Ellington Financial reports Q3 EPS 29c, consensus 44c

“Robust securitization activity, excellent results from our securities businesses, and continued solid credit performance across our diversified loan businesses, including Longbridge, drove Ellington Financial’s (EFC) strong results for the quarter,” said Laurence Penn, Chief Executive Officer and President. “We generated GAAP net income of $0.29 per share and adjusted distributable earnings of $0.53 per share – again substantially exceeding our dividends – and our total portfolio holdings4 grew by 12% sequentially. During the third quarter, we further strengthened our balance sheet by significantly increasing our long-term, non-mark-to-market financings. We priced seven securitizations during the quarter, and including activity subsequent to quarter end, have now priced 20 securitizations year-to-date, more than triple last year’s pace. Notably, we are currently working on our inaugural securitization of residential transition loans, which would reduce reliance on short-term financing in that strategy, unlock capital for redeployment, and create high-yielding retained tranches for our portfolio. Additionally, on the final day of the third quarter, we successfully priced $400 million of five-year senior unsecured notes, rated by Moody’s and Fitch and broadly distributed to institutional investors. We view our shift toward a greater proportion of long-term unsecured financing and securitization financing – and a lesser proportion of shorter-term repo financing – as a fundamental evolution of our capital structure that is fortifying our balance sheet, enhancing risk management, and supporting earnings stability. As of October 31, nearly 20% of our recourse borrowings are unsecured, and we intend to increase that proportion over time. We priced our unsecured notes at a yield of 7.375%, representing a spread of 3.63% to the five-year U.S. Treasury. We were pleased with the execution, and we expect that pricing will improve on our future note offerings as we become a more established unsecured note issuer and as we migrate more of our borrowings to long-term borrowings, creating a virtuous cycle. Looking ahead, with conservative leverage, significant dry powder from our recent unsecured note issuance, and a steady pace of securitizations, we believe that Ellington Financial is well positioned to continue delivering strong and sustainable dividend coverage.”