$Ellington Financial Inc.(EFC-B)$ Reports First Quarter 2025 Results

OLD GREENWICH, Conn.--(BUSINESS WIRE)--May 07, 2025-- 

Ellington Financial Inc. $(EFC)$ ("we") today reported financial results for the quarter ended March 31, 2025.

Highlights

   -- Net income attributable to common stockholders of $31.6 million, or $0.35 
      per common share.1 
 
          -- $57.1 million, or $0.63 per common share, from the investment 
             portfolio. 
 
                 -- $52.9 million, or $0.58 per common share, from the credit 
                    strategy. 
 
                 -- $4.2 million, or $0.05 per common share, from the Agency 
                    strategy. 
 
          -- $(1.0) million, or $(0.01) per common share, from Longbridge. 
 
   -- Adjusted Distributable Earnings2 of $35.5 million, or $0.39 per common 
      share. 
 
   -- Book value per common share as of March 31, 2025 of $13.44, including the 
      effects of dividends of $0.39 per common share for the quarter. 
 
   -- Dividend yield of 12.2% based on the May 6, 2025 closing stock price of 
      $12.75 per share, and monthly dividend of $0.13 per common share declared 
      on May 7, 2025. 
 
   -- Recourse debt-to-equity ratio3 of 1.7:1 as of March 31, 2025. Including 
      all recourse and non-recourse borrowings, which primarily consist of 
      securitization-related liabilities, debt-to-equity ratio of 8.7:14. 
 
   -- Cash and cash equivalents of $203.3 million as of March 31, 2025, in 
      addition to other unencumbered assets of $650.2 million. 

First Quarter 2025 Results

"Ellington Financial's first quarter results reflect continued strength in our diversified residential and commercial mortgage loan portfolios, and ongoing momentum in our securitization platform," said Laurence Penn, Chief Executive Officer and President. "For the quarter, Ellington Financial generated net income of $0.35 per common share and adjusted distributable earnings of $0.39 per common share.

"Our loan businesses continued to generate steady growth and income, particularly in commercial mortgage bridge loans, non-QM loans, proprietary reverse mortgage loans, and closed-end second lien loans. In addition, we accessed the securitization markets opportunistically in the first quarter. We were able to price five separate securitization transactions before the recent market volatility and yield spread widening, thus locking in long-term, non-market-to-market financing at attractive economics, while also expanding our portfolio of high-yielding retained tranches. We also closed on two additional loan financing facilities to support future portfolio growth, and took advantage of the tight yield spreads earlier in the quarter to sell portions of our portfolio into a strong market, including Agency and non-Agency RMBS, non-QM retained tranches, and CLO notes.

"Finally, we made notable progress on our handful of commercial mortgage workouts, and we expect that by the end of the second quarter we will only have one significant remaining workout asset detracting from our adjusted distributable earnings.

"The high current levels of volatility are recharging the opportunity set and creating compelling trading opportunities; this is an environment that we believe is well-suited to our core strengths. As in past periods of market stress, we are bringing to bear our dynamic hedging strategies, diversified portfolio, multiple financing sources, and low leverage, aiming to preserve book value and navigate the evolving landscape successfully. In fact, we had already built up our credit hedges considerably since mid-2024, and profits on those credit hedges in April 2025 more than offset any valuation declines we saw in the long portfolio. Despite the widespread market weakness in April, we estimate that our economic return was still positive for the month."

Financial Results

Investment Portfolio Segment

The investment portfolio segment generated net income of $57.4 million in the first quarter, consisting of $53.2 million from the credit strategy and $4.2 million from the Agency strategy.

Credit Performance

The total adjusted long credit portfolio(5) decreased by 4% to $3.30 billion as of March 31, 2025, compared to $3.42 billion as of December 31, 2024. The decline was due to the impact of securitizations completed during the quarter, as well as a smaller residential transition loan portfolio, with principal paydowns in that portfolio exceeding new purchases, and net sales of CLOs. Offsetting a portion of the decline were larger commercial mortgage bridge and non-QM loan portfolios, driven by net purchases.

Key Highlights(6) :

   -- Overall positive performance driven by higher net interest income and net 
      gains from forward MSR-related investments, commercial mortgage loans, 
      closed-end second lien loans, and non-QM retained tranches. 
 
   -- Positive results from equity investments in loan originators. 
 
   -- Partially offsetting higher net interest income were net realized and 
      unrealized losses on consumer loans, CLOs, non-QM loans, and residential 
      transition loans; as well as losses on residential and commercial REO. 

During the quarter, the net interest margin(7) on our credit portfolio decreased to 2.90% from 3.02%, as a higher cost of funds more than offset higher asset yields. We continued to benefit from positive carry on our interest rate swap hedges, where we overall receive a higher floating rate and pay a lower fixed rate.

Agency Performance

The long Agency RMBS portfolio decreased by 14% quarter over quarter to $256.1 million as of March 31, 2025, driven by net sales.

Key Highlights(6) :

   -- Agency RMBS yield spreads tightened in January and February, before 
      reversing course and widening in March, driven in part by rising 
      volatility related to uncertain tariff policies. 
 
   -- Net gains on Agency RMBS, driven by strong results in January and 
      February, exceeded hedging-related losses, which delivered positive 
      results overall in the Agency strategy. 
 
   -- Pay-ups on specified pools increased slightly to 0.69% as of March 31, 
      2025, from 0.67% as of December 31, 2024. 

The net interest margin(7) on our Agency portfolio (excluding the Catch-up Amortization Adjustment) increased to 2.46% as of March 31, 2025 from 2.22% as of December 31, 2024, driven by a lower cost of funds.

Longbridge Segment

The Longbridge segment reported a net loss of $(1.0) million for the first quarter. The Longbridge portfolio (excluding non-retained tranches of consolidated securitization trusts) increased by 31% sequentially to $549.0 million as of March 31, 2025, driven by proprietary reverse mortgage loan originations.

Key Highlights(6) :

   -- Positive contribution from originations, driven by higher origination 
      margins for proprietary reverse mortgage loans and steady margins for 
      HECM, despite lower origination volumes quarter over quarter. 
 
   -- Net gain on the HMBS MSR Equivalent, driven primarily by tighter HMBS 
      yield spreads. 
 
   -- Overall net loss in the segment was driven by net losses on interest rate 
      hedges. 

Corporate/Other Summary

With interest rates lower during the quarter, we had gains on the fixed receiver interest rate swaps used to hedge the fixed payments on our unsecured notes and preferred equity. These gains exceeded net losses on our unsecured notes, which included a mark-to-market loss on our unsecured notes driven by lower interest rates, as well as a realized loss related to the par redemption of our 6.75% senior notes that we had carried at a slight discount to par.

 
_____________________________________________________________ 
 

(1) Includes $(24.4) million of preferred dividends accrued and certain corporate/other income and expense items not attributed to either the investment portfolio or Longbridge segments.

(2) Adjusted Distributable Earnings is a non-GAAP financial measure. See "Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings" below for an explanation regarding the calculation of Adjusted Distributable Earnings.

(3) Excludes U.S. Treasury securities and repo borrowings at certain unconsolidated entities that are recourse to us. Including such borrowings, our debt-to-equity ratio, adjusted for unsettled purchases and sales, based on total recourse borrowings was 2.1:1 as of March 31, 2025.

(4) Excludes U.S. Treasury securities and repo borrowings at certain unconsolidated entities.

(5) Excludes non-retained tranches of consolidated securitization trusts. The adjusted long credit portfolio also includes the proceeds from financings related to the MSRs underlying our Forward MSR-related investments. Forward MSR-related investments, at fair value are presented on our Consolidated Balance Sheet net of such financings; as of both March 31, 2025 and December 31, 2024, such borrowings were $93.5 million.

(6) Sector-level results include associated financing costs and hedging gains/losses where applicable.

(7) Net interest margin represents the weighted average asset yield less the weighted average secured financing cost of funds on such assets. It also includes the effect of actual and accrued periodic payments on interest rate swaps used to hedge the assets.

Credit Portfolio(1)

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