Ellington Financial LLC Reports Fourth Quarter 2017 Results
OLD GREENWICH, Connecticut—February 13, 2018
Ellington Financial LLC (NYSE: EFC) today reported financial results for the quarter ended December 31, 2017.
Net income1 of $7.4 million, or $0.23 per basic and diluted share.
Book value per share as of December 31, 2017 of $18.85 on a diluted basis, after payment of a quarterly dividend of $0.41 per share, as compared to book value per share of $18.96 on a diluted basis as of September 30, 2017.
Credit strategy gross income of $12.7 million for the quarter.
Agency strategy gross loss of $(0.06) million for the quarter.
Announced a dividend of $0.41 per share for the fourth quarter of 2017, equating to an annualized dividend yield of 11.1% based on the February 12, 2018 closing price of $14.77 per share; dividends are paid quarterly in arrears.
Repurchased 656,239 common shares during the quarter, or approximately 2.1% of our outstanding common shares, at an average price of $15.01 per share. After year end and through February 12, 2018, repurchased an additional 462,396 common shares, or approximately 1.5% of our outstanding common shares, at an average price of $14.74 per share.
On February 6, 2018, the Board of Directors authorized the repurchase of up to 1.55 million common shares.
Debt-to-equity ratio, excluding repo borrowings on U.S. Treasury securities, of 2.4:1 as of December 31, 2017.
Fourth Quarter 2017 Results
"In the fourth quarter, Ellington Financial had net income, including the full impact of mark-to-market adjustments, of $7.4 million, or $0.23 per share," said Laurence Penn, Chief Executive Officer and President. "Our Credit strategy performed well during the quarter, while our Agency strategy's return was roughly breakeven. We benefited from strong performance from several of our loan-related strategies, including non-QM loans, small-balance commercial mortgage loans, investments in mortgage originators, U.S. residential non-performing loans, and U.S. consumer loans. We continued to grow our Credit portfolio, and we generated an annualized return of 6.6% for the quarter.
"During the fourth quarter, with our share price trading at a significant discount to book value, we saw an attractive opportunity to repurchase our shares more aggressively. We bought back more than 2% of our outstanding shares in the quarter, which was accretive to book value by $0.08 per share. We have continued to repurchase shares following quarter end, having acquired an additional 1.5% of our outstanding common shares through February 12, 2018. We expect to continue to repurchase shares as the market presents us with attractive opportunities, while balancing the accretive effect of these 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 ratio and the on liquidity of our shares.
"During the quarter, we made further progress extending and improving our financing sources. Our inaugural non-QM securitization closed in November, with excellent execution and strong investor demand. We continue to acquire non-QM mortgage loans and are optimistic that market conditions will support another securitization later this year. We also participated in our second Ellington-sponsored CLO, which priced in December and closed in January. Execution of this latest CLO was even stronger than the first, leading to a higher projected yield on our retained equity tranche. We also significantly improved the financing terms on our small-balance commercial and consumer loan financing facilities.
"Reflecting on 2017, we saw heightened competition for credit assets throughout the year, and our disciplined acquisition approach led to a slower-than-planned deployment. In light of the volatility of the past few weeks, we believe that the patience we have shown will ultimately be rewarded. We are excited about the proprietary loan pipelines that we have built, and we continue to find opportunities to improve and diversify our financing sources. We project that our Credit portfolio will reach desired size during the middle part of this year. In the meantime, we're taking advantage of our discounted stock price by repurchasing shares, thereby supplementing our earnings with book value accretion. Finally, we are actively evaluating the potential actions we may take in response to the passage of the Tax Cuts and Jobs Act, including possible changes to our investment strategies and to our structure as a publicly traded partnership."
1 Increase (decrease) in shareholders' equity from operations, or "net income (loss)."
The following information was filed by Ellington Financial Llc (EFC) on Tuesday, February 13, 2018 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.