter to quarter. Non-capitalized transaction costs include expenses, generally professional fees, incurred in connection with the acquisition of an investment or issuance of long-term debt. We also include in Adjusted Distributable Earnings, for all loans that we originate through Longbridge, any realized and unrealized gains (losses) on such loans up to the point of loan sale or securitization, net of sale or securitization costs.

Adjusted Distributable Earnings is a supplemental non-GAAP financial measure. We believe that the presentation of Adjusted Distributable Earnings provides information useful to investors, because: (i) we believe that it is a useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain current-period earnings components that we believe are less useful in forecasting long-term performance and dividend-paying ability; (ii) we use it to evaluate the effective net yield provided by our investment portfolio, after the effects of financial leverage and by Longbridge, to reflect the earnings from its reverse mortgage origination and servicing operations; and (iii) we believe that presenting Adjusted Distributable Earnings assists investors in measuring and evaluating our operating performance, and comparing our operating performance to that of our residential mortgage REIT and mortgage originator peers. Please note, however, that: (I) our calculation of Adjusted Distributable Earnings may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable; and (II) Adjusted Distributable Earnings excludes certain items that may impact the amount of cash that is actually available for distribution.

In addition, because Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with U.S. GAAP, it should be considered supplementary to, and not as a substitute for, net income (loss) computed in accordance with U.S. GAAP.

Furthermore, Adjusted Distributable Earnings is different from REIT taxable income. As a result, the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain adjustments) to our stockholders, in order to maintain our qualification as a REIT, is not based on whether we distributed 90% of our Adjusted Distributable Earnings.

In setting our dividends, our Board of Directors considers our earnings, liquidity, financial condition, REIT distribution requirements, and financial covenants, along with other factors that the Board of Directors may deem relevant from time to time.

The following table reconciles, for the three-month periods ended December 31, 2024 and September 30, 2024, our Adjusted Distributable Earnings to the line on our Condensed Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S. GAAP measure:

 

 

Three-Month Period Ended

 

 

December 31, 2024

 

September 30, 2024

(In thousands, except per share amounts)

 

Investment Portfolio

 

Longbridge

 

Corporate/Other

 

Total

 

Investment Portfolio

 

Longbridge

 

Corporate/Other

 

Total

Net Income (Loss)

 

$

25,664

 

 

$

26,832

 

 

$

(21,838

)

 

$

30,658

 

 

$

44,115

 

 

$

(2,451

)

 

$

(18,341

)

 

$

23,323

 

Income tax expense (benefit)

 

 

—

 

 

 

—

 

 

 

397

 

 

 

397

 

 

 

—

 

 

 

—

 

 

 

12

 

 

 

12

 

Net income (loss) before income tax expense (benefit)

 

 

25,664

 

 

 

26,832

 

 

 

(21,441

)

 

 

31,055

 

 

 

44,115

 

 

 

(2,451

)

 

 

(18,329

)

 

 

23,335

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized (gains) losses, net(1)

 

 

(11,876

)

 

 

—

 

 

 

(9

)

 

 

(11,885

)

 

 

63,515

 

 

 

—

 

 

 

(1

)

 

 

63,514

 

Unrealized (gains) losses, net(2)

 

 

37,029

 

 

 

4,543

 

 

 

7,679

 

 

 

49,251

 

 

 

(57,575

)

 

 

52

 

 

 

2,429

 

 

 

(55,094

)

Unrealized (gains) losses on reverse MSRs, net of hedging (gains) losses(3)

 

 

—

 

 

 

(14,906

)

 

 

—

 

 

 

(14,906

)

 

 

—

 

 

 

11,728

 

 

 

—

 

 

 

11,728

 

Negative (positive) component of interest income represented by Catch-up Amortization Adjustment

 

 

471

 

 

 

—

 

 

 

—

 

 

 

471

 

 

 

(498

)

 

 

—

 

 

 

—

 

 

 

(498

)

Adjustment related to consolidated proprietary reverse mortgage loan securitizations(4)

 

 

—

 

 

 

(2,627

)

 

 

—

 

 

 

(2,627

)

 

 

—

 

 

 

(2,007

)

 

 

—

 

 

 

(2,007

)

Non-capitalized transaction costs and other expense adjustments(5)

 

 

2,186

 

 

 

1,127

 

 

 

261

 

 

 

3,574

 

 

 

2,353

 

 

 

2,846

 

 

 

219

 

 

 

5,418

 

(Earnings) losses from investments in unconsolidated entities

 

 

(10,895

)

 

 

—

 

 

 

—

 

 

 

(10,895

)

 

 

(7,281

)

 

 

—

 

 

 

—

 

 

 

(7,281

)

Adjusted distributable earnings from investments in unconsolidated entities(6)

 

 

4,865

 

 

 

—

 

 

 

—

 

 

 

4,865

 

 

 

2,769

 

 

 

—

 

 

 

—

 

 

 

2,769

 

Total Adjusted Distributable Earnings

 

$

47,444

 

 

$

14,969

 

 

$

(13,510

)

 

$

48,903

 

 

$

47,398

 

 

$

10,168

 

 

$

(15,682

)

 

$

41,884

 

Dividends on preferred stock

 

 

—

 

 

 

—

 

 

 

7,385

 

 

 

7,385

 

 

 

—

 

 

 

—

 

 

 

6,833

 

 

 

6,833

 

Adjusted Distributable Earnings attributable to non-controlling interests

 

 

506

 

 

 

—

 

 

 

390

 

 

 

896

 

 

 

205

 

 

 

43

 

 

 

332

 

 

 

580

 

Adjusted Distributable Earnings Attributable to Common Stockholders

 

$

46,938

 

 

$

14,969

 

 

$

(21,285

)

 

$

40,622

 

 

$

47,193

 

 

$

10,125

 

 

$

(22,847

)

 

$

34,471

 

Adjusted Distributable Earnings Attributable to Common Stockholders, per share

 

$

0.52

 

 

$

0.17

 

 

$

(0.24

)

 

$

0.45

 

 

$

0.54

 

 

$

0.12

 

 

$

(0.26

)

 

$

0.40

 

(1)

 

Includes realized (gains) losses on securities and loans, REO, financial derivatives (excluding periodic settlements on interest rate swaps), and foreign currency transactions which are components of Other Income (Loss) on the Condensed Consolidated Statement of Operations.

(2)

 

Includes unrealized (gains) losses on securities and loans, REO, financial derivatives (excluding periodic settlements on interest rate swaps), borrowings carried at fair value, MSR-related investments, and foreign currency translations which are components of Other Income (Loss) on the Condensed Consolidated Statement of Operations.

(3)

 

Represents net change in fair value of the HMBS MSR Equivalent and Reverse MSRs attributable to changes in market conditions and model assumptions. This adjustment also includes net (gains) losses on certain hedging instruments (including interest rate swaps, futures, and short U.S. Treasury securities), which are components of realized and/or unrealized gains (losses) on financial derivatives, net, realized and/or unrealized gains (losses) on securities and loans, net, interest income, and interest expense on the Condensed Consolidated Statement of Operations.

(4)

 

Represents the effect of replacing mortgage loan interest income (net of securitization debt expense) with interest income of the retained tranches.

(5)

 

For the three-month period ended December 31, 2024, includes $2.9 million of non-capitalized transaction costs, $0.5 million of non-cash equity compensation and depreciation expense, and $0.2 million of various other expenses. For the three-month period ended September 30, 2024, includes $2.2 million of non-capitalized transaction costs, $2.1 million of one-time compensation expense related to the cancellation of employee stock options, $0.5 million of non-cash equity compensation and depreciation expense, and $0.6 million of various other expenses.

(6)

 

Includes net interest income and operating expenses for certain investments in unconsolidated entities.

 

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Investors: Ellington Financial Investor Relations (203) 409-3575 info@ellingtonfinancial.com

or

Media: Amanda Shpiner/Grace Cartwright Gasthalter & Co. for Ellington Financial (212) 257-4170 ellington@gasthalter.com