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: | February 20, 2019 | By: | /s/ JR Herlihy | |||
JR Herlihy | ||||||
Chief Financial Officer |
Exhibit | Description | ||
99.1 | Earnings Press Release dated February 20, 2019 |
• | Net loss1 of $(2.2) million, or $(0.07) per basic and diluted share. |
• | Book value per share as of December 31, 2018 of $18.92, after payment of a quarterly dividend of $0.41 per share. |
• | Credit strategy gross income of $8.1 million for the quarter, or $0.26 per share. |
• | Agency strategy gross loss of $(4.9) million for the quarter, or $(0.16) per share. |
• | Net investment income of $10.2 million for the quarter, or $0.33 per share; Adjusted net investment income2 of $12.7 million for the quarter, or $0.41 per share. |
• | Announced a dividend of $0.41 per share, equating to an annualized dividend yield of 9.6% based on the February 19, 2019 closing price of $17.16 per share. |
• | Repurchased 361,090 common shares during the quarter, or approximately 1% of our total common shares as of the beginning of the quarter, at an average price of $15.34 per share. |
• | Debt-to-equity ratio of 3.35:13 as of December 31, 2018. |
December 31, 2018 | September 30, 2018 | |||||||||||||||
(In thousands) | Fair Value | Cost | Fair Value | Cost | ||||||||||||
Long: | ||||||||||||||||
Credit: | ||||||||||||||||
Dollar Denominated: | ||||||||||||||||
CLO | $ | 123,893 | $ | 139,424 | $ | 156,087 | $ | 160,561 | ||||||||
CMBS | 18,426 | 17,828 | 14,923 | 13,995 | ||||||||||||
Commercial Mortgage Loans and REO(1) | 245,536 | 244,193 | 160,515 | 158,159 | ||||||||||||
Consumer Loans and ABS Backed by Consumer Loans(2) | 209,922 | 218,895 | 209,848 | 218,183 | ||||||||||||
Corporate Debt and Equity | 15,316 | 17,526 | 44,559 | 43,250 | ||||||||||||
Equity Investment in Loan Origination Entities | 37,067 | 28,314 | 30,171 | 25,314 | ||||||||||||
Non-Agency RMBS | 153,214 | 141,130 | 180,223 | 168,399 | ||||||||||||
Residential Mortgage Loans and REO | 498,126 | 495,551 | 393,846 | 392,634 | ||||||||||||
Non-Dollar Denominated: | ||||||||||||||||
CLO | — | — | — | — | ||||||||||||
CMBS | 15,482 | 16,510 | 16,250 | 16,774 | ||||||||||||
Consumer Loans and ABS Backed by Consumer Loans | 884 | 761 | 919 | 825 | ||||||||||||
Corporate Debt and Equity | 10,810 | 11,821 | 11,400 | 12,165 | ||||||||||||
RMBS(3) | 160,342 | 168,289 | 199,108 | 200,416 | ||||||||||||
Agency: | ||||||||||||||||
Fixed-Rate Specified Pools | 884,870 | 904,048 | 850,453 | 877,590 | ||||||||||||
Floating-Rate Specified Pools | 5,496 | 5,627 | 5,539 | 5,684 | ||||||||||||
IOs | 29,516 | 30,399 | 33,050 | 34,134 | ||||||||||||
Reverse Mortgage Pools | 55,475 | 56,799 | 55,396 | 57,552 | ||||||||||||
TBAs | 474,860 | 473,115 | 303,552 | 304,331 | ||||||||||||
Government: | ||||||||||||||||
Dollar Denominated | 76 | 76 | 4,230 | 4,257 | ||||||||||||
Total Long | 2,939,311 | 2,970,306 | 2,670,069 | 2,694,223 | ||||||||||||
Repurchase Agreements | ||||||||||||||||
Dollar Denominated | 41,530 | 41,530 | 140,352 | 140,352 | ||||||||||||
Non-Dollar Denominated | 19,744 | 19,744 | 20,070 | 20,116 | ||||||||||||
Total Repurchase Agreements | 61,274 | 61,274 | 160,422 | 160,468 | ||||||||||||
Short: | ||||||||||||||||
Credit: | ||||||||||||||||
Dollar Denominated: | ||||||||||||||||
Corporate Debt and Equity | (23,462 | ) | (23,872 | ) | (60,809 | ) | (60,965 | ) | ||||||||
Agency: | ||||||||||||||||
TBAs | (772,964 | ) | (766,777 | ) | (562,098 | ) | (564,232 | ) | ||||||||
Government: | ||||||||||||||||
Dollar Denominated | (34,817 | ) | (34,410 | ) | (52,809 | ) | (52,884 | ) | ||||||||
Non-Dollar Denominated | (19,334 | ) | (19,545 | ) | (19,633 | ) | (19,605 | ) | ||||||||
Total Short | (850,577 | ) | (844,604 | ) | (695,349 | ) | (697,686 | ) | ||||||||
Net Total | $ | 2,150,008 | $ | 2,186,976 | $ | 2,135,142 | $ | 2,157,005 |
(1) | Includes equity investment in a limited liability company holding small balance commercial mortgage loans. |
(2) | Includes equity investment in a securitization-related vehicle. |
(3) | Includes RMBS secured by non-performing loans and REO, and an investment in an entity holding a securitization call right. |
Quarter Ended December 31, 2018 | Per Share | % of Average Equity | Quarter Ended September 30, 2018 | Per Share | % of Average Equity | Year Ended December 31, 2018 | Per Share | % of Average Equity | |||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||||||
Credit: | |||||||||||||||||||||||||||||||||
Interest income and other income | $ | 27,335 | $ | 0.89 | 4.49 | % | $ | 26,522 | $ | 0.86 | 4.32 | % | $ | 97,455 | $ | 3.14 | 15.91 | % | |||||||||||||||
Net realized gain (loss) | 3,496 | 0.11 | 0.57 | % | 9,845 | 0.32 | 1.60 | % | 18,407 | 0.59 | 3.01 | % | |||||||||||||||||||||
Change in net unrealized gain (loss) | (15,482 | ) | (0.50 | ) | (2.54 | )% | (9,886 | ) | (0.32 | ) | (1.61 | )% | (6,642 | ) | (0.21 | ) | (1.08 | )% | |||||||||||||||
Net interest rate hedges(1) | (561 | ) | (0.02 | ) | (0.09 | )% | 468 | 0.02 | 0.08 | % | 115 | — | 0.02 | % | |||||||||||||||||||
Net credit hedges and other activities(2) | 8,416 | 0.27 | 1.38 | % | (3,250 | ) | (0.11 | ) | (0.53 | )% | 8,020 | 0.26 | 1.31 | % | |||||||||||||||||||
Interest expense(3) | (9,622 | ) | (0.31 | ) | (1.58 | )% | (8,786 | ) | (0.28 | ) | (1.43 | )% | (32,735 | ) | (1.05 | ) | (5.34 | )% | |||||||||||||||
Other investment related expenses | (5,456 | ) | (0.18 | ) | (0.90 | )% | (3,921 | ) | (0.13 | ) | (0.64 | )% | (15,284 | ) | (0.49 | ) | (2.50 | )% | |||||||||||||||
Total Credit profit (loss) | 8,126 | 0.26 | 1.33 | % | 10,992 | 0.36 | 1.79 | % | 69,336 | 2.24 | 11.33 | % | |||||||||||||||||||||
Agency RMBS: | |||||||||||||||||||||||||||||||||
Interest income | 8,205 | 0.27 | 1.35 | % | 7,873 | 0.25 | 1.28 | % | 31,116 | 1.01 | 5.08 | % | |||||||||||||||||||||
Net realized gain (loss) | (528 | ) | (0.02 | ) | (0.09 | )% | (1,388 | ) | (0.04 | ) | (0.23 | )% | (4,612 | ) | (0.15 | ) | (0.75 | )% | |||||||||||||||
Change in net unrealized gain (loss) | 9,008 | 0.29 | 1.48 | % | (6,167 | ) | (0.20 | ) | (1.00 | )% | (13,901 | ) | (0.45 | ) | (2.27 | )% | |||||||||||||||||
Net interest rate hedges and other activities(1) | (16,011 | ) | (0.52 | ) | (2.63 | )% | 5,510 | 0.18 | 0.90 | % | 3,144 | 0.10 | 0.51 | % | |||||||||||||||||||
Interest expense | (5,585 | ) | (0.18 | ) | (0.92 | )% | (5,087 | ) | (0.17 | ) | (0.83 | )% | (18,582 | ) | (0.60 | ) | (3.03 | )% | |||||||||||||||
Total Agency RMBS profit (loss) | (4,911 | ) | (0.16 | ) | (0.81 | )% | 741 | 0.02 | 0.12 | % | (2,835 | ) | (0.09 | ) | (0.46 | )% | |||||||||||||||||
Total Credit and Agency RMBS profit (loss) | 3,215 | 0.10 | 0.52 | % | 11,733 | 0.38 | 1.91 | % | 66,501 | 2.15 | 10.87 | % | |||||||||||||||||||||
Other interest income (expense), net | 422 | 0.01 | 0.07 | % | 347 | 0.01 | 0.06 | % | 1,664 | 0.05 | 0.27 | % | |||||||||||||||||||||
Other expenses | (4,707 | ) | (0.15 | ) | (0.77 | )% | (4,182 | ) | (0.14 | ) | (0.68 | )% | (17,539 | ) | (0.57 | ) | (2.86 | )% | |||||||||||||||
Net increase in equity resulting from operations (before incentive fee) | (1,070 | ) | (0.04 | ) | (0.18 | )% | 7,898 | 0.25 | 1.29 | % | 50,626 | 1.63 | 8.28 | % | |||||||||||||||||||
Incentive fee | — | — | — | % | (424 | ) | (0.01 | ) | (0.07 | )% | (715 | ) | (0.02 | ) | (0.12 | )% | |||||||||||||||||
Net increase (decrease) in equity resulting from operations | $ | (1,070 | ) | $ | (0.04 | ) | (0.18 | )% | $ | 7,474 | $ | 0.24 | 1.22 | % | $ | 49,911 | $ | 1.61 | 8.16 | % | |||||||||||||
Less: Net increase (decrease) in equity resulting from operations attributable to non-controlling interests | 1,147 | 813 | 3,235 | ||||||||||||||||||||||||||||||
Net increase (decrease) in shareholders' equity resulting from operations(4) | $ | (2,217 | ) | $ | (0.07 | ) | (0.38 | )% | $ | 6,661 | $ | 0.22 | 1.12 | % | $ | 46,676 | $ | 1.52 | 7.86 | % | |||||||||||||
Weighted average shares and convertible units(5) outstanding | 30,735 | 30,859 | 31,006 | ||||||||||||||||||||||||||||||
Average equity (includes non-controlling interests)(6) | $ | 608,772 | $ | 613,816 | $ | 612,513 | |||||||||||||||||||||||||||
Weighted average shares and LTIP units outstanding(7) | 30,514 | 30,647 | 30,792 | ||||||||||||||||||||||||||||||
Average shareholders' equity (excludes non-controlling interests)(6) | $ | 583,206 | $ | 596,204 | $ | 593,483 |
(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. |
(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 | Year Ended | |||||||||||
(In thousands, except per share amounts) | December 31, 2018 | September 30, 2018 | December 31, 2018 | |||||||||
Investment income | ||||||||||||
Interest income | $ | 35,694 | $ | 35,300 | $ | 131,027 | ||||||
Other income | 1,157 | 1,046 | 4,014 | |||||||||
Total investment income | 36,851 | 36,346 | 135,041 | |||||||||
Expenses | ||||||||||||
Base management fee to affiliate (Net of fee rebates of $430, $423, and $1,380, respectively) | 1,744 | 1,830 | 7,573 | |||||||||
Incentive fee to affiliate | — | 424 | 715 | |||||||||
Interest expense | 16,083 | 15,678 | 56,707 | |||||||||
Other investment related expenses: | ||||||||||||
Servicing and other | 4,201 | 4,384 | 15,307 | |||||||||
Issuance costs related to Other secured borrowings, at fair value | 1,647 | — | 1,647 | |||||||||
Other operating expenses | 2,962 | 2,352 | 9,967 | |||||||||
Total expenses | 26,637 | 24,668 | 91,916 | |||||||||
Net investment income | 10,214 | 11,678 | 43,125 | |||||||||
Net realized gain (loss) on: | ||||||||||||
Investments | 4,675 | 8,551 | 25,421 | |||||||||
Financial derivatives, excluding currency hedges | (389 | ) | 479 | (2,639 | ) | |||||||
Financial derivatives—currency hedges | 2,594 | 297 | 4,475 | |||||||||
Foreign currency transactions | 2,698 | 775 | 4,131 | |||||||||
9,578 | 10,102 | 31,388 | ||||||||||
Change in net unrealized gain (loss) on: | ||||||||||||
Investments | (13,181 | ) | (13,372 | ) | (25,947 | ) | ||||||
Other secured borrowings | (82 | ) | (358 | ) | 758 | |||||||
Financial derivatives, excluding currency hedges | (2,829 | ) | 173 | 7,093 | ||||||||
Financial derivatives—currency hedges | (839 | ) | 528 | 565 | ||||||||
Foreign currency translation | (3,931 | ) | (1,277 | ) | (7,071 | ) | ||||||
(20,862 | ) | (14,306 | ) | (24,602 | ) | |||||||
Net realized and change in net unrealized gain (loss) on investments, financial derivatives, and other secured borrowings | (11,284 | ) | (4,204 | ) | 6,786 | |||||||
Net increase (decrease) in equity resulting from operations | (1,070 | ) | 7,474 | 49,911 | ||||||||
Less: Increase (decrease) in equity resulting from operations attributable to non-controlling interests | 1,147 | 813 | 3,235 | |||||||||
Net increase (decrease) in shareholders' equity resulting from operations | $ | (2,217 | ) | $ | 6,661 | $ | 46,676 | |||||
Net increase (decrease) in shareholders' equity resulting from operations per share: | ||||||||||||
Basic and diluted | $ | (0.07 | ) | $ | 0.22 | $ | 1.52 | |||||
Weighted average shares and LTIP units outstanding | 30,514 | 30,647 | 30,792 | |||||||||
Weighted average shares and convertible units outstanding | 30,735 | 30,859 | 31,006 |
As of | ||||||||||||
(In thousands, except share amounts) | December 31, 2018 | September 30, 2018 | December 31, 2017(1) | |||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 44,656 | $ | 53,598 | $ | 47,233 | ||||||
Restricted cash | 425 | 425 | 425 | |||||||||
Investments, financial derivatives, and repurchase agreements: | ||||||||||||
Investments, at fair value (Cost–$2,970,306, $2,694,223, and $2,071,754) | 2,939,311 | 2,670,069 | 2,071,707 | |||||||||
Financial derivatives–assets, at fair value (Net cost–$22,526, $20,895, and $31,474) | 20,001 | 31,338 | 28,165 | |||||||||
Repurchase agreements (Cost–$61,274, $160,468, and $155,109) | 61,274 | 160,422 | 155,949 | |||||||||
Total Investments, financial derivatives, and repurchase agreements | 3,020,586 | 2,861,829 | 2,255,821 | |||||||||
Due from brokers | 71,794 | 83,915 | 140,404 | |||||||||
Receivable for securities sold and financial derivatives | 780,826 | 670,952 | 476,000 | |||||||||
Interest and principal receivable | 37,676 | 38,635 | 29,688 | |||||||||
Other assets | 15,536 | 5,207 | 43,770 | |||||||||
Total assets | $ | 3,971,499 | $ | 3,714,561 | $ | 2,993,341 | ||||||
LIABILITIES | ||||||||||||
Investments and financial derivatives: | ||||||||||||
Investments sold short, at fair value (Proceeds–$844,604, $697,686, and $640,202) | $ | 850,577 | $ | 695,349 | $ | 642,240 | ||||||
Financial derivatives–liabilities, at fair value (Net proceeds–$19,019, $16,294, and $27,463) | 20,806 | 27,226 | 36,273 | |||||||||
Total investments and financial derivatives | 871,383 | 722,575 | 678,513 | |||||||||
Reverse repurchase agreements | 1,498,849 | 1,636,039 | 1,209,315 | |||||||||
Due to brokers | 5,553 | 4,551 | 1,721 | |||||||||
Payable for securities purchased and financial derivatives | 488,411 | 430,808 | 202,703 | |||||||||
Other secured borrowings (Proceeds–$114,100, $114,190, and $57,909) | 114,100 | 114,190 | 57,909 | |||||||||
Other secured borrowings, at fair value (Proceeds–$81,728 $90,409, and $125,105) | 297,948 | 89,569 | 125,105 | |||||||||
Senior notes, net | 85,035 | 84,968 | 84,771 | |||||||||
Accounts payable and accrued expenses | 5,723 | 5,337 | 3,885 | |||||||||
Base management fee payable to affiliate | 1,744 | 1,830 | 2,113 | |||||||||
Incentive fee payable to affiliate | — | 424 | — | |||||||||
Interest and dividends payable | 7,159 | 6,451 | 5,904 | |||||||||
Other liabilities | 424 | 1,141 | 441 | |||||||||
Total liabilities | 3,376,329 | 3,097,883 | 2,372,380 | |||||||||
EQUITY | 595,170 | 616,678 | 620,961 | |||||||||
TOTAL LIABILITIES AND EQUITY | $ | 3,971,499 | $ | 3,714,561 | $ | 2,993,341 | ||||||
ANALYSIS OF EQUITY: | ||||||||||||
Common shares, no par value, 100,000,000 shares authorized; | ||||||||||||
(29,796,601, 30,155,055, and 31,335,938, shares issued and outstanding) | $ | 563,833 | $ | 583,179 | $ | 589,722 | ||||||
Additional paid-in capital–LTIP units (2) | — | 10,618 | 10,377 | |||||||||
Total Shareholders' Equity | 563,833 | 593,797 | 600,099 | |||||||||
Non-controlling interests (2) | 31,337 | 22,881 | 20,862 | |||||||||
Total Equity | $ | 595,170 | $ | 616,678 | $ | 620,961 | ||||||
PER SHARE INFORMATION: | ||||||||||||
Common shares, no par value (2) | $ | 18.92 | $ | 19.69 | $ | 19.15 | ||||||
DILUTED PER SHARE INFORMATION: | ||||||||||||
Common shares and convertible units, no par value (3) | $ | 18.92 | $ | 19.37 | $ | 18.85 |
(1) | Derived from audited financial statements as of December 31, 2017. |
(2) | On December 31, 2018, the Company redeemed all 503,988 of its outstanding LTIP units which it had originally issued under its incentive plans, with each LTIP unitholder receiving in exchange an equivalent number of LTIP Units of the Operating Partnership. As such, these LTIP units are now treated as non-controlling interests. |
(3) | 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 December 31, 2018 | |||
Net investment income | $ | 10,214 | ||
Include: | ||||
Net realized and unrealized gains (losses) from certain equity investments in partnerships(1) | 103 | |||
Net accrued periodic (payments) receipts on interest rate swaps | 130 | |||
Exclude: | ||||
Incentive fee to affiliate | — | |||
Catch-up Premium Amortization Adjustment | 16 | |||
Debt issuance costs related to Other secured borrowings, at fair value | (1,647 | ) | ||
Costs related to tax conversion | (615 | ) | ||
Adjusted net investment income | $ | 12,693 | ||
Weighted average shares and convertible units outstanding | 30,735 | |||
Net investment income per share | $ | 0.33 | ||
Adjusted net investment income per share | $ | 0.41 |
(1) | Includes only those components that would be included in net investment income at the underlying partnership. |