Ellington Financial Inc. Reports Fourth Quarter 2020 Results
Ellington Financial Inc. (NYSE: EFC) (the "Company") today reported financial results for the quarter ended December 31, 2020.
Highlights
-
Net income of
$63.2 million , or$1.44 per common share; full year 2020 net income of$17.2 million , or$0.39 per common share. -
Core Earnings1 of
$16.0 million , or$0.37 per share. -
Book value per common share as of December 31, 2020 of
$17.59 , including the effects of dividends of$0.29 per common share for the quarter. -
Credit strategy gross income of
$75.0 million for the quarter, or$1.69 per share. -
Agency strategy gross income of
$6.3 million for the quarter, or$0.13 per share. -
Dividend yield of
7.5% based on the February 17, 2021 closing stock price of$15.92 per share, and dividend of$0.10 per common share declared on February 5, 2021. - Debt-to-equity ratio of 2.6:1 and recourse debt-to-equity ratio of 1.6:12 as of December 31, 2020.
-
Cash and cash equivalents of
$111.6 million as of December 31, 2020, in addition to other unencumbered assets of$442.5 million .
Fourth Quarter 2020 Results
"Ellington Financial fired on all cylinders in the fourth quarter, with broad-based contributions across our diversified credit and Agency portfolios. EFC generated Core Earnings of
"During the fourth quarter, our loan origination businesses again led the way. In the non-QM space, our affiliate LendSure had a record quarter for origination volume, and our affiliate Longbridge concluded an outstanding year in the reverse mortgage space. We also closed on our second non-QM securitization of the year, and we securitized a pool of our unsecured consumer loans. We had strong performance across our short-duration loan portfolios, particularly residential transition mortgage loans, consumer loans, and small-balance commercial mortgage loans. In addition, our credit securities performed very well, most notably CLOs, CMBS, non-Agency RMBS, and European RMBS, as prices continued to recover from the March selloff. Finally, our Agency portfolio delivered another quarter of excellent results.
"Moving into 2021, our focus continues to be on growing our proprietary loan origination businesses, including potentially adding more strategic equity investments and loan flow purchase agreements. We will also continue to be opportunistic in our securities strategies, and plan to continue to extend and diversify our financings. We still hold ample liquidity and employ low leverage, which means that we have plenty of dry powder to add assets and grow earnings. As always, our disciplined hedging and risk management should continue to be critical in protecting book value, as we tackle the challenges and opportunities of the year ahead."
Financial Results
The Company's total long credit portfolio3 increased by approximately
The Company's debt-to-equity ratio decreased to 2.6:1 as of December 31, 2020, as compared to 2.7:1 as of September 30, 2020, primarily as a result of the completion during the quarter of a consumer loan securitization, which the Company did not consolidate, as well as an increase in the Company's total equity. The Company's recourse debt-to-equity ratio, adjusted for unsettled purchases and sales, also decreased over the course of the quarter to 1.6:1 from 1.7:1, driven by the increase in the Company's total equity. As of December 31, 2020, the Company had cash and cash equivalents of approximately
During the fourth quarter, the Company's credit strategy generated total gross income of
The Company's credit portfolio generated excellent results for the quarter, driven by strong net interest income4 and significant mark-to-market gains across the portfolio. The Company benefited from strong performance in all of its credit strategies, as prices and liquidity continued to improve following the substantial market selloff earlier in the year. The Company also had notable strong performance from its equity investments in mortgage originators. Finally, with credit spreads tightening across most asset classes, credit hedges were the sole detractor of results during the quarter.
The Company's Agency strategy delivered another quarter of strong performance, as Agency RMBS yield spreads tightened significantly. The primary drivers of these results were strong net interest income on the Company's Agency RMBS investments, net realized and unrealized gains on its long TBA holdings, driven by Federal Reserve purchasing activity, and net realized and unrealized gains on interest rate hedges as long-term interest rates rose. A portion of this income was offset by net realized and unrealized losses on the Company's Agency RMBS investments, driven largely by elevated prepayment activity. Average pay-ups on the Company's specified pools declined to
During the fourth quarter the Company continued to hedge interest rate risk, primarily through the use of interest rate swaps, and to a lesser extent through the use of short positions in TBAs, U.S. Treasury securities, and futures. In addition, the Company continued to hold a portfolio of long TBAs for investment during the quarter.
1 Core Earnings is a non-GAAP financial measure. See "Reconciliation of Net Income (Loss) to Core Earnings" below for an explanation regarding the calculation of Core Earnings.
2 Excludes repo borrowings at certain unconsolidated entities that are recourse to us. Including such borrowings, the Company's debt-to-equity ratio based on total recourse borrowings was 1.6:1 as of December 31, 2020.
3 Includes REO at the lower of cost or fair value. Excludes hedges and other derivative positions, as well as tranches of the Company's consolidated non-QM securitization trusts that were sold to third parties, but that are consolidated for U.S. GAAP reporting purposes. Including such tranches, the Company's total long credit portfolio was
4 Excludes any interest income and interest expense items from Interest rate hedges, net and Credit hedges and other activities, net.
The following table summarizes the Company's investment portfolio(1) holdings as of December 31, 2020 and September 30, 2020:
|
|
Fair Value |
||||||
(In thousands) |
|
December 31, 2020 |
|
September 30, 2020 |
||||
Long: |
|
|
|
|
||||
Credit: |
|
|
|
|
||||
Dollar Denominated: |
|
|
|
|
||||
CLO(2) |
|
$ |
181,229 |
|
|
$ |
165,954 |
|
CMBS |
|
117,652 |
|
|
105,015 |
|
||
Commercial Mortgage Loans and REO(3)(4) |
|
269,287 |
|
|
304,698 |
|
||
Consumer Loans and ABS backed by Consumer Loans(2) |
|
112,077 |
|
|
200,857 |
|
||
Corporate Debt and Equity and Corporate Loans |
|
12,606 |
|
|
10,257 |
|
||
Equity Investments in Loan Origination Entities |
|
79,536 |
|
|
57,009 |
|
||
Non-Agency RMBS |
|
154,492 |
|
|
166,787 |
|
||
Residential Mortgage Loans and REO(3) |
|
1,188,731 |
|
|
1,033,481 |
|
||
Non-Dollar Denominated: |
|
|
|
|
||||
CLO(2) |
|
6,108 |
|
|
2,693 |
|
||
Consumer Loans and ABS backed by Consumer Loans |
|
306 |
|
|
333 |
|
||
Corporate Debt and Equity |
|
28 |
|
|
27 |
|
||
RMBS(5) |
|
51,388 |
|
|
47,663 |
|
||
Agency: |
|
|
|
|
||||
Fixed-Rate Specified Pools |
|
807,704 |
|
|
756,580 |
|
||
Floating-Rate Specified Pools |
|
6,454 |
|
|
7,046 |
|
||
IOs |
|
47,656 |
|
|
51,705 |
|
||
Reverse Mortgage Pools |
|
97,629 |
|
|
104,524 |
|
||
Total Long |
|
$ |
3,132,883 |
|
|
$ |
3,014,629 |
|
Short: |
|
|
|
|
||||
Credit: |
|
|
|
|
||||
Dollar Denominated: |
|
|
|
|
||||
Corporate Debt and Equity |
|
$ |
(218) |
|
|
$ |
(461) |
|
Government Debt: |
|
|
|
|
||||
Dollar Denominated |
|
— |
|
|
(14,310) |
|
||
Non-Dollar Denominated |
|
(38,424) |
|
|
(36,722) |
|
||
Total Short |
|
$ |
(38,642) |
|
|
$ |
(51,493) |
|
(1) |
|
This information does not include financial derivatives. |
(2) |
|
Includes equity investments in securitization-related vehicles. |
(3) |
|
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) |
|
Includes equity investments in unconsolidated entities holding small balance commercial mortgage loans and REO. |
(5) |
|
Includes an equity investment in an unconsolidated entity holding European RMBS. |
The following table summarizes the Company's operating results for the three-month periods ended December 31, 2020 and September 30, 2020 and the year ended December 31, 2020:
|
|
Three-Month Period Ended
|
|
Per Share |
|
Three-Month Period Ended
|
|
Per Share |
|
Year Ended
|
|
Per Share |
||||||||||||
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Credit: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest income and other income(1) |
|
$ |
34,089 |
|
|
$ |
0.77 |
|
|
$ |
37,764 |
|
|
$ |
0.85 |
|
|
$ |
150,266 |
|
|
$ |
3.41 |
|
Realized gain (loss), net |
|
(3,984) |
|
|
Ellington Financial Inc.
NYSE:EFCEFC RankingsEFC Latest NewsEFC Stock Data
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Securities and Commodity Exchanges
Finance and Insurance
United States of America
Greenwich
About EFCellington corp is an entertainment company located in p.o. box 218153, columbus, ohio, united states.
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