Ellington Financial LLC Reports Fourth Quarter 2016 Results
OLD GREENWICH, Connecticut—February 13, 2017
Ellington Financial LLC (NYSE: EFC) today reported financial results for the quarter ended December 31, 2016.
Net increase in shareholders' equity resulting from operations ("net income") for the fourth quarter was $1.7 million, or $0.05 per basic and diluted share, as compared to net income of $0.5 million, or $0.02 per basic and diluted share, for the quarter ended September 30, 2016.
Book value per share as of December 31, 2016 was $19.46 on a diluted basis, after payment of a quarterly dividend in the fourth quarter of $0.45 per share, as compared to book value per share of $19.83 on a diluted basis as of September 30, 2016.
Our Credit strategy generated gross income of $5.0 million for the quarter ended December 31, 2016.
Our Agency strategy generated gross income of $1.8 million for the quarter ended December 31, 2016.
Our Board of Directors declared a dividend of $0.45 per share for the fourth quarter of 2016, equating to an annualized dividend yield of 11.1% based on the February 10, 2017 closing price of $16.15 per share; dividends are paid quarterly in arrears.
Fourth Quarter 2016 Results
"For the fourth quarter, Ellington Financial had net income, including the full impact of mark-to-market adjustments, of $1.7 million or $0.05 per share," said Laurence Penn, Chief Executive Officer and President. "With this quarter's results, we conclude what has been a year of disappointing financial results. Overall, our assets performed well in 2016, but losses on our high-yield corporate credit hedges led to overall performance that fell far short of our expectations. Nevertheless, we remain very optimistic about our business and our future prospects, as we continue to see high-yielding opportunities and growing pipelines in our various loan businesses.
"During the fourth quarter, we continued the shift in our credit portfolio away from certain securities such as non-Agency RMBS, and towards loan assets. As a result, we continued to shrink our high-yield corporate credit hedges during the quarter, and at this point our portfolio is no longer significantly exposed to the performance of those hedges. Despite our continued selling of non-Agency RMBS, our Credit portfolio and its leverage actually increased slightly during the quarter, finally reversing the trend from recent quarters.
"Expanding and enhancing our financing arrangements for our loan portfolios remains a high priority for us. Since executing our first financing facility for small balance commercial mortgage loans early last year, we've added facilities for non-QM mortgage loans, residential NPLs, and consumer loans and ABS. We're currently evaluating additional borrowing facilities for both our non-QM mortgage business and our consumer loan business, and gaining long-term financing through the securitization markets remains a strong possibility for us in 2017 in several of our loan businesses. We believe that investment opportunities remain attractive in all of our loan businesses, and as 2017 progresses we are hopeful that we will be able to meaningfully increase our leverage and portfolio size.
"During the fourth quarter we repurchased approximately 1.0% of our outstanding shares, which was accretive to our diluted book value by $0.04 per share. We expect to continue to repurchase shares as the market presents us with attractive opportunities, while balancing the accretive effects of our repurchases on book value per share against the attractiveness of the investment opportunities in our targeted asset classes, together with the effects on our expense ratios and the liquidity of our stock."
The fourth quarter of 2016 was characterized by sharply higher interest rates and increased market volatility, especially in the aftermath of the U.S. elections in November. The election of Donald Trump to the U.S. presidency along with continued Republican control of Congress led to a surge in interest rates, as many market participants predicted that the policy goals of the new administration would lead to an acceleration in U.S. economic growth. Among the shared policy goals of the new administration and Congress are a lowering of corporate income tax rates, increased infrastructure spending, and a roll-back in regulation, such as many of the regulations included in the Dodd-Frank Act. The rise in long-term interest rates during the fourth quarter was the largest quarterly increase since the financial crisis, and one of the largest quarterly increases ever. Over the course of the quarter, the 10-year U.S. Treasury yield rose 85 basis points to end the quarter at 2.44%, and closed as high as 2.60% on December 15th. The yield curve steepened substantially during the quarter, with the 2-year U.S. Treasury yield rising
The following information was filed by Ellington Financial Llc (EFC) on Tuesday, February 14, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.