EFC - Earnings call transcript Q4 2024 | Ellington Financial Inc.

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Ellington Financial Fourth 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.

You may begin.

Alaael-Deen Shilleh

you. Thank

Private I'd forward-looking everyone of are statements future harbor nature of begin, risks should call be this the from not to Act provisions include Reform may within materially these the detailed historical like in so they and we These that remind conference safe of Before XXXX. Litigation statements in quarterly to annual and Securities events. differ the and filed results with of may be involve not predictions considered reports the uncertainties our SEC. Actual statements meaning

The company to these forward-looking undertakes statements. no obligation update

today are me and of Investment Executive Officer Officer; Ellington Financial; JR Herlihy, Joining Officer. Penn, Tecotzky, Financial Co-Chief Larry Mark Chief Chief

our and call track end presentation. in notice Our fourth quarter notes statements earnings all their important the conference figures on ellingtonfinancial.com. that entirety will website, call are presentation and references in available presentation to and the qualified by Today's is

the Larry. With call that, over I'll to hand

Laurence Penn

and very Thanks, a QX year, our for and off Alaael. capping throughout Good morning, quarter, the Ellington Financial, as channels. strong loan thank you a fourth expanded very was sourcing the joining XXXX. quarter In today. successful we us for portfolios everyone,

several proprietary mortgage originator and that our Longbridge from we during performance strong quarter. led first, Key business; another from of income again comfortably by We earnings $X.XX to covering $X.XX adjusted second, completed of distributable begin net per securitizations affiliates; sizable we on results quarter, non-QM per share, financing the fourth adjusted quarter reverse balance Slide share, $X.XX our dividend continued our the increased segment, presentation. steadily Mortgage strengthened share. of our our included: distributable share sheet, gains third, loan $X.XX per by generated Reverse per and the we and other our X drivers and while grew earnings. I'll of from another In quarterly sequentially the excellent

continue portfolio credit the in quarter. scale We to fourth up our

grew second where combined of and This HELOC, originator growth end the portfolios yet substantial we by a Prop in businesses, bridge loan loan investment expansion on venture closed closed Reverse mortgage XX%. another origination further Our joint lien, quarter. our proprietary commercial mortgage reflected

we typical is and a investment JVs, how flow of that our structure agreement we these As to tied with forward originator. equity

adding our earnings agreements flow the they the forward enable key fourth pace. strengthened These sources we key in ways: lines been on in securitization to and on predictable a across preferred of we seen high-quality our quarter growth. pricing all stock. lock us and and redeeming executing high-cost capitalized In securitizations, lines. product sheet different to X X and loans completing spreads at growth securitization securitizations Meanwhile, we portfolio transactions have balance tightest and have of attractive in our year at side liability as by the improving X warehouse debt

reflecting the earning X up The had that time we returns can sooner can capital. the we the First, faster of sector. our tranches non-QM great the same October turnaround loans and earning securitizations the the to kind calendar we've This completed in increased non-QM from of time at X securitization the acquisitions each start that acquisition on velocity first X in been in quarter. redeploy retained sooner non-QM November, freed our X outsized marked the non-QM we on completed levels. that and deals, execution we the our in

the small no now. non-QM part Ellington's investments increasing relationships we market in is due to that originator and years share fostered over numerous in many

which times in prior a dealer our of considerably XXXX. securitization X was oversubscribed third deals we over and our completed than the Next, proprietary price and several mortgage tighter reverse year

so mortgages, one see of of become proprietary to the market reverse owned pricing continue in as We'll has well that power wholly subsidiary, on great good Our flow. as largest of visibility we product. Longbridge have the that originators

to closed strategy. in the proprietary equity key a securitization growth we financing locked on market. driver of further but Finally, an space, of mortgage our market. inaugural a drive Home theme of loans, extraction lien remains second small that mortgage theme important is match relatively nonrecourse closed-end in reverse This the which that's

On demand strong fueling loans. a larger continued level, home second equity lien extraction for is

can XXXX. of lien became an Given through second second securitization, the loans recent this component financing long-term lien we supply important of portfolio loans growth increased the and in get excellent terms sector on our

non-mark-to-market we fourth generated securitizations quarter, secured we on in the the we net financing gains, completed long-term With the assets. underlying

help up that our We investment Ellington And believe competitive and tranches remains securitizations retained highest-yielding We loans, drive expect earnings the advantage redeploy to high-quality and franchise our strategic cover that we build additional for and portfolio. source dividend Financial. securitizations both freed to XXXX. strong earnings to ability core for capital continue of will value structure we will a our adjusted distributable retained use and our tranches in high-yielding GAAP help and earnings,

side to financing spreads. providing we're securitization financing. financing. seen the amount spreads finally warehouse but and banks the Okay, in market We've tighten the providing they're financing in liability sheet, with asset allocated and More to capital the of balance warehousing financing are increasing on still and sympathy warehouse credit of from let's more move

preparing this existing on X new competition, several financing both by and capitalized counterparties. loan by negotiating improved increased lines on facilities with We terms

millions of have growth. accommodate of borrowing dollars of to plenty We loan hundreds increased capacity of

X notes financing Our appreciate EFC's by which rated. the remain our is supported NAIC counterparties creditworthiness, unsecured that fact

in us cost for we the that funds goal deserve. unsecured get definite of can of we we XXXX notes, round assuming think another issue is to A

outstanding and debt. immediately higher cost capital steps cost we with merger, of lower highest Arlington debt, replacing we our stock repaid are accretive the cost refinanced we our from Finally, inherited and redeemed that some earnings. These that preferred that to are

walk our to to call With financial JR results JR? detail. over more through that, I'll in turn the

JR Herlihy

Thanks, Larry. everyone. Good morning,

share breakdown by net per strategy. mark-to-market an from $X.XX GAAP see fully On from of share and basis, quarter, income net Slide For can on $X.XX of you per negative income $X.XX ADE $X.XX Longbridge per X, the from we credit, Agency. $X.XX share. a the fourth reported

Slide of see portfolio segment net higher and on And MSR from sequentially can the HELOCs, investment expenses larger our which by ABS Net net the portfolio equity wider loan and driven $X.XX performance the corporate investments credit net from $X.XX gains and RMBS, interest net X, the breakdown segment. and by share investments. forward originator interest reflected ADE a income, margin you non-Agency in quarter-over-quarter. gains portfolio segment. per was on Positive from Longbridge

were credit loans non-QM tranches, consumer a loans, retained these mortgage portion gains modest case decline net in a and each commercial Offsetting on slight performance. by losses of driven and and loans

we addition, income negative on In workouts. REO had operating

versus higher property gain quarter. Longbridge driven across Longbridge. which to robust as the by MSRs sequentially increased during from yield XX% a had its by for origination with driven spreads Hakam rate Turning products, gains that originations, related margins excellent HMDS quarter securitization. higher on the results net segment well hedges rates gains tighter in and volumes, The improved also on attributable net to were interest as to all an net

hedging strategy rates election intra-quarter as Agency of market-wide. generated rising the and presidential around the volatility relative instruments a interest underperformance loss Agency Meanwhile, the for to drove modest quarter RMBS

on liabilities fair those reflected Our also the a our rate loss fixed results balance our senior notes. We value net for in quarter sheet.

to tranches pay the brought which that from one despite of particular, value par next the credit unsecured of maturities due tighter is In off and we during their those approaching. as their they at par, year-end. quarter interest the rates, matures notes they And shortening higher fair with around marked Ellington to increased where and we durations intend were over month, spreads pull at

well stock, With the had with don't value we as fixed net interest also the hedges GAAP. quarter, in higher on notes rate the senior on our preferred fair losses on rates which the under payments we associated as

Turning and seconds, our to non-Agency by now loan shows X the billion, credit closed-end RMBS. changes adjusted purchases Slide $X.XX portfolio of X% portfolio HELOCs to commercial of net during driven bridge loans increase a quarter.

of you the as portfolio our total offset to $XXX capital into and by million declined XX% see continue RMBS RTL driven non-QM A as portfolios, that securitization opportunities. to sell well rotate by as and the we growth can by paydowns design by long Agency another activity. that X, higher-yielding Slide portfolio portion was smaller loan On down

and points average for the sequentially of tighter quarter the turn Slide total to exceeded illustrates business. impact XX% borrowing during interest summary driven Slide impact the by our basis to X spreads, that mortgage Please year-end, XX decreased our rate bridge decreased borrowings. to by Larry At portfolio lower next short-term by as the of the $XXX as in completed securitization rates please proprietary weighted on mentioned. recourse X.XX% that originations new reverse long financing borrowings a million of XX

Driven by on lower sequentially. net both the interest increased our credit and costs, agency financing margins portfolios

X.X:X X.X:X. including ratio debt-to-equity recourse unchanged debt-to-equity Our from and consolidated increased securitizations, X.X:X our ratio quarter-over-quarter to was overall at

million for at year-end, Z Ellington from acquisition, combined to was unencumbered value Book non-annualized. $XXX common recently we At and brought or the XX% and return per quarter the approximately to December, reset a increased total fourth Series than stood and redeemed cash assets rate. our equity. with In economic we which our more total share $XXX X.X% of preferreds, which floating a over rate fixed

I'll to Mark. it over pass that, With

Mark Tecotzky

we Thanks, origination it affiliates. we secondary in see the attractive our organic with secondary more destiny. XXXX, in strong our to JR. but manufacture quarter. in the our were happy advantage from was allows which investments opportunities to loan where to own growth, loan of take in own us I those of growth portfolio past are more to was integration, cyclical market contrast our really originator the in market, Early also resulting control Much this partnership vertical able effectively opportunities are of

platforms you both focus interest the speaking, environment activity originators we those to that later volume actually interface industry-wide. has the Despite really origination their all the with of grow the reliable levels roster and depressed partner, volumes rate to housing high sectors teams, by current we that potential and mortgage at of should relatively these if XXXX. gaining with have led market as and in been home the have on, and financing -- partner origination refinancings EFC purchases that, strong up mortgage indications, in high pick originators decline look growing a with Generally share sources

ago, are with rate compared year to, we consistently expect now the financing average will us tighter lockstep spreads, financing a add to counterparty, board say, spreads assets. liens. I in second the with asset While have In March, a non-QM and financing in providing we've been to almost able new lowest across our the lower both

taking QX on of in Larry securitizers issue investment-grade consistently strong new advantage bonds. execution As were we mentioned, very active the

Importantly, levels of the excellent the EMT performance historical that able to our thanks the the we were in to market. lock best of were shelf, debt some in spreads

execution is but Our partners. origination consistently better helps a real pricing strong also pass which competitive earnings, our deal to enables us our not advantage to along drive only

turn, And loan their for rates allows along us. that, share more additional mortgage capture which a them market competitive partners in customers, to quality our and to produce helps origination pass higher

our had also in performance Longbridge segment. We terrific

subsidiary. Over mortgages, completed X which our our proprietary Longbridge originated reverse XXXX, were the course of all private of we securitizations first by label

translates that With each roster tighter mentioned helping and for in investors, the on executed build tighter levels. which into and volumes Continuing deal them market and brought debt a is loan we've I and at larger theme share. loan tighter Longbridge, execution larger more just competitive pricing succeeding deal, directly we of

Much team, area research HELOCs. to and and has products. Another second the a both credit for for these been risk goes for a which of for liens robust growth success framework evaluating phenomenal that has prepayment credit built us

selected our relationship Again, foundation are we addition, in the decades some has with mortgage in believe which the close have to upon we retaining organic helped highest the securitization effort in case, construct. of a underwriting have originators, been sector, with endorsed In wins best portions from secure sector. our portfolio what among programs sourcing cases, our loans that this of with span yielding some we built guidelines in loans and EFC of quality growth

active of an future to the come second-lien of is EFC a benefit in a up deal chest with underlying Non-QM the overlooked that of resecuritize the deal loans potentially rights. often building is cost war call at lower option and securitizations Another call securitization funds.

quarter. experience rates We of XXXX, did very call they EFC exercising in the made money interest rates Before future. the And its options. non-QM in spiked a profitable in fourth some headwinds decline should could lot again, be

the On mortgage workout. steady in X commercial loans most side, we progress resolving our making a are significant

have XX contract? the finalize X days case the up resolve court waiting the in property should the second for been the and divvy properties expenses of next loan, proceeds. these sold the underlying the with the of just of basically we're bankruptcy the already loans sale One In underlying and to and

and These which protracted able AD anticipated. know generating resolution processes initially more proceeds, haven't more But period. workout been shortly I'm to be we the any during resolution we'll redeploy that expensive are than excited for the us to

the third currently more time. done, phase work lease-up be Finally, to and construction in but will that loan a take is is and needs progressing, that more

the are valuations statement of seen and an residential value on to stabilization also all mind believe loan most expenses notably our we that CapEx and and realistic timing our Keep fair sale. our uptick reflect in sheet. through delinquencies, in And ongoing estimates we and our our of income that in non-QM and balance conservative loans portfolio. We've workout

So attribute of and into a mortgage material Weakening we them pervasive. much a our haven't delinquencies two, by higher higher We well creating these the monthly believe obligation as in therefore, expect rates far, estate. losses loan are and likelihood secured payment portfolio combination the real these the non-term vast sizes is do credit delinquency of loans forward, underlying the of pretty higher greater majority translated consumer nor going delinquency. to rates, bigger we

premium of big -- in the parts experiencing premiums. a country jump some are insurance home homeownership that, of in top On the

We have cycle before. seen this

we and market, buy been you underwriters tight We have the team on you data, effort have of to with. choose underwriting, a to we what very we and big managers on research whom into the address the tear asset experienced programs Relative a selective about and have to partner issues.

costs some debt have are taken we rising on focused borrowers, on this toll said, That issue. their very

X stakes So and integration, environment vertical which non-QM have This another informed the at in we culminating playbook, securitization soup pricing far lien efficient closed retain already in and to us with our securities a underwriting to deal. our allowed originators really by want want. of models equity from XXXX, to we've prices process the second continued runs and securitizations creation has very the in nuts to our we leverage guidelines we to

Larry. to back Now

Laurence Penn

year out to high I heading our closed a momentum With note XXXX. have proud included portfolio XXXX. to which the with Mark. in you, Early drivers fourth we in Thank of growing accomplishments earnings, the I'm Longbridge into great . quarter, in am the origination distributable pleased successful accomplished the credit a delivered. year, on what we and to and we at Financial, growing laid returning adjusted profitability

way our first Longbridge. credit XX% portfolio half in per fourth the with increased quarter. the strong and With growth from $X.XX the performance of second the all in Altogether, we share the of XXXX share $X.XX ADE up per year-over-year from to quarter

and Longbridge for proprietary products. our particular, reverse mortgage momentum the the about excited at are in demand We growing

every moving of ADE ADE on to quite will we each so contribution I'm course, not our continue which, EFC's and goal. that high do forward, anticipate overall quarter, being counting is the cover While dividend always Longbridge's

As also earlier, delinquencies some the loan be we as our we discussed will our capital ADE commercial book. in from supported mortgage redeploy remaining

across careful as REIT we're avoided seen believe the sectors, stress you've kinds can't other about companies. in out Mark key our serious other market-wide. the problems of that talked been enough we to has I seeing as any diversifying By we're how being delinquencies mortgage diversified I and that success. that there. diversification upticks have at

close from this ways benefit highlighting to that we by the I'd many diversification. like

as diversification investing which loans. by benefit in asset loan investments a actively from securities mortgage commercial investing been diversified we we've in diversify loans, securities by First We machine, both dimensions. both multiple We us and built of tightened. and on crucial has up and all, formidable generation spreads residential in have for

commercial for forward the been and in to sector. we're back the minor We mortgage by So relatively reverse diversify both in that investing mortgages. offense sector problems and playing have in us ones

one non-QM mortgage space, mortgage the to the originators largest the Meanwhile, bridge we we mortgage in mortgage And originate in everything of mortgages to residential in own in own reverse forward from loans commercial transition country. stakes fact, originators loans. loan

and servicing on also mortgage both We rights, MSRs. forward reverse MSRs

it can creates work beneficial We short to proprietary by in short-duration bridge diversified also -- mortgage reverse mortgages, for paydowns times loans We duration mortgage us we duration. many own though even be loans. extremely like it own reinvesting of RTL, mortgages duration non-QM lien commercial so like constantly and be and more the second stress. loans loans and longer loans Having

XXXX, during flow For we purchase COVID, short coming off dramatically to in which widened non-Agency cash to had during liquidations. duration out sizable forced used due RMBS our COVID portfolio mortgages example, a distressed of

Okay. We which guaranteed, employ lower we further higher leverage well as we lower-yielding employ diversified agency leverage. on assets as by which credit having non-guaranteed both assets on

fourth was other share with of quarter. The didn't in rate one for our value at we rate book directly capital sector mortgages spoil tough agencies. Meanwhile, REITs our but effect interest better refocus can relative it mortgage and more on soaring always to under agencies. a the agency volatility we credit in X% quarter to When the allocation, large per saw some overall drops sectors, value relative see agency their on due

I Slide from really dimension our use add mortgage which to Finally, think EFC XX. REITs. diversification of another through portfolio please yet credit of to turn distinguishes hedges, We our other the

is portfolio saw in their liquidity during mortgage credit mostly more countercyclical. to market corporate tail less try COVID. we though wider. hedge robust credit their want to because protection big we like to spreads hedges events and when are focused, spreads and instruments when tighter on our use We of have be Even Here, are we

column CMBX you this mortgage-backed rightmost the to that can securities. use lesser On default credit on swaps we to also hedge, a of commercial see slide, are which extent,

can the see on large had as prior on both overall year-end. a you at the As portfolio hedging credit Slide as XX on XX, Slide well we books

add-on we December. in have and sense most types credit the a fact, That tighten reached In XXXX spreads while. long since their in throughout makes us for

that real metrics, to In late been started they inflation corporate December were economy. massively in fact, was clear they first the a many it since by had spreads XXXX the before became right when out tightest widen threat to credit

to first a of in widened corporate XXXX, have like these X credit point that I'd spreads months out out bunch.

taken steady hedges of credit that cycles. years economic so XXXX we've been have year and a And key and delivered return performance key in our our off as dividends. returns over market some another and maintained believe we to diversification I was recently. difficult fervently to our discipline our solid X%

our Our XX, peer both is shows comparison in resilience our steadiness And on shows deviation Slide market cycles over through on group. illustrated of standard financial shocks. our market to and which in and crises XX a returns Slide which particular,

forward, the we built have on committed building multiple across XXXX momentum are lines. securitization including to we XXXX, business our achievements, in Moving maintaining

Mark mentioned, As we've months. in securitization X far XXXX already closed so just X deals in

are the sourcing diversified more for pipeline. capital have portfolio leverage year also ahead. prudent a strong believe Should positioned dynamic that will few and our expand asset liquidity, very we expect the ample originator channels. a base, a I well we hedging, further strategy, We in With investments

ahead. With that, the Q&A. please up open let's Operator, go to floor

Operator

question take our Doug UBS. We'll from first with Harter Instructions] [Operator

Unknown Analyst

you that for you about the originator the some a making? commentary And appetite investments of Can delinquencies? little given kind of made talk bit non-QM around the more you're

Laurence Penn

that? want Mark, do to take you

Mark Tecotzky

to for meeting back where think small we a credit principles, platforms the playbook on Doug, and the know Yes. XXXX, we there's where the relatively we so to had -- investments minds stakes of and in tend goes we've quality make originator underwriting.

processes can by being we a we heft Can look in what guarantee for synergistic. warehousing place. lower financial have. with their help the some that them by putting are that, is underwriting their And EFC's maybe informing costs we situations for of them help I mean, pricing a help And by more with data Can them we their consistent we loans?

a And done worked that of well. has since We've handful XXXX. them

the Even market but said about of of going And couple than I years. to on in the basically say, move down after though, from years from us, this generally has what Now they and been right are FICO, COVID. move those were higher delinquencies with the also sort up LTV in for adjustments, in past that. delinquencies -- what you've response the has seen

for time. think I long a

did our non-QM I So think, we XXXX. loan, first

credit in consistent time seen control to might market our shocking. also that the just I And underwriting loans on than we smaller damage much, so not more you're And that see don't where were years, monitor -- think the we assumptions, on. how of tools nothing losses a anything And It's and the think the haven't it's incrementally nothing losses it's have to we for many, many you requisite going you it's credit other right? minimize into much cycles. period to And underwrite. with and

does of which it non-QM, pricing. informs a expectations we assumptions now we where value market. though our find But still are inform on our in have, the and lot So we that with then loss

Unknown Analyst

business? that's would earnings a of that in you contextualize that kind slightly can -- then XQ as the more I always sit volatile understand of help can think be earnings would of expect Appreciate And you help kind power we that where that. the to Great. stream. of where XQ on of But the ranges go-forward going just Longbridge, sits you about earnings

JR Herlihy

we we Doug, we share coming talked and as it's see of quarter, which kind $X.XX achievable. about per Longbridge run think longer-term a what per rate is J. from target quarter Last

shouldn't number high to we $X.XX about. think but I such or plus rate, that run mentioned Larry think is good level, minus, And QX. in expect that doubled almost we So a a

been of the of rate, If by above here their quarters. our you able but dividend to multiply exceed you if allocation we run the have last kind in actually capital in their couple it's contribution, will,

the said kind our would on direct answer of what think reiterating that earnings we call. be would I be So

Operator

with . We'll question from next Hagen Eric our take BTIG.

Eric Hagen

Going maybe back with isn't attractive had these there. that? Agency valuations? if capital the to why portfolio And what share you more you would the you that like at you allocation maybe Can do and potentially more incremental to guys

Mark Tecotzky

for at is say, we thought there advantage years, really and decisions X Financial competitive it these Yes, about advantage sort credit a take versus I'd the we sectors. Ellington focused or gives one of really last, it to think of going high-level out Sure. just have integration X the more vertical which us big of have buying QSIPs in

capital so obligation. having originator And retention and to up do it's securitization stakes for risk that, between intensive fairly bulking loans the and

for So the portfolios at of good opportunity pretty been and a in agencies the And year, speaking, been good good. start has has this broadly had 'XX. Agency

So we it's -- it's that an attractive not don't we sector. don't think

been capital vehicle over the permanent the EFC, they've for need investment it being on property be It's in And permanent a talk and but you is use, to construction. to down better getting mortgage liquidity have we a commercial on side doesn't we we but sort in is this the in commercial made vehicle. for put oversea strategy, credit, cycles, can food to the call, in and in a mortgage done very we've invest us originator have the think years chain helpful side, good think it borrowers, the for and done management capital it of agency just really closer didn't go in underwriting, advantage and we and to on the capital controlling partnered and in a we of substantial. advantage And down and that's able to the about that be taking strategy going residential with

a lending integration agency in have capital Those the conclusion investments Agency it's you it's dislocation to while of more think And return can massive cycles our vertical the -- we're capital market. just better again generate and just we -- we that Financial, that to this kind superior permanent side, on returns doing returns in permanent need the get and stable so it's sort side. of Ellington over going

You saw in them XXXX.

capital we for be opportunistic it, retain have this But non-Agency when right we core Freddie now, parts growth securitization retrench private to And a a think ability more seeing are do -- of you firm. we were the used getting credit of competency mortgage that the and going and and enhanced Fannie exciting the right are ability dominate we'll bit that's a now and they certainly and to little more just now it's there, opportunity. the -- in seeing that market you're by

Eric Hagen

sense. makes Definitely I that. appreciate

maybe that? So delinquencies, from you expectation managing don't in even the out up expect on you eventual Like loss? of result trust. non-QM investors And those following liquidity is do there to differently an is an securitization if the buy you there a that the manage loans read-through temporarily of need your trust credit any as a

Mark Tecotzky

is risk we've expectation. not loans I in -- our and to that can the chunky we you while retainers it's our [indiscernible] there's work lot bit risk And think kept of I that deals. I think loans, think little By market I and been the see the No, what a we've like different in and now large, don't than securitization. on a credit are those expectation out talking about resolve we -- those have right? you're the So think

Operator

We'll from next with KBW. take question Bose George our

Bose George

net the on interest First, income.

the good noted, run Is the So the net this liability rate of you've on side. kind interest forward? work done a think income you going about to obviously, guys quarter

Laurence Penn

missed I of question. the the middle Sorry,

Unknown Executive

or... run we Are interest as rate a getting income. -- net say Just

Bose George

Yes.

side, that the just... it liability run checking was around so a $X.XX, the if I So you've was was had good rate up since on just I improvement guess, on

Laurence Penn

the beginning take I at didn't ongoing those mean Yes. place remember, the improvements and are quarter. of

that think I be we yes, better? So seeing something should

JR Herlihy

is okay, rates. plus average funds is think mean, you're of by declined I credit during portfolio of NIM cost on echo with several we tighter that declined drop and negotiating . short-term bps what That's pointing the providers XX which quarter. I out, financing -- the -- that's the which combination that. mentioned and spreads weighted of a widened -- Yes, the the would I

So of in more resi think I we a of it's QX commercial loans. I it's composition, that the adding but think do do bridge loans, saw mix, representative in what adding more terms function product also portfolio

think run good I rate it's yes, So a too.

Laurence Penn

Yes. other we've compression that I for of mean, look, we're spread some RTLs. buying on hand, now, And in seen example, loans some the other products. the on

So asset over, turns may portfolio I tightening you the think some see as on the side.

-- don't guidepost. the that's for But a guess, I and not I certainly you this first see it's I currency good could for counter kind quarter, So why of think any current, say. -- reason

Bose George

And then on as similar level. a actually up quarter. Okay. it side It's the went well, of Great. expense kind last

tick guys might I . decent suggested is rate this but you of a for run us think back kind down, had it

JR Herlihy

Yes.

rate. option-related I think up have it's onetime We a last quarter decent run that tick identified. some you did

I think -- the line kind -- you're real results. individual QX rate referencing items. a of a I it's of just short, use that the quarter-over-quarter with small it's that percentage now increase Yes, is the no movement think forward, run going I any in think in to good

Laurence Penn

to bit just line. I'd would I like add of option color a little And that Yes. to

there half and then back few was company our of So was of owning years having And event. owned other of partner Longbridge equity as thought a ago. half the the realization private sale a basically firm, potentially we and had until a a some

no partially that back management, company. we I'm senior mean -- actually back granting of going sort the the I And or been said other so all the plans have sell realization through works that basically down then, the bought point well a Again, all at ever no that within Ellington some sorry, so and and ultimately, employees really think intention we've we was which for company, anticipating When so the options Financial say, event the let's to the far. we several compensated in especially had company half specific just reasons road. way years. owned

can when subsidiary Those ensuing basically years price fair much option those when at a sense, what as options had in out So employees have at between repurchase options them bought the right, didn't monetize, granted happened an really make we never to the were in we and given that right? a them. a

a no thing. options was there And onetime it why So more now outstanding. that's are

And JR. sorry, go ahead

JR Herlihy

covers No, Yes. that think I it.

Okay.

Bose George

just spread with kind see of And discussion. actually, the what's mainly just look yields OAS in do of on on spreads, of math at sort the you that. or spreads, do terms spreads, agency look And you MBS also a Actually, at where follow-up leverage of nominal you current Great. the ROEs?

Mark Tecotzky

On the Agency space?

Bose George

Yes, on the Agency space.

Mark Tecotzky

Yes.

would right? say peer this, it of I bit So some always the differently We've a than little run group.

the we've hedges. So of liked use TBA

hedged a swaps So so There's versus when things with mortgages, we we treasuries, at. not look or few have TBAs.

at specified So we on a pools, the look lot OAS.

best measure the value going do that moves. capture sort I to capture over you're is of market to think

So we look OAS. at

a lot up a you with environments, low sort and look pools think less market pay-ups, the pay spread. optionality also we substantially, I'd vol pay primarily We up Like can can So buy right? a very it's go sometimes there's and about say OAS certain of lot in X in right? up it's

Are versus carry market the be how pay a part Now what big of that our when does like then role And of XX think ticks, with we outperformance. the could it. a from TBA. of or TBA? the have convexity we ticks handful that be well, okay, on pool like moves a pools there and TBA pool XX, of up X.X of, can what That's versus is maybe point up lot going to it's go

what of a up? have you call kind -- were pay-up of So sort they do kind the pay lot of of we looking what kind so of volatility convexity, upside it in and

XXXX sort returns the we other long superior -- it have roles being there hedges, than of And That's then can then pools could period these thing specified over far and back like when time. where and Fannie about And TBA are. when care And definitely is of cost. compelling harkens Fannie like like and pools. that's done substantial delivering sometimes [indiscernible] long what have were the consistently so roles be hedging just rate Xs versus discount we what over are a lot the roles a longs

spread it going really that on camp the versus I something vol pick that they So but other them. to at it We're little that's to buy OAS vol than lower reluctant and because think just we're X have pools? in hedged the you firmly spread bit have want a OAS. vol How head, to fewer a that need spread We're you reverse. I depends our OAS. X look gun think very But is a are things low higher participants a to

Laurence Penn

Yes, I actually bit your looking numbers wanted little we to follow at of the offline here. on just up a expense question were some because

on. going So there a are things few

on not you and But look, this sure loans securities, on that made we make always even versus year. the we're definitely improvements we're And expenses. focusing so So obviously efficient about to think we're some more agencies. far looking versus more we when fact credit --

to But are even securities, more just going people. versus those require loans

extent servicing Longbridge, also are compensation these well. is they've look versus need income terms been growing we're by costs, as these also particular, the in I that increased a I you sectors, proprietary to rising has way, again, money, so us what been they're it's right, be of portfolio, the things their when lot all this in growing not our as headcount that what to And a think as we doing. in that that making of they've business question mean

what I think these and always rewarded you've we're doing And terms of than long portfolio. increases, more of have -- absolutely what in you've to our really that there. been are bridge again, the in seen I compensation at going what look we're personnel think, modest efficiencies of seen side in what in loan investments a And on in costs terms and been but

Operator

We'll JMP. Citizens Trevor next take question with from Cranston our

Trevor Cranston

if impact of are to cuts whether HUD wondering seen there on Longbridge. of to the focus could the at other guys not what the that on any comment you foresee and staffing you and and places X.X you on or on But of HMBS overall related HMBS be rollout impact of have or the know All side Question is the a I Longbridge. on I lot guys was proprietary could things. right. market related

Laurence Penn

important I answer of tell now. have And Yes. question. a Look, going see we'll it's to than a had lot like wish right on to things I just with better an you,

we the has crop the do really driving hand, earnings. business, have other the which On been

we're seeing to just but see. again, there have and you HMBS would profitability, I administration, -- So change have mean, agency refer of Trump improving a wait side. wait and we on X.X, Maybe in of whether to questions have the side where just going and this see. sort materialize, at will were a see look, in first remember The did heck be that, basically see. there'll I exactly the But and just results we'll administration as a of further to to absence be lot but to they're of questions the have can't to to I were well. to think going going has in been actually that be just and just we'll those the some that wait have wait and anticipating regulations boost but we're won't in to positive. Heckamside

JR Herlihy

if on profit. And product but change add, and to regulatory front leaves there could also an you the mean, is demand on hard it's like, drive would tea the just I the the I Yes. to read interruption could see

Laurence Penn

market profit believe we than and -- a market have to and large though have we share larger So and share see. just have wait we in have And very we even do we right. That's we'll

Operator

Randy We'll Riley. Binner question take our next B. . with from

Unknown Analyst

interesting Actually, the just on HUD, that's really area. a

believe to pretty a administration, staffing at new cuts I So lot already monitor the they've there's significant had understood HUD. some with that but

-- of So you perspective kind the a anything all in real feeling with there -- is just just time, government? from are dealing procedural you --

Laurence Penn

I haven't No. heard anything.

Unknown Analyst

Okay.

the of -- of and what gets It comprehensive. it. on I think just a as Have capital this some much that how on result the workouts freed quantified my of would been loans. But you prepared details very provided you REO last yes, stages in they're up question . appreciate has like of I So REO all the in script, of these sounds couple be timing negotiation. the workouts kind a

Laurence Penn

It's probably say just Yes. -- to as JR. think, but ahead, -- I'm it's going go as not much you not not it's

JR Herlihy

Yes.

more loans of that it. altogether. we million less invested So About year-end, call Andy, is commercial $XX the half of million, about, had that that talked X short it. At delinquent those loans we've the than $XXX not -- answer, in quantified is constitute more we in half than and REOs X than of

we -- quantified. we haven't that, So have beyond

Laurence Penn

It's anything these and resolved great. XXs, assume on. want changing. quite argument's see for that I sake then high few again, is -- move Don't We great. quickly me in about the a get this I you're it say wrong. But not so just talking not mean, was game to something it's

JR Herlihy

Yes.

have is cases, And the remarks. some the -- also, we financed, it is mentioned quarter. in as negative to in contribute ADE, Some doesn't But ADE prepared some has not. during it implications we

relative So disproportionately it some the can not a to cases. pool both also smaller on capital impact have through a of overall but can in -- ADE, drag the being size a ED despite negative have generating

Laurence Penn

getting past that. So forward we're looking to

Unknown Analyst

Understood. Okay.

guide, and reasons. not So on would agent be a the you then preferable different And doubled to place model. -- for you add to And of I boomers. I that wave it's seemingly, your mean, I'm going have the reverse, of guess this in number demographic

mean do I I this underappreciated. business, Do -- get so generally just has think it's the more think, been to of niche mainstream a lot can kind market stay -- going taking that and you that still reverse you are it's of large. -- -- back, sense mortgage where get this competitors you tremendous you're have in of kind can share do Or of And a that you kind a you area? step a

Laurence Penn

actually to lot a be technically some the seniors that with question want thing reverse other -- and And mention extent that we're have -- not Yes. is but is just similar working may your to Longbridge partners it to create other is I for products think I of some some mortgages, actively the characteristics. way, addresses other by

for with with So when give there's just seniors, to example. much. the But program relationships too I dealing I away unique that a -- yes, don't reverse ways of with more much do we with have so there's compliance the to would mortgage is, originators say, that want lot sort the have of to

so can some that interesting we're excited near products and future. announce yes, even So hopeful we in we're the new

Unknown Analyst

insurers. be in life like that Would partnership with

Laurence Penn

with types of no, originators. other No, . loan

Operator

Crispin next from We'll Piper take with Love question our Sandler.

Crispin Love

through opportunity just driven more into quarter. deeper dig moves? bit than Is It affordability seconds, and you've there HPA looks that there? the portfolio HELOCs with the you there is rate acquisitions? And just along the mostly growth like little still rates in if fourth Can that in a closed-end with was doubled space down, do that curious And could down a where bunch in today. if demand come of come on meaning how rates do runway be are just rates

Laurence Penn

Mark. ahead, Go

Mark Tecotzky

Crispin, thanks for the question.

has had Freddie, we've second X.X been that buying little And loans, lien first down Fannie, been is the first first, home where appreciation. bit. first. opportunity what they've liens, for a from They've and borrower buying, the X.XX rate the Jenny just low amortized we've set or note rate price a So note

most there combined now these loan-to-value of XXX, type things range, the So FICOs are in the XXX ratio.

in remember, of in lien, asset, Family's a refi right? really activity the equity. typically don't that's were first house right? his that. an so that XX to rate it's a XXs, activity, high the want XX So second on years. you're you house, the been years persona's have, They So the first cases, guys part XXXX, got as at a plus If X, mortgage, of lot with in borrowers been lien lot some first, right? paying because valuable the you house got And been X.X% The X.XX% in or you a

it's unsecured. to cards credit But kitchen a to Because yet, and to lot than maybe cheaper heck you than a want lot do your of you want maybe home, renovate cheaper borrow against right? your landscape -- want you heck some a

lien, the a out of take it or some whatever tap home. in your smart way percent And it's a equity X-odd to is. you So second

Fannie most Ginnie big market because rates, really a coupon we've even it's the still years is set opportunity Credit low been that's since low super stuff. had of So that those though

it as big So opportunity see we a set.

would over That's liens. doing you're we've been things adventurous I to what going in. people second in more time, not suspect participating see

account with higher to we borrower the even their the loan ratio. we this even us, a -- second So lien, from take low been evidenced home and a still is is obligations, borrower very run to it's obligation borrower debt by chance loan think after additional a strings loan-to-value borrower excellent into long get a note for additional like rate that an past is

that that things market. So then combination securitization it's the active HELOC. with similar us has And there in the of to things addition, about -- been sector an drawn and liens, with is second

the about ability term to -- side talked sheet. liability our So the Larry out of balance

you're spreads is And fixed-rate more so that found issuing debt have debt just the a And when come on repo. repo loans profitable securitization do like matches non-QM, you it's as with replacing we lien, than on the assets. second cash the keeping to securitizations in, flow just us

big think I a opportunity so it's set. pretty And

change I won't think changes it. think it is lived. long what going rates up, pretty will I I be mean,

going I you'll rates see think up, volumes. still good

I of market drop lien. where it it's the think could see refinancing smarter second That's take borrowers to where precipitously, changes rates to the a you first dynamics some these lien then than were where change. if

it doesn't to then sense math scales and $XX,XXX, you of X, first, it's it your get first if off maybe Like down more were borrow X.X the a to and to the X.X take come rates you sudden, lot, all make a in a to then bigger you can borrow are pay balance. just you then first right now, X.X% if But want to have a first. X% --

Crispin Love

Great. helpful. appreciate all And for that me. last Mark, X then I really just

potential for and conservatorship GSEs question of administration. on the new big coming out the picture Just

you happening impacts that do be you as it? the the And few is and probability how on that way for EFC the to see years? of position you'd over view there occurring may and next any Just

Mark Tecotzky

great I a question. think it's

Trump FHFA, on but at it talking about and it's first certainly now. possibility. think I depends We're on the for been it leadership radar they've a the administration certainly

Secretary of that that comments does it's home to the raise a So Treasury you've way a I done not definitely ownership. think it needs think in possible. lot be the definitely from of had I cost

that. think I on focused very they're

don't government of does think is And -- think ultimate So create is I short-term the an whether some I it I happen, it or not, I the there think to certainly could though, know. possibility backstop what volatility.

end, really of the mortgages agency in So a and with ag. happens, where the a maybe big way backstop bonds they and compete are for now. the and in extremely liquid they have the corporate way investment-grade it's they're a They're bonds dollars whenever do done investment-grade still part treasury it

certainly some going happens put made suggestions you we out are volatility. cause to short-term can get and there can now But that comments where what finally from

of sort think the which we've this is set opportunity So think Financial the the accelerated and a a current focused on think substantial short-term for think set is and been picture I I is Ellington bigger opportunity -- for the very years that couple is I this gradually I that Freddie administration? and -- are fact trend Ginnie Is that it with footprint. -- shrinking Fannie their of

They subsidize loans because with certain fees a they're clear other to they guarantee mission-driven, it's cross losses more And to Freddie. able loans, level mentality want above maybe are subsidies way that expected be adjustments price have Fannie for and and LTV where way, they higher loans. know charging of loan

they In to in to market. private they're now are we that. a that adjustments. adjust like willing their the fee enhanced seems share to seen oftentimes G they're to of years Freddie less and see Fannie But money the Freddie in used they and credit Fannie would then make now, and private where likely get to let level label do on losing so their when would it I loan market And portions market lot adjust of certain you've price used market fees the that past, the think guarantee areas,

Fannie private and result right going seeing XXX% this. could don't the and all think a Freddie could loans of go crisis, housing Freddie I market, that went to up certainly think financial would Freddie. but you're how I in role to and I know, Fannie that's Capital's go reform? And So as after and to GSE Fannie the that

for many many, and see go to better to ready, are increasing private you're that starting execution now finding numbers And in market. by Fannie loans was, label large, case the the years. that could And

Laurence Penn

Mark, odds of I'm I just that course, going make to think I anything don't but the -- predictions, is possible. usually

going there eventual an I think a think think. adds people people more of are than release, lot the I it's a if complicated But to I lower be think. think than is lot

about long I that take So time. a talking something you're really think could

generating cat agencies a actually of They're of the what happen their are could actually they right, Meanwhile, global type the financial reinsuring through lot CRTs. stacker risk and programs, believe in to levels I crisis are terms model got -- are to -- table treasury a increase now profits potentially. that obviously, going going They massive that of you've lot those to on to and deficits the things housing. are the right

them though well there And market. talk the in even administration the to was think much I again. people it's think of a than of lot I think is complicated more first sort from as disentangle

think I going it's very So a take long to time.

think. people the think I

Operator

thank you for the day. We in the Quarter XXXX Earnings Conference question final participating our was Ellington that for Call. Fourth And Financial

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

Ellington Financial (EFC) 28 Feb 252024 Q4 Earnings call transcript