Delaware | 001-34569 | 26-0489289 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 7.01. | Regulation FD Disclosure. |
Item 9.01. | Financial Statements and Exhibits. |
ELLINGTON FINANCIAL LLC | ||||||
Date: | November 7, 2018 | By: | /s/ JR Herlihy | |||
JR Herlihy | ||||||
Chief Financial Officer |
Exhibit | Description | ||
99.1 | Earnings Press Release dated November 7, 2018 |
• | Net income1 of $6.7 million, or $0.22 per basic and diluted share. |
• | Book value per share as of September 30, 2018 of $19.37 on a diluted basis, after payment of a quarterly dividend of $0.41 per share, as compared to book value per share of $19.57 on a diluted basis as of June 30, 2018. |
• | Credit strategy gross income of $11.0 million for the quarter, or $0.36 per share. |
• | Agency strategy gross income of $0.7 million for the quarter, or $0.02 per share. |
• | Net investment income of $11.7 million for the quarter, or $0.38 per share; Adjusted net investment income2 of $12.5 million for the quarter, or $0.40 per share. |
• | Announced a dividend of $0.41 per share for the third quarter of 2018, equating to an annualized dividend yield of 10.6% based on the November 6, 2018 closing price of $15.43 per share; dividends are paid quarterly in arrears. |
• | Debt-to-equity ratio of 3.04:13 as of September 30, 2018. |
September 30, 2018 | June 30, 2018 | |||||||||||||||
(In thousands) | Fair Value | Cost | Fair Value | Cost | ||||||||||||
Long: | ||||||||||||||||
Credit: | ||||||||||||||||
Dollar Denominated: | ||||||||||||||||
CLO(1) | $ | 156,087 | $ | 160,561 | $ | 210,935 | $ | 216,236 | ||||||||
CMBS | 14,923 | 13,995 | 16,927 | 16,890 | ||||||||||||
Commercial Mortgage Loans and REO(2) | 160,515 | 158,159 | 139,546 | 137,846 | ||||||||||||
Consumer Loans and ABS Backed by Consumer Loans(1) | 209,848 | 218,183 | 196,584 | 205,243 | ||||||||||||
Corporate Debt and Equity | 44,559 | 43,250 | 71,422 | 68,878 | ||||||||||||
Debt and Equity Investment in Mortgage-Related Entities | 30,171 | 25,314 | 30,823 | 25,314 | ||||||||||||
Non-Agency RMBS | 180,223 | 168,399 | 156,834 | 144,760 | ||||||||||||
Residential Mortgage Loans and REO | 393,846 | 392,634 | 294,366 | 292,994 | ||||||||||||
Non-Dollar Denominated: | ||||||||||||||||
CLO | — | — | 4,670 | 4,788 | ||||||||||||
CMBS | 16,250 | 16,774 | 16,309 | 16,468 | ||||||||||||
Consumer Loans and ABS Backed by Consumer Loans | 919 | 825 | 8,723 | 899 | ||||||||||||
Corporate Debt and Equity | 11,400 | 12,165 | 11,911 | 12,576 | ||||||||||||
RMBS(3) | 199,108 | 200,416 | 130,395 | 128,620 | ||||||||||||
Agency: | ||||||||||||||||
Fixed-Rate Specified Pools | 850,453 | 877,590 | 853,120 | 874,862 | ||||||||||||
Floating-Rate Specified Pools | 5,539 | 5,684 | 6,155 | 6,304 | ||||||||||||
IOs | 33,050 | 34,134 | 32,899 | 33,630 | ||||||||||||
Reverse Mortgage Pools | 55,396 | 57,552 | 56,371 | 58,104 | ||||||||||||
TBAs | 303,552 | 304,331 | 317,013 | 316,530 | ||||||||||||
Government: | ||||||||||||||||
Dollar Denominated | 4,230 | 4,257 | 70,468 | 70,467 | ||||||||||||
Total Long | 2,670,069 | 2,694,223 | 2,625,471 | 2,631,409 | ||||||||||||
Repurchase Agreements | ||||||||||||||||
Dollar Denominated | 140,352 | 140,352 | 194,230 | 194,229 | ||||||||||||
Non-Dollar Denominated | 20,070 | 20,116 | 20,181 | 20,117 | ||||||||||||
Total Repurchase Agreements | 160,422 | 160,468 | 214,411 | 214,346 | ||||||||||||
Short: | ||||||||||||||||
Credit: | ||||||||||||||||
Dollar Denominated: | ||||||||||||||||
Corporate Debt and Equity | (60,809 | ) | (60,965 | ) | (84,395 | ) | (85,280 | ) | ||||||||
Agency: | ||||||||||||||||
TBAs | (562,098 | ) | (564,232 | ) | (618,665 | ) | (616,872 | ) | ||||||||
Government: | ||||||||||||||||
Dollar Denominated | (52,809 | ) | (52,884 | ) | (159,220 | ) | (159,005 | ) | ||||||||
Non-Dollar Denominated | (19,633 | ) | (19,605 | ) | (19,866 | ) | (19,668 | ) | ||||||||
Total Short | (695,349 | ) | (697,686 | ) | (882,146 | ) | (880,825 | ) | ||||||||
Net Total | $ | 2,135,142 | $ | 2,157,005 | $ | 1,957,736 | $ | 1,964,930 |
(1) | Includes equity investment in a securitization-related vehicle. |
(2) | Includes equity investment in a limited liability company holding small balance commercial mortgage loans. |
(3) | Includes RMBS secured by non-performing loans and REO, and an investment in an entity holding a securitization call right. |
Quarter Ended September 30, 2018 | Per Share | % of Average Equity | Quarter Ended June 30, 2018 | Per Share | % of Average Equity | Nine-Month Period Ended September 30, 2018 | Per Share | % of Average Equity | |||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||||||
Credit: | |||||||||||||||||||||||||||||||||
Interest income and other income | $ | 26,522 | $ | 0.86 | 4.32 | % | $ | 23,053 | $ | 0.75 | 3.75 | % | $ | 70,120 | $ | 2.25 | 11.41 | % | |||||||||||||||
Net realized gain (loss) | 9,845 | 0.32 | 1.60 | % | 105 | — | 0.01 | % | 14,911 | 0.48 | 2.43 | % | |||||||||||||||||||||
Change in net unrealized gain (loss) | (9,886 | ) | (0.32 | ) | (1.61 | )% | 11,046 | 0.36 | 1.80 | % | 8,840 | 0.28 | 1.44 | % | |||||||||||||||||||
Net interest rate hedges(1) | 468 | 0.02 | 0.08 | % | 29 | — | — | % | 676 | 0.02 | 0.11 | % | |||||||||||||||||||||
Net credit hedges and other activities(2) | (3,250 | ) | (0.11 | ) | (0.53 | )% | 1,659 | 0.05 | 0.27 | % | (396 | ) | (0.01 | ) | (0.06 | )% | |||||||||||||||||
Interest expense(3) | (8,786 | ) | (0.28 | ) | (1.43 | )% | (7,680 | ) | (0.25 | ) | (1.25 | )% | (23,113 | ) | (0.74 | ) | (3.76 | )% | |||||||||||||||
Other investment related expenses | (3,921 | ) | (0.13 | ) | (0.64 | )% | (3,288 | ) | (0.11 | ) | (0.53 | )% | (9,828 | ) | (0.32 | ) | (1.60 | )% | |||||||||||||||
Total Credit profit (loss) | 10,992 | 0.36 | 1.79 | % | 24,924 | 0.80 | 4.05 | % | 61,210 | 1.96 | 9.97 | % | |||||||||||||||||||||
Agency RMBS: | |||||||||||||||||||||||||||||||||
Interest income | 7,873 | 0.25 | 1.28 | % | 8,345 | 0.27 | 1.36 | % | 22,911 | 0.74 | 3.73 | % | |||||||||||||||||||||
Net realized gain (loss) | (1,388 | ) | (0.04 | ) | (0.23 | )% | (1,509 | ) | (0.05 | ) | (0.25 | )% | (4,084 | ) | (0.13 | ) | (0.66 | )% | |||||||||||||||
Change in net unrealized gain (loss) | (6,167 | ) | (0.20 | ) | (1.00 | )% | (4,151 | ) | (0.14 | ) | (0.67 | )% | (22,909 | ) | (0.74 | ) | (3.73 | )% | |||||||||||||||
Net interest rate hedges and other activities(1) | 5,510 | 0.18 | 0.90 | % | 3,406 | 0.12 | 0.56 | % | 19,155 | 0.62 | 3.12 | % | |||||||||||||||||||||
Interest expense | (5,087 | ) | (0.17 | ) | (0.83 | )% | (4,439 | ) | (0.14 | ) | (0.73 | )% | (12,997 | ) | (0.42 | ) | (2.12 | )% | |||||||||||||||
Total Agency RMBS profit (loss) | 741 | 0.02 | 0.12 | % | 1,652 | 0.06 | 0.27 | % | 2,076 | 0.07 | 0.34 | % | |||||||||||||||||||||
Total Credit and Agency RMBS profit (loss) | 11,733 | 0.38 | 1.91 | % | 26,576 | 0.86 | 4.32 | % | 63,286 | 2.03 | 10.31 | % | |||||||||||||||||||||
Other interest income (expense), net | 347 | 0.01 | 0.06 | % | 497 | 0.02 | 0.09 | % | 1,242 | 0.04 | 0.20 | % | |||||||||||||||||||||
Other expenses | (4,182 | ) | (0.14 | ) | (0.68 | )% | (4,598 | ) | (0.15 | ) | (0.75 | )% | (12,832 | ) | (0.41 | ) | (2.09 | )% | |||||||||||||||
Net increase in equity resulting from operations (before incentive fee) | 7,898 | 0.25 | 1.29 | % | 22,475 | 0.73 | 3.66 | % | 51,696 | 1.66 | 8.42 | % | |||||||||||||||||||||
Incentive fee | (424 | ) | (0.01 | ) | (0.07 | )% | (291 | ) | (0.01 | ) | (0.05 | )% | (715 | ) | (0.02 | ) | (0.12 | )% | |||||||||||||||
Net increase (decrease) in equity resulting from operations | $ | 7,474 | $ | 0.24 | 1.22 | % | $ | 22,184 | $ | 0.72 | 3.61 | % | $ | 50,981 | $ | 1.64 | 8.30 | % | |||||||||||||||
Less: Net increase (decrease) in equity resulting from operations attributable to non-controlling interests | 813 | 991 | 2,089 | ||||||||||||||||||||||||||||||
Net increase (decrease) in shareholders' equity resulting from operations(4) | $ | 6,661 | $ | 0.22 | 1.12 | % | $ | 21,193 | $ | 0.69 | 3.53 | % | $ | 48,892 | $ | 1.58 | 8.18 | % | |||||||||||||||
Weighted average shares and convertible units(5) outstanding | 30,859 | 30,907 | 31,098 | ||||||||||||||||||||||||||||||
Average equity (includes non-controlling interests)(6) | $ | 613,816 | $ | 612,622 | $ | 614,426 | |||||||||||||||||||||||||||
Weighted average shares and LTIP units outstanding(7) | 30,647 | 30,695 | 30,886 | ||||||||||||||||||||||||||||||
Average shareholders' equity (excludes non-controlling interests)(6) | $ | 596,204 | $ | 597,870 | $ | 597,625 |
(1) | Includes TBAs and U.S. Treasury securities, if applicable. |
(2) | Includes equity and other relative value trading strategies and related hedges. |
(3) | Includes interest expense on the Company's Senior Notes. |
(4) | 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. |
(5) | Convertible units include Operating Partnership units attributable to non-controlling interests and LTIP units. |
(6) | Average equity and average shareholders' equity are calculated using month end values. |
(7) | Excludes Operating Partnership units attributable to non-controlling interests. |
Three-Month Period Ended | Nine-Month Period Ended | |||||||||||
(In thousands, except per share amounts) | September 30, 2018 | June 30, 2018 | September 30, 2018 | |||||||||
Investment income | ||||||||||||
Interest income | $ | 35,300 | $ | 31,941 | $ | 95,333 | ||||||
Other income | 1,046 | 1,094 | 2,857 | |||||||||
Total investment income | 36,346 | 33,035 | 98,190 | |||||||||
Expenses | ||||||||||||
Base management fee to affiliate (Net of fee rebates of $423, $252, and $950, respectively) | 1,830 | 2,021 | 5,829 | |||||||||
Incentive fee to affiliate | 424 | 291 | 715 | |||||||||
Interest expense | 15,678 | 13,383 | 40,624 | |||||||||
Other investment related expenses: | ||||||||||||
Servicing and other | 4,384 | 3,771 | 11,107 | |||||||||
Other operating expenses | 2,352 | 2,578 | 7,004 | |||||||||
Total expenses | 24,668 | 22,044 | 65,279 | |||||||||
Net investment income | 11,678 | 10,991 | 32,911 | |||||||||
Net realized gain (loss) on: | ||||||||||||
Investments | 8,551 | (388 | ) | 20,747 | ||||||||
Financial derivatives, excluding currency hedges | 479 | (3,632 | ) | (2,251 | ) | |||||||
Financial derivatives—currency hedges | 297 | 3,787 | 1,881 | |||||||||
Foreign currency transactions | 775 | (1,110 | ) | 1,433 | ||||||||
10,102 | (1,343 | ) | 21,810 | |||||||||
Change in net unrealized gain (loss) on: | ||||||||||||
Investments | (13,372 | ) | 7,457 | (12,767 | ) | |||||||
Other secured borrowings | (358 | ) | 414 | 840 | ||||||||
Financial derivatives, excluding currency hedges | 173 | 6,553 | 9,922 | |||||||||
Financial derivatives—currency hedges | 528 | 76 | 1,404 | |||||||||
Foreign currency translation | (1,277 | ) | (1,964 | ) | (3,139 | ) | ||||||
(14,306 | ) | 12,536 | (3,740 | ) | ||||||||
Net realized and change in net unrealized gain (loss) on investments, financial derivatives, and other secured borrowings | (4,204 | ) | 11,193 | 18,070 | ||||||||
Net increase in equity resulting from operations | 7,474 | 22,184 | 50,981 | |||||||||
Less: Increase in equity resulting from operations attributable to non-controlling interests | 813 | 991 | 2,089 | |||||||||
Net increase in shareholders' equity resulting from operations | $ | 6,661 | $ | 21,193 | $ | 48,892 | ||||||
Net increase in shareholders' equity resulting from operations per share: | ||||||||||||
Basic and diluted | $ | 0.22 | $ | 0.69 | $ | 1.58 | ||||||
Weighted average shares and LTIP units outstanding | 30,647 | 30,695 | 30,886 | |||||||||
Weighted average shares and convertible units outstanding | 30,859 | 30,907 | 31,098 |
As of | ||||||||||||
(In thousands, except share amounts) | September 30, 2018 | June 30, 2018 | December 31, 2017(1) | |||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 53,598 | $ | 22,071 | $ | 47,233 | ||||||
Restricted cash | 425 | 425 | 425 | |||||||||
Investments, financial derivatives, and repurchase agreements: | ||||||||||||
Investments, at fair value (Cost–$2,694,223, $2,631,409, and $2,071,754) | 2,670,069 | 2,625,471 | 2,071,707 | |||||||||
Financial derivatives–assets, at fair value (Net cost–$20,895, $24,510, and $31,474) | 31,338 | 30,669 | 28,165 | |||||||||
Repurchase agreements (Cost–$160,468, $214,346, and $155,109) | 160,422 | 214,411 | 155,949 | |||||||||
Total Investments, financial derivatives, and repurchase agreements | 2,861,829 | 2,870,551 | 2,255,821 | |||||||||
Due from brokers | 83,915 | 84,196 | 140,404 | |||||||||
Receivable for securities sold and financial derivatives | 670,952 | 637,965 | 476,000 | |||||||||
Interest and principal receivable | 38,635 | 32,469 | 29,688 | |||||||||
Other assets | 5,207 | 24,399 | 43,770 | |||||||||
Total assets | $ | 3,714,561 | $ | 3,672,076 | $ | 2,993,341 | ||||||
LIABILITIES | ||||||||||||
Investments and financial derivatives: | ||||||||||||
Investments sold short, at fair value (Proceeds–$697,686, $880,825, and $640,202) | $ | 695,349 | $ | 882,146 | $ | 642,240 | ||||||
Financial derivatives–liabilities, at fair value (Net proceeds–$16,294, $18,294, and $27,463) | 27,226 | 25,675 | 36,273 | |||||||||
Total investments and financial derivatives | 722,575 | 907,821 | 678,513 | |||||||||
Reverse repurchase agreements | 1,636,039 | 1,421,506 | 1,209,315 | |||||||||
Due to brokers | 4,551 | 3,250 | 1,721 | |||||||||
Payable for securities purchased and financial derivatives | 430,808 | 431,024 | 202,703 | |||||||||
Other secured borrowings (Proceeds–$114,190, $95,630, and $57,909) | 114,190 | 95,630 | 57,909 | |||||||||
Other secured borrowings, at fair value (Proceeds–$90,409 $102,298, and $125,105) | 89,569 | 101,100 | 125,105 | |||||||||
Senior notes, net | 84,968 | 84,902 | 84,771 | |||||||||
Accounts payable and accrued expenses | 5,337 | 4,105 | 3,885 | |||||||||
Base management fee payable to affiliate | 1,830 | 2,021 | 2,113 | |||||||||
Incentive fee payable to affiliate | 424 | 291 | — | |||||||||
Interest and dividends payable | 6,451 | 6,791 | 5,904 | |||||||||
Other liabilities | 1,141 | 360 | 441 | |||||||||
Total liabilities | 3,097,883 | 3,058,801 | 2,372,380 | |||||||||
EQUITY | 616,678 | 613,275 | 620,961 | |||||||||
TOTAL LIABILITIES AND EQUITY | $ | 3,714,561 | $ | 3,672,076 | $ | 2,993,341 | ||||||
ANALYSIS OF EQUITY: | ||||||||||||
Common shares, no par value, 100,000,000 shares authorized; | ||||||||||||
(30,155,055, 30,149,880, and 31,335,938, shares issued and outstanding) | $ | 583,179 | $ | 589,000 | $ | 589,722 | ||||||
Additional paid-in capital–LTIP units | 10,618 | 10,567 | 10,377 | |||||||||
Total Shareholders' Equity | 593,797 | 599,567 | 600,099 | |||||||||
Non-controlling interests | 22,881 | 13,708 | 20,862 | |||||||||
Total Equity | $ | 616,678 | $ | 613,275 | $ | 620,961 | ||||||
PER SHARE INFORMATION: | ||||||||||||
Common shares, no par value | $ | 19.69 | $ | 19.89 | $ | 19.15 | ||||||
DILUTED PER SHARE INFORMATION: | ||||||||||||
Common shares and convertible units, no par value (2) | $ | 19.37 | $ | 19.57 | $ | 18.85 |
(1) | Derived from audited financial statements as of December 31, 2017. |
(2) | Based on total equity excluding non-controlling interests not represented by instruments convertible into common shares. |
(In thousands, except per share amounts) | Three-Month Period Ended September 30, 2018 | |||
Net investment income | $ | 11,678 | ||
Include: | ||||
Net realized and change in net unrealized gains (losses) from certain equity investments in partnerships(1) | 104 | |||
Net periodic (payments) receipts on interest rate swaps(2) | 79 | |||
Exclude: | ||||
Incentive fee to affiliate | (424 | ) | ||
Catch-up Premium Amortization Adjustment | (170 | ) | ||
Adjusted net investment income | $ | 12,455 | ||
Weighted average shares and convertible units outstanding | 30,859 | |||
Net investment income per share | $ | 0.38 | ||
Adjusted net investment income per share | $ | 0.40 |
(1) | Includes only those components that would be included in net investment income at the underlying partnership. |
(2) | Net periodic (payments) receipts on interest swaps related to our interest rate hedging portfolio. |