EFC - Earnings call transcript Q3 2021 | Ellington Financial Inc.

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial Third Quarter 2021 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode before it will be open for your questions following the presentation. now Frank, to Secretary, Deputy is over the please It Jason to General Instructions] my turn pleasure call begin. [Operator Counsel and

Jason Frank

you. Thank

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

historical are not in statements nature. Forward-looking

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

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

Larry Penn

Thanks, Jay. morning, good everyone. And

time your in on X. begin Slide you Financial. interest always, thank Ellington I'll for and As

Financial share. income per generated third of $X.XX per share During earnings core net of Ellington $X.XX the quarter, and

X to total first of year, have Through XX%. continue a our over we economic earnings of cover to months So, now return of delivered stockholders dividend. the and core return XX% an the over

Next, XX. slide please turn to

the we second you And or quarter, slide. the third loan we in non-QM our also the second quarter we for in our in common the capital July. had consecutive proprietary our million a portfolios in can business as record our During funding loan funding, on originations equity record grew raise from here We $XXX quarter. our business for quarter see this $XXX transition quarter, had as million RTL deploy significantly in third originations residential our our consecutive

deployment actually funding wouldn't Our one, in portfolios the from XX% couple during quarters, capital RTL for to paydowns. grew that flip RTL keep grew pace of the the pleased us business is seasonal businesses to I RTLs, quarter-over-quarter of could growth million that hopeful be us a I'm the but more than was RTLs that our the fixed and extremely and big prior Overall, I expect of see XXXX. $X.XX net a with of by XX% we was our growth for Within $XXX quality quarter. in Proprietary quarter. And next Loan mind billion. the so

high and we so The new yielding loan fully ease. was supply to proprietary third earnings. with and continue quarter relative were absorbed with raised avoid to material able drag the robust us that on within Our deployed pipelines a and all provide of supply core investments capital any we both

Meanwhile, third from non-QM as our the our to able commercial closed loan to bridge asset posted from on flow in LendSure, loan continued to before in we but we our growth prices well in origination have for small class. just we our from by the We our manufacture And record thanks residential LendSure strategic non-QM during to quarter. the pipelines volume [Indiscernible] were growth for be all Looking record securitization at continue loan in and earnings ahead, attractive also profitability we prospects our to Thanks important shortly to believe the quarter, flow months and secondary we're we've X the thanks loan benefits excellent. in securitization the strengthened the hope originators passed proprietary we're its last several high-yielding, total And to financing We This not Balance others the on ninth And complete by securitizations, enhance that the Sheet for affiliate $X loans certainly loan business. This EFC. our quarter-end. mark not several acquisitions, in low-risk, mortgage the billion least, last and the long-term equity highly complete the has acquired additional reap able a increase works market. benefits substantially of followed the year-end. loan after seen retained securitization provided in in now six to-date. balance of we've of earnings non-QM recently have market. And that addition year seeing mortgage businesses, superior now we've available LendSure ultimately, to non-QM represented cycle completed. non-QM stakes we

fortify our supply underwritten to With high-quality, high to to stakes, additional which consistent specifications. these vertically strategic of business, a we're integrated our continues origination flow assets yielding continuing loan

strategic help relationships proprietary loan we about of reliable and expand in equity are these help their I'm and investments, pipelines. underwriting help with diversify affiliates I only we their improve them also sources, visibility symbiotic and the we will overall with their guidelines, for financing stability that as outlook our not boost provide them them further and our originator enhance production, we their they terms a the believe new Our marketplace. excited

in the third the to continue net way, turn the the again our by which can in please to Now, income income by exhibit you performance. This credit Slide driven credit X growing strategies our loan also see portfolios, led was net way quarter. interest interest where excellent

of quarter for delivered our also from record the our driven LendSure 's significant quarter. portfolios during with Our the together gains gains contributions significant the CLO, this profits credit share with CMBS, non-agency RMBS and by net strategies

its speeds mortgage and rolling XXXX are mortgage Longbridge and I of refinance. in excellent and third combined. to the XXXX, reverse appreciation interest 's record so market, to affiliate. products the the by million agency new led to on amplifying is high scale. reverse seek second pools. to turn its years for XX% price of $XXX our growth these channels. origination momentum reverse was quarter loans, their total prepayment we'll just has originated both excited for $XXX I'll and has LendSure been performance LendSure's out volumes million. on exceed, market was volume origination response mortgage elevated market, even as increase to with repricing existing to continued saw In prior borrowers have team rates X critically, As continued volume the of products in which LendSure Financial, And Most originator the working in higher downward bring. home be far to of speeds, earnings. we But loan In a is pace quarter's a HMBS origination next channels LendSure agency what which see one, is low together for some on LendSure mentioned, as acute levels

caused portfolio quarter. forces these was boosted value Longbridge, they origination of drove Longbridge's profitable the mortgage during Longbridge's This in of the MSRs. quarterly servicing still also segment volumes for the of Company. But rights an net decline have importantly, market overall loss While or the origination

origination net volume quarterly year-to-date this had see we anomaly number Longbridge. total in loss result, is the September a in industry in for and Company The As record as monthly Longbridge issuance. for actually an HMBS X a

our be And bounced believe in right in prospects fact, in continue more detail. and I'll to quarter results third pass financial to October. it that With Moving excellent. back has the forward, earnings to we J.R. that, profitability growth Longbridge's Company discuss

J.R. Herlihy

Larry. everyone. good Please Thanks, turn the to X back Slide presentation. And of morning,

and per share. ended core share $X.XX $X.XX per Income to $X.XX for quarter earnings share of reported and compare Net results Net Income earnings of prior of the For Ellington XXth, quarter. core $X.XX of the September share Financial These per per

reflected those past the which the loan a Removing paid several recovery previously of earnings run last small resolutions, expenses. core of unchanged share core earnings idiosyncratic balance roughly last of our mentioned and rate core estimated per was resolutions, included and quarter's the quarter's effects As interest earnings reminder, that payment due commercial on asset quarter-over-quarter, mortgage slightly we above actually was call.

approximately through shares we of $XXX offering stock During increased we million common another $X.XX In issued common stock and XX%. program. our At-the-Market we million stock in shares $X.X a common through or million third our follow-on total, by the issued of equity quarter, July,

third the issuances Importantly, fully the from quarter. these the of were by invested end proceeds

just X, Moving our our that to how quarter positioned similar we over last see agency of we the to to strategies Slide allocated credit deployed allocated third capital are to can XX% strategy, and finished quarter. you XX% with

and into Our shortly. by grew credit XX% get where that growth I'll portfolio occurred quarter-over-quarter

earnings to of Next, credit strategies. please attribution and turn for between our X the agency back Slide

strategies per strong the the in credit during most of the performance quarter. $X.XX loss strategy from total These strategy $X.XX quarter. compare income share third generated while per per of gross gross per During the and and share. We $X.XX income in credit generated benefited primary of to third a quarter, in the strategy prior agency $X.XX share, the results the credit strategy of share agency our

Our equity primarily small income by primarily also commercial excellent CLO, loan non-agency high balance residential interest driven the gains. in RMBS net and transition, non-agency -- unrealized by realized on CMBS, strategies, and mortgage, generated including performance strategies non-QM, driven strategies net returns consumer were while and

the And of We commercial in the profit. resolutions couple the commercial to at a larger significant one NPLs. on closed of real quarter-end, on portfolio a also subsequent successful we had REOs of sale mortgage estate largest

negatively for treasuries. performance Ellington On Financial volatility MSR noted, interest fall its and losses early by as driven the In continued the August, and on hand, incurred results. to to increased, net In portfolio, was RMBS quarter. quarter, mixed rates agency July RMBS agency which loss other Larry Financials’ impacted a the causing mark-to-market during Longbridge under-perform

half the of for our boosted to rates the clarity into withdraw Reserve's our our And got reverse prepayment specified increase quarter, strong gains the the end pools RMBS the spreads on anticipated from and mortgage quarter, declines. agency as mortgage led impacted income on interest rates tightened RMBS. and lower-coupon market to net lower-coupon tapering expectations in Federal the Incrementally net latter more reduced securities purchases negatively losses of interest-only interest coupon particularly Net holdings and on our performance higher-coupon portfolio. the higher on portfolio, Fed agency while exceeded higher began and plan. rates, Moving towards volatility September, of yields

swaps rate and on the coupons, Treasury higher net TBA side, slightly hedges. on On exceeded U.S. hedging interest particularly positions, gains net losses short on

slide Turning X. to next

During the page. transition the in credit on the third deploy the issuance. equity quarter, majority non-QM and occurred $X.XX residential The captured our slice this our July loan XX% grew as portfolio to by from long in residential loan billion of we total both are proceeds which strategies, vast growth

Our sales our opportunistic where gains, XXth. commercial portfolio X% during of caused increased $X.XX overall there of although some Slide small commercial generated portfolio quarter to September as the you real shrink grew, RMBS significant billion On slice also by CMBS, sequentially. the see balance long to Agency also mortgage X, we can estate

as new our decreased as by compared to total XXth and as X to X, of securitizations September to borrowings for X.X as sales X.X non-QM equity unsettled XXth to of related to to partially debt-to-equity of borrowings offset as increased. and non-recourse paydowns Slide were purchases ratio June purchases Turning X related adjusted to

unchanged to debt-to-equity related was XXth, sales for Our purchases X.X roughly equity. ratio unsettled September to as new at X and in recourse of proportion total borrowings as purchases to increased adjusted

average borrowing at rate XXth, as X.XX% our as September slightly just at XXth. compared higher Finally, weighted of to X.XX% was June

income fee but G&A total $X.XX third an quarter, exceeded compared we unrealized tax gain due for million tax $X.X recorded $X.XX the securitization costs not share, the a expenses million other our trailing non-QM the in to investment in in prior to prior due the incentive of in the that Longbridge $X we Financial. investment-related we penny quarter related by mainly the share while quarter liabilities during third per net in were $X.XX to current expenses declined the share of an incurred Also, quarter issuance a four period. benefit quarter. to decrease as the For per on reduction primarily income quarter, to deferred in our recorded And hurdle as we per

the $XX.XX was Finally, value $XX.XX we book economic XXth. the slightly common positive X.X%. return our $X.XX dividends September at that the declared at for Including quarter, from our June down per third third was quarter share during per XXth, per common per share share share of

Mark. over Now, to

Mark Tecotzky

all the Agency markets that between provide rate third market doesn't Delta about the was phase The support. of from QX relatively Fed's the in of new is And In are J.R. plan a June, out putting and in slower financial and plans, calm. grapple treasury we meeting. Thanks, period, its to of entering that to is mean how the end to as week's Fed continue got way taper were will interesting pace. saw non-event. interest it seem by quarter, contrast, Fed but the discussed of month, support the the to the Fed spread In the which the high a we the inflation. lot Treasury system, of in lot MBS volatility a in about albeit last markets the portfolios for on gone taper and variant know during the in credit the timeline diminished with attention Fed taper pace specifics on further clarity provided Growth has the put a cash of Starting next a clarity this its system. we based at cash expected spreads has

we we credit think spreads somewhat over of means wider course in may the So, XXXX, that yields. see

into raise welcome an higher dry the into how as quarter-end compressed yields the we issue. widening an plus reversed about September, spread in that any the fashion. security our for all [Indiscernible] in changes far on investment-grade earnings wider as spreads core not spread the widening. in those Well, have credit have is QX. and widened to widened on and hiccups some market a Spreads since much result October. continuing so have as So, EFC, new October, spread of of But We've spreads deploy wider because had talked from CMBS, non-QM, performance. of result past CLOs Already not has are loans capital in powder we of as [Indiscernible] it's demanding previous calls in year. Rather, influx orderly partially

If trends to close without in market. rates mortgage thing we're been wage housing other drift demand housing is at attention may pace. become The and the paying incredible Since supply higher growth, market robust the has affordability COVID, appreciating issue. and an affordability an

market. about we EFC, strength for get So, the the housing can't complacent of

be which lower EFC spreads will happens quite prices closely. monitoring I balance through sale. on quarter high, securitization originators Since We have by squeezed owning end, yields. in are this When EFC, we machines. quarter, the it securitization inevitably also loan seen by in prices like and sectors, we are both higher wider at economics achieved benefits gains like some when loan robust have

supply come or prices to whether originator sponsor. believe the security EFC the the that chain, business. to economics loan sale loan integrated loan in compress, We thrive As favor the securitization off securitization the loan margins that and being benefit vertically more by low accrues can

made so equity new a In use small science situations LendSure. peers that X don't originators and at loan far data additional secure a EFC, that 's financial used year. risk, We strength investments, capital we've lot have we industry resources. and already that with advantage partners volume lack we for the and to fact, same We Ellington competitive our we 's can EFC so plan for those look in investments successfully for over investments give of for relationship these this make playbook we've

growing We the new experiencing partners also give platforms. of origination benefit

portfolio. for shape. has overall HPA continued the covered the balance activity to think sheets and was third remain solid our our strong. commercial credit increased earnings upside, and good portfolio base. very in capital to surprised given rebound loan that's and I dividend, values performance results, the in estate Consumer Turning real in performance quarter drove deal our great Core commercial

sales. we to we that lot The that our attractive had on strategies CMBS see estate real and due but mortgage driven see credit small growth sector. Slide quarter, actually quarter-over-quarter, our to commercial RTL. Nonetheless, balance mortgage most by of sequentially, significantly a opportunistic in in this holdings portfolio and shrunk continue grew The can You commercial that increase actually X residential was deals significant portfolio. non-QM

our see slide in and have can of portfolio three residential You we on XX% sectors: primary mortgage, commercial credit X that our consumer. mortgage,

We portfolio also had growth the quarter. in modest MBS our Agency during

grown really base, it our deploy matured this every substantial liquidity balance commercial support to greater agency are Fed well point in for issues year-end and us see across happy positioned capital. to the and liquidity I've was that room It's companies majority loan exposure of as are us QX. a we mortgage quarter, loans rate that the dimensions capital increase being other on small portfolio; have been to floors. of our a billion. by to opportunities. stock. net are present over MBS in Fed with in growing we relationships interest sourcing benefit in in growth vast many portfolio additional relatively also easy the floating-rate diversified portfolio stock where can $XXX take mortgage market XX, diminishing from have Fed our positions our Despite lot the that been Consistent has issued with a On We source you with of purchases portfolio the our loan XXXX, and agency slide have first-lien great loan see We should its grown opportunities. stability to advantage great

that private able attractive support that be may to think more demand yields. even we wanes, capital As

Now, to back Larry.

Larry Penn

in far loan growing portfolios. XXXX, Ellington Thanks, our origination made pleased the Financials’ that particularly progress Mark. and and we've so very with businesses performance I'm with

this just growth. scale, the around loan continued of to markets, we to fueling positions us in common year-end value. we addition capital additional concerns, COVID, to volatility Following again even this Sheet around whether macro or see This concerns the portfolio driving related equity, capital, and $XXX majority they be be million of economies pockets or year-end but again over October, book in capital already continue should the In also raised the us capital quarter-end, Balance additional at tapering around markets the our with should operationally. of access portfolio, provide invested We've capital additional typical of to we in new just opportunistic inflation pressures. any growth,

a position and play our we of the as also security management into in and Meanwhile, we're disciplined -- offense to continue being to risk staying with preserve and strategies our we opportunistic will strong protect year. cultivating, work expanding So, value. move expanding pipelines book weeks and while proprietary loan the final liquidity on on to

capitalization. our like I'd That's we will efficiently. latest liquidity in markets of a stockholders, in to the enable common us equity point out with billion raise, it's milestone And EFC. Finally, for that Ellington to our and now market, Financial significant capital capital increase market has access further debt that mark passed $X more believe one the both our our equity and the stock visibility the for total increase

time our particular, both on open earnings March or questions. following additional Operator. cost fact, Xst. freely you drive $XX and our With the to now can stock refinance capital unsecured with Balance structure, become up In the we'll at increase could core to especially you Sheet our of size to a call add debt, Sheet be that, higher to lower balance of leveraging our will sheet. able issuances, Balance on And of debt at still. the our the In we're that our good helping outstanding this notes and preferred point, look well-positioned recent thereby unsecured million that our senior equity equity if see

Operator

our with will we And question Instructions] first from Harter Suisse. Credit [Operator Doug take

Doug Harter

opportunities? how talk about adding loan What do Thanks, little products to and I about that you investments bit pipeline X of the the was a I hoping of made would you think in they originators. more guess could make you type

Larry Penn

in not going other they that provide than area. on any say that Yeah, we're are color all the additional to residential to just

commercial on there. as just the were area We are area on but now, of at working well least the in those residential one

very As small we in going portfolios, said, residential the you to but a meaningful like bit of they're a a markets probably while growth before space. and it's everything non-QM investments and little see be little

Doug Harter

returns Can you talk where the some about how returns Okay. given you and where And of mentioned the widening just you you then execution -- the -- moves today? of can securitizations. spread that securitization, in see just that

Mark Tecotzky

Sure, it's Mark.

in October. just you tremendous saw of lot supply of a So, in sectors amount a

You investor supply, deals. had agency-eligible a that some non-QM, of some X.X that of mortgage lot of

You lot CLO saw a of supply.

a of You lot CMBS supply. saw

prices. And being of widening so, you've I matched seen and now a that's slightly lower little loan think bonds bit by investment-grade

than So, it less when difference economics. in don't is thing. I which retaining net with a risk, prices, think we're lower a the two see prepayment that, together, loan I I generally means big Other securitization good

Doug Harter

Thank Great. you.

Operator

next Love Crispin go with to We'll Piper Sandler.

Crispin Love

Thanks. Good morning for questions. taking and my thanks

that First, X portfolio a level you this can't breakout. I was credit now. the with looking residential XX% portfolio at are time recall Slide where near the

CMBS that bit. market? in is seeing in and commercial opportunities increased getting, all hedging are negative presentation, you're And the due to the the might like it on or your you largely you're little RTL a also, more at you have mortgage So, incrementally in looks flow non-QM the

little a there would just So color great. be

J.R. Herlihy

you think Hey, Namely, spot portfolio I Yeah, it's driven larger Sure. It's is quarter-to-quarter. first the suggested on. J.R. by a non-QM Crispin. thing

million non-QM XX%, some of June XXth, put so credit billion the to numbers those XXth, it, the about that whereas and on around numbers Just about million $XXX XX%. was of at portfolio about our were $X.XXX $XXX September portfolio, at

strategies X The the slide biggest would opportunistic on prepared definitely, I we well has Larry origination his point of in driver where we're Ellington far record sales. is growth chart. loans. there. it about mentioned directly terms pie as CMBS by that So, also transition Financial commercial had and this mentioned non-QM, we're residential mortgages, -- seeing remarks, say definitely in that volume, so there Larry by for were that's quarters residential followed the those turn reflected

balance mortgage have offsetting small and growth sales commercial the you pay-downs, in So, sector. offsetting some

we're commercial real So, We as see I say continued of would about in portfolio loans growth estate. excited are the to expect we well. very seeing would there

Crispin Love

Thanks, there you J.R. from to at in get would that any there or to addition products the flow and well, new also that color did some expect is And products adding happen? you should non-QM, give mention LendSure then you looking additional is as they could

Mark Tecotzky

Sure, it's Mark.

LendSure come there is They starting the lot do. mortgage the jumbo having extremely of extremely senior team a thoughtful could experienced to and where space. internal RTL been prime are credit. they think the I lot involved lay management The a time there space. a can about to potentially is and start getting in in involved get discussions groundwork have

X there. think is like originate is us sectors presence value. So, those -- ones to are that of played liked I we've them non-QM. liked because well would have loans. closest you there to bank have seems component It's IO We've don't There it starting say the to you now a much me actually to to are -- I to

So just so we there's of the a expertise that sort that lot have nicely core been have with that's non-QM why initial meshed focus. of things

Crispin Love

just and saw believe could you than quarter did you X question -- then disclose six that clarifying last you've months. quick the the -- added I there then I And stakes. X you it's X Is more I on you added the commentary last think said originator in last one

new? three all or one additional one there is So,

Larry Penn

one the during one third No, It's you're quarter. right. additional

And total we last so say, have QX. hoping several it's others in I by would three then that X discussion one incremental months in so, year-end. And that close we're are, to in

Crispin Love

you. thank Great,

Larry Penn

Thank you.

Operator

go to Vandervliet We'll Brock UBS. next with

Brock Vandervliet

larger transition good just the threat market. these it And is or happens, as if -- niches? Could at another competitive you seeing rising and well. those broaden you in and that in at your to look as sectors, move Hey, look competitive much organizations talk boost morning. the Are dynamics about do that resident you take a loan in non-QM to any of tide generally just program other when profile and look that any where

Mark Tecotzky

do larger really the more very think Mark. it space, a has but Brock. the market. what been are some that than underwriting has thoughtful I And way Hey, It's there understanding the projects had really the space space. we in focused the do -- It's that in year there. of the fragmented would publicity that a on of say it's I local In and is dependent it pools past upon space, more RTL focus gotten housing of capital in past. there's

So, this I mentioned of don't over homes prepared is that old. we done. that it as can age of see run. in deferred lot us is of Larry that a needs think the lot maintenance median get The for threat. a long comments be country growth very his There a in to

that been you have sector pre say seen might but pools from - some large capital what bit focus to a I of volumes more -- think ample say has there, opportunities than read, grow XXXX. have on I our we from there do just what I I COVID, little think do

Brock Vandervliet

and like of in curve the the just terms hedging Okay, a looking be contemplated changes over methodology, their yield Longbridge of trade and the may in on rates flattening. things? here lower Any MSR, now at seems rotating and terms the it pan those

Larry Penn

changes No in No. of methodology. terms expected it's hedging Hey, Larry.

Just forward but absolute it Yes, was rates a here. a where got mortgage the -out little rates MSR the then been low, price wasn't situation a just a tied can bigger the their of different just who where from rates borrowing mortgages continued to borrowers It of that just you've can it's in with of of alone level Basically, trigger. bunch sort with have outstanding stock that they combined appreciation. the comparison also And low market of was replace so by loan it's more old take advantage home cash against loan. homes. their to

that hedgeable market the -- not forward. not also aspect aspect no TBA and it's hedgeable that is that other could isn't there's really So, HMBS so all that really you that's where sell

they've -- been place. were behind while as news believe that a is HMBS -- they the this prices about we while, they as were us. that this in low or when so do low about And I are write-down as took think in but is good as a

And that incredibly and prospects. look originations think you great so, that feel we I to strong think that that I about be their continue at certainly just the share when Company's continues fact to grow, market

Brock Vandervliet

for Thanks Okay. my taking questions.

Larry Penn

you. Thank

Operator

to KBW. We'll next Bose of George go

Bose George

I good some X in just guys, Longbridge. just how Hey home gain trends Actually, terms positive guess, those just In -- all reverse fundamentals of can of trending? appreciation, are price morning. of, more of on etc., the about on the sort you sale talk side in business, maybe the

Larry Penn

Yeah, FHA itself that originating we credit are because really, ultimately exposure guaranteed sure. they that Longbridge from a believe yeah. has The mortgages don't are these so perspective much

prices. of Again, in that market gain seen out we've able that So, there buying the unit on there, the they terms of now, are some HMBS profit flushed the and HMBS in and gain in that widening back. They that wholesale buying the after are especially are in market And little that either most in loans once the of some takes loans in and a on those of form cases -- gain once elasticity come cut sale they've to the therefore in spread headwind so restore had were closed already sale there just the loans, cases, was pipeline, where there's they It that elasticity were sale, their there in loans sell so definitely we're and an per on. market, event. And market to wholesale is committed closed margins been previously. the loans or biggest they some had pipeline in the lower. originating just those system was the a loans lot that because on while was had profitability already out the on -- to there's negative

again, very So that profitable. nicely continue was very should volume profitable to think origination October strong. and Again, we be

a that significant, is just number in As Longbridge you one issuer. of that said, many and market X probably players there's obviously, HMBS as most it's not the know, we

good about prospects on gain really forward. we feel yes, the going So sale

Bose George

prepayments or was by there; main caused And that was spread the then driver? in the widening saw that the that pickup you

Larry Penn

Yes.

Bose George

talk new operating Okay, capital invest you'd over great, then could companies? allocation work, to continuing you're And could level thanks. incremental in go operating there as is think the allocation, of can where you a -- companies, just obviously you the and that just next about this to you switching

Larry Penn

as think Yeah, going as continue we're and the opportunities don't I themselves to take to -- they we find present them.

interested we have sometimes selling after from for originator be quality the And a -- it'll we'll obviously, we of return. as definitely if give they're we'll stake. us at. -- seeing of proactively that them We and approach we're things loans been their then to an them We buying in business, then said, looking in see example lots

that mentioned give we we data want We of analytics before. to growth and retests. really a them don't the the Sometimes in terms still and We're to lines, this how able portfolio big Mark credit meet certainly budget have have additional grow. substantial

in I with rather -- what the million growth as loan obviously much important worth their for been important based able so lot We'd that's there. As the our LendSure, overall obviously we've there symbiotically have grow a cyclical if upon risk mean, now we was been have less just you you terms original we business. portfolios. and the and that plenty not to is we these increase that's investments a asset with can more. stake have would -- as make $X a We smaller and of origination under exempt just said, our TRS Mark initially. everyone probably just changes more as an component know, measured focused in -- works on very at We've investments obviously it's gross LendSure, that basis see on investment rather test capital of and flows, can way and origination at

Bose George

Okay, great. Thanks.

Operator

go Securities. We'll Cranston JMP to next Trevor with

Trevor Cranston

the overall on terms backs thoughts on changes couple the issuance CRT Question back caps the Thanks. potentially the sector? issuance impacts seen the on FHFA from any of you curious, loan specifically bringing private-label investor of how CRT guys the [Indiscernible] credit removing GSE and purchases. have we've the supply reducing of loans recent and investor bringing in But of the depend just some on

Mark Tecotzky

if on being now that issuance the than great issue risk. for that's private-label private done, of better is It's would right the capital economically are underwrite issuance sector. Because for I the willing impact the risk, the Mark. just think sector people better. question, in you willing on to -- big to it's just have investor capital don't in caps willing have have It's GSEs your private driven better say a credit in by label private Trevor. just to loans, It's and market going the it's that I if take some what -- economically to level's a you private-label -- if better have aggregation to

private I Agency capital I viewed regards you're CRT, the was In of and to to we the aberration it. So, not restarting see that involved so guess, what to the as eligible think pause in sector. going much continue

that think the housing, goals are home that more obviously continue. dynamic so business now business GSEs out more see been has guarantee to There first-time to done say been the and going squeezed see be there's some lines been shareholder have GSEs now. some risk wouldn't the at that homeowners. that changes. can be And critical changes lot from been we buyers to way fee that going the these I would policy people CRTs additional think of that that have there leadership for think I The business. with you're changes surprised on of has so and a to important the will an We I there's affordable single-family rental all you some at to mitigate first-time promote FHFA, one that about challenges And thing forward.

Trevor Cranston

you, Thank helpful guys. color. Okay. That's

Operator

next Hagen go to BTIG. Eric We'll with you

Eric Hagen

in X. on Good right guys the morning. pledged collateral, curve, us you now? at cost end collateral. repo there which is that might of haircut sensitive do Maybe that the Hey, remind thanks. the you of the including gets expect can just How changes the credit yield applied And that the short be segment Thanks.

Mark Tecotzky

Yeah. Hey, Eric --

Larry Penn

Mark. I can ahead. Go take -- oh, go ahead,

Mark Tecotzky

to track we a would that's our more normally on significant where thought you to I have in Yeah, little we going going in credit weakness was One either asset on of in in Fed haircuts, extended the you've stable and and/or and are that the financing performance performance have do term anticipate prices. because changes the weakness the consequence we've prices. the it changes had they're as stable think we we say you've asset short of bit dynamic repo don't done in haircuts the what repo Increases relatively markets costs, we end. because advantageous. thing is think agency of portfolio a side had

So, certainly some done of repo the rates where spilling we've into be could think up going they're close period now a because one-year we one-year are to time that and active. people the Fed to your go repo think

So, you assets, off assets curve, of the in terms of end of the lot floating-rate or like front commercial have loans bridge non-QM lot of a like net priced interest the If margin, a loans. the

change repo think of in our net or going costs. are overall very spreads are to a I to levels think because our financing expect change I hold just well going don't haircut. a do up in the margins LIBOR affect interest But we

Larry Penn

said. to just And I to add what Mark --

have resilient would and agency haircuts think XXXX you really I incredibly financial say, historically, they since there the financial I look steady repo, if the crisis, at crisis. been the

And again, those very than go terms around X% or situations in don't because don't call here if a but Agency it. leverage. haircuts of something repo things to times, that's think whatever of leverage; it's haircut but can costs you're a you'd of treasury residential we really like in to frankly, extreme general market, you now plenty or in have X% tracking. times, tracked there able look increase slide those the on of basis X% -- like going that -- or taper end of spreads, recent say -- leverage easing collateral of We rates really the have we other so COVID, actually is very few and just or in move, to and you plenty and it, I us, want significant Ellington call Obviously, certainly deck, in for up points right have I around see certain in let's see tracked the closely. customers certainly it like like our in all. a right at So area think just that, that to that of if or terms X% it's a XX XX, close being for

have also credit other we Now non-agency gets them the because sector, invest all I that think where products in not RMBS, have it repo agency just mortgages, loans. the we also in in we is interesting and including

the that, event like repo. you haircuts our at look via And in the that and spreads, response crisis. financed seen COVID a are pattern have you'll then Some loans there you've is in of that's I to but XXXX and liquidity nothing market, compression an actually when in there the and think early

to You're haircuts go immediately. up going see

see financing You're go spreads spreads going and up assets to going the themselves yield to you're also go see on up.

both financing So the pattern. that happened been Really I to asset historically; that's and think ways. then always seems lead the the

in last half, down. haircuts obviously come seen you've steadily a then year since you'll the So, and

asset have haven't You've that fast as down is on But They to seen come continue here. little and certainly still their down. trend the come a spreads think maybe spreads from as assets see steadily that come we'll hopeful believe so credit we're yields direction, in the down. you continue I and and to I haircuts will continue to repo see compress compressed bit the

Eric Hagen

Thanks a lot. Appreciate it.

Mark Tecotzky

Thank you.

J.R. Herlihy

Eric. you, Thank

Operator

was for We you Ellington XXXX for third final That Financial question call. conference quarter our in thank earnings the today. participating

time, at have line and wonderful a your this day. disconnect may You

Ellington Financial (EFC) 8 Nov 212021 Q3 Earnings call transcript