Ellington Financial(US:EFC)2025-11-10 21:11Ownership and Structure - As of September 30, 2025, Ellington Financial Inc. had an ownership interest of approximately 99.1% in its Operating Partnership[459]. - The company completed a merger with Arlington Asset Investment Corp. on December 14, 2023[462]. Business Segments - Ellington Financial operates through two reportable segments: the Investment Portfolio Segment and the Longbridge Segment, focusing on diverse financial assets including residential and commercial mortgage loans, RMBS, and CLOs[463][464]. - The Investment Portfolio Segment includes investments in Agency RMBS, CMBS, consumer loans, and various mortgage-related derivatives[463]. - The Longbridge Segment specializes in the origination and servicing of reverse mortgage loans, including HECM loans insured by the FHA[464]. Investment Strategy - The company aims to generate attractive, risk-adjusted total returns by utilizing an opportunistic investment strategy without targeting a specific yield[458]. - The strategies employed by Ellington Financial are designed to adapt to changing market conditions, allowing for flexibility in asset allocation[465]. - Ellington Financial expects to continue investing in targeted asset classes in the U.S. and Europe, maintaining its REIT qualification[467]. Financial Performance - For the three-month period ended September 30, 2025, net income attributable to common stockholders was $29.5 million, an increase from $16.2 million in the same period of 2024, driven by higher net interest income and earnings from investments in unconsolidated entities[597]. - Interest income for the three-month period ended September 30, 2025, was $122.8 million, up from $107.3 million in the same period of 2024, reflecting coupon payments and accrued interest on holdings[598]. - For the nine-month period ended September 30, 2025, net income attributable to common stockholders was $104.1 million, an increase from $95.4 million for the same period in 2024[643]. Asset Management - The total adjusted long credit portfolio increased by 11% to $3.56 billion as of September 30, 2025, compared to $3.22 billion as of June 30, 2025, driven by net purchases of non-QM loans and commercial mortgage bridge loans[523]. - The fair value of the company's Forward MSR-related investments is $156,065, with a total unpaid principal balance of $10,905,634 as of September 30, 2025[539]. - The total balance of residential mortgage loans is $3,338,338, with a fair value of $3,234,797 as of September 30, 2025[537]. Debt and Borrowings - Total recourse borrowings increased to $3,252.9 million as of September 30, 2025, compared to $2,950.5 million as of June 30, 2025, resulting in a debt-to-equity ratio of 1.8:1[559]. - The total outstanding borrowings under repos and other secured borrowings were $5.2 billion as of September 30, 2025, with approximately 3% related to Agency RMBS holdings[558]. - The overall debt-to-equity ratio was 8.6:1 as of both September 30, 2025, and June 30, 2025[561]. Market Conditions - The Federal Reserve cut the target range for the federal funds rate by 25 basis points to 4.00%–4.25% in September 2025, marking the first rate cut of the year[509]. - U.S. equity markets experienced significant growth in Q3 2025, with the NASDAQ rising by 11.2%, the S&P 500 by 7.8%, and the Dow Jones Industrial Average by 5.2%[524]. - Inflation, as measured by the Consumer Price Index, increased to 3.0% in September 2025, up from 2.7% in July[517]. Loan Performance - The percentage of delinquent loans in the residential mortgage loan portfolio decreased quarter over quarter, while the commercial mortgage loan portfolio saw an increase in delinquency[526]. - The total delinquency rate for residential mortgage loans is 7.0%, while the rate excluding non-performing loans at acquisition is 6.2%[538]. Reverse Mortgage Operations - Longbridge originates and purchases reverse mortgage loans, primarily home equity conversion mortgage loans (HECMs), which are insured by FHA[494]. - The Longbridge segment's proprietary reverse mortgage loans increased to $1,387.5 million as of September 30, 2025, up from $1,085.1 million as of June 30, 2025[549]. Interest Income and Expense - Interest income from the Longbridge segment increased to $30.5 million for the three-month period ended September 30, 2025, compared to $14.6 million in 2024, attributed to a larger portfolio of proprietary reverse mortgage loans[605]. - Total interest expense for the three-month period ended September 30, 2025, was $73.1 million, slightly down from $73.7 million in the same period of 2024[607]. Equity and Valuation - Equity increased by $205.0 million to $1.796 billion as of September 30, 2025, driven by net proceeds from common stock issuance of $205.4 million and net income of $128.2 million[594]. - The book value per share of common stock was $13.40 as of September 30, 2025[594]. Other Financial Metrics - The net interest margin for the three-month periods ended September 30, 2025 and 2024 was 3.55% and 2.59%, respectively, reflecting improved performance[613]. - The weighted average yield of the total portfolio for the three-month period ended September 30, 2025, was 7.56%, compared to 7.07% in 2024, excluding the Catch-up Amortization Adjustment[603].