Ellington Financial LLC Reports Second Quarter 2017 Results
Ellington Financial LLC (NYSE: EFC) today reported financial results for the quarter ended June 30, 2017.
Highlights
- Net income1 of $5.1 million, or $0.16 per basic and diluted share.
- Book value per share as of June 30, 2017 of $19.21 on a diluted basis, after payment of a
quarterly dividend in the second quarter of $0.45 per share, as compared to book value per share of $19.50 on a diluted basis as
of March 31, 2017.
- Credit strategy gross income of $9.4 million for the quarter ended June 30, 2017.
- Agency strategy gross income of $0.4 million for the quarter ended June 30, 2017.
- Announced a dividend of $0.45 per share for the second quarter of 2017, equating to an annualized
dividend yield of 11.1% based on the August 2, 2017 closing price of $16.26 per share; dividends are paid quarterly in
arrears.
- Debt-to-equity ratio, excluding repo borrowings on U.S. Treasury securities, of 1.85:1 as of June 30,
2017.
1 Increase (decrease) in shareholders' equity from operations, or "net income (loss)."
Second Quarter 2017 Results
"In the second quarter, Ellington Financial had net income, including the full impact of mark-to-market adjustments, of $5.1
million, or $0.16 per share," said Laurence Penn, Chief Executive Officer and President. "Our performance reflects solid carry from
our long investments, but that carry was partially offset by losses on our hedging portfolio and our relative value trading
strategies, as spreads continued to tighten and volatility remained low in most credit sectors. Although we net sold U.S.
non-Agency RMBS over the quarter as the rally in that sector continued, our total allocation to RMBS credit actually increased, as
we added U.K. non-conforming RMBS investments, which we believe currently offer superior value to their U.S. counterparts. We also
net added to our CLO, small balance commercial mortgage loan, and non-QM mortgage loan portfolios during the quarter.
"I am also pleased to report that in June we contributed a portion of our leveraged loan portfolio to Ellington CLO I, a
collateralized loan obligation securitization, and retained a portion of the junior tranches. This securitization effectively
provides us with long-term, locked-in financing on the collateral pool, with an effective cost of funds well below the yield on the
collateral pool. The transaction not only created an asset for us that we believe will generate mid-to-high teens annualized return
on equity, but it also freed up additional capital that we plan to deploy either in a future CLO securitization or in other
high-yielding strategies.
"Looking forward, we continue to see a steady pipeline of high-yielding loan assets, and we expect to fund more and more of this
pipeline through the use of long-term non-mark-to-market financing, thereby creating a stronger and more consistent earnings
stream. While repo financing generally provides a lower cost of funds, long-term non-mark-to-market financing, such as through
securitization, minimizes our need to set aside reserve capital for potential margin calls or for repo financing roll risk. Until
relatively recently, for many of our investments we felt that the cost of funds advantages made repo financing the more attractive
choice for us. However, as the effective cost of funds achieved through securitization has become more and more competitive with
repo financing, we are now often finding securitization financing to be the superior choice."
Market Overview
- For the third consecutive quarter, the Federal Reserve raised the target range for the federal funds
rate by 0.25%, to 1.00%–1.25%. At the June FOMC meeting, the Federal Reserve outlined the mechanics of the eventual tapering of
its asset purchases. While the Federal Reserve did not signal exact timing, the market's expectation for the initial taper is the
fourth quarter of this year.
- For another quarter, yields on U.S. Treasury securities traded in a tight range while the yield curve
continued to flatten. The 2-year U.S. Treasury yield rose 13 basis points to end the quarter at 1.38%, whereas the 10-year U.S.
Treasury yield fell 9 basis points to 2.30% and traded in an extraordinarily tight 29 basis point range during the quarter.
- Mortgage rates continued to decline during the second quarter, with the Freddie Mac survey 30-year
mortgage rate falling 26 basis points to end the quarter at 3.88%. Mortgage rates remain at something of a "sweet spot" between
prepayment risk and extension risk—namely, the market has low exposure to either risk unless rates move more than about 25 basis
points in either direction.
- Quarter over quarter, overall Agency RMBS prepayment rates were slightly higher. The small increase
reflects lower mortgage rates and the fact that the second quarter of each year typically includes a portion of the peak activity
season, when home sales increase significantly.
Volatility continued to hit new lows in the second quarter. The Merrill Lynch Option Volatility Estimate Index, or MOVE Index,
sunk to a four year low, and the Chicago Board Options Exchange Volatility Index, known as the VIX, dropped to its lowest level in
23 years, while longer-term interest rates and MBS price volatility also declined. The 29 basis point range for the 10-year U.S.
Treasury was one of the tightest ranges for a quarter in the past 40 years.
Non-Agency RMBS yield spreads continued to grind tighter, as did those for many other credit products such as CMBS, while demand
remained strong for floating-rate debt instruments, including CLOs and leveraged loans. The energy-related sectors of the corporate
bond market were notable exceptions to this trend, as yield spreads in these sectors widened in response to sharp declines in oil
prices. Meanwhile, Agency RMBS remained one of the few fixed-income asset classes trading at the wider end of their trailing
two-year range, with their option-adjusted spreads relatively unchanged quarter over quarter. We largely attribute the relative
underperformance of Agency RMBS to concerns around the Federal Reserve's plan for tapering its asset purchases.
Financial Results
We prepare our financial statements in accordance with ASC 946, Financial Services—Investment Companies. As a result, our
investments are carried at fair value and all valuation changes are recorded in the Consolidated Statement of Operations.
We also measure our performance based on our diluted net-asset-value-based total return, which measures the change in our
diluted book value per share and assumes the reinvestment of dividends at diluted book value per share and the conversion of all
convertible units into common shares at their issuance dates. Diluted net-asset-value-based total return was 0.85% for the quarter
ended June 30, 2017. Based on our diluted net-asset-value-based total return of 166.05% from our inception (August 17, 2007)
through June 30, 2017, our annualized inception-to-date diluted net-asset-value-based total return was 10.42% as of
June 30, 2017.
Credit Summary
As of June 30, 2017, our total long Credit portfolio (excluding corporate relative value trading positions, hedges, and
other derivatives) increased 6.9% to $684.7 million from $640.3 million as of March 31, 2017.
Our Credit strategy generated gross income of $9.4 million for the second quarter, or $0.28 per share. The primary components of
this strategy include: non-Agency RMBS; CMBS; performing, sub-performing, and non-performing residential and commercial mortgage
loans; consumer loans and ABS; investments in mortgage-related entities; and credit hedges (including relative value trades
involving credit hedging instruments). We also opportunistically invest in U.S. and European CLOs, distressed and non-distressed
corporate debt, and corporate credit relative value trading when attractive opportunities in those markets arise.
During the second quarter, each of our credit strategies was profitable even after taking into account the credit hedges, with
the notable exception of our credit relative value trading strategy. We benefited from especially strong performance in our
non-Agency RMBS strategy, our non-performing and re-performing U.S. residential mortgage loan strategy, and our CMBS strategy. We
benefited from solid carry both in our securities portfolios and in our loan portfolios, as well as strong gains in most sectors.
Our small balance commercial mortgage loan strategy, while still solidly profitable for the quarter, was not quite as profitable as
in recent quarters as a result of a decline in resolutions during the period. In our corporate credit relative value trading
strategy, we were generally long the cash-synthetic basis on lower-yielding credits and short the cash-synthetic basis on
higher-yielding credits. Credit default swap spreads tightened less than bond spreads on higher-yielding credits in particular, and
as a result we had net losses for this strategy for the quarter.
Currently, our credit hedges consist primarily of financial instruments tied to high-yield corporate credit, such as CDS on
high-yield corporate bond indices, as well as tranches and options on these indices; short positions in and CDS on corporate bonds;
and positions involving ETFs of high-yield corporate bonds. Our credit hedges also currently include CDS tied to individual MBS or
an index of several MBS, such as CMBX. We also opportunistically overlay our high-yield corporate credit hedges and
mortgage-related derivatives with certain relative value long/short positions involving the same or similar instruments. In the
second quarter, credit hedges again reduced profitability in most of our credit strategies, as spreads in most credit sectors
continued to tighten in the second quarter, including the high-yield corporate and CMBS sectors in which most of our credit hedges
continue to be concentrated.
In addition to credit hedges, we also use interest rate hedges in our Credit strategy in order to protect our portfolio against
the risk of rising interest rates. The interest rate hedges in our Credit strategy, which currently consist primarily of interest
rate swaps, slightly reduced our results for the quarter. We also use foreign currency hedges in our Credit strategy, in order to
protect our assets denominated in euros and British pounds against the risk of declines in those currencies against the U.S.
dollar. We had net losses on our foreign currency hedges for the quarter, but these were more than offset by net gains on foreign
currency-related transactions and translation. We believe that our publicly traded partnership structure affords us valuable
flexibility, especially with respect to our ability to adjust our exposures nimbly by hedging many forms of risk, such as credit
risk, interest rate risk, and foreign currency risk.
Agency Summary
As of June 30, 2017, our long Agency RMBS portfolio was $834.0 million, down slightly from $841.3 million as of
March 31, 2017. During the second quarter, our Agency strategy generated gross income of $0.4 million, or $0.01 per share. Net
interest income and net realized and unrealized gains on our RMBS assets were significantly offset by net realized and unrealized
losses on our interest rate hedges. We actively traded our Agency RMBS portfolio during the quarter in order to capitalize on
sector rotation opportunities. Our portfolio turnover for the quarter was approximately 15% (as measured by sales and excluding
paydowns), and we had net realized losses of $(0.7) million, excluding interest rate hedges.
Pay-ups on specified pools were higher over the quarter, but strong TBA dollar rolls and the relative outperformance of TBAs
compared to specified pools dampened our net income, as net short positions in TBAs continued to represent a significant portion of
our interest rate hedging portfolio. Pay-ups are price premiums for specified pools relative to their TBA counterparts. Average
pay-ups on our specified pools increased to 0.77% as of June 30, 2017, from 0.66% as of March 31, 2017.
Consistent with past quarters, as of June 30, 2017, our Agency RMBS consisted mainly of specified pools. Our Agency
strategy also includes RMBS that are backed by ARMs or Hybrid ARMs and reverse mortgages, and CMOs, including IOs, POs, and IIOs.
Finally, our Agency strategy also includes interest rate hedges for our Agency RMBS, as well as certain relative value trading
positions in interest rate-related and TBA-related instruments.
During the quarter we continued to hedge interest rate risk in our Agency strategy, primarily through the use of interest rate
swaps and short positions in TBAs, and to a lesser extent, short positions in U.S. Treasury securities. During the quarter,
longer-term interest rates rose, negatively impacting our interest rate swaps and short positions in U.S. Treasury securities and
TBA roll prices held firm, generating losses on our short positions in TBAs. In our hedging portfolio, the relative proportion
(based on 10-year equivalents2) of TBA short positions decreased quarter over quarter relative to interest rate
swaps.
2"10-year equivalents" for a group of positions represent the amount of 10-year U.S. Treasury securities that would
experience a similar change in market value under a standard parallel move in interest rates.
The following table summarizes our operating results for the quarters ended June 30, 2017 and March 31, 2017 and the
six month period ended June 30, 2017:
|
|
Quarter
Ended
June 30,
2017
|
|
Per
Share
|
|
% of
Average
Equity
|
|
Quarter
Ended
March 31,
2017
|
|
Per
Share
|
|
% of
Average
Equity
|
|
Six Month
Period
Ended
June 30,
2017
|
|
Per
Share
|
|
% of
Average
Equity
|
| (In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income and other income |
|
$ |
14,098 |
|
|
$ |
0.43 |
|
|
2.19 |
% |
|
$ |
13,133 |
|
|
$ |
0.40 |
|
|
2.02 |
% |
|
$ |
27,231 |
|
|
$ |
0.83 |
|
|
4.22 |
% |
| Net realized gain (loss) |
|
3,858 |
|
|
0.12 |
|
|
0.60 |
% |
|
2,259 |
|
|
0.07 |
|
|
0.35 |
% |
|
6,117 |
|
|
0.19 |
|
|
0.95 |
% |
| Change in net unrealized gain (loss) |
|
6,784 |
|
|
0.21 |
|
|
1.05 |
% |
|
10,277 |
|
|
0.31 |
|
|
1.58 |
% |
|
17,061 |
|
|
0.52 |
|
|
2.64 |
% |
| Net interest rate hedges(1) |
|
(438 |
) |
|
(0.02 |
) |
|
(0.07 |
)% |
|
146 |
|
|
— |
|
|
0.02 |
% |
|
(292 |
) |
|
(0.01 |
) |
|
(0.05 |
)% |
| Net credit hedges and other activities(2) |
|
(9,591 |
) |
|
(0.30 |
) |
|
(1.49 |
)% |
|
(3,920 |
) |
|
(0.12 |
) |
|
(0.60 |
)% |
|
(13,511 |
) |
|
(0.41 |
) |
|
(2.09 |
)% |
| Interest expense |
|
(3,253 |
) |
|
(0.10 |
) |
|
(0.51 |
)% |
|
(2,199 |
) |
|
(0.07 |
) |
|
(0.34 |
)% |
|
(5,452 |
) |
|
(0.17 |
) |
|
(0.85 |
)% |
| Other investment related expenses |
|
(2,013 |
) |
|
(0.06 |
) |
|
(0.31 |
)% |
|
(1,496 |
) |
|
(0.04 |
) |
|
(0.23 |
)% |
|
(3,509 |
) |
|
(0.12 |
) |
|
(0.54 |
)% |
| Total Credit profit (loss) |
|
9,445 |
|
|
0.28 |
|
|
1.46 |
% |
|
18,200 |
|
|
0.55 |
|
|
2.80 |
% |
|
27,645 |
|
|
0.83 |
|
|
4.28 |
% |
| Agency RMBS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income |
|
6,397 |
|
|
0.19 |
|
|
0.99 |
% |
|
8,630 |
|
|
0.26 |
|
|
1.33 |
% |
|
15,027 |
|
|
0.45 |
|
|
2.33 |
% |
| Net realized gain (loss) |
|
(663 |
) |
|
(0.02 |
) |
|
(0.10 |
)% |
|
(711 |
) |
|
(0.01 |
) |
|
(0.11 |
)% |
|
(1,374 |
) |
|
(0.04 |
) |
|
(0.21 |
)% |
| Change in net unrealized gain (loss) |
|
1,522 |
|
|
0.05 |
|
|
0.24 |
% |
|
(2,570 |
) |
|
(0.08 |
) |
|
(0.40 |
)% |
|
(1,048 |
) |
|
(0.03 |
) |
|
(0.16 |
)% |
| Net interest rate hedges and other activities(1) |
|
(4,659 |
) |
|
(0.14 |
) |
|
(0.72 |
)% |
|
(1,572 |
) |
|
(0.05 |
) |
|
(0.24 |
)% |
|
(6,231 |
) |
|
(0.19 |
) |
|
(0.97 |
)% |
| Interest expense |
|
(2,226 |
) |
|
(0.07 |
) |
|
(0.35 |
)% |
|
(1,857 |
) |
|
(0.06 |
) |
|
(0.29 |
)% |
|
(4,083 |
) |
|
(0.13 |
) |
|
(0.63 |
)% |
| Total Agency RMBS profit (loss) |
|
371 |
|
|
0.01 |
|
|
0.06 |
% |
|
1,920 |
|
|
0.06 |
|
|
0.29 |
% |
|
2,291 |
|
|
0.06 |
|
|
0.36 |
% |
| Total Credit and Agency RMBS profit (loss) |
|
9,816 |
|
|
0.29 |
|
|
1.52 |
% |
|
20,120 |
|
|
0.61 |
|
|
3.09 |
% |
|
29,936 |
|
|
0.89 |
|
|
4.64 |
% |
| Other interest income (expense), net |
|
215 |
|
|
0.01 |
|
|
0.03 |
% |
|
136 |
|
|
— |
|
|
0.02 |
% |
|
351 |
|
|
0.01 |
|
|
0.05 |
% |
| Other expenses |
|
(4,590 |
) |
|
(0.14 |
) |
|
(0.71 |
)% |
|
(4,526 |
) |
|
(0.14 |
) |
|
(0.70 |
)% |
|
(9,116 |
) |
|
(0.28 |
) |
|
(1.41 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net increase in equity resulting from operations |
|
$ |
5,441 |
|
|
$ |
0.16 |
|
|
0.84 |
% |
|
$ |
15,730 |
|
|
$ |
0.47 |
|
|
2.41 |
% |
|
$ |
21,171 |
|
|
$ |
0.62 |
|
|
3.28 |
% |
| Less: Net increase in equity resulting from operations attributable to
non-controlling interests |
|
377 |
|
|
|
|
|
|
452 |
|
|
|
|
|
|
829 |
|
|
|
|
|
| Net increase in shareholders' equity resulting from operations
(6) |
|
$ |
5,064 |
|
|
$ |
0.16 |
|
|
0.80 |
% |
|
$ |
15,278 |
|
|
$ |
0.47 |
|
|
2.40 |
% |
|
$ |
20,342 |
|
|
$ |
0.62 |
|
|
3.21 |
% |
|
Weighted average shares and convertible
units(3) outstanding
|
|
32,799 |
|
|
|
|
|
|
32,930 |
|
|
|
|
|
|
32,864 |
|
|
|
|
|
| Average equity (includes non-controlling interests)(4) |
|
$ |
644,868 |
|
|
|
|
|
|
$ |
649,113 |
|
|
|
|
|
|
$ |
645,924 |
|
|
|
|
|
| Weighted average shares and LTIP units outstanding(5) |
|
32,587 |
|
|
|
|
|
|
32,718 |
|
|
|
|
|
|
32,652 |
|
|
|
|
|
| Average shareholders' equity (excludes non-controlling interests)(4) |
|
$ |
630,182 |
|
|
|
|
|
|
$ |
637,712 |
|
|
|
|
|
|
$ |
633,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Includes TBAs and U.S. Treasuries, if applicable. |
| (2) |
|
Includes equity and other relative value trading strategies and related hedges. |
| (3) |
|
Convertible units include Operating Partnership units attributable to non-controlling
interests and LTIP units. |
| (4) |
|
Average equity and average shareholders' equity are calculated using month end
values. |
| (5) |
|
Excludes Operating Partnership units attributable to non-controlling interests. |
| (6) |
|
Per share information is calculated using weighted average shares and LTIP units
outstanding. Percentage of average equity is calculated using average shareholders' equity, which excludes non-controlling
interests. |
|
|
|
Portfolio
The following tables summarize our portfolio holdings as of June 30, 2017 and March 31, 2017:
Investment Portfolio
|
|
June 30, 2017 |
|
March 31, 2017 |
| (In thousands) |
|
Current
Principal
|
|
Fair Value |
|
Average
Price (1)
|
|
Cost |
|
Average
Cost (1)
|
|
Current
Principal |
|
Fair Value |
|
Average
Price (1) |
|
Cost |
|
Average
Cost (1) |
| Non-Agency RMBS and Residential Mortgage Loans |
|
$ |
331,501 |
|
|
$ |
262,767 |
|
|
$ |
79.27 |
|
|
$ |
252,519 |
|
|
$ |
76.17 |
|
|
$ |
304,065 |
|
|
$ |
228,124 |
|
|
$ |
75.02 |
|
|
$ |
220,325 |
|
|
$ |
72.46 |
| Non-Agency CMBS and Commercial Mortgage Loans |
|
178,252 |
|
|
95,483 |
|
|
53.57 |
|
|
99,808 |
|
|
55.99 |
|
|
184,790 |
|
|
99,496 |
|
|
53.84 |
|
|
108,882 |
|
|
58.92 |
| ABS and Consumer Loans |
|
223,277 |
|
|
219,830 |
|
|
98.46 |
|
|
223,785 |
|
|
100.23 |
|
|
164,375 |
|
|
161,889 |
|
|
98.49 |
|
|
166,711 |
|
|
101.42 |
| Total Non-Agency MBS, Mortgage loans, and ABS and Consumer
Loans(2) |
|
733,030 |
|
|
578,080 |
|
|
78.86 |
|
|
576,112 |
|
|
78.59 |
|
|
653,230 |
|
|
489,509 |
|
|
74.94 |
|
|
495,918 |
|
|
75.92 |
| Agency RMBS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Floating |
|
9,610 |
|
|
9,991 |
|
|
103.97 |
|
|
10,108 |
|
|
105.19 |
|
|
10,579 |
|
|
10,999 |
|
|
103.97 |
|
|
11,093 |
|
|
104.86 |
| Fixed |
|
698,299 |
|
|
739,908 |
|
|
105.96 |
|
|
742,175 |
|
|
106.28 |
|
|
702,323 |
|
|
742,563 |
|
|
105.73 |
|
|
746,273 |
|
|
106.26 |
| Reverse Mortgages |
|
50,986 |
|
|
55,315 |
|
|
108.49 |
|
|
55,941 |
|
|
109.72 |
|
|
54,138 |
|
|
58,301 |
|
|
107.69 |
|
|
59,185 |
|
|
109.32 |
|
Total Agency RMBS(3)
|
|
758,895 |
|
|
805,214 |
|
|
106.10 |
|
|
808,224 |
|
|
106.50 |
|
|
767,040 |
|
|
811,863 |
|
|
105.84 |
|
|
816,551 |
|
|
106.45 |
| Total Non-Agency and Agency MBS, Mortgage loans, and ABS and Consumer
Loans(2)(3) |
|
1,491,925 |
|
|
1,383,294 |
|
|
92.72 |
|
|
1,384,336 |
|
|
92.79 |
|
|
1,420,270 |
|
|
1,301,372 |
|
|
91.63 |
|
|
1,312,469 |
|
|
92.41 |
| Agency Interest Only RMBS |
|
n/a |
|
28,783 |
|
|
n/a |
|
29,184 |
|
|
n/a |
|
n/a |
|
29,425 |
|
|
n/a |
|
29,671 |
|
|
n/a |
| Non-Agency Interest Only and Principal Only MBS and Other(4)(5) |
|
n/a |
|
23,129 |
|
|
n/a |
|
20,018 |
|
|
n/a |
|
n/a |
|
26,819 |
|
|
n/a |
|
24,788 |
|
|
n/a |
| TBAs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long |
|
172,950 |
|
|
179,874 |
|
|
104.00 |
|
|
180,243 |
|
|
104.22 |
|
|
243,982 |
|
|
253,146 |
|
|
103.76 |
|
|
252,101 |
|
|
103.33 |
| Short |
|
(428,424 |
) |
|
(450,055 |
) |
|
105.05 |
|
|
(451,073 |
) |
|
105.29 |
|
|
(502,617 |
) |
|
(523,620 |
) |
|
104.18 |
|
|
(521,631 |
) |
|
103.78 |
| Net Short TBAs |
|
(255,474 |
) |
|
(270,181 |
) |
|
105.76 |
|
|
(270,830 |
) |
|
106.01 |
|
|
(258,635 |
) |
|
(270,474 |
) |
|
104.58 |
|
|
(269,530 |
) |
|
104.21 |
| Long U.S. Treasury Securities |
|
22,122 |
|
|
22,165 |
|
|
100.20 |
|
|
22,060 |
|
|
99.72 |
|
|
36,529 |
|
|
36,488 |
|
|
99.89 |
|
|
36,455 |
|
|
99.80 |
| Short U.S. Treasury Securities |
|
(106,045 |
) |
|
(104,924 |
) |
|
98.94 |
|
|
(104,922 |
) |
|
98.94 |
|
|
(104,609 |
) |
|
(101,820 |
) |
|
97.33 |
|
|
(102,205 |
) |
|
97.70 |
| Short European Sovereign Bonds |
|
(65,980 |
) |
|
(67,556 |
) |
|
102.39 |
|
|
(66,666 |
) |
|
101.04 |
|
|
(61,873 |
) |
|
(63,260 |
) |
|
102.24 |
|
|
(66,738 |
) |
|
107.86 |
| Repurchase Agreements |
|
266,659 |
|
|
266,659 |
|
|
100.00 |
|
|
265,403 |
|
|
99.53 |
|
|
293,802 |
|
|
293,802 |
|
|
100.00 |
|
|
294,468 |
|
|
100.23 |
| Long Corporate Debt |
|
111,293 |
|
|
94,584 |
|
|
84.99 |
|
|
95,816 |
|
|
86.09 |
|
|
173,688 |
|
|
154,819 |
|
|
89.14 |
|
|
155,130 |
|
|
89.31 |
| Short Corporate Debt |
|
(63,142 |
) |
|
(61,267 |
) |
|
97.03 |
|
|
(61,755 |
) |
|
97.80 |
|
|
(91,367 |
) |
|
(89,466 |
) |
|
97.92 |
|
|
(89,598 |
) |
|
98.06 |
| Non-Exchange Traded Preferred and Common Equity Investment in Mortgage-Related
Entities |
|
n/a |
|
20,000 |
|
|
n/a |
|
20,000 |
|
|
n/a |
|
n/a |
|
23,099 |
|
|
n/a |
|
22,185 |
|
|
n/a |
| Non-controlling equity interest in limited liability companies(5) |
|
n/a |
|
11,557 |
|
|
n/a |
|
15,937 |
|
|
n/a |
|
n/a |
|
6,436 |
|
|
n/a |
|
10,734 |
|
|
n/a |
| Non-Exchange Traded Corporate Equity |
|
n/a |
|
4,141 |
|
|
n/a |
|
4,069 |
|
|
n/a |
|
n/a |
|
4,382 |
|
|
n/a |
|
4,313 |
|
|
n/a |
| Long Common Stock |
|
n/a |
|
1,625 |
|
|
n/a |
|
2,339 |
|
|
n/a |
|
n/a |
|
2,837 |
|
|
n/a |
|
2,784 |
|
|
n/a |
| Short Common Stock |
|
n/a |
|
(3,432 |
) |
|
n/a |
|
(3,563 |
) |
|
n/a |
|
n/a |
|
(2,154 |
) |
|
n/a |
|
(2,223 |
) |
|
n/a |
| Real Estate Owned |
|
n/a |
|
24,977 |
|
|
n/a |
|
25,462 |
|
|
n/a |
|
n/a |
|
25,390 |
|
|
n/a |
|
25,475 |
|
|
n/a |
| Total |
|
|
|
$ |
1,373,554 |
|
|
|
|
$ |
1,376,888 |
|
|
|
|
|
|
$ |
1,377,695 |
|
|
|
|
$ |
1,388,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Represents the dollar amount, per $100 of current principal, of the price or cost for
the security. |
| (2) |
|
Excludes non-Agency Interest Only and Principal Only MBS and Other (see footnote 4
below). |
| (3) |
|
Excludes Agency Interest Only RMBS. |
| (4) |
|
Other includes equity tranches of CLOs, non-Agency residual MBS, and similar
positions. |
| (5) |
|
Conformed to current period presentation. |
|
|
|
Non-Agency RMBS and CMBS are generally securitized in senior/subordinated structures, or in excess spread/over-collateralization
structures. Disregarding TBAs, Agency RMBS consist primarily of whole-pool pass through certificates. We actively invest in the TBA
market. TBAs are forward-settling Agency RMBS where the mortgage pass-through certificates to be delivered are "To-Be-Announced."
Given that we use TBAs primarily to hedge the risk of rising interest rates on our long holdings, we generally carry a net short
TBA position.
Derivatives Portfolio (1)
|
|
June 30, 2017 |
|
March 31, 2017 |
| (In thousands) |
|
Notional Value |
|
Fair Value |
|
Notional Value |
|
Fair Value |
| Mortgage-Related Derivatives: |
|
|
|
|
|
|
|
|
| Long CDS on RMBS and CMBS Indices |
|
$ |
11,198 |
|
|
$ |
(1,760 |
) |
|
$ |
14,971 |
|
|
$ |
(2,244 |
) |
| Short CDS on RMBS and CMBS Indices |
|
(48,350 |
) |
|
7,416 |
|
|
(79,502 |
) |
|
10,642 |
|
| Short CDS on Individual RMBS |
|
(9,641 |
) |
|
4,900 |
|
|
(10,005 |
) |
|
5,610 |
|
| Net Mortgage-Related Derivatives |
|
(46,793 |
) |
|
10,556 |
|
|
(74,536 |
) |
|
14,008 |
|
| Long CDS referencing Corporate Bond Indices |
|
13,973 |
|
|
880 |
|
|
11,909 |
|
|
832 |
|
| Short CDS referencing Corporate Bond Indices |
|
(223,178 |
) |
|
(7,361 |
) |
|
(62,821 |
) |
|
(2,911 |
) |
| Long CDS on Corporate Bonds |
|
94,620 |
|
|
(5,119 |
) |
|
108,028 |
|
|
269 |
|
| Short CDS on Corporate Bonds |
|
(154,232 |
) |
|
(259 |
) |
|
(146,391 |
) |
|
(6,330 |
) |
| Short Total Return Swaps on Corporate Equities(2) |
|
(24,986 |
) |
|
(1 |
) |
|
(21,683 |
) |
|
(11 |
) |
| Interest Rate Derivatives: |
|
|
|
|
|
|
|
|
| Long Interest Rate Swaps |
|
364,843 |
|
|
(1,206 |
) |
|
365,806 |
|
|
(2,378 |
) |
| Short Interest Rate Swaps |
|
(839,288 |
) |
|
3,404 |
|
|
(879,314 |
) |
|
5,605 |
|
| Long Eurodollar Futures(4) |
|
— |
|
|
— |
|
|
11,000 |
|
|
(11 |
) |
| Short Eurodollar Futures(4) |
|
(42,000 |
) |
|
(47 |
) |
|
(42,000 |
) |
|
(39 |
) |
| Short U.S. Treasury Note Futures(3) |
|
(6,800 |
) |
|
44 |
|
|
(6,800 |
) |
|
(7 |
) |
| Interest Rate Caps |
|
113,453 |
|
|
2 |
|
|
61,908 |
|
|
1 |
|
| Purchased Equity Call Options(5) |
|
16 |
|
|
23 |
|
|
23 |
|
|
28 |
|
| Purchased Equity Put Options(5) |
|
5 |
|
|
2 |
|
|
5 |
|
|
38 |
|
| Total Net Interest Rate Derivatives |
|
|
|
2,222 |
|
|
|
|
3,237 |
|
| Other Derivatives: |
|
|
|
|
|
|
|
|
| Short Foreign Currency Forwards(6) |
|
(73,747 |
) |
|
(1,319 |
) |
|
(63,223 |
) |
|
(125 |
) |
| Total Net Derivatives |
|
|
|
$ |
(401 |
) |
|
|
|
$ |
8,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
In the table above, fair value of certain derivative transactions are shown on a net
basis. The accompanying financial statements separate derivative transactions as either assets or liabilities. As of June 30,
2017, derivative assets and derivative liabilities were $26.6 million and $27.0 million, respectively, for a net fair value of
$(0.4) million, as reflected in "Total Net Derivatives" above. As of March 31, 2017, derivative assets and derivative
liabilities were $29.9 million and $20.9 million, respectively, for a net fair value of $9.0 million, as reflected in "Total
Net Derivatives" above. |
| (2) |
|
Notional value represents number of underlying shares times the closing price of the
underlying security. |
| (3) |
|
Notional value represents the total face amount of U.S. Treasury securities
underlying all contracts held. As of both June 30, 2017 and March 31, 2017 a total of 68 short U.S. Treasury note futures
contracts were held. |
| (4) |
|
Every $1,000,000 in notional value represents one Eurodollar future contract. |
| (5) |
|
Notional value represents the number of common shares we have the option to purchase
multiplied by the strike price. |
| (6) |
|
Notional value represents U.S. Dollars to be received by us at the maturity of the
forward contract. |
|
|
|
The mix and composition of our derivative instruments may vary from period to period.
The following table summarizes, as of June 30, 2017, the estimated effects on the value of our portfolio, both overall and
by category, of hypothetical, immediate, 50 basis point downward and upward parallel shifts in interest rates.
|
|
Estimated Change in Value (1) |
| (In thousands) |
|
50 Basis Point Decline in
Interest Rates
|
|
50 Basis Point Increase
in Interest Rates
|
|
|
Market Value |
|
% of Total Equity |
|
Market Value |
|
% of Total Equity |
| Agency RMBS - ARM Pools |
|
$ |
63 |
|
|
0.01 |
% |
|
$ |
(74 |
) |
|
(0.01 |
)% |
| Agency RMBS - Fixed Pools and IOs |
|
11,745 |
|
|
1.84 |
% |
|
(16,064 |
) |
|
(2.53 |
)% |
| TBAs |
|
(3,653 |
) |
|
(0.57 |
)% |
|
5,627 |
|
|
0.88 |
% |
| Non-Agency RMBS, CMBS, Other ABS, and Mortgage Loans |
|
3,405 |
|
|
0.53 |
% |
|
(3,171 |
) |
|
(0.50 |
)% |
| Interest Rate Swaps |
|
(6,731 |
) |
|
(1.06 |
)% |
|
6,476 |
|
|
1.02 |
% |
| U.S. Treasury Securities |
|
(3,377 |
) |
|
(0.53 |
)% |
|
3,225 |
|
|
0.51 |
% |
| Eurodollar and U.S. Treasury Futures |
|
(316 |
) |
|
(0.05 |
)% |
|
307 |
|
|
0.05 |
% |
| Mortgage-Related Derivatives |
|
52 |
|
|
0.01 |
% |
|
(52 |
) |
|
(0.01 |
)% |
| Corporate Securities and Derivatives on Corporate Securities |
|
4 |
|
|
— |
% |
|
38 |
|
|
0.01 |
% |
| Repurchase Agreements and Reverse Repurchase Agreements |
|
(668 |
) |
|
(0.10 |
)% |
|
652 |
|
|
0.10 |
% |
|
|
$ |
524 |
|
|
0.08 |
% |
|
$ |
(3,036 |
) |
|
(0.48 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Based on the market environment as of June 30, 2017. The preceding analysis does not
include sensitivities to changes in interest rates for instruments for which we believe that the effect of a change in interest
rates is not material to the value of the overall portfolio and/or cannot be accurately estimated. In particular, this analysis
excludes certain corporate securities and derivatives on corporate securities, and reflects only sensitivity to U.S. interest
rates. Results are based on forward-looking models, which are inherently imperfect, and incorporate various simplifying
assumptions. Therefore, the table above is for illustrative purposes only and actual changes in interest rates would likely
cause changes in the actual value of our overall portfolio that would differ from those presented above and such differences
might be significant and adverse. |
|
|
|
Borrowed Funds and Liquidity
Borrowings By Collateral Type
The following table summarizes our aggregate borrowings, including reverse repos and other secured borrowings for the three
month period ended June 30, 2017 and March 31, 2017.
|
|
As of
June 30, 2017
|
|
For the Quarter Ended
June 30, 2017
|
|
As of
March 31, 2017
|
|
For the Quarter Ended
March 31, 2017
|
| Collateral for Borrowing |
|
Outstanding
Borrowings
|
|
Average
Borrowings
|
|
Average
Cost of
Funds
|
|
Outstanding
Borrowings |
|
Average
Borrowings |
|
Average
Cost of
Funds |
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| Credit(2) |
|
$ |
301,362 |
|
|
$ |
274,958 |
|
|
3.87 |
% |
|
$ |
213,191 |
|
|
$ |
237,942 |
|
|
3.44 |
% |
| Agency RMBS |
|
791,083 |
|
|
807,615 |
|
|
1.11 |
% |
|
793,020 |
|
|
792,810 |
|
|
0.95 |
% |
| Subtotal(2) |
|
1,092,445 |
|
|
1,082,573 |
|
|
1.81 |
% |
|
1,006,211 |
|
|
1,030,752 |
|
|
1.53 |
% |
| Corporate Credit Relative Value Trading Strategy |
|
87,799 |
|
|
66,829 |
|
|
1.56 |
% |
|
105,370 |
|
|
54,427 |
|
|
1.32 |
% |
| U.S. Treasury Securities |
|
27,094 |
|
|
48,923 |
|
|
0.92 |
% |
|
36,492 |
|
|
37,848 |
|
|
0.58 |
% |
| Total |
|
$ |
1,207,338 |
|
|
$ |
1,198,325 |
|
|
1.76 |
% |
|
$ |
1,148,073 |
|
|
$ |
1,123,027 |
|
|
1.48 |
% |
| Leverage Ratio (1) |
|
1.90:1 |
|
|
|
|
|
1.75:1 |
|
|
|
|
| Modified Leverage Ratio (1)(2) |
|
1.72:1 |
|
|
|
|
|
1.54:1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
The leverage ratio does not account for liabilities other than reverse repurchase
agreements ("reverse repos") and other secured borrowings. |
| (2) |
|
Excludes U.S. Treasury Securities and investments in our corporate credit relative
value trading strategy. |
|
|
|
Throughout the second quarter, borrowing costs increased as LIBOR rose, which impacted our Agency-related as well as
Credit-related borrowings. As shown in the table above, the reverse repo borrowings in our corporate credit relative value trading
strategy have much lower costs of funds than most of our other Credit-related borrowings, because this strategy tends to involve
more liquid assets than our other credit strategies. In light of this large difference in borrowing costs, as well as the more
short-term nature and varying overall size of our positions in this strategy, we have broken out in the above table the borrowings
in that strategy from our other Credit-related borrowings. Our average cost of funds on our total credit portfolio, including our
corporate credit relative value trading strategy was 3.42% and 3.05% for the three month periods ended June 30, 2017 and March 31,
2017, respectively.
Our modified leverage ratio, excluding borrowings related to U.S. Treasury securities and investments in our corporate credit
relative value trading strategy, increased to 1.72:1 as of June 30, 2017, as compared to 1.54:1 as of March 31, 2017. Our
leverage ratio may fluctuate period over period based on portfolio management decisions, market conditions, and the timing of
security purchase and sale transactions.
Reverse Repurchase Agreements By Remaining Maturity (1)
| (In thousands) |
|
As of June 30, 2017 |
|
As of March 31, 2017 |
| Remaining Maturity (2) |
|
Outstanding
Borrowings
|
|
% of
Borrowings
|
|
Outstanding
Borrowings |
|
% of
Borrowings |
| 30 Days or Less |
|
$ |
311,846 |
|
|
27.9 |
% |
|
$ |
503,493 |
|
|
46.3 |
% |
| 31-60 Days |
|
332,008 |
|
|
29.7 |
% |
|
187,720 |
|
|
17.3 |
% |
| 61-90 Days |
|
232,897 |
|
|
20.8 |
% |
|
196,116 |
|
|
18.0 |
% |
| 91-120 Days |
|
122,071 |
|
|
10.9 |
% |
|
2,987 |
|
|
0.3 |
% |
| 121-150 Days |
|
6,709 |
|
|
0.6 |
% |
|
83,680 |
|
|
7.7 |
% |
| 151-180 Days |
|
10,365 |
|
|
0.9 |
% |
|
34,536 |
|
|
3.2 |
% |
| 181-360 Days |
|
103,342 |
|
|
9.2 |
% |
|
77,739 |
|
|
7.2 |
% |
|
|
$ |
1,119,238 |
|
|
100.0 |
% |
|
$ |
1,086,271 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Reverse repos involving underlying investments that we had sold prior to the
applicable period end for settlement following the applicable period end, are shown using their original maturity dates even
though such reverse repos may be expected to be terminated early upon settlement of the sale of the underlying investment. Not
included are any reverse repos that we may have entered into prior to the applicable period end for which delivery of the
borrowed funds is not scheduled until after the applicable period end. |
| (2) |
|
Remaining maturity for a reverse repo is based on the contractual maturity date in
effect as of the applicable period end. Some reverse repos have floating interest rates, which may reset before maturity. |
|
|
|
The majority of our borrowed funds are in the form of reverse repos. The weighted average remaining term on our reverse repos as
of June 30, 2017 increased to 67 days from 59 days as of March 31, 2017. In addition to borrowings under reverse repos,
we had other secured borrowings related to certain of our loan portfolios in the amount of $88.1 million and $61.8 million as of
June 30, 2017 and March 31, 2017, respectively.
Our borrowings outstanding under reverse repos were with a total of nineteen counterparties as of June 30, 2017. As of
June 30, 2017, we held liquid assets in the form of cash and cash equivalents in the amount of $134.5 million.
Other
Our expense ratio, which we define as our annualized base management fee and other operating expenses, but excluding interest
expense, other investment related expenses, and incentive fees, as a percentage of average equity, was 2.8% for the quarter ended
June 30, 2017, unchanged from the prior quarter. We did not incur incentive fee expense for either the first or second
quarters of 2017.
Dividends
On July 31, 2017, our Board of Directors declared a dividend of $0.45 per share for the second quarter of 2017, payable on
September 15, 2017 to shareholders of record on September 1, 2017. We expect to continue to recommend quarterly dividends
of $0.45 per share until conditions warrant otherwise. The declaration and amount of future dividends remain in the discretion of
the Board of Directors. Our dividends are paid on a quarterly basis, in arrears.
Share Repurchase Program
On March 6, 2017, our Board of Directors approved the adoption of a share repurchase program under which we are authorized to
repurchase up to 1.7 million common shares. The program, which is open-ended in duration, allows us to make repurchases from time
to time on the open market or in negotiated transactions. Repurchases are at our discretion, subject to applicable law, share
availability, price and our financial performance, among other considerations.
During the three month period ended June 30, 2017, we repurchased 51,518 shares at an average price per share of $15.81 and
a total cost of $0.8 million. From inception of the current repurchase program through August 2, 2017, we have repurchased 128,267
shares for an aggregate cost of approximately $2.0 million.
About Ellington Financial LLC
Ellington Financial LLC is a specialty finance company that primarily acquires and manages mortgage-related and consumer-related
assets, including residential mortgage-backed securities, residential and commercial mortgage loans, consumer loans and
asset-backed securities backed by consumer loans, commercial mortgage-backed securities, real property, and mortgage-related
derivatives. The Company also invests in corporate debt and equity, including distressed debt, collateralized loan obligations,
non-mortgage-related derivatives, and other financial assets, including private debt and equity investments in mortgage-related
entities. Ellington Financial LLC is externally managed and advised by Ellington Financial Management LLC, an affiliate of
Ellington Management Group, L.L.C.
Conference Call
We will host a conference call at 11:00 a.m. Eastern Time on Friday, August 4, 2017, to discuss our financial results for
the quarter ended June 30, 2017. To participate in the event by telephone, please dial (877) 241-1233 at least 10 minutes
prior to the start time and reference the conference passcode 51075258. International callers should dial (810) 740-4657 and
reference the same passcode. The conference call will also be webcast live over the Internet and can be accessed via the "For Our
Shareholders" section of our web site at www.ellingtonfinancial.com. To listen to the live webcast, please visit www.ellingtonfinancial.com at least 15 minutes prior to the start of the call to register, download, and install
necessary audio software. In connection with the release of these financial results, we also posted an investor presentation, that
will accompany the conference call, on its website at www.ellingtonfinancial.com under "For Our Shareholders—Presentations."
A dial-in replay of the conference call will be available on Friday, August 4, 2017, at approximately 2 p.m. Eastern Time
through Friday, August 11, 2017 at approximately 11:59 p.m. Eastern Time. To access this replay, please dial (800) 585-8367
and enter the passcode 51075258. International callers should dial (404) 537-3406 and enter the same passcode. A replay of the
conference call will also be archived on our web site at www.ellingtonfinancial.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Actual results may
differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking
statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words
such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal,"
"objective," "will," "may," "seek," or similar expressions or their negative forms, or by references to strategy, plans, or
intentions. Examples of forward-looking statements in this press release include without limitation management's beliefs regarding
the current economic and investment environment and our ability to implement our investment and hedging strategies, performance of
our investment and hedging strategies, our exposure to prepayment risk in our Agency portfolio, statements regarding our net Agency
premium, estimated effects on the fair value of our holdings of a hypothetical change in interest rates, statements regarding the
drivers of our returns, our expected ongoing annualized expense ratio, and statements regarding our intended dividend policy
including the amount to be recommended by management, and our share repurchase program. Our results can fluctuate from month to
month and from quarter to quarter depending on a variety of factors, some of which are beyond our control and/or are difficult to
predict, including, without limitation, changes in interest rates and the market value of our securities, changes in mortgage
default rates and prepayment rates, our ability to borrow to finance our assets, changes in government regulations affecting our
business, our ability to maintain our exclusion from registration under the Investment Company Act of 1940 and other changes in
market conditions and economic trends. Furthermore, forward-looking statements are subject to risks and uncertainties, including,
among other things, those described under Item 1A of the our Annual Report on Form 10-K filed on March 16, 2017 which can
be accessed through our website at www.ellingtonfinancial.com or at the SEC's website ( www.sec.gov ). Other risks, uncertainties, and factors that could cause actual results to differ materially
from those projected or implied may be described from time to time in reports we file with the SEC, including reports on Forms
10-Q, 10-K and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
|
ELLINGTON FINANCIAL LLC
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
Three Month
Period Ended |
|
Six Month
Period Ended |
| (In thousands, except per share amounts) |
|
June 30, 2017 |
|
March 31, 2017 |
|
June 30, 2017 |
| Investment income |
|
|
|
|
|
|
| Interest income |
|
$ |
21,788 |
|
|
$ |
22,886 |
|
|
$ |
44,674 |
|
| Other income |
|
872 |
|
|
939 |
|
|
1,811 |
|
| Total investment income |
|
22,660 |
|
|
23,825 |
|
|
46,485 |
|
| Expenses |
|
|
|
|
|
|
| Base management fee |
|
2,372 |
|
|
2,410 |
|
|
4,782 |
|
| Interest expense |
|
7,625 |
|
|
6,003 |
|
|
13,628 |
|
| Other investment related expenses |
|
2,058 |
|
|
1,521 |
|
|
3,579 |
|
| Other operating expenses |
|
2,173 |
|
|
2,116 |
|
|
4,289 |
|
| Total expenses |
|
14,228 |
|
|
12,050 |
|
|
26,278 |
|
| Net investment income |
|
8,432 |
|
|
11,775 |
|
|
20,207 |
|
| Net realized gain (loss) on: |
|
|
|
|
|
|
| Investments |
|
691 |
|
|
594 |
|
|
1,285 |
|
| Financial derivatives, excluding currency forwards |
|
(4,046 |
) |
|
(1,581 |
) |
|
(5,627 |
) |
| Financial derivatives—currency forwards |
|
(2,523 |
) |
|
(822 |
) |
|
(3,345 |
) |
| Foreign currency transactions |
|
531 |
|
|
978 |
|
|
1,509 |
|
|
|
(5,347 |
) |
|
(831 |
) |
|
(6,178 |
) |
| Change in net unrealized gain (loss) on: |
|
|
|
|
|
|
| Investments |
|
2,829 |
|
|
5,758 |
|
|
8,587 |
|
| Financial derivatives, excluding currency forwards |
|
(2,619 |
) |
|
(1,157 |
) |
|
(3,776 |
) |
| Financial derivatives—currency forwards |
|
(1,194 |
) |
|
330 |
|
|
(864 |
) |
| Foreign currency translation |
|
3,340 |
|
|
(145 |
) |
|
3,195 |
|
|
|
2,356 |
|
|
4,786 |
|
|
7,142 |
|
| Net realized and change in net unrealized gain (loss) on investments and
financial derivatives |
|
(2,991 |
) |
|
3,955 |
|
|
964 |
|
| Net increase in equity resulting from operations |
|
5,441 |
|
|
15,730 |
|
|
21,171 |
|
| Less: Increase in equity resulting from operations attributable to
non-controlling interests |
|
377 |
|
|
452 |
|
|
829 |
|
| Net increase in shareholders' equity resulting from operations |
|
$ |
5,064 |
|
|
$ |
15,278 |
|
|
$ |
20,342 |
|
| Net increase in shareholders' equity resulting from operations per share: |
|
|
|
|
|
|
| Basic and diluted |
|
$ |
0.16 |
|
|
$ |
0.47 |
|
|
$ |
0.62 |
|
| Weighted average shares and LTIP units outstanding |
|
32,587 |
|
|
32,718 |
|
|
32,652 |
|
| Weighted average shares and convertible units outstanding |
|
32,799 |
|
|
32,930 |
|
|
32,864 |
|
|
|
|
|
|
|
|
|
|
|
|
ELLINGTON FINANCIAL LLC
CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES AND EQUITY
(UNAUDITED)
|
|
|
|
|
|
As of |
| (In thousands, except share amounts) |
|
June 30,
2017
|
|
March 31,
2017
|
|
December 31,
2016 (1)
|
| ASSETS |
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
134,515 |
|
|
$ |
104,219 |
|
|
$ |
123,274 |
| Restricted cash |
|
425 |
|
|
655 |
|
|
655 |
| Investments, financial derivatives, and repurchase agreements: |
|
|
|
|
|
|
| Investments, at fair value (Cost – $1,799,464, $1,876,105, and $1,525,710) |
|
1,794,129 |
|
|
1,864,213 |
|
|
1,505,026 |
| Financial derivatives–assets, at fair value (Net cost – $36,162, $37,658, and
$40,724) |
|
26,602 |
|
|
29,907 |
|
|
35,595 |
| Repurchase agreements (Cost – $265,403, $294,468, and $185,205) |
|
266,659 |
|
|
293,802 |
|
|
184,819 |
| Total Investments, financial derivatives, and repurchase agreements |
|
2,087,390 |
|
|
2,187,922 |
|
|
1,725,440 |
| Due from brokers |
|
62,934 |
|
|
57,873 |
|
|
93,651 |
| Receivable for securities sold and financial derivatives |
|
484,124 |
|
|
550,241 |
|
|
445,112 |
| Interest and principal receivable |
|
21,157 |
|
|
25,071 |
|
|
21,704 |
| Other assets |
|
6,881 |
|
|
5,264 |
|
|
3,359 |
| Total assets |
|
$ |
2,797,426 |
|
|
$ |
2,931,245 |
|
|
$ |
2,413,195 |
| LIABILITIES |
|
|
|
|
|
|
| Investments and financial derivatives: |
|
|
|
|
|
|
| Investments sold short, at fair value (Proceeds – $687,979, $782,395, and
$589,429) |
|
$ |
687,234 |
|
|
$ |
780,320 |
|
|
$ |
584,896 |
| Financial derivatives–liabilities, at fair value (Net proceeds – $19,994,
$16,024, and $12,012) |
|
27,003 |
|
|
20,938 |
|
|
18,687 |
| Total investments and financial derivatives |
|
714,237 |
|
|
801,258 |
|
|
603,583 |
| Reverse repurchase agreements |
|
1,119,238 |
|
|
1,086,271 |
|
|
1,033,581 |
| Due to brokers |
|
3,898 |
|
|
5,512 |
|
|
12,780 |
| Payable for securities purchased and financial derivatives |
|
224,529 |
|
|
310,535 |
|
|
85,168 |
| Other secured borrowings (Proceeds – $88,100, $61,802, and $24,086) |
|
88,100 |
|
|
61,802 |
|
|
24,086 |
| Accounts payable and accrued expenses |
|
3,996 |
|
|
3,729 |
|
|
3,327 |
| Base management fee payable |
|
2,371 |
|
|
2,410 |
|
|
2,416 |
| Interest and dividends payable |
|
3,977 |
|
|
4,137 |
|
|
3,460 |
| Other liabilities |
|
119 |
|
|
1,136 |
|
|
17 |
| Total liabilities |
|
2,160,465 |
|
|
2,276,790 |
|
|
1,768,418 |
| EQUITY |
|
636,961 |
|
|
654,455 |
|
|
644,777 |
| TOTAL LIABILITIES AND EQUITY |
|
$ |
2,797,426 |
|
|
$ |
2,931,245 |
|
|
$ |
2,413,195 |
| ANALYSIS OF EQUITY: |
|
|
|
|
|
|
| Common shares, no par value, 100,000,000 shares authorized; |
|
|
|
|
|
|
| (32,112,697, 32,164,215, and 32,294,703, shares issued and outstanding) |
|
$ |
615,702 |
|
|
$ |
626,116 |
|
|
$ |
627,620 |
| Additional paid-in capital–LTIP units |
|
10,229 |
|
|
10,135 |
|
|
10,041 |
| Total Shareholders' Equity |
|
625,931 |
|
|
636,251 |
|
|
637,661 |
| Non-controlling interests |
|
11,030 |
|
|
18,204 |
|
|
7,116 |
| Total Equity |
|
$ |
636,961 |
|
|
$ |
654,455 |
|
|
$ |
644,777 |
| PER SHARE INFORMATION: |
|
|
|
|
|
|
| Common shares, no par value |
|
$ |
19.49 |
|
|
$ |
19.78 |
|
|
$ |
19.75 |
| DILUTED PER SHARE INFORMATION: |
|
|
|
|
|
|
| Common shares and convertible units, no par value (2) |
|
$ |
19.21 |
|
|
$ |
19.50 |
|
|
$ |
19.46 |
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Derived from audited financial statements as of December 31, 2016. |
| (2) |
|
Based on total equity excluding non-controlling interests not represented by
instruments convertible into common shares. |
Investors:
Ellington Financial LLC
Maria Cozine, 203-409-3575
Vice President of Investor Relations
Lisa Mumford, 203-409-3575
Chief Financial Officer
info@ellingtonfinancial.com;
or
Media:
Amanda Klein, 212-257-4170
Kevin Fitzgerald, 212-257-4170
Ellington@gasthalter.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20170803006472/en/