EFC - Earnings call transcript Q4 2017 | Ellington Financial Inc.

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Operator

Good morning ladies and gentlemen, thank you for standing by. Welcome to the Ellington Financial Fourth Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this this all participants have been placed on a listen-only mode. Then the floor will be open for your question following presentation. Instructions]. [Operator now Vice turn President is to floor pleasure Cozine, Maria of my it the to over And Investor Relations.

begin. may You

Maria Cozine

Thanks everyone. good and Carla morning

that the this start, statements meaning forward-looking XXXX. of we I Harbor like Litigation the remind Before provisions Reform Safe of of would statements within made Securities call conference everyone during the may Private constitute to certain Act

historical are not in statements nature. Forward-looking

update as Ellington and Financial; otherwise. new be any no who Penn, Co-Chief undertakes are annual revise are report Mark XX, As to on XX-K her to upon described forward-looking of Lisa of Lisa under Officer; or from the on risks as Chief March company of date statements call, on Executive have I future estimates whether these statements, me information, call Item and Officer the obligation today future the of with Larry Financial of expectations, differ filed could and of its as company's this retirement result of XXXX, variety statements our forward-looking that events cause Consequently, to replacing call a predictions Chief as Officer -- subject XA Mumford of our will Financial Chief at Tecotzky, a Mumford, beliefs, during our on you and made uncertainties rely end actual forward-looking made our Form and the events. results the should Officer not Statements projections. conference this Investment or March.

turn Slide call now I Management's the available With along. our presentation fourth X on website, Larry. described to prepared over quarter will ellingtonfinancial.com. to earnings Please follow in earnings is our track the release, will presentation. remarks turn to call As our press that, conference

Larry Penn

call quarter fourth We Thanks listen the you're to time earnings our call. and welcome everyone appreciate today. taking to the XXXX to Maria

has contributors to I'd next the retire past Lisa As like years thanking Lisa Mumford Officer Ellington Ellington pending been and to service had the of which success Officer Sponsored of Hurley, financial Lisa's announced December, like estate of in talent was and time, the to direct he Financial's X various this that since residential investment by his And both the retirement. and end REIT the Housing, plans CFO Ellington to with to specialist in first, real single including have investments for on X inception. for been key and nearly JR would commercial month. Financial. Ellington leadership our Chief Officer upon its around has side, as then Financial Ellington the financial during start served to multifamily co-Chief crisis. dedicated investments of roles also Treasurer, an that congratulate Investment Her focused wake her on side Financial promotion JR currently as and I the Chief Ellington and of mortgage in Financial years. on reporting

Financial's year-end. highs headlines markets November. low So, upon XXXX spreads a reached and an easing throughout experience financial in steady was will CFO. hikes in going rates were Controller, in To was three and a market. Ellington role retirement. equity all-time Financial's Washington quantitative to and Interest first And administration the have historically rate exited as decade. new geopolitical reporting. fed persistently of new despite as low tighter over brings Credit in Lisa's grinded record and pullback [ph] Ellington XXXX year year remarkable the several same and into significant all-time at also Officer over investments Accounting Martin, his Volatility capital comp as promoted considerable JR Chief Chris congratulations to expertise, be well who the unusually

story. diversified grow different to built witnessed based and and the on sourcing. credit We we've a as securities the treasury and its At widened range, portfolio entirely fourth nicely in have stocks dividend. have of violent help since loans has spreads Besides broken Ellington we analysis of size were to cover able highest XXXX. think VIX XXXX few is touched where the XXXX fundamental closer getting proprietary of in the portfolio it course, and patiently credit that’s out so Financial our our we quarter Of its to swings these even in needs XX-year to past second weeks, level be

credit million by is $XXX our increase. grew portfolio Specifically, quarter-over-quarter which a XX%

somewhat assets interim that were ramp lower investments acquired yielding to we that these higher we liquid included yielding couple of of over more the next continue quarters. expect the Now but that in chunk figures term long to

So, strong growth that elaborate growth XX% the part Ellington second fourth-quarter very financial per will a We last quarter. share you is that XXXX extrapolate per the credit call. approximately not $X.XX portfolio. showing up had Financial's certainly our and portfolio, value this continued quarter in in in [FFO] all this off third X.X% on Thanks in more January. later the solid should to JR week from And improvement start. book Ellington was share credit the announced steady in to

mentioned are on are we and we summer credit earnings portfolio that that this guidance our the the will that year. be of the ramped part middle coming forecasting gave together last in call we pieces nicely our all by earnings the So, and are fully to we optimistic as release

$XX reloaded was accretive of out or value additional X% capital last shares loan of trading a attractive prices outstanding book to compelling of $X.XX of our million per We our shares an end our to which with our coming access During share an aggressively. our have the million additional for pipelines been use of our total directors Even stock X.X% just of X% we to repurchase stock quarter shares with stock outstanding. quarter at are outstanding we program though share. love Since discount repurchase worth our than a back our and our more shares the an shares by recently. board book X.XX value price about purchased significant opportunity of we our or week saw fourth buybacks bought nearly

mentioned we more XX% buybacks As we should the I significant buying accretion higher and a or providing substantial stock past have where that. to price. are discount earnings-per-share a value book of to be level we to these is to lead stock aggressively and think in book ultimately a value levels both At accretion which will that

and and partnerships financial especially in partnerships businesses XX% tax have from from status in income passage publicly December With Tax the the tax federal XX% converting many discussing the those been possibility traded of maximum corporation. rate Act of corporate Jobs Cuts of the lowering the in to particular their to

of our as performance has traded quarter will delivering is Lisa the portfolio. this here CFO in discuss As I'll response with been Lisa Ellington is alluded actively duties but financial similar a call ongoing portfolio results. JR whether our my and Mark us our of to of actions going will today After in calls. new follow and earnings markets JR partnership. laws the and tax reassessing Today's in formats earnings our on the in from potential discuss outlook management transition will rundown over further evaluating prior our performance publicly later to includes market of our our the structure be and the of forward remarks call. closing Financial the Mumford JR, release for call the spirit our in that the

Finally, JR. turn I will follow the to to the with before that with floor call opening over I'll closing remarks questions. And

Please I'm refer everyone. for morning Financial good and over attribution Ellington and earnings excited Larry, on between Slide you, to our credit as X Chief Financials Thank Lisa's to upon details strategies. retirement. the take agency of Officer

which quarter. assets million contributed $X.XX generated or while of or for gross we per million the share. After our generated share. per to cents expenses rounds other a zero fourth our per slight the agency produced Our Credit $X.XX net $XX.X income credit of of and strategy loss strategy income $X.X adjustments, share income entirety of $XX,XXX

$X.X quarter of of the income the share. brief in results. had drivers The comparison, is our overview For or net $X.XX we per following third of million

with share $X.XX which the EFC's about year-end. XX% increased Gross equity income represented begin Let's per of by at or million credit quarter-over-quarter. strategy allocated $X.X

made and reflected in carry quarter-over-quarter these higher interest is income. incremental mentioned, the investments As we from quarter Larry this purchases significant

led increased mortgage these Financial driven quarter purchases this hedges also Further so one to mark-to-market the tightening credit in of significant the by is were gains Bridge strategic borrowings losses activities to while unrealized interest certain first a Our with Net non-QM credit expense also the spreads Long on contributing quarter. value gains the for our and correspondingly assets an completion our increase higher. of and securitization of other on of originator investments.

$X.XX securitization, these over quarter because last with considerably other the million investment per related cost non-QM rather fully expenses expenses share life Additionally, were deal deal. or the amortizing than associated higher than the $X.XX of were we expensed the which

P&L activity interest the earnings of end for our from limited strategy. of the Finally, quarter. was interest impact primary At rate driver trading was this hedges in income the quarter, and credit

increased we times. the income have in and Over credit steadily the increased size course XXXX, our portfolio our of interest of net

UK from quarter, to non-QM generating smaller in XXXX, predictable following to earnings loans, commercial strategies, steady non-conforming we we interest high-quality a In assets mortgage the the look the we consumer added our RMBS. assets As and loans fourth will income believe stream. forward key be loans, and the loan balance

Larry the we middle non-agency a amount yielding mentioned, of COL U.S. As RMBS in also substantial more lower liquid acquired and assets somewhat markets.

on they provide deployment are have EFC. Although capital into the and for that relatively yield liquid using target our these carry strategies. capital yielding solid higher They the below pending opportunity for investments of positive are

remained effectively deemed sheet loans for are non-QM reporting securitized the GAAP we purposes securitization the balance Finally, on to because our we control trust. that

As quarter entire billion the at caption third is credit with In portfolio value. under included sold XX% to our securitization sheet conjunction our have previous the our the from the total, Secured consolidated $X.XX so we balance parties year-end. fair XX% the at sheet on to debt a previous from Borrowings Other balance an year-end, securitization the increase in of and increased on result, the

UK loans this increases and now RMBS. hosted originators. small strategy. We had CLOs quarter-over-quarter Security from consumer European non-conforming strategies mortgage income loans, performance in balanced that non-performing gross the included mortgage in income related investments and Looking gross loan strategies, at non-QM quarter higher loans, following loans, commercial by

also corporate than income declines We although quarter-over-quarter value. RMBS quarter excellent and profitable from CMBS had We on in this was slightly non-Agency our quarter. strategy relative the legacy an third credit had in modest less

rounds RMBS loss strategy which $X.X of share. at agency the for Our per quarter fourth generated $XX,XXX a slight

the debt net a plus Leverage assets hold XX-year and interest coupon pools income investments which for the a significant would Since These in pools to fairly and as of interest a higher credit widening the consolidating consolidated Although and XX, Combined the current the increased of reduced holdings RMBS gains repurchases reversed. when dividends. million September been unrealized from GAAP duration coupon losses. ratio X.XX:X. XX, million was we with broke XXXX. budged pools due capital strategies of reporting were that XX-year quarter coupled investments Many securitization we mark December higher related our meaningful end resulted our has higher debt-to-equity agency had EFC had significant X.XX:X because quarter. to during increase agency year-end non-QM the market ratio we base leverage X.XX:X. hedges At have agency growth purposes. coupon rate over quarter on roughly of and had as the offset adjusted RMBS we non-QM also XXXX, our spread and weren’t we debt-to-equity even. compared shorter losses such December XX-year by on our at previous to If that pools ratio fourth The the the securitization and XXXX of much was XX, $XXX of $XXX

During quarter XX% at XXX,XXX on shares repurchased the common book we discount value fourth per to diluted a average share.

discounts these of by share repurchases share. per result a our $X.XX As were accretive

full-year expenses diluted value annualized of with XXXX with per the of of our expense book We which were XX.XX. as presentation representing line general well. for was million, the turn quarter an in the ended ratio share ratio operating I'll over to X.X% now For the $X.X quarter Mark.

Mark Tecotzky

the limited high cues their sheet. such a March themes was memory had other the QX credit from credit rate like taking the volatility. of like now. spread QX you yield and balance market themes you competing flatter JR. yield, strong distance felt are In with hiring steady the many All limited assets stably sectors stock tightest many continued that spreads from commoditized in year curve earlier interest volatility as most established and Thanks for investors

For we EFC helped year. are it the was QX for QX only performance and took XXXX. the also helping that a initiatives throughout also was realization on we portfolio a the worked very a lot in but of quarter of not busy live EFC the steps

First, and we substantially market. by two purchasing attractive in also There ways. Organically more in the portfolio. with two in proprietary our proprietary assets for were grew grew big We accomplishments open the pipeline. way traditional our investments,

our non-QM EFMT Firstly, with in is in strategic portfolio non-QM inaugural ideas investment. the ticker [indiscernible] we originated by securitize on November. the our our XXXX-X a All which equity deal Bloomberg. hold provider mortgages and were mortgage which we priced

gross LPV financing with was rating agencies XX% well our a received deal Our guidelines us structure agencies of allowed to balance. disciplined and both Rating capital that attracted of low principal proceeds us by rewarded generate investors. and to underwriting

junior in the spread We deal financing that are in than our more into retained. investors we and bond result, we grow performed not non-QM on value footprint. and significant magnify additional only margins equity on the interesting franchise competitive in EFC's is a loans mark list market the that to week. to to every growing focused to provides to the of the loans million bought but [indiscernible] that long-term that are currently We increasingly with have protect portfolio stake securitization directly has levered $XX had potential future. allows isn’t blue-chip fell the balance tranches purchasing also and and profit the non-QM investors The Lynch and sheet a unsecuratized excess is has market how deal have constantly much As over from us company of add our well The [indiscernible] on

the of and was The Ellington second equity by of debt. the some managed of ESP milestone second CLO significant growth pricing and our organic the retention

This loans, issuer, coupon advantageous EFC area, year was board. have tighter a attractive are cost to example non-QM terms our Now taking This sheet us in is to that more our on how spreads and the we improve issued net CLOs. unsecured levered CLO and among we from financing in finance spreads. to worked further way a loans, believe lines in funds -- source this with received is assets gives more quarter financing improving the commercial capital EFC's both managed been from debt improved the growing par, vastly at EFC small-balance ago negotiate The great our hard tranches. late to peer you counterparty us in LIBOR are financing name that and interest unsecured EFC its than low for our terms an notes planned longer participate structure. first-time EFC across deal to we in to NPL our attractive advantage at have no any and able retained among been can are demand from benefited the deal of the a cheapest is last well no we lowest lenders, unsecured financing we Ellington further QX we counterparty our We look of risk. at Taking when consumer residential and among our the great for included close possible. group. lenders. unchanged lender all-in has we issued Working lower mortgage LIBOR summer balance five debt market to keep The without rising, which margin to Financing of the

can from year, announced, we share brought per portfolio to see January is volatility as The since Looking short seen serious book into estimated performing XXXX. at early and XXXX, the well, yield nothing which far we've value have the this that you market the X.X% we've we ahead returned duration so high seen like non-annualized.

high both by yielding commoditized as largely on acquire to Instead purchase varied and sourced typically most transfer These expertise downturn are focused away commoditized such get model. market assets underperforming market. with credit impacted have are security analytic from in typically have gyration. stayed the yield investment most we sectors less We credit overall the in extensive a less for likely high harder have structured agency that sympathy their

we currently For we to of at as positioning increased is the certainly how can mortgage-based this has year QX. were We've volatility our portfolio to positioned this able spreads, grow overall hedges. hopeful credit has didn't agency some year-end. NBS our yields as seeing QX volatility rate at I add like our be in have underperformed assets are That defensively helping more. exposure portfolio quarter higher than grown earnings interest that close very and most rate interest they in our attracted so proceed credit and pricings been agency We're are so we'll moderate we're and income particularly EFC positioned. actively the with reduced us finally far so traded in year high been that growing much

magnifies economy an tax the pipeline inflation their our Our nicely believe earnings in opportunities. our the of and have a first volatility stronger overall and may from to recently We earnings. to per book price share and accretive hit the expectation, most to point investments two metrics smaller an of swings book continuing count tipping with mines because most buyback earnings and with that discounts wild using passage with land reform. back is trading important to in Meanwhile increased that coming The basis, drive value skittishness increase markets progress and create price drive this can that both to our QX have stocks been further share company, been contributed share portfolio year. amplify at all proprietary big dollar gives more this, share tailwind. of buyback handsomely powerful buying is growth continues a our of every We're to to levels and

consumer-focused borrowers seeing we in our and I strong For deductions. loan most in think and rise wages consumer will benefit and assets, performance increase are the from mortgage

focused recent in capturing call turn by dislocations. the back the are We Larry. to opportunities to presented the that With us I'll

Larry Penn

Thanks Mark.

originally we XXXX, capital pace on rewarded. was than our believe our had planned of that back slower being Looking is we deployment patience but

our covering acquisition we our as in hedging rates the prudently been are seen we to to now growth quarter, disciplined share true believe ever. otherwise with with it's volatility that the of yet. and recently staying earnings acquisitions XXXX our but far, on repurchases. continuing in opinion reaching there very happy way more essential desired strategy portfolio recent and too our price are made pace we our stock about managing the than solid reflected long progress risk be so I'm continue our accretive towards with and dividend Given not fourth have we quarter fourth plan We supplement our portfolio project midyear. to in the healthy we meantime, in In credit still to around our standards

and discuss like potential in I Before we close Ellington Act briefly the of Financial. the impact to Jobs Tax Cuts

we more assets flexibility assets crucial a our the own having group including legislation, the of first as believe as As success. the Financial been a estate formed fully in we even traded non-real a a evaluating we the could including a to actively company actions REIT. partnership. and rather to release the changes tax risk XXXX may as we enabled REIT hedge passage partnership are also this credit on possible publicly of structure traded element potential than it a are diversified ability strategies our us structure to and we has we because that We than non-mortgage to When earnings our take of to response Ellington our publicly mentioned chose in investment to

'XX our to other For crisis and example, with financial us intact struggling the were to in book credit-oriented survive. XXXX value REITs enabling when whether

traded in to our at CCORE that publicly While tax corporate our the more felt or effect advantages was the structure time we a momentarily. income rate consideration corporate at now has again. of federal flexibility has serious XX% for maximum rate corporate income federal been reduced tax the partnership the We that because to tax get a the structure. to idea corporate that even rejected than which I'll too price structure a XX% pay back corporate deserves inception, steep But structure

at Namely financial We website convert everyone income and and one a and the a Many to will like work to announced significant of publicly and to of arguably it hard the the Financial alternative ramifications, some most C such partnerships C Apollo, on of these analyzing our also KKR asset PTPs amount the is appreciate that than asset manager help corp same sense Blackstone, higher all to conversion to pros alternative corporate the corp of have be with have of possible asset alternative and already the make tax management any a conversion. subsidiaries. list to been flows for take the time cons bar the them of a to conversion will the decide other for we fair issues repercussions PTPs. corp C for decision. that through our their considerations analyzing considerations posting is they're it of corp advisors for asset C manager of managers fee settle of as virtually traded the easier Ellington block In

fee income corporate whether that rates they managers to asset alternative the is tax already or for So, not. convert

incremental these the the So, conversion rate the of unaffected. full effect income their by tax a chunk because and caused companies income tax is effective isn’t of corporate tax for rate big a

all the be incremental since as fee conversion will virtually similar however closed rate effective opposed our of Financial rate. Ellington or tax to has full us corporate income income for income investment income the effective tax For to income, upon

whether that for made, no us assure or shareholders of and of can manage it's caveat, none feedback take and alternative you tax that been Even occur. and with made, being our decision only for step not our of course C way even changes PTPs. probably a welcome structure in to is We the our So, speculate potential to any input of major close too not has converting shareholders. remotely will asset to most be will the just corp but early on than such harder I to

lower We depending after-tax course tax partnership result to publicly tax overall and other it's rats, shareholders. local on higher also including are traded distributions in but All similar many, for corporate out exactly our many structure possible a to effective of that distributions while shapes and struggling recognized quite that for alternative will some conversion federal but also conversion C traded our The corporate after-tax not where asset has income shareholders that just corp advantage. rate with issue. And these also managers analyze said, publicly its and issues. continue we will interest state

We our what that mission, our the laser grow remarks. businesses am market primary on I reward just year, so strong your prepared continuing us I Financial confident the this and now of our track. take thereby first is ultimately Ellington earnings. this last our that mainly will and focused of on our remain for. quarter new this is heads That will month down Operator? and are right to believe are We're and now the staying credit questions. is concludes to fourth year And pleased keeping

Operator

Instructions]. [Operator

first from Credit Suisse. Douglas Your with Harter question

Douglas Harter

to credit fully share get buyback? would the change you expect ramped Does to Can portfolio? that talk that Thanks. a the you about due timing to

Larry Penn

pinpoint haven't time. to it, anyway. of we Not enough, a standard kind a Obviously, pinpoint subject it’s that exact of tried

yes, right, million I a talking mean about on difference you're I the So margins, affect quarter. a will talking certainly things X% huge last about a think it is X%. having but $XX repurchased not quarter,

the not to that's too needle So much going either way. move

Douglas Harter

kind credit is expect about, duration what of you just little of Got off roll to those how assets? about talked a those more you talk you longer-term of do it. some And the the can the assets bit and kind those of placeholder with of sort of

Mark Tecotzky

Hey, Mark. Doug, it's

in have rate CLO of mortgages and non-agency terms sensitivity. typically are they season's some primarily rate little interest very holding. And very seasoned sensitivity. They So, interest

don't have interest they rate So, sensitivities.

expectations of more of hikes of the lot cases prices higher rate increases. impacted So, been In their sort a from for them. haven't LIBOR rate generally by fed supportive

portfolio. in enough they assets you share a long, because our time, can represent So, of there over them them are have cash. had significant so for we've there to is that a used financial these convert long the been But like in liquid lion's Ellington into yield capital. advantage We

redeploy some you less see that capital high liquid can yielding in. the investments If you

Larry Penn

spread point, of many this it assets they perspective. just to so at of our targets And then the half in probably put have

Mark Tecotzky

a efficient really manage more sheet. just to That’s balance way our

Operator

Your next question is JMP DeLaney from of Securities. Steve

Steve DeLaney

generally. First me applaud the the sort me buyback optimizing say mid balance portfolio -- credit of mentioned you the excellent. or let is Larry let for XXXX just activity sheet

were So, be? billion size what's you credit what credit in give idea the the rough in us portfolio for portfolio? your end the of of you growth of might X right at in the In portfolio. other magnitude a Could the sort that of words, target the forward

Larry Penn

with. to will said we rate. they to optimizing going I more start yielding fuzzy are us portfolio say continue acquisition but the standard be certain right and to what to able to we covering that obviously would be I it's as our then available Its by -- Sure, a that I a say I dividend are you we think was now right and are assuming seeing have assuming assets instead

on argument for are be to did at obviously looking obviously basis to I by think gets want number fact midyear. is in little quarter QM bit difficult And GAAP to by but made that securitization on consolidate. over or if distorted it terms when a million sheet I balance that have say don’t a we I can muddled the little sheet for it get either a and under that’s we a thing there little the non there gets add little example the of those one XXX consolidated you and but we'll or against -- actual think a balance not loans around remain

So of in the assets yielding as that we income perspective locked that obviously sense trading that’s we to and to these also order higher want, well is the part is as want. as growth matter like from portfolio quarter would is perspective replaced with the composition asset lower going this going an yielding one And just that growth due from an generation interim with to well. assets we are that we

more So, some the -- seen that acquisitions the as have a of this from real was growth could quarter growth the borrowing in as almost quarters. you XX% from portfolio have you saying future think -- of been that we long-term

Steve DeLaney

something And said that have for me. clarify so, something you may helped

the you as right. on loans you your a that -- retained think XX the just securitization, are I the loans -- am on gross Page I On telling that right? this me table And -- in hearing are non-QM your not showing securitization are bonds total it's basis,

Larry Penn

Yes, correct. that’s

Steve DeLaney

obviously you offline as equity than that’s securitizations and bigger you bigger something GAAP for to gross have about assets? consolidate we far allocation just the just the So a as with actual whether get of its question useful talk can -- is but more

Larry Penn

Absolutely.

Steve DeLaney

And just to the now under had trying new been authorized just optimization, for understand. the a X.XX or authorization. is X.XX stock I'm buying prior back clarification total you board the additional an

Larry Penn

I was our I X, affected in it's on think it February think it? And was earnings release.

with XX,XXX which it the in brought purchase see that was to share announced the went authorization press it speak. release between shares earnings February at that to included look of X through, we what and XX you you program so purchased XX February was when and when we If February was the

days. for last number been good we've few pretty the what basically that's just less So buying

Steve DeLaney

level. said is you obviously X% about which total it's but of good a shares Okay,

Larry Penn

always Right we authorization we back when it. need for go more and

Steve DeLaney

generally worked what value, And of that think noticed detail, has asking weeks. value in and just you January But we or just X lot I just put not positions performance? one week. past up final when what I'm just hedge favor out comment this so could just have X% of strong Okay. the certainly for well almost in over the book on to here, your that a last thing, book X asset but delivered kind what really classes you

Larry Penn

get into much to too want don't I Well. detail.

be earning that X.X% saying of in non-recurring. gains mean sort going month are Some some of and changes not item. sitting and here that obviously month the in a to to realized item first we reflects realized we're are unrealized I

for market you to up the non-recurring and them there have down. We we obviously we So, create were things can do portfolio. us changed but some and conditions mark do call

I time. agencies we about mean flat So in obviously talked quarter. there, well. year hedges which that about And doing our this went And is has are

So, don't want detail to much into too get there. I

Steve DeLaney

sounds Understand, had you might well. and to like but it volatility statement, it when the an a past and volatility that takeaway pretty just guys you And in general tended we handle and we periods then might investor outperform. in of as

Larry Penn

alluded one They lot to That’s assets thing now right. and the favoring are about we're this is there that shorter of market that Mark to the to a assets to accumulating. it, that that think I been them, exceptions, portfolio we not the to tend mean bit up than vulnerable. tend are that high look in of And that they all and be have but be

at you if you've frankly that to conditions you are move got So, pay for in have and loan, all like versus a massive in that a when coverage value commercial in huge buy downturn within resolve macroeconomic less property. some expect probably that if you loan a situation terms you And property a idiosyncratic are effect. about because going a non-performing one, of they Number overall should them would not year them. to for that price on example what I buy just things of two say

term. Our consumer loans also short are relatively

acquisition that on it really amortized and of or our both on not walked to some it's first conditions from down, marketing right. interest so depending course, So rate keep like -- rate for as X are as us things loans XX-year like fixed dial we is not up stuff what wasn’t the non-event that is that the duration volatility short always, again, interest change criteria clearly see a that we're And you be of working really can we and should quickly or into month. type portfolio going we're in rate criteria or well and and

Operator

question with Eric is Hagen next KBW. Your from

Eric Hagen

talk for Appreciate investments how more you the JR acquiring into to it. about new be appointment. investments portfolio? you the Can and CLO on Chris, congrats able just your bring and might pipelines quickly

Larry Penn

Ellington and ones risk there does risk it including good case portion tradable of in financial participated rules all those to the two deals, whereas chance one development seem away it first that retention going the -- non-tradable. just we Financial at I'll add interesting was to CLOs the that think is which those I securitizations a the retained portion for -- a a is if rules sponsored was like right, core from what I go that so right retention will go actually we a become two will there of away, say large of sponsored, an that looks least with that as having before aside would

in even that of that a pieces good value. maybe worth would I more makes argue terms So, XX% those their X%

not We plans a trade that’s clearly positive. just no but makes to those well. securitization having necessarily easier as retention And just have risk

in quite easy, this they assets large and so So, that to we I lot that that that -- bit did it's typical is CLOs and the assets are of that. little asset and are we find it's gravitate [ph] we ones might was the to they book like companies a for deals accumulate things and them to a undervalued, that an to two can have the so but not for really be the work not not were CLOs that think like that sort enough that’s some into, of are going be We we structures we actually distressed things niche, based that yieldy a towards fit the angels, how high CLOs your to that and they with of we continuity large enough think but do falling in upon used sense smaller our leverage your just a a capital that. tend very also have ratings quicker that extent are which typical smaller don't don’t class loans business

year. depend deals couple to that certainly conditions. going this hopeful but do You us on We or a last that’s three are market of year saw we obviously two can do

Operator

Crispin from is question with next Love O'Neill. Sandler Your

Crispin Love

covering when first So should or coincide changed an a your last the about the you a little I'm you little talked bit of the desired of update expectations size XXXX. of wondering quarter and that. bit the quarter And reached second Have on just this at all maybe dividend all? just potentially credit portfolio?

Larry Penn

have dividend we're Yes, that’s to to be we income. is with are cover a level that think that line the portfolio kind given able of we net interest where the yields just set accumulating we seeing largely the when get right, the goal

prior first the So, of saying And we I we're year the us gives the about book head I good to the really obviously of we're the but quarter year, not is first place. see middle of value looking obviously caller's net think where and on dividend. a that mean terms start, month interest some increase just of activity mentioned, that in question, was I taking income. as and in covering

of and and where really going place saying terms in terms year the in that's as So we're, portfolio and year at our we're middle of what going targeting. the in we're part is where this of reliable size, repeatable to for important with this the us it's in more of is just forward yields where middle both is level

Crispin Love

to kind just now SBC right still what the same this to know quarters. you a of also couple bit. seeing in is Okay, kind of the consumer quarter best was your of fall then and little for I off kind of thanks. opportunities? seeing next And Are expect opportunity assets non-agency mentioned the are you

Larry Penn

you do that? Mark, on to want comment Yeah.

Mark Tecotzky

residential big been good non-performing I made just Europe Yeah, opportunities contribution, the with opportunities on to And commercial we're in for good loans of assets. been see non-performing, like bit that's to think we a thing volatility have less little competition some the going some a reforming space. Same has this the there. presented small us mortgage a opportunity. there

we So, across I we're the things to think going see board, like.

We non-QM. continue to ramp up

the consumer of flow that to portfolio mentioned You arrangements. through continues grow

CMBS there sort big the is year. I'm going a area each to pie in So, of dynamic to changed and grow. to response in was relative market optimistic, really think of lot more we're see an to we're big year the opportunities opportunity. of diversification. this That opportunities thickness do And see I didn't last we benefit we of slice

So, facing some like Europe, CLO. having debt corporate facing U.S. consumer debt versus versus having

volatility power I keeping overall think reduced high. reduced your without, earnings while volatility you

mentioned for going in to we're I the see sectors keep to going best we're rare. portfolio We So, those diversified, some but opportunities growth.

Crispin Love

more If your one for of couple regarding potential last it this in Okay. to reading line? C to corp. something kind comments do a changes quarters And kind X,X,X years. is the I'm happen you were than down next me right, think the of of thanks, one that's just If rather

Larry Penn

I serious want don't to something going that's all It's I to ramifications time speculate. to take the that consider said.

but we very rather, happy soon. this, to that? would think we're happen is discuss I to anytime all going of about nothing How

Operator

is question from FBR. with next Sara Your B. Riley Jessica Levi-Ribner

Jessica Sara Levi-Ribner

one asked leverage. but been on have one answered, and Most last

securitization, about X.XXx. is the ex that correct? your So, Is leverage

Larry Penn

Correct.

Jessica Sara Levi-Ribner

And would target? what your be

Larry Penn

get think to bigger slightly I could a X.X that could than I be it it little higher. think, maybe

junior which those are equity of on talking riskier of assets retain upon securitization are obviously or others. I about. again that's we depends assets you When tranche sort some think a than

So, those leverage typically we right. wouldn’t

assets we have times we have agency that asset ones some what are we credit ramping So, yields of the with obviously versus X%-X% on include on of yields that maybe -- it depends turn a that that those, could blend lower range on -- is good in or… the kind two have those of full are leverage agency of and ad

Mark Tecotzky

Yes, [multiple excluding the speakers]

Larry Penn

would we numbers well. but -- risk the credit agency little short our the low were all so focus maybe portfolio very the TDAs obviously as the so Yes, of leverage believe bit very a itself. obviously on I because that strategy leveraged, more is in affects

say which be So, could it's X.X think is go think definitely let's if you presentation a securitization that you you and I I let's of the yes, consolidated if the think I have that target. up times excluded the turn and Page X.X say would good decent times ish probably then X.X X

Operator

Ladies and this XXXX quarter Financial concludes gentlemen, earnings fourth Ellington the call.

You may now disconnect.

Ellington Financial (EFC) 14 Feb 182017 Q4 Earnings call transcript