EFC - Earnings call transcript Q1 2024 | Ellington Financial Inc.

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial First Quarter 2024 Earnings Conference Call. Today's call is being recorded. [Operator Instructions].It is now my pleasure to turn the call over to Alaael-Deen Shilleh.

begin. may You

Alaael-Deen Shilleh

Thank you.

safe statements like this Annual made forward-looking conference Form the of Reform our of in nature would XA remind on that statements I the our Item meaning XX-Q. XA Form XX-K quarterly not as Act everyone of to are historical call on under the statements start, Litigation described during certain of we item within Private X report Before XXXX.Forward-looking Securities provisions Report harbor may of and constitute Part

future no the Forward-looking on this and Mark projections. Penn, statements forward-looking conference this from a Officer Financial; whether Tecotzky, as the results of company EFC. not as of and are subject JR made events. are revise or of EFC; and Herlihy, the to call of date Officer of Chief these differ or co-Chief you Consequently, a company's Statements of uncertainties am and variety call, new events risks on any made its Financial to undertakes estimates statements by Chief of rely to cause Ellington Larry during statements, that expectations, as should beliefs, could forward-looking actual call future today Officer otherwise.I of obligation result Executive update Investment information, the joined predictions

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

Laurence Penn

and morning, good Thanks, Alaael-Deen, everyone.

and with of first distributable share share. we and XX% share you I'll transition performance strong from thank by our adjusted non-agency in and per CLO, net Slide the net contributor and X returns steady earnings quarterly primary As for together Financial. time per The per of the of results, from reported quarter, to credit income was always, secondary $X.XX our businesses, presentation.For income, the our strategy residential generating of portfolios. Ellington your non-QM led begin RMBS on loan CMBS interest $X.XX

was strategy modest quarter gain a agency interest certain where share net contributed market MBS that higher rally expectation.Finally, on on with quarter, second ADE per so after out the Longbridge of $X.XX ahead GAAP overall shifting still quarter. broader the positive generated projections. volumes share slightly our for again credit, Our origination submissions hedges, per a to quarter for well and in quarter. in Longbridge $X.XX weighed and volumes slightly negative are for a the from income. lagged Longbridge agency consensus pacing That longer mark-to-market rate MSRs of at I'll Though negative far taking note reverse quarter and in note, EFC's the ADE from second a But first Longbridge ADE down the

uninvested capital our expect quarter.Meanwhile, the positively first quarter, closing we so progress made held of year-end second the And we at ADE the the in Arlington to in to following we Longridge merger. contribute deploying the

Our portfolio larger driven CLO corporate RTL purchases. credit portfolio, and by opportunistic expanded, a

we about new quarter mortgage payoffs our during that consecutive commercial of bridge realistic the seeing finally a Sheridan us portfolio originations also after to borrowers first quarters which Capital, of loan more estate are commercial With from for sourced achieved like some so key I'd real couple portfolio has grew also X exceeding flow portfolio. highlight. our far objectives XXXX.We affiliate that valuations, also strong origination in We in property NPLs

cost reverse inaugural converted non-mark-to-market repo at which financing into an securitization our mortgage attractive successfully we financing loans term funds. Longbridge, First, of completed proprietary from of

our an securities selling our our Since of the bridge our and MBS cull we agency quarter, far overall in beginning the portfolio, established second down loan use expanded drove We capital our non-agency these lower-yielding quarter, proprietary increased RTL ratios loan and portfolios, we to businesses.Second, deployment in to our expect portfolio, commercial sales despite order our generally mortgage portfolios, first program business, overall.So non-QM leverage similar further the reverse our and of we in leverage originated mortgages program continued more March in for marks than the reverse from to more that of capital HELOCs. and we loans in mortgage have securitization second the ongoing equity we in begun the proprietary We've that closed-end MBS or opportunities. investments lines in lower-yielding credit, higher-yielding on RMBS heels especially portfolios. in also free adding for home lien agency up and securitization, MBS do this CMBS we've

years Closed Mac potential locked haven't rates we seeing until doesn't prospects opportunities. the One home forward.After credit pay the products their this of histories on with that now make to demand homeowners surge mortgage refinance and price the are low-rate home about from borrowers highest optimistic mortgage. tap sharply, sense significant closed with of in HELOCs country to seconds across While we are end attractive first borrowers of for enable focused amount it and low consecutive existing competition pristine into is Freddie from sector going home second on are But in Mae. equity borrowers disturbing of up these HELOCs sitting an rate the of quality enormous without and recently, most wildcard Fannie here appreciation, and their a these equity. some capital mortgage.We several yield deploying for

retain our we're of many non-QM tightest we'll X focus months, a completed we as XX a recent in want In to first years months, securitization marketplace. advantage levels, take the competing non-QM the choosing market, in them where first securitize significant turn to XXXX we've loans finally some loan in back JR booking call in yield residual result. in to with tranches and detail. had more that, April, our not the AAA results gain spreads in advantage economics with early achieve high-yielding quarter and financial on some over discuss to to were bids able products to those the to taking I'll of JR? always, the of we we to than spreads rather As whole But strong seen boot.With agencies.Also AAA been securitization sell great

JR Herlihy

investment.A loans, liquidations. losses net sizable and exceeding was on quarters credit net per income made GAAP share our consecutive of attribution see fully of income and gains Larry, quarter, On driven by portion a and Thanks, credit income net credit posted on we net basis, several offset the mortgage strategy on RMBS performance, and a basis share on $X.XX the first among morning, net income net The on operating everyone.For interest on interest commercial stake earnings Longbridge. REO, and share. of in rate non-agency in $X.XX hedges, in share GAAP LendSure credit, non-performing equity good of in agency, per quarter, in adjusted the first you has solid distribution of net strong EFC's quarter, it residential net hedges. by the total with certain and distributable the mark-to-market income can cost and per REO our the reported X and LendSure, distribution now gains negative generated well Slide income, net that of strategy $X.XX our losses of

agency our net our the increase net February, agency This for lower interest interest We on last interest lower payer net a losses a yield driven drove Despite net interest credit a a negative first as market higher net swaps in purchased volumes. which loans.Finally, excess cut decline payments hedges recover originations, spreads, offset agency on net a offsetting was income.Our and common meaningfully by did by and execution pushed capital of for negative the tighter many also the sale in timing across loss fixed both spreads quarter, concentrated.While partially gains also proprietary preferred the driven also with that rate agency and the quarter GAAP modestly yield on RMBS curve quarter those led coupons of generated segment hold by quarter. the tail particularly were gain fixed had in against negative $X.XX our a by on results rally net the for partially our was margins as share rates. which on of had gain by by debt strategy the rate by to improved back. reflects Ajax positive Despite volatility yield was we and on our income overall that on and losses first increase unsecured per fixed shares terminated shares. in gains where we results in notes, hedges Meanwhile, net the rate Reserve interest hedges.In rate of Overall rate gains Great our return, March, that during net for for used loss we merger, a were interest spreads, consensus lagged agency gains generated HECM, for Federal the net rates pools Partially the origination Longbridge first interest profitable the portfolio quarter, as $X.XX rate driven the connection exceeded the and per rates year's offset in interest HECM on particularly our first receiver interest treasuries. equity, on Equivalent, improved inflows, also by net pressured GAAP to long-term lower hedge from share MSR servicing. yield spreads from on holdings offset well these the yield contributed on generated in to HECM the driven the on HMBS servicing modestly positive net quarter, agency in securitizations, Tighter our income to driven broader senior the income RMBS swap net for were gain volatility excess return mostly as

Longbridge long-term expenses, per X, effectively the bought of interest interest hedge obligations and certain In we where of please commercial trends. and loan increased corporate non-agency As non-performing on MSRS by from generated can portion you into also X% by a commercial, to the by larger have Longbridge, see portfolio $X.XX CMBS. ADE ticked to a and we mortgage because fixed floating REO bridge ADE net ADE mortgage purchases by rate reminder, Apart of of other in A still portfolio net the segment. and with mark-to-market sales $X.X per smaller market quarter-over-quarter, used gains, to multifamily last to the bridge Total portfolio, driven loan convert increase swaps negative rate net portfolio the investment delinquencies CLOs. Slide excluding that's rate gain transition first offset obligations.Turning share. in originations, of but as but of our breakout and line the higher rate to March after these continued loans in we and the quarter, turn from and Also was corporate was loan RMBS highlighted loan driven share sales share, loan Slide billion of of exceeded total modestly principal portfolios, loans paydowns increase non-performing the is quarter. residential the portfolio, which a ticked delinquencies, XX, our non-accrual down $X.XX X. per non-QM up long non-QM weighed loan we our work commercial credit the loan an quarter, up quarter.Next, residential by incrementally first through in during X only which that segment, by broader expenses.During $X.XX sequentially, totaled net delinquencies first

the those into commercial RTL the Slide capital quarter, bridge short the higher yielding portfolios, to sequentially continued XX% that the portfolio the the value this received from our decline from that technically the reverse securitizations, to for as $XXX in to we continued XX%, and across XX% made channels in to steadily.On channel retained balance Please of our only of $XXX capital wholesale in you was loan from increased we can our even similar million RMBS million sequentially the the fair declined presentation, total paydowns principal a prop, to include by primarily represented quarter coming share consumer mortgage is opportunities.Slide our mortgage $XXX million, XX% of securitization, previous from combined XX% sheet by by those quarter, prop For to $XXX and during shrink consolidated how the decreased million present quarter. X, originated XX% though X duration portfolio with we that originations proprietary consolidated its size the as securitization illustrates XX%. driven GAAP non-QM purposes.In portfolios which share on of note $XXX return we for March. entire a XX% we reporting of HECM agency Longbridge loan tranches completion first to Longbridge portfolio Longbridge's securitization its quarter, successful which first first correspondent and into through declining our retail rotate long of and portfolios million, total that The see the

As track Larry to Slide borrowings, of mentioned, points XX borrowing average to summary Longridge a the by our turn total basis volume X.XX% to On weighted X borrowings. in March at is our rate on origination increase XX. for next QX.Please recourse increased

higher swap where rate our rate. interest on a to we pay fixed and continued lower a We receive carry from floating benefit rate overall positive hedges,

increased NIM expansion which the both yields both agency for and strategies. drove credit quarter, in Asset during

debt XX, highly in of our recourse prop X.X:X decline by to at agency from reverse RMBS borrowings mortgage a loans securitization in Our in levered and smaller we X:X mentioned, equity down to a consolidate securitization. of March.As end, proprietary recourse portfolio, our year do ratio decreased driven to that but related borrowings more our I decrease March on as

do which tranches, for stay term financing us, sold our the sheet. represent balance So non-recourse long on

decrease added too, of over that overall our equity financing X.X:X to the our while our from March assets to here, unencumbered totaled new cash XX, ratio So approximately facilities that from first the debt year debt loan up end. $XXX was we X and recourse X.X:X, also note million, quarter April.At at smaller I'll equity than decreased sequential in course decrease ratio. million to the combined $XXX in

at Our end, XX. book down December value share from was for $XX.XX common at quarter $XX.XX

positive was quarter.Now return the to Mark. economic over total for Our first X.X%

Mark Tecotzky

sold the structured a wondering one conducive many assets. will they for from high down uncertainty was they Thanks, quarter how about came to for JR.The QX market reach a their what believed Fed in and products. through for came and That's the backdrop yield financing speculating as non-mark-to-market did that good when a environment we we and do securitization, across more we volatility volatility structured about our cut. spreads most during Implied spread is products we sourced environment, some corporates to repo assets income, some converted in.EFC financing REIT in Rate levered that supposed spread much declined hike we captured spread to potential, selectively assets spread high-yielding would portfolio. tighter shifted could full about

quarter, work broad-based For from ample of both to to in credit into the that came we residential, loans securities.We across our strategies, and and closed year the had some deploy and cash merger portfolio. that with commercial we contributions including growing put the our mid-December, both Arlington

opportunity tightened both estate the we've portfolio, underwriting substantially Including commercial our One originations at them a and regional bought de-risking. now. X well by substantial believe bank. of which And underlying we to regional is April, non-performing a estate, of related where mentioned as have growth dislocation picked new recent bridge quarters, for purchase EFC up, par, that we commercial an the this to in year non-performing opportunity bank are was discounts highlights mortgage real and here approaching loan secured acquisitions from coming loans our the real even one we of criteria.In

our not loans, The for Sheridan reverse positioned in-house on but prop to HECM reverse Our team deep the the was types leaves of situations.Another and mortgage partnership for with loans. securitization quarter highlight underlying FHA-insured mortgage these private-labeled experience rather capitalize well Capital loans the big securitization. were of us our

improved reverses. mortgages had volume, have growth potential for this sale prop year. additional a of our significantly again. addition, prop to securitization securitizations non-QM reverse very Proprietary some with retained we in down in for with Longbridge.In this second securitization the non-agency slowed of tightened tranches a sector in debt early will and could quarter lot securitizations on is is our securitization gain competitors. The So These high-yielding hoping capital origination lead priced issue. that I'm margins recycle tranches. few both and XXXX, and a long-duration attractive allowed securitizations to profits however, the a create version us increase in relatively we spreads the and for on and XXXX, the making wide spreads In we over thus face first future

for look Slide Our how to first securitization quarter. in X, to our allowed tighter EFC portfolio.Turning April high-yielding retained portfolio and tranches let's during evolved create these at the back leverage spreads the

sectors, can opportunistic very can premiums, we believe are see NIMs, equity more our retained portfolio Closed we about potentially and in yielding seeing continue substantial in very we'll sales be manufacture X, Both purchase growth. scaled so started Seconds growth opportunities their advantage and agency low here quarter-end. but we had high-yielding further us more to has in portfolio We modest interesting End That investments.On extraction high other MBS. shrink note we quality, continued that see other portfolio modest over bridge RTL, some took RTL, the buying non-agency equity direction, sitting and both can our working bridge had substantial the tighter homeowners harvest also see in in With and You Seconds commercial and RMBS Closed We spreads in many commercial XX gains past homes grew continued following we has first tremendous months.Portfolio of returns portfolio. also HELOCs. what securitization on our levered are and up we've we to and Slide some you high to with as outlets some rates, agency rates, high as opportunity. with to mortgages a potential credit HELOC provide and End large,

high opportunities expectations should which for further dampen draw to should cuts generate continue should the investment both rate spread ADE. market, products. volatility and interest high to capital returns Looking Market the rate continue and market for ahead, more into backdrop current support

In their a been should portfolio recently assets runoff, which pouncing. by they sheets; buy.We addition, the EFC and and slowdown in see balance exciting bank announced has several opportunities, new Fed expansion in has support the

First, of the discounted pace sales and is deeply CMBS increasing. of NPLs commercial

well our be few on portfolio bridge securitizations for run we got to RTL rated currently businesses.We'll significantly is are those opportunities, workout. organically, only spreads deliberately our last positioned as significantly off commercial last loans prop-reverse RTL are as securitization and a improving We from in our mortgage allowed the capitalize recently of have year business and our Securitization financing tightened as first financing tailwind which year, non-QM done, in economics. to exploring

Finally, we back HELOCs.Now, are Larry. ramping Seconds up both Closed to in End and

Laurence Penn

Thanks, Mark.

have wide high-yielding As significant you to we variety we're a can work. where loan currently strategies putting tell, of capital

pool For by of originations a effect non-QM net portion loan and added and continued agency and our we've recent to Longbridge agency trimming the April, the further purchases impact significant our of specified securitizing portfolios our for in by sales and make credit has our so perspective, far, room leverage loan outweighing portfolio.From quarter been non-QM our portfolio, the second we've flow of a securitization. more to meaningfully and

recourse on our So is again. rise to equity ratio debt the

progression to and to dry earnings to always powder of in capitalize always, balance expect from I as other after forward, ratchet dual portfolio we ample strategy.As push objectives ADE with with up. the we to the opportunistic expect and as from end, elements pull it near quarter, linear unencumbered have management the situations leveraged real capacity given even to forward our debt. come won't expansion, term MSRs.Besides play our other To the cash is activity, was in lots as borrowing growth to plus the portfolio assets preserving continue on be case aim first that lightly areas. commercial seeing are in our assets, different what leverage such continued estate of of distressed growing a Moving principal But X currently we April's such out

commercial handful portfolio. loans and REOs in progress our on First, continued non-performing the of

returning progress second, year, So Longbridge in this steady. profitability to but this been far has slow originations. And

well partially As ahead second submissions Longbridge has reflects the origination higher additional quarter sourcing are interest earlier, that of volumes far projections, despite established. rates, channels successfully which I and mentioned so in

rising movements rather active comment the than EFC's interest result, book drove we're interest to per in rates have almost ADE was EFC a XX year the hedges, longer-duration I'd again where speculating to to in is on of Longbridge here. for Over to on changes positioned As wrapping in profits always some which contribute hedging how protect up, rates. history, second of our direction interest share interest important on EFC's value we expecting losses positively rate from longer-term endeavored offset against This on our like rates, the quarter.Before philosophy investments. first quarter, through

Ellington is forward, duration, rate for Moving in we the are Financial Operator, servicing ahead. portfolios short higher a loan hedging mortgage with please to expertise, call we'll positioned seems, open environment, questions. indeed high-yielding believe rights if it go longer our and now well portfolios.With interest as I that, that up

Operator

for The question with you. first call Bose your now is KBW. Instructions] questions. George comes Thank from open [Operator Our

Laurence Penn

come we second to don't the Why question. Bose for back

Operator

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

Trevor Cranston

sources? could longer-term On you of opportunity proprietary also or talk Closed for financing in Seconds from originator source you about HELOCs, terms from to little talked relationships those you color of are bit you're those about And different and maybe able have, those coming guys products. if strategy things are existing the of can End maybe the a the add you sort on

Mark Tecotzky

X%. pool out, that generally had Sure. makes Trevor. HPA. of that have They've real first where them End they lot borrowers different people the It's Mark. to They entities. Closed lien Yes, have of took mortgages from say, 'XX rates note sourced generally The for those a take or are been during 'XX. around sense have agency it Seconds

working financing, repo originators X is options. agency presence.In there's have financing. primarily One it's that an of terms think with So I

And way non-QM RTL just repo it's different then than not really financing. there's outlets. also in this So or securitization

underlying rates, able high the have premiums, get looks note and we hasn't to real very surface what so big yet, get far, high credit an So on like not but where that quality you're is it loans. high area pretty been

Trevor Cranston

Got it.

Okay. a now, side, That's bit lot focus doing. proprietary investment which about more then but pretty things guys if the helpful. like right across you could sounds have returns seems like of maybe the talk And there it there's are available you more good the different I opportunities, is little relatively all a was there. curious on been CLO small

So that just deploying of opportunity the loans doing? capital kind of how you the into you have see some versus in guys other been

Mark Tecotzky

secondary of It's This all, similar it's to on part opportunistic there, as is, Credit we're what secondary CLOs. first CLOs. of doing right, over Ellington focusing at transformation, that

And strategy in so well, Financial's Ellington getting Ellington alongside have allocations been that as Credit.

we So see are or it's opportunistic, transition I there. things than, just think residential liquid more say, like opportunities these but loans good that, obviously do

So I growth significant that section opportunistic significant are risk-reward represent of the as of of wouldn't on enough for a time very necessarily period it's certainly the small we long and that would call, portfolio. while portfolio. was of mention did a part there. holding very our we still think of And to this a But sort something core like

well. Ellington has participating extent some as to Financial So there been

Operator

KBW. take question We'll from Frank Labetti with next our

Francesco Labetti

This is Frankie filling in for Bose.

on touch normalized comfort when earnings how And line you the dividend? to see at roughly the in you with dividend, being level? level current are the comfortable wanted Just your do on

Laurence Penn

dividend resets. level set keep some at for like where with I Yes, think prior it a we stably it we comfortable. to there we we're time, have hope Yes, just

this a think few yes, going everyone had different But a dividend, the we is actually that remind while. be it's back. years $X.XX from where that not we're that quite for to the is dividend would I comfortable So, I that

Francesco Labetti

that's the some to volatility because And a got to just getting when do normalize we've you Yes, harder mentioned we've as on drag. and little the follow-up, project, earnings? see a call, company

right. we've So to sort around first our with is looking contribute to a like that's is that ADE the big some the hasn't that of soon. assets part think We positively, a contributed that in a capital to a that our segment. mentioned direction.And that in portfolio. pretty we turn ADE We of not investment and contributes second then quarter going all, said, got yield right going is well that as NPL/REO NPLs really to giving in so trend that Longbridge, contribute it's of yield-bearing yield, are the us couple also the thing It's commensurate

So, while can we're to drag working be that a our those out, ADE.

catch resolve Of that those flow that course, into a ultimately lot when doesn't going assets, perspective. up earnings certainly ADE. an But we're always hopeful from to we we're even

Sometimes necessarily sort of approach translate But get don't sale also in things we earnings. other the into translate on it certainly to hope strong does, will the continue to depending seeing accounting closer I precise sometimes how ADE I you but date, closer ADE doesn't, the and per I are our that our upon it meantime, the give sort that just resolution. can't nature and dividend. gains se, say but of would of That's a works.So ADE into that GAAP

sort impression out while thereby our dividend. GAAP dividend and book we're focusing than wise, on maintain goal want is book to kind So preserve ADE I ever earnings. value GAAP that to the more ultimately, of that earn don't give paying of and value the And

Operator

from question next with our Jason take JonesTrading. We'll Weaver

Jason Weaver

yields? of what RTL in regional more if from in wonder of transitional and behind the some available be commercial how context involved reluctance we're quarters affecting sort could to give last you from the few that's competition I hearing space non-banks, banks amid for

Mark Tecotzky

Mark. is sector. heavy that This where surprise underwrite. regional it is doesn't aren't Yes, this a is in involved me this It a sector banks

out is, that of other of like, It's lot put have lending necessarily as kind thing commercial developer, in it's multifamily. lot the work construction construction about are need of a of you people timelines. for cost, a have putting team banks.And a You dollars not a knowledgeable expertise the you the opposed to to to, a these regional

$XXX,XXX also Here, a there's And out at there's to only money draws but we're putting the you initial supervise. time. underwrite, $XXX,XXX, have not

competitive. the that competitive it always fact space like but don't a I few banks years regional attract fairway of mortgage competitive, more space is and what than seems it we're middle this like we attract it is the every ago. now sector really So, as doesn't in this space originators.Yes, was doesn't of the view generic, sort

entrants, used You've are a people but longer no new other of that had couple involved. to had be some involved you

had us If of how has in sourcing competitors bit and fair not loans, an have a do XXXX like tighter of have we in So among at guidelines anything, we got to our guidelines actually ability all. the guidelines not and and pressured we underwrite. we terms loosened relax feel

Jason Weaver

seeing remarks, currently? updated it And if apologies can give book prepared an but I then you missed value that where the leverage you're during and

Mark Tecotzky

precise April put given haven't later in out will Ordinary course, end, a given balance remarks did terms in estimate we haven't ticked securitize we've Larry prepared current amount. in been the which then loans happen book on up quarter-to-date. leverage, of share month May. active leverage we net-net deploying And we the that for has value that non-QM also April. yet. sheet. off And each that come his per leverage in So mention we But

So far we a provide. that, did that's we haven't quantified color but

Operator

BTIG. from next will Our with come question Hagen Eric

Eric Hagen

kind adding And areas doing, some like those and will? being talked for a longer really talking hedges rate of interest mostly any hedges You you're in the hedge, is Are just to well-hedged bridge higher portfolio you ] think the portfolio? for How the do about underwriting about guys? are you credit the about? help CRE you mitigate the environment. risk Or [ of if that

Mark Tecotzky

Mark. it's Eric,

of mitigate I mean, back in higher just level being at risk rate longer, I'd well always I hedged. a interest step think that well always take by we're that, I for to rate tried We've would the say, hedges. a company So series for hedged

for in bridge, can spread RTL, comments you prepared all if sourcing are really Larry's commercial our this construction well longer commercial indexes, bridge, there, think just environment, the our higher and I in the think remarks do that, portfolio you is duration, SOFR. So, short channels

So like, that's right a particular hedging higher.In really macroeconomic some hedges big the credit short of year. we've other IG hedges, spread current sort we've of like had if Like of the function coupon XX. ways. for a credit X they big done where is have securitization. indices on you yield, And for keeps IG the is kind risk really stuff get now terms but function One Like, credit those. just against In overall while. the index of the had around Fed well way the rates they a is non-QM hedge,

us some think, now. that, for NAV a hedge.So, of the owning less of kind some that hedges we on indices. interesting, that of spread like a limited we index right they're I the deal wide. seems risk volatility. CMBS and we can into we of our from sort of April, see of has were or protection time credit hedge we us And back it the to in in certainly priced cheapening out sort basis but mitigate spreads we like execution. on was credit manage CMBX-specific That's liquid, less that sort widened when pieces. our they're part you where and when points bit little bought CMBX sold pricing. able what of doing we kind hedges more it X risk, get had hedges, that corporate that good that little market, sort a downside we're on you B to referencing had have overall in to just non-QM also And long are now macroeconomic but of of had for now of time of So But And gotten priced, credit volatility IG X credit

Eric Hagen

ROE securitization spreads, mentioned a credit and from return that's embedded expect including at profile? that. in all-in of these great execution, a can the the of any you of the I let's return, including rates talk the piece When that estimates what transactions, That's loss share detail. appreciate do the is and that the you on kind you about retained non-QM you sort you think

Laurence Penn

do JR, want you Wasn't Yes. give. disclosure normally sure that? to we how take much

JR Herlihy

about We ROEs. think me give that. Let precise don't

where I think we on, price the and start we we that and speak can AAAs, can stack. total compare capital broadly can we with the

punchline. the mid-teens I kind we think where is of is pencil

color underwriting on where the up think and components of those. A B. with, is some we think, I let build picture, we can mid-teens that, we're me of to get from assumptions penciling But provide conservative forward how we going on Eric, that, As always to more big how about kind

Laurence Penn

Yes.

can provide here. what see Let's we

sale to that try difference the right, that recognize loss then expenses of because loans think And you're were are always retained cetera. We securitizations, But between and of of this a to not securitization, so that's distinction, which way, first sort of a accounting-wise, sometimes when on a gain are consolidated securitization, and of worth going the gives thinking kind what as an And your And be securitization, say, but now those what right. necessarily, So, trashes the going think did them a differently, we are are sort tranches, we that, not it you securitization, not, back.And retained put right. securitization kind of that a way, accounting really of a always that we've think on very et retained you the non-QM doing let's into and sale. tranches. of sale, say sometimes that the then obviously. those a of on retained or were, expenses in tranches, for do And right, the that's let's you value accounted loans transformed like of for all, of gain a right?So on it's they're what worth don't legal, that It's even our we purchase they're them it's a just variable. taking if we sometimes put loans are the you, really into to okay, gain underwriting, right. as, there if securitization we

to to the loans short, very securitization upon from that the hedge in story addition Mark long is of into now, we gain we going IG mentioned how interest on sale, the we of But that. sale loss rate what basis. a do we'll hedges, gain we a swaps sale use or think TBAs a have whatever, on gain hopefully upon on when depending use going a hedges interest variable everything sort sometimes, or as securitization, we be sometimes make well rate to So, depending

of event, tranches that the single tranches. say And of at They're tranches be rated think one-time So a there's much what don't we retain, if be that's it'd retaining deal. portion we're B have going that to right?And away subordinated IO, the principal, you or look then then that they? the giving maybe an non-rated too to the right. more are I

those in able hold the not if knowing are we and risk so those, deal. retention own basically we're until some that and call and sell to to And going cases we're forever we those subject to

them, and as where to These to conservative and try market price, are spreads those the deals get you can value of wide financing quite we think on the that. But we and on them we those So well. going can look be values you we're if at where extrapolate. sort

of well call do retain So thing well, as those sort we want into the and well, often and as are mid-teens.In mentioned, value. those we we're that to of, as terms we JR IOs, have value another the because rights

our call super really with deals that value much have Now, coupons, on old rights now. those did the don't we low

IOs, off your believe. I If something this Mark, you But don't years it's using extremely we're one the in top where leverage the kind few an ago. were to, where in wide, revalue head, we that. mean, of from of we the they on we what But as answer a need do know before down speaking, even those of deals, value So is we're think, right? every those don't have generally when I priced gone these OAS you? quarter, I teens,

Mark Tecotzky

you add, lot if teens you're would have back, called other unlevered. we a And of securitizations. low old Yes, Eric, is, I look the thing

seasoned those those very as executed loss in loans. sell-off XXXX. calls on season, the Now, prove tighten agencies But as were the because can favorably loan options rating very look valuable before big spreads call the expectations of

most put new securitizations, speaking, very called our economics deals, XXXX them and was 'XX, we, recycled the loans, for of us. into it generally our XXXX, So and we've helpful

So to when think can realize that in do ancillary time you there's doing these I pay you don't future. it the dividends the benefit it, securitizations at but

Operator

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

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

Ellington Financial (EFC) 8 May 242024 Q1 Earnings call transcript