Key Highlights

  • Adjusted Distributable Earnings were USD 58.0 million, or USD 0.45 per share, while GAAP EPS was USD 0.31.
  • Revenue was USD 117.72 million against a USD 125.83 million estimate, with EPS of USD 0.45 against USD 0.47.
  • Book value per share was USD 13.53 at September 30, after dividends of USD 0.39 per share for the quarter.
  • The company issued USD 150 million of 7.375% senior unsecured notes due 2030, bringing the series to USD 550 million.

Ellington Financial (NYSE:EFC) described a quarter of rising interest rates and late-quarter spread widening in which it completed a controlling stake in Loan servicer Statebridge, added to its senior unsecured notes and grew its loan portfolios. Net Income attributable to common stockholders was USD 40.4 million, or USD 0.31 per share, and Adjusted Distributable Earnings were USD 0.45 per share, against an estimate of USD 0.47.

Strategy, Funding and Operations

Chief executive Laurence Penn said the company benefited from retained tranches of non-QM and Agency-eligible securitizations, commercial Mortgage bridge loans and corporate credit, and that loan originator investments, particularly LendSure, contributed to results. Its residential loan portal connected with 57 sellers and generated USD 1.6 billion of loan purchases during the quarter.

Statebridge serviced about 14,700 loans with USD 1.9 billion of unpaid principal balance at September 30, nearly all for third-party clients. The company said the stake lets it apply data and workout expertise to delinquent loans and real estate owned. On funding, it said the September notes offering priced about 70 basis points tighter over Treasuries than the prior year's issuance and advances a goal of reducing reliance on secured, mark-to-market financing.

Financial Results

Revenue was USD 117.72 million. Interest income was USD 174.7 million and interest expense was USD 105.7 million. Net interest income was USD 69.0 million against USD 72.3 million in the second quarter. Total other income was USD 48.8 million against USD 50.8 million, and total expenses were USD 71.9 million against USD 76.0 million.

The Investment portfolio segment contributed USD 61.1 million, or USD 0.47 per share, of net income, and USD 77.6 million, or USD 0.60 per share, of Adjusted Distributable Earnings. Net interest Margin on the portfolio was 3.55% against 3.36% in the prior quarter. The adjusted long portfolio was USD 4.70 billion, a 4.5% sequential increase.

Longbridge contributed USD 12.5 million, or USD 0.10 per share, against USD 30.2 million in the second quarter, with Adjusted Distributable Earnings of USD 8.6 million. The company tied the change to narrower origination margins and lower proprietary reverse mortgage securitization gains. Longbridge originated USD 676.3 million of loans, up 36% year over year, and reached an HMBS Market Share of 31%.

Balance Sheet, Equity and Debt

Book value per common share was USD 13.53 against USD 13.61 at June 30. The recourse Debt-to-Equity Ratio was 2.2:1, and 9.4:1 including all recourse and non-recourse borrowings. Of recourse borrowings, 25% are long-term and non-mark-to-market and 17% are unsecured, and repo borrowings have a weighted average remaining term of 8.9 months. Unencumbered Assets were USD 1.92 billion, including USD 269.5 million of cash.

During the quarter the company issued 2,496,140 shares under its at-the-market program at an average of USD 13.61. After quarter end it repurchased 329,045 shares at an average of USD 11.44, which management described as limited to just under USD 4 million.

Dates and Milestones Named

Adjusted Distributable Earnings of USD 0.45 per share sits alongside GAAP net income of USD 0.31 per share, dividends of USD 0.39 per share and Book Value of USD 13.53.

Management named the 7.375% notes due September 30, 2030, the 8.9 month repo term and a conference call on November 5, 2026. It said it would act on similarly accretive repurchase opportunities if they arise under normal market conditions, and pointed to investment opportunities it sees developing after the recent spikes in interest rates and volatility.