Ellington Financial LLC Reports Third Quarter 2018 Results
OLD GREENWICH, Connecticut—November 7, 2018
Ellington Financial LLC (NYSE: EFC) (the "Company") today reported financial results for the quarter ended September 30, 2018.
Net income1 of $6.7 million, or $0.22 per basic and diluted share.
Book value per share as of September 30, 2018 of $19.37 on a diluted basis, after payment of a quarterly dividend of $0.41 per share, as compared to book value per share of $19.57 on a diluted basis as of June 30, 2018.
Credit strategy gross income of $11.0 million for the quarter, or $0.36 per share.
Agency strategy gross income of $0.7 million for the quarter, or $0.02 per share.
Net investment income of $11.7 million for the quarter, or $0.38 per share; Adjusted net investment income2 of $12.5 million for the quarter, or $0.40 per share.
Announced a dividend of $0.41 per share for the third quarter of 2018, equating to an annualized dividend yield of 10.6% based on the November 6, 2018 closing price of $15.43 per share; dividends are paid quarterly in arrears.
Debt-to-equity ratio of 3.04:13 as of September 30, 2018.
Third Quarter 2018 Results
The Company's results in the third quarter reflected the continued growth of its credit portfolio, which increased 15% sequentially and drove net investment income of $0.38 per share and adjusted net investment income of $0.40 per share.
"Most significantly for the quarter, we were able to maintain the strong growth of our credit portfolio and our net investment income," said Laurence Penn, Chief Executive Officer and President. "Our third quarter adjusted net investment income of $0.40 per share essentially covered our $0.41 dividend, and we still have room to grow the credit portfolio. In addition, we had excellent performance in several of our credit strategies, including small balance commercial mortgage loans, where strong origination volume and favorable loan resolutions helped generate a high return on equity this quarter. In our CLO strategies, our first CLO was reset with improved pricing and structure, and we have begun accumulating assets for a potential fourth CLO. Our CMBS portfolio also contributed significantly to our third quarter results.
"We believe that our robust growth demonstrates the strength of our origination and sourcing capabilities, as well as the benefits of a diversified portfolio. Our larger portfolio this quarter reflects the continued growth of our non-QM loan strategy, where we have reached critical mass for a second securitization. We have also begun to originate and acquire residential bridge loans, a business where we see the potential for very attractive risk-adjusted returns on equity.
"Finally, our emphasis on hedging interest rates and certain credit risks in our portfolio, along with a commitment to maintaining moderate leverage and a strong balance sheet, should continue to provide significant protection to book value, particularly as interest rates rise and volatility returns to the market."
Corporate Structure Update
The Company continues to evaluate potential changes to its tax status. Although it has not completed its analysis or made any final decision, the Company currently expects, barring any unforeseen impediments, to convert from a publicly traded partnership to a REIT in the first half of 2019. In connection with such a conversion, the Company would expect to take several steps to help qualify as a REIT, including selling certain non-real-estate-related assets, and moving other non-real-estate-related assets into taxable REIT subsidiaries. A REIT conversion would also be facilitated by exchanging a portion of the Company's existing public senior unsecured notes for private notes issued by one or more of its taxable subsidiaries.
1 Increase (decrease) in shareholders' equity from operations, or "net income (loss)."
2 Adjusted net investment income is a non-GAAP financial measure. See "Reconciliation of Adjusted Net Investment Income to Net Income" below for an explanation regarding the calculation of Adjusted net investment income.
3 Excludes repo borrowings on U.S. Treasury securities.
The following information was filed by Ellington Financial Llc (EFC) on Wednesday, November 7, 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.