EFC - Earnings call transcript Q2 2018 | Ellington Financial Inc.

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial Second Quarter 2018 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] It is now my pleasure to turn the floor over to Jason Frank, Associate General Counsel of Ellington and Secretary. begin. may you Sir,

Jason Frank

morning. good and Thank,

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

are not nature. in statements Forward-looking historical

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

X now call qualified to their notes the presentation. at note, press I As track along. will With follow remarks the earnings conference turn that figures end described turn the on second to the our over ellingtonfinancial.com. presentation. earnings in any prepared entirety back Slide Management's call to our our by presentation the quarter references this release, will in Please presentation website, is Please available to Larry. in of are that,

Laurence Penn

the We everyone today. quarter to call to Jay appreciate to listen our call. second Thanks, taking the and time you earnings XXXX welcome

were quarter. quarter. today performance last continue growing earnings Ellington the to of benefit which this Please first momentum portfolio we second had our posted prepared the X% on another website excellent Financial Our to will in our build from Slide able night. presentation strong increased to follow We the the we on as that turn X, credit quarter remarks

where of space, credit there a be expertise RMBS pricing phase overall a differentiated we also yield a and much find Overall, U.S. in first income quarter, CLO Financial growing past returns. our the in deep Adjusted $X.XX dividend is $X.XX the our strategies; covering per the loans, loan performance on to underwriting credit rely We non-performing period of Ellington we million year of in corporate the European for achieving almost performance annualized. to market return several issue book on annualized of loans. loans, non-QM investment we our securitizations is or This our investment for loans, The assets. Among results. value than up third U.S. dividend CLOs, of own. an We XX%. CMBS, competition in small or even lower for growth posted Ellington strategies market. the sponsored of quarter related and the key relative of credit security in quarter. strong generated X.X% commercial share of balance including half consumer XX.X% is European result value, less within As the Based CLO widely Excellent have new tighter and a believe corporate syndicated continues issuances our inefficiencies previous all driver our performance nicely from strong $XX.XX X.X% it's mortgage and is per quarter's less longer $XX.X to in the closing our net loan a our income strategy through increasing for softer benefited and leverage European dividends, on second economic now participated results. net rated yesterday's price share CLO our drove portfolio the

Moving percentage Bloomberg. upgraded the of all classes during reported the to securitizations This inaugural highest [ph] XXXX-X. deal securitization, non-QM has second the three perfect FMT it's as of our our quarter securitization S&P and vintage strategy; payer non-QM by

current We our are and you entry, that At of quarter-end Please later a credit of and nearing critical XX% favor X.X% are securitization and X various investing regulation. where to of market to agency product our capital that's was banks year strategies blended our for strategies before generating longer for can invested we're conditions. continue where follow-on an a plan overview this turn yield subject we to Slide mass that big focus portfolio the across market where and of strategies. to see big due analytics, where barriers post-crisis compete credit leverage; no of on to strategies in course strategies in there

a short, capital. of on relatively large duration portfolio We portion it's liquidity of kept have constantly so also a the have ample returning and

Our volatility. advantage disciplined periods approach should enable opportunities of liquidity us to take in investment to management of

see of of first of quarter. X, concentrated leverage in this X.XX:X finished with a the our highly X.XX:X a debt-to-equity ratio the also of we at This the with you to agency much As on could compares liquid quarter Slide end debt-to-equity portfolio. ratio

start approaches grow expect the growth composition. rate continues shares I but portfolio and as the desired level-off and it's would to tick-up we leverage size the So to to of as buyback portfolio

market to repo. and is of unsecured our in on as have of leverage short-term the to follow our all our the sheet a call our borrowings that and to today less onto than total past. facilities; equal we We'll shocks much not we market decent relates created balance securitization portion deal consolidate our same term vulnerable are to format leverage non-QM senior course notes the Of these to forms non-mark bank

portfolio our performed, our then our our CFO, is how and how our investment run performed Co-CIO, through will last will Herlihy, Mark discuss results; what outlook First, quarter, JR financial going forward. markets our Tecotzky

Monford to CFO remarks to floor get Financial. recently the have am [ph], our closing with to follow questions. Ellington opening back mention before I we before excited financial But retired I'll Lisa how the I wanted results to Finally, with

forward. insights Herlihy. CFO, we will to continue Lisa's Lisa's that as strategy. we last to is of he our three remaining from Lisa turn with and Financial the Mike engaged but lead Mark be board Tecotzky ever I Ellington stepping as and directors the the the And investment invaluable call As with board as me announced the company to of Investment JR Ellington deep will and company down where as Financial continue joining the on drive Vranos night, Officer over as Co-Chief replacement, understanding will independent

JR Herlihy

fee realized $XX.X per Thanks, fees $X.XX turn a million or Slide $X.XX share statement. second less of to $X.XX and net Please share or share income minus good plus non-controlling net of share everyone. net as unrealized per X, morning, incentive $XX million interests million In generated or the Larry gain down broken per $X.X and share. per for loss follows; per income of and or our investment or of to $X.XX summary allocation $XX.X of change in EFC $XXX,XXX management income net G&A $X.XX million quarter, after of

and share, By as comparison, net net covered that portion yielding. in net our per $XX power had mind investment generate for investment capital proxy share $X.XX $XX.X will per limitations. but higher of any $X.XX in as of earnings cost keep grew portfolio quarter borrowings. funds not that Net of investment our rotate income income. this income a or of or income quarter and view higher continue and net we some million capital the always comfortably credit last income At point it's income Our dividend it into invested asset per time $X.XX we our despite of investment grow to We be share. good our in million net do a has

originators value, thus For where investments in the shows earnings unrealized contribution and appreciation example; equity in up strategic reflected franchise and mortgage is to gains. in

another income never the foreclose credit that's real an of for not Moreover, on we basis successful gain recognize the investment trading. income. Slide unrealized considered our via continued gross in NPL, and from of LIBOR of loss our increase. As second $XX.X the rose per the of will the $X.XX investment In per between a or credit the our while commercial income of gross generate on that to when average cost gross opportunistic share strategy we on yield example; agency earnings the or mortgage an per amounts share, turn generated strategy million on generated strategy credit In typically income $X.XX the and assets portfolio, value or the loan, X the credit a return $X.XX income or quarter. versus did $XXX,XXX per quarter, estate the to net as and in compared the funds the of portion These strategies. the capture attribution $X.XX million agency details total we Please from $XX.X of strategies as our share. share gross $X.XX prior agency of to

our rate and $X.XX EFT's the financing from strategy related gross gross agency related mark-to-market of credit expenses excludes million, million $X.X fees, during expenses end, on X, with and and increased other REO fee. and quarter-end other moving XX% expenses, to about to other and of Slide annualized servicing $XX.X last second or income loss operating the that the to quarter last slight of related million fees incentive hedges an the gross of contribution Staying increased higher did properties. income, of $XX.X of costs, results expense to per utilized million costs, Net our corporate at income impact includes and holdings to most related million which In hedging the notable income and not realized the Other interest consumer second both European $XX.X our subsequent majority to our from was relative quarter other across gains. came change activities to $XXX,XXX $X.X P&L. This our but share [ph] As result, fees in $X.XX in investment Overall, $X.X share the and in on to interest and income credit but million servicing value strategy. portfolio based credit and gains gain the allocated interest general Gross management second assets the income net a quarter-over-quarter, strategy. quarter. by million. total XX% quarter now equity million total, realized of interest from from and a increased $XX.X down from per portfolio positive of approximately investment and gain prior quarter contributed NPO's, of quarter. operating P&L unrealized of for to credit or the meaningfully increased compared ROE closed net Similar driven hedges contributions of in and $XX.X it's generated net $X.XX return sale the strategies, quarter expenses was

During portfolio which unrealized the and share. realized second on net $X.XX million again led or quarter, totaling prices agency RMBS losses $X.XX to our per declined

contained European CLO These growth of here, residential offset came other as in RMBS of target end. primarily mortgage following activities gains securitizations REO, CLO securitization net these in the than our were XX, in June Please interest the XXXX portfolio is in traunches However, from which The by portfolio share. which altogether was X% $X.XX loans to million consolidating in net losses from totals of is income retained loans credit credit back-up and a was purchases and about which interest or quarter last ABS, in approximately Slide the per more our the hedges non-dollar consumer trust. turn $X.XX X; slice the billion and which strategies; rate effect increase net totaled in $X.XX non-QM our slides.

portion strategies. We yielding of such our X; as liquid XX, investments and $XXX.X and million Please to agency into lower rotated CLO of $XXX.X million also RMBS sold that increased XXXX X% U.S. a Slide turn our from approximately June assets risk XX, our more long capital of XXXX. non-agency note to March as portfolio RMBS higher as

X.XX% prior to X.XX% period. asset from our essentially average and unchanged Our in weighted increased mix was the coupon

breakout and borrowings our please which Slide Next, shows turn the of to XX leverage.

from XX, increased As X.XX:X last new note of liquid that June balance of borrowings RMBS holding had and quarter. purchases, an up such the investments. from leverage as lighter the balance agency sheet resulted in CLO overall The certain connection we to been and ratio credit reflect debt-to-equity X.XX:X higher more in assets U.S. we've of continues on favor lower risk non-agency and cash with

been related leverage debt consolidating GAAP X.XX:X. the because Finally, would consolidate securitization GAAP higher If for non-QM our is reporting ratio we securitization have non-QM debt-to-equity we the purposes. weren't

the about shares to the share. XX% outstanding average second or per X.X% diluted book we During quarter, repurchased a XXX,XXX at into value discount of shares our quarter coming

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

our expenses Mark. the annualized general the value is to of quarter where the quarter which We ended $X.X now were we For over operating share around expense of ratio $XX.XX. our second see I'll with forward. call per an million X% book diluted representing ratio turn expense going

Mark Tecotzky

X% through the year of JR. component a the with and over down have a XXXX an end consumer sectors portfolio which small our non-annualized. mortgage this plus capital all markets for X%. the contribution This Barclay's sectors impressive generated inflection We through corporate down quarter year-to-date our broad-base of from almost the Halfway our Thanks, share with residential of we all meaningful and economic Ag few agency struggled that X% of credit have allocation. accomplished income EST had year a financial point [ph] of mortgages, solid is portfolio, great spreads part corporate. credit contribution mortgages, gross for given return per making this and commercial a a portfolio reasons. for a $X.XX components is only particularly total credit June, of with the is

can have First, in the returns Fed's ride cocktails longer now, negative big now duration so to big year. expect that sheet rising meaningful reduction rates returns fact can't to no a so implementing generate investors and gap, generate returns they over are investors lead Fed to the Since [ph] running is as balance when curve by yield flat the past can is

are drive highly commoditized most same of credit most further already better we've sensitive and example, out expect terms spread returns camp made, credit securitization the much for the to has tighter spreads origination, parts just in Second, sectors transfer these tremendous year you over this we credit few great have and like spreads. some sectors; other the so water; is tightened be compression many there that from financing years, trading made so in and the these past sectors time, in been market a the outlined to think of mostly can't credit opportunities tailwind risk At that returns. loan have

to expertise, can't proprietary mortgage strategy. find We we ours a we securitization servicing, yielding asset of commoditized such create with that Longbridge, commercial and bank real yielding shore, sectors We high yield balance one one cast strategic for In and reverse Freddie high at net, in origination markets wide handful sector, can't loans as commoditize. capital truly a of unique have a small source their the investment. yielding who the are research CLO a look to a To and granular commercial partners assets only space, to mortgage that of we Fannie estate a yields we non-QM unhigh In investment be believe BP of we strategic select class another of then loans buyers distressed sector. leverage bridge of advantage of that CMBS our secure pipeline of market lot to mortgage our be us. loans effort knowledge, quite developed after take network able mortgage that we've in the originator lend loans,

groups. work-out sources in bank Our investment and from pulls Europe NPL IPL team

your loans ways in corporate, why spreads [ph] our space, We the versus opposed consumer longer we're a we market diversify commodities to choose mortgage loans, is origination that the on mortgage or from are For on for don't that's consciously across loans driving the we look Fed-driven versus bet loans look we all relying partners. every ourselves; framework relying will and We buy as a lower proprietary bite manufacture on These our credit we sector how thesis based the time, buy has figures that the it a returns a versus as overpriced one we forever. that one both loans no next; performance and big the same isn't becomes trick competition and is secondary year risks often the a pony, one-trick built We've diversify. out; versus continuously that you best good drawdown residential eventual portfolio versus matter in the the in for value risk return risk reassessed. the Europe. we consumer dimension; a syndicated commercial U.S. sectors, that loans loans, security actively in we found have that

the As credit can loan from see X; Slide you portfolio.

the Slide loan You portfolio. credit X can on

roughly a in dissecting reasons; should this the has consistent, important cut quarter. pie two is higher theme financial first, a returns more see service number, made ratio. a make To every ours slices, our you contribution for almost of diversify, headline strategy equal nice Now it [indiscernible] return shark

should or don't avoid an risks at elsewhere. to we much more we're alright. If you to we Second, comes looks I'm not take, expensive too robust. capital one [indiscernible] of sector all returns we're make competent allocation giving them example, are think with good any the sector that sure allocate

because the the have catastrophe of buyback credit of low Now levels almost they risk.

highly example; a in by it's control consumer one Fed's cocktails sort That a commercial building flooding exposure. stock widening risk. main safest but way loans. high facing spread natural risk summarize research us; book all-encompassing break disaster blocks; risk, yields that this of would and effort big generate a the but our leveraging the Slide bulletproof, mortgages, isn't we aren't the while summer strategy was For Houston the limiting last to down To strongly data; widening. XX portfolio into necessary feel mortgages, here new up This the model we cross-spread debt, [ph] can our commoditized residential are returns is relationships, expertise high credit we is we four aren't riding assets to for can't credit impact controlling certainly to predict weather, then we we corporate building something returns. value in is specialized and we just the unsecured finding using and the sectors impact it with capturing

are We the current convinced the environment. in approach it's market right that

Larry. to back Now

Laurence Penn

with and year. our portfolio, really the so Thanks, made the Mark. I'm we've progress pleased this growing we've results generated far

and and about so being off; discount We a return book; generated to nearly still strategic XX% to strategy our offense, a interest adding stock lot the assets and and the by Our playing total more today economic perform building trading a some We plenty of by reasons X.X% here. caution; represented is modest loan they leverage. building is and of rising turmoil of an room portfolio curve Even that really still see on year-to-date, were patient of yield pipeline and Europe. in flattening from the challenges big slowing total the we're paying with out for from rates in reported adding whether or diligent but China, the trade our still is possibility talked return return XX% last have year-to-date. at growth of we there political wars, we've shocks prospect

the as market important continues will stabilizing to way tightening, lose to to quantitative continue an force. quantitative easing around give globe Additionally, the

risks volatility early I'd great and start but objective portfolio. in of reiterate our the we keep important that these much our year the ours. and duration book off an we liquid be out relatively always that to maintaining enable to return, parts to at more So believe that trading leverage, like stability of hedging we does short. a of year of Of is yields by will advantage adding of The take saw ever some of believe disciplined the our assets higher light it's value of that to this portfolio and about this us important as to on is

our of non-agency of the vast the see CMBS table peer interest rising previous fourth on captures credit returns As XX, in I additional on was economic but our rate down, long stability. highlighting other ABS sensitivity. this low this can loans into Slide RMBS, Slide In our majority you rates and unmatched insight -- again mortgage of XX, stability quarterly our group. provides the line of Slide it's XX on in worth pointed our sort of calls environment the portfolio. level out

to to see, we basis be about minus basis value short rate rate from an before rate down can interest run opportunities to non-performing portfolio focusing short-term up accumulated to and would if to about shift that's very I XX effective volatility our or into of X.X interest duration impact reinvest estate the real two-year returns That see enabling you prioritize that plus in duration XX years, by If our fast on like by As points. to on naturally bridge overall products or consumer estimate where book one markets; even we'll that be We've assets off the portfolio a the points, loans, duration at hedges. we time. short account whatever such think installment translates taking and our loans loans, and credit happy resolution. are quickly, continue us commercial

continuing As maintain half we high assets, our second portfolio, year; look of particular, and our to grow income primary continuing our duration earnings net yielding to move to of our grow momentum, on credit in investment short coverage. stability we and emphasizing business dividend to the our thereby and into focus provide the plan, executing is

comes most our of sources high once duration portfolio Let or that of with the again portfolio, should me of environment enable management the credit and current believe of of it to the combined I performance liquidity whether our rates reiterate us dynamic together; periods volatility. current to not income whether all hedging both short diverse and how our financing interest in rise sustain strategies, continue

discussed data traded as to possible a as our Finally, to we previously, partnership. evaluate we've publicly tax continue changes

publicly-traded partnership. Our options include a remaining of C-Corp, to conversion REIT, potential a to conversion a course, potential and

to continue progresses. our We provide as analysis will updates

feedback to questions. take And we're Operator? is welcome. our and issues remarks investor this pleased these prepared concludes your always on As now

Operator

Carter from [Operator Credit Suisse. Bill the Instructions] comes question with line of Your first [ph]

Unidentified Analyst

you the last of portfolio, where the duration those a state? the points the can new of -- continue the On run-off one about whether loans products of you kind making flow creation in sort of relative short those or you talk non-QM and of those about of see portfolios to you're consumer kind of to steady the you're grow kind just can of in

Laurence Penn

mean, of volume is the of just that platform. that some but increased I is non-QM, few there I last a seasonal mature and see the has in months some more

when get would new, $X of to is XXx it's monthly I around you portfolio million, of typically in plus. when is and which deal non-QM, volume size in on $XXX maybe $XX see a we sort paydowns million the million month, origination relatively say So that order of that, say

portfolio So we'll and a that will some continue grow, do potentially retain pieces. securitization then to

side, On very new where to the two run-off the where state is a years; to short of it's are consumer loans relative material purchases. there some maturity, inside steady closer

Unidentified Analyst

And those? then that assets -- you source assets kind you other could you're to use about credit the talk into non-QM more us you size of help kind target two have as maybe can to -- rotate you able just the liquid -- of or

Laurence Penn

U.S. they contribution, so it's net as does good terms I'm fits market value they're to out in available that's $XXX sure, so pipeline In income; value, think investment provide take million assets non-agencies, notes now of run-off and we a market meantime to investments close. of and strong they're but the particularly the I the of in so around that CLO U.S. levered. or

Unidentified Analyst

rotate can guess I in been or into term -- your the hasn't change And a targeted kind longer ROE potential as of assets? of you either much there pick-up ROA

Laurence Penn

number. pick think we good think a I said that's still X.X% I up, about

Operator

line comes question the Steve with from of Our JMP Delaney next Securities.

Steve Delaney

the ago XX, to you those talking about companies exist made Larry, type think of an in by equity many some made loans. end on a type XX% finance entity where portfolio Ellington the and how using In slide non-bank of has today specialty the I relationships the under being slide finance some or some Ellington and type debt strategic new I'm you were specialty some phraseology of I partner? investment struck that strategic that of that's investments or a two mortgages; can residential three Page remember years and with non-conforming

Laurence Penn

an In a terms there two nicely. is of and we're equity existing but with provider on working investment progressing that's flow third

the So by the I will three. think end that I be of expect year that

Steve Delaney

of as or approach second is one my expand is you mean, to question this do was products strategic slow to buyers. volume different -- just to of whether investments see it… multiple it's making I this superior that those That expand than the – just that continue is that be

Laurence Penn

it we're and also the to existing Right by with way, a co-provider. me fourth, occurred again, just considering an

So yes, by the be end that actually of the four could year.

Steve Delaney

that So me that lot I me but your the lot frankly, it improved everything, in is sounds X% looking to an energy blended seems pie? like yield -- honestly, from results you're mean, your benefit and to of at it awful markets of and to XX% a coming the of that

Laurence Penn

the yes, ones of I But there. for we if another think Yes. have but the some mean, you Lynch And it Merrill again a pie just call But space. to the very yes, and NPLs. I we're on at slice residential mortgages, comes are when mentioned don't example, commercial business. in have businesses at in then loan I me considering to, yet, show look some consumer be loans That's Those clear, bridge right, not of the don't broker -- loans we you investments in especially, mortgages, and bridge that strategic loans. and NPL/RPL relationship-oriented that's say your bridge

it's really that earlier. we've balance maybe spent. commercial something least mean, small we doing So XXXX, loans at since been I

many, up now. years like that, these networks we've things of and brokers and over built So that loan many relationships

Steven Delaney

servicing And doing you on your are loans? on

Laurence Penn

we're doing so got -- lot own of So, se, per a you two servicing them no, types not mind, our of but keep in that loans.

that much so -- nonperforming. you have don't nonperforming they're yes, got You've loans collection, in so

high servicing very through with process, you're borrower, the the about that what negotiations It's those of in that in-house. you're types about things. legal So process and really handling the foreclosure certainly talking talking, shepherding

on have and sheet encourage these we comes some our deals by these those partners. that people opportunities some of talk at us interest partners we certainly we lot balance from as of partners to of look non-controlling bring that Sometimes, like to the our they bring then the co-investment we them about that co-invest see

Steven Delaney

Great.

Just me. out to close from

for You for that process, that or My decision mentioned year thank of whereby a this calendar you process the question corporate on -- decision type is, mentioning continued may a the evaluation the structure. decision if be not made, got effective is I not if that you for correctly that do something words, other it's XXXX, if think it's XXXX; for thinking not am that it's is be not would not whatever it's in midyear, then longer takes made XXXX, may there? to

Laurence Penn

question. then If great of thing depends. at -- for deal. there tax the done -- obviously, if not corp, we a year is any your shift pretty Yes. kind -- no a C that can time That's we to issue. really shorter be that's big It much If a your stay,

Of getting works, work end the it extra it calendar course, of That's late return. calendar cash now It's you going before pretty complexities. going to this to add have you're if the we're that year and do year. in

point, do X, not tell, anything if of at So we anything, Jan we be that not be -- I XXXX. effective would can effect the will do this until

period you of let's to even case it way, say, your in more the of analysis. time, that Now satisfy to try XXXX, the the then you have short gets a sort it kind which towards complicated because of end very do of, on REIT, if by puts strain of

things sort want of out. to year the whole smoothen You

worthwhile be the as it be beginning as have long XXXX. beginning wouldn't X if one until X we too to it, like something it but structure do going do would got in that's to I the that in and as make I a change January would long, back we're year, something effect not relatively And take we've to next. make be could say of expect X, didn't again, anything nice to So it the to

Steven Delaney

brining back role. on Congratulations her Lisa new in

Laurence Penn

Thank you.

Operator

Our next question line from comes O'Neill. from Crispin of Love the Sandler

Crispin Love

since we it on, the color Michael and Can a leaving leaving him is for on what the kind have being XXXX? little after rationale board the more board of

Laurence Penn

a about to and really that lot Lisa we couldn't as really, have mean, less a got corporate structure. add yes, well, And board. obviously, to more Mike. have March, small only so Sure, short thing. adding because I retired thing that's just about opposed it's is The Lisa It's of to it's and even at tax is this tremendous a it we talked Lisa -- in the continuing in and we really Lisa to board, about positive about term, directors. -- as just leave and opportunity in consider of respect Lisa X Lisa. of change it's a And for Lisa Lisa. our And all always the offer extremely good couldn't When has instead we Lisa an here,

York New of Exchange rules provide independence. Stock

company lately, so by the very not So just she of would newly we independent if recently. we she the management one -- obviously was employed added be considered because is

So who he those for that would and independence. a and will of is of be know X always trader And you, portfolio X, Mike, trader at a not manager. and a that majority be a manager portfolio heart

it actually, And for sense And I so as actually, we've well. this Co-CIO Mike was of Financial, Slide mean a XX. as Ellington slide a -- makes

think that I owns Ellington can management you XX, yes, XX% see Financial. of

I ever, as he's external that's most still engaged owns -- as is still the I CEO of is still think manager. that mean, the the Mike. shares, of

Lisa, always. room would be really I for and this as obviously, So voice say, making heard is will Mike's just,

Crispin Love

helpful the one. majority the That's And independence. of with then, second the

realized bit a you talked half a of deeper? speaking in JR, bit gains. that to us gains, expect the a continue about give So but your this on and kind is second unrealized of and to you if that the in little Can it a you just you've drivers of of properties, can kind little slowing them color know comments second I outsides key about foreclosed consecutive quarter prepared XXXX? little

JR Herlihy

sure. Yes,

subsequent of subsequent mentioned, had NPLs as sale quarter, a I consumer realized in in unrealized. will move of closed that appeared quarter-end, Europe unrealized we into it gain and reverse then side to on June XX So so that as

the that's big one So of drivers.

really In portfolio, terms bucket. nearly of gains every the gains realized in across had we realized

actually strategy. attributions the that in because relative We realized and in strategy. big long a see not we that corporate have is have reason unrealized you offsetting gain loss, value shot there it's had is meaningful table, the that We so a -- credit

side. handful distributed again then, gains that we the any trade And across healthy we evenly I mark-to-market had mentioned. little strategies, realized So But the pretty really had suffice European the the driver not the across say, to of exception that's on gains, strategies particular one realized most a one loan unrealized, bit. with notable number some

Crispin Love

or we then, And 'XX? in of Okay. less a what or for the kind the there saw half you of guys of than kind around X% expecting are second bit growth second quarter, little in that? X% Credit portfolio Is that the

Laurence Penn

and -- rest important away hard. may really don't it the at just of think out I But to really some liquid of would non-QM and $XXX the kind the that I of down. some growth up, at leverage continue goes stretch, just higher-yielding measures I'm think any assets that think, think the by We comfortable that trends, to we million turnover from for assets. overall. little than we available to mentioned I not for sort we us assets lower-yielding, you'll time we're the predict. by liquid we're we're number measures we're do first more that it's the thing is it's probably that applying take less think hard these if are number we off. securitization, leveling all, by if apply grow the be JR got on should putting a you Really, capped see year. don't mean, any of to of look we more goes to

Crispin Love

should 'XX ramped well? Credit some Okay. as And fully see XXXX growth by it do even portfolio you be could the into think end the or of

Laurence Penn

what picture. that's year. be is now by big mean, absolutely, I maybe have are to [Indiscernible] full before. of the can targeting But to the certainly what at we and even that level happen between yes end Yes.

look you doubled. where it's are in look portfolio at If more you at months, we the XXXX and then than where we end were of XX at the Credit

project So I the continue. that of to wouldn't level growth mean, I

Crispin Love

to the far? from because in I expect any And would me. valuation, quarter the you so there third one last current At you then just one not haven't be repurchased repurchasing saw shares

Laurence Penn

Right, yes.

necessarily we say I close that just than at or too XX% I that that is we now? other to what to so much XX% think So right before, into wouldn't which said read now, reiterate

JR Herlihy

Yes.

Laurence Penn

accretive we're So back given of the buying to interested I it's liquidity of bigger ratio, not enough not to company. our in expense At a XX%, justify versus book stock, company shares. value mean, just smaller

So very trade really kind long. are we're quarter, we we This We're we of could. certainly too interested. Below we the of XX%, interested, where below really as we're XX% past not said kind now.

the put of programs, with course, which we place shortly and basically, our Of went parameters XXBXX after blackout talked we in call. which periods, this

things we of So exactly kind parameters, be place those we terms those in automated. have to where affect those of

in close what wouldn't yes, investment so now here. just trading we we're given to I terms buying we're So seeing where -- stock opportunities, is be now, given of XX%, that back think which just

As to yes. XX% will we XX%, It stay. the get what no, of parameters XX% the below and And XXbXX we'll of close to depend program close seeing. or kind we're upon

pretty good that's think guidance. I So

past XX%, maybe repurchased think you're bit our I'm quarter sure, last look looking or December, I look little X this longer over of is you time, X.X a quarter, discount. long, since we around shares, around if If again, over X% but of you period if discount average more at, say

program. reloaded repurchase share we Just our

release. I the think that's disclosed in earnings

that X.XX million available. were to not shares that's So reluctant certainly reload that

prior to it's consistent our I with guidance. So be going think

Operator

the line of Our Eric next KBW. question from Hagen comes from

Eric Hagen

actually quarter? income the was the contribution you investments say from equity what total during Could

Laurence Penn

Out. No, that. mean, I strategic don't No. investments? the break we

Eric Hagen

Yes.

JR Herlihy

tell you that. can I

year, strong contributor. been yes. For it's a But, the

is but the million-ish? small We've right. got it's of So, not what small, $XX maybe number, were amount capital the

Laurence Penn

It's about $XX million.

feeds those It's done there asset side some of that investments [indiscernible] great opposed our kind could we are those portfolio lot of year effect our on although equity yes, investment are it's -- to about not. well, the those companies as in -- obviously, is one they've leverage on money rest worth returns really those small of investments, of per that and the X% believe great do even -- asset much happy equity it's day. So this think we're we possible this are company only if it it's that the of have side not se, but So that's that be equity has really of as --

Eric Hagen

Well, value the of to two Yes. investments, $XX breakdown with million? the have between what the Longbridge LendSure fair that $XX you regards actually and is between million

Laurence Penn

million, LendSure it's around Yes, think. -- $X is one is I around,

JR Herlihy

Yes.

Laurence Penn

Yes, go. there you

The million. other is $XX around

Operator

FBR. B. with the Our next question Riley comes from line Tim of Hayes

Timothy Hayes

kind process on the C-Corp getting are touch just still of Can follow regarding Just point? analysis those wanted be of question done on shareholders just needs you're from the where in that you evaluating feedback at you to or this up in to reconversion. Steve's the and the

Laurence Penn

either will price, take, Yes. I a C-Corp REIT, think what We've or what right? whatever -- matter Well, tact do I it no saw with think we KKR. share if we I convert that that help to our think seen

their share right? extremely the and companies price has watching other these is so have second how think happened see the stock of done react. in well quarter, I to So part that

Of there rate. the case, that course, I looking that tax at we of every terms company a effective In challenges on in of is the is our different in REIT, think the effect terms strategies. a would we few those little to of if shed are friction And would terms be do the were we And important how strategies. tax have then in question that, that to is perspective. probably would,

-- tax we few assets of which those of -- some is percent right if would will it's basically some organically subsidiary, that's be are and like know any because XX%-plus very done have it to have state selling, would a purposes example, that you'd shift could be done so is we could for be those to rate of the more strategies, actually somewhat and more considerable for effective still I You shed shift just local. have some now, into convert those we again don't amount to then nonmortgage somewhat would taxes, were C-Corp to and runoff. assets our paying have be We of by But subsidiary a REIT, tax low. to tax if which assess

a say, overall that but would a moderate yes effect rate. tax I So have on a, would our definite,

flexibility, but not rules traded pretty bigger even being our -- more total flexibility modest. things comply of to originating we terms of some kind we have goes partnership it tax So of publicly and also now than up a as as the a rate have C-Corp of originator in really that. shared more hopes that's much partnership rollout much we with lot, like effective

we think than space I REIT the through in can subsidiaries. where other our market do it

So it's complicated.

terms feedback from we've think it's mixed. very gotten I of in the shareholders,

more, and might or any to all would slightly more say, on perspective for are the if grow be it. them for holders own enable stream because lower I'm time, I going a the whether just substantially us stock do think. frankly, their would increased I We slightly from look, of our hey, the that. some say, own over why should taxes scenario, would the it just have or ultra-long-term dividend lower shares, why C-Corp who be I So love let's of be dividend liquidity should it to stream lower in just Others,

investor. the on So it's really depends

publicly either it's very we type I'd smaller, I smaller. it's stick stickier. see partnerships, think base, that We've a turnover investor base. it's it does I structure, that think think base, to I traded got investor investor small if would say, convert we of do in our own Because right? a

probably would REIT, you investors. So have really we have I a we right have now, it pay depends think foreign taxes but withholding on the have the that we're very the get attractive from now, to lot of shareholders we buyers doesn't think would company to on some don't and a I types demand so different turnover, because and the much really

some see So turnover would I think there. we

Operator

questions. there further today's At this conference call. time, are concludes This no

disconnect. now may You

Ellington Financial (EFC) 7 Aug 182018 Q2 Earnings call transcript