Ellington Financial (EFC) 8 Aug 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial Second Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time all participants have been placed in listen-only mode and the floor will be opened for your following the presentation. Instructions] [Operator

my the now Tara over to [ph]. Byrne pleasure is call turn to It

begin. may You

you. Thank

Before would may start, Harbor Act made within we of I meaning provisions during certain everyone the Securities this statements of that XXXX. the conference Litigation the call of constitute Private statements like forward-looking Safe to Reform remind

Item quarterly Forward-looking not historical Form Part on of XA Item report for statements ended in on under the our are March our and XX-K XA Form XX-Q X, XX, Part X, report nature as of annual quarter described XXXX.

are a expectations, to subject differ Forward-looking and risks statements results cause beliefs, its to estimates and could uncertainties that from actual projections. of company's the variety

I future made events result a Executive Ellington Consequently, conference the during as whether Co-Chief update Larry you revise Financial; should Chief of Penn, rely as company EFC; JR Financial Mark EFC. today these to or Investment Officer not this forward-looking Herlihy, of Statements otherwise. any call undertakes of on of Officer events. Chief this on call, are forward-looking of and Tecotzky, date predictions information, future the statements of made obligation and no the call as of by Officer or am new joined statements

our the to references qualified end notes Management's remarks any the will prepared the the in second backs quarter presentation. available ellingtonfinancial.com. website, note their of presentation. earnings in release, that in described earnings As our by presentation is track press our conference at call entirety on presentation figures Please are the

Larry. now over will call I to that, With the turn

Thank you, and Tara, morning, good everyone.

interest Slide of you the X begin Financial. for I'll Ellington thank in always, your presentation. time and As on

positive offset per return Steady our loan strong and from commercial reported the in net investments, bridge second share net mortgage and portfolio, risk share. overall. earnings modestly non-QM, portfolios, distributable generated quarter, $X.XX credit the of Ellington notably performance combined our performance from residential losses For loan $X.XX elsewhere economic per Financial and transition of transfer income a adjusted we with

capital mortgage X wider small You share contributing of share, at $X.XX on yield was gain positive strategy on spreads Agency of immediately and quarter And the distressed to per going $X.XX forward. servicing our a earnings. recovered the margins Slide share Longbridge adjusted were can Credit to margins end, $X.XX in after distributable margins a bankruptcy net sequential on EFC's see that driver primary lower was acquire income, relatively notably, generated quarterly expect on of a HECM per driver while shortly able reverse proceeding Longbridge portfolio accretive also will results, however. Longbridge July, we in per which be adjusted even a the and results. overall contributed primary attributable HECM a earnings allocation, sale and weighed decline out as The compressed the EFC's of somewhat earnings price, at

strategies, should, of for higher net due of diversify advantages. Ellington sequentially borrowing Arlington strategic expertise costs. forward offer Corp. further REITs: as course, also during existing yields well. and and will both Credit aligned two rotation other up second Ajax to agreements NIMs exceeded Agency supportive mortgage complement our of margins these Corp quarter, that we and and going definitive Asset Investment strategic with assets Great acquisitions signed interest public add book as Each Financial's for investment transactions Higher ticked The ADE be the of portfolio higher Also asset

investments. over earnings should RPL/NPL of rate hedge risk of And includes portfolio LTVs. they a profile limited This a Ellington first also a adding low Ajax, virtue Financial's many Arlington, low securitizations. scale residential pick on by by to loans, lien benefit credit provide environment, so financed function a With servicing in at loans via sheet their of MSRs strategy natural rights mortgage RPL/NPL $X an portfolio we portfolio that scale. existing coupon at interest with of of up These rising our loans with billion and Great both grow substantially and and balance directly we as owned

LLC; and we strategic With transactions with and These benefits with stock, mortgage of investment Great synergies will unlock existing in servicer, to Ellington important loan non-mark-to-market which Ellington other provide affiliated also Ajax, Ajax's more Great respected unsecured both we million a capital. investment term equity of And Financial's portfolio. cost highly multiple than operating Funding attractive Financial. will assume Arlington, $XXX acquire preferred debt perpetual Gregory could across efficiencies

addition these into deploy upfront the available both highly-attractive strategies acquisition investment to and over yield provide should the Ellington time, benefits, spreads to in the In additional existing market. at Financial's capital,

can Presentations Financial website. additional of about You information find transactions in these the Ellington the section

drive Ellington in while earnings We to Agency second other With grew X% after volatility. shrinking navigate portfolio. position we back the still by on portfolio should Financial's that wide during yield significantly to Moving it quarters. continuing a took basis, prior the several quarter steps spreads that to historical market us quarter in

residential in mortgage an also credit continue reverse point to before and June our to and add We portfolio of quarter loans. the attractive loans risk spread proprietary in the early in transition of tightening entry that expand July, advantage transfer high-yielding took investments sector and

principal to our in the exceeded new the quarters, bridge quarter and size payoffs again originations. second of the commercial loan portfolio paydowns prior three significantly as declined Similar

relatively continues of on addition, non-QM, represent to buyers, majority multifamily bid loan strong. commercial the bridge to loans In insurance from whole In the portfolio. be continued our particularly companies,

were we an to as we whole sales via loan whole As now regularly consider on to pools alternative this loan outright non-QM execution securitization. our sale, a one good of and get an past quarter, result, able,

to our continue be sector American been, of have compared how their very mortgage whole Similarly, high Not selling buyers. low originator last loan surprisingly, new and more the to rates affiliates, Heritage, recently production LendSure to in third-party been given originations have non-QM year.

quarter remains the which a portfolio finishing non-QM than million, is As home at year-over-year result, a more XX% $XXX decline. our relatively small, loan

and other And portfolio slack. if to room course, of transition have segments spreads loan up spreads should portfolio, plenty non-QM taken regrow. the especially to have widen our our Of continue of securitization tighten; our residential loans,

Our overall performance. continue the benefit to strong loan portfolios credit and duration from short

to and interest We credit rate dynamically our related and and continue to quarter, acquisitions. establishing hedges, hedges adjust new public included this also those past pending that REIT

our interest of the quarter with and borrowing of a which recourse capacity. end ended sudden usual, liquidity In related which modest fact, Slide negative sensitivity have the our duration. acquisitions debt-to-equity the shows we We of those of additional as to towards high table, hedges Meanwhile, was addition and why of you'll rate a historical explains find that still XX it on all pending X.X:X, presentation, interest a lower ratio of levels. the maintained levels is rate

the of non-performing reflect a we dry sector, and I As the that our asset have you to been while, In lot with small we as in powder and commercial surprised deploy dry hit expect can others levels to wouldn't Slide that see as a we mortgage substantial mortgage cash in unencumbered particular, is it's commercial ultimately if X, that invest. loans. distress our and be real estate commercial powder back on loan portfolio

our Arlington closing and which look capital Ajax year, forward later acquisitions we meaningfully Great base. will this to Finally, to the add

our in detail. to that, over turn JR second discuss I'll quarter financial results more to With it

good and Thanks, everyone. Larry, morning,

second Credit, income the Agency per for Credit $X.XX a adjusted of quarter. the earnings basis the share For share. results investments per including on prior per you realized of mortgage on and well income of share these $X.XX of generated losses net reported negative fully by net investments Longbridge. ADE net and hedges. on net equity gains income our we and The in entities, and quarter, see and can share Slide hedges. gains our earnings gains X, of income portfolios, loans as per strategy on and between our and interest driven per $X.XX On as share net our portion portfolio attribution CRT A were offset $X.XX to These loan-related distributable mark-to-market in $X.XX unrealized of by on consumer loan our rate net results unconsolidated net on in commercial interest entities, originators loan net of credit compared losses

uptick we commercial these in overall continue residential performance. credit low Finally, experience mortgage levels to have in delinquencies and loan of portfolios and strong year-to-date, our portfolios seen although losses credit

EFMT several research classes of May. no cumulative in and were size our remarkably, portfolio, XX-plus fact, non-QM done currently X,XXX securitizations like June, from is issuers lowest EFMT delinquencies. our date. despite that to XX billion reported approximately shelf outstanding, for XXXX, upgraded day with In tied large America deals have XX $X.X non-QM by Fitch have encompassing those more deals of outstanding, securitizations to deals experienced the Bank five or XX the among Since of loans UPB. And of we've the losses and According

MBS FDIC net sales tightened. the $X.XX banks. in quarter, experienced well Agency And absorbed in net Agency yield these quarter MBS and were of in the Accordingly, generated had per and dispute yield portfolio positive second resolved, moderate strategy. June. in for debt failed income FDIC on interest Agency we spreads declines income widening and we our share with The Later the sales began by of losses reversed volatility balance, spreads as volatility but quarter. ceiling May April, prepared with and quarter MBS rate Agency with the elevated for for market from Meanwhile, regional the the the the

Longbridge's the origination rates wider per also Ajax a gains originations by Longbridge we hedge and HMBS our for Arlington mortgage by which loss interest use HECM margins equity on yield gains in net losses in higher unsecured loans and quarter, related rate on reduced driven gains net more by offset net resolutions volumes. net well the loans proprietary rates was swaps losses reflected by net driven than interest during increase to an Finally, to on quarter. overall on interest the quarter sale net income the and long-term market interest $X.XX transactions, of spreads on Great the partially on HECM positive reverse combination as gain were and income the preferred rate gains as debt. in expenses of the second in equivalent, related the of EFC's driven net to net were buyout hedges. higher loans, offset HECM share contributed MSR the results These and as

you breakout ADE overhead. and portfolio, On among can the a corporate see of the Longbridge investment Slide X,

originations. long Next, slight sequentially please quarter, the larger X. credit as billion second new investments, The purchases portfolio, loan and primarily RTL which flip by total by X% increase significantly was was the moderately XXth. of portfolios June portion increase a In where increased occurred by A by bridge net quarter-over-quarter loan of driven of portfolio paydowns non-QM Slide May. and exceeded loan $X.XX offset commercial our to CRT to in smaller

RTL, and during the For the fair $XXX combined total, bridge we the paydowns quarter. of coming XX% quarter, commercial portfolios represented in second million received the consumer into of which portfolios those value of principal loan

can while see quarter which partially that can buyout increased by in of quarter, which as portfolio On $XXX March. added the driven were reverse most had the closed Longbridge XX. by that million million increased – originations In during across next to The total channels long correspondent originated to the X% offset which acquired by of quarter-over-quarter we XX% Longbridge declined you the resolving wholesale $XXX which pools million loans. from Slide – Longbridge retail slide, was during second our our of to primarily Longbridge's of On as prop, XX% incrementally up XX% were specified RMBS X, portfolio you decrease acquired opportunistically most see This was originations Slide was quarter-over-quarter. proprietary X, share the decline of X% $XXX in the mortgage Agency success quarter. through HECM transaction XX%, that decreased and June and from HECM loans, to XX%. The by

the weighted to as Next, to costs borrowings of our points our of X.XX% on strategies related overall please increased rate. also On the our slide increase recourse we in asset of Slide Agency higher floating to by and turn this benefit the June positive average top and we to basis XX the recourse borrowing now where carry driven XX by rate rates. hedges, shows borrowings. only. The thanks our a rate summary for fixed XXth, borrowings, to short-term from interest during both and a lower interest yields swap Book for continue portfolio pay receive rate increased quarter, Credit our a turnover,

As a margins expanded interest both Agency Credit result, net in sequentially. strategies our and

of unsettled June at purchases X.X:X remained for of debt-to-equity to compared adjusted as XXst. as XXth and March ratio low Our recourse sales X:X

increased June unsettled ratio, sales, of to debt-to-equity as as overall for as XXst. March to Our again, X.X:X X.X:X and compared XXth of incrementally adjusted purchases

XXth, $XX.XX, book approximately quarter. our the points Finally, totaled second dividends $XX.XX common that quarter. combined at million, per down XX assets return declared common the unencumbered our our we quarter, value per from in $X.XX cash Including the June $XXX for and and economic prior was share total share was basis during the of

Now over to Mark.

return inflation. two-year Thanks, of JR. in XX and slope of EFC the curve, of slightly persistent more a on-the-run is on volatility Credit basis yield huge the also as level moving That failures point in range both moved the the slope volatility volatile XX-year point with saw five-year the as a There fear fear lot very the living in a moved market spreads the in the and reflects XX and positive rates had in XX of absolute between range an of bank note quarter. of range. index the investment-grade a basis a point versus was basis as range.

and While public drive acquisitions mREIT future it returns, and the were the returns. some interest very that across in of that at book I quarter. the including kept or can quarter cycle, volatility either of we have very discipline tightening all a mentioned near busy its is for Larry interest XXXX think market heightened characterized help end materializing opportunities our market into two Despite portfolios, Ellington wasn’t the preserve important in hedging that that rate we to is growing levels with third Reserve that rate to Financial Federal consensus announced value. new at memorable the XXXX, persisted

potentially year, X, Slide these both Fannie size. late production very credit which both Freddie remarkably as some from vintage above-market by see much, specific last bonds. derisk tremendous some did as prepayment at and CRT helped add identified backed the categories until offering opportunistically within XXXX we well as returns. did we not to speeds HPA stable had The have that fast the XXXX very in was spreads, can mid last of you although portfolio wide As sectors year, substantially CRT bonds have move Most

the fixed wage this year, even ratios borrowers rate their costs, this being of have return. payments program combination drive rate in and floating expertise which example and are This large to Ellington’s and very our has and are investment strained driving service unlike tendering increasing a Additionally, returns. that fundamentals great is XX you EFC’s a technicals, helping locked bond borrowers a by of the now, these have debt years great gains of of of mandate Combine with driven debt-to-income strong GSE total breadth total low lower. good flexibility

larger On Slide the agency see X, discussed. portfolio can you as

market. Slide view Longbridge, reverse which on of private And see part you exciting and growing through the we X, mortgage label reverse, that as can we added an

that for see non-QM quarter. pending in as as protection the a those hedge index agency. both We added acquisitions credit spreads can spread hedges XX, you and Slide tightened our for substantially public On grew

along, portfolio to In the performance net portfolio income. terms substantial quarter, of RTL generating in continues our interest chug

focus One our of is second originated market. XXXX vintage us top area of through for loans, at quarter the which the working housing were

the property performance longer loans, their we for maturity than that sell the to to. But expect borrower we Some have to extended expected. given of because taken strong it credit for these underwrote the ultimately has loans LTVs these they be

commercial loan to interesting are sector. still and challenges, down, higher. For year affordability earlier QX prices vintages, bridge including performance. to Meanwhile, continued XXXX early our more seeing this have XXXX, loans and some albeit stabilized pay portfolio been home we’re QX see strong, hedging that and starting originated we newer opportunities in Despite in

from been for Financial. happening A lot recent real banks written the report about has all Fed Ellington and confirms This regional that’s great Commissioned pullback of SLOOS lending, time. in the is

distressed opportunities. come to exactly presenting to that deals ago. the banks. strategy stress substantial were part Also, the some investments have our of started and that commercial are seeing would bread mortgage with butter the of Those a is historically in decade mortgage more kind that flow of We’re over NPL the high-quality us cash us market regional commercial gone

originator further net and been commercial our they loan forward. terms partner, broadens generating EFC’s expands strategic can operating property expertise great so profits Capital, a management are and us opportunities and capabilities relationship servicing far their mortgage now, I in the construction, in to what of we pursue. types and of going expect renovation Sheridan own be but highly has EFC for Not only them for

non-QM in of loans well performed quarter. tranches Our retained portfolio also the

mentioned, strong both has competition from other. demand strategies loan EFC as solidify viable whole spreads, insurance attracted are profitable securitizations and and now as securitizations. that sales That’s and provide Loan has companies, loans from Larry originator sector and helped production our well for healthy each As for exit true portfolio which affiliates. sales both both some for

portfolio year non-QM half depressed. For since last prices the substantially shrunk EFC, quite has of our second were when

with Now, spreads and moving improved, opportunity liquidity the grow a portfolio to forward. we substantial tighter see securitization again

merits of to these way a between the constantly past RMBS loans increase Our We led loans, two and CRT. pivoting had about incremental a relative times a and think portfolio nine in quarter, few strong non-Agency have excess great RMBS dynamic months. seen is We sectors versus to the we tend securities add value also some this to capital when allocation [indiscernible] non-Agency by return. securities,

stable, in be worst creeping us. still For Loan has are some levels, below while been is cases, volume our loan growing. originator affiliates, the prices it well the looks up, behind and like it may XXXX

years Fannie is of to lower to us are The how unimaginable its Xs the price very wide in the nearing been two tightening is spreads almost rate cycle opportunity forward quarter. that just closed portfolio. taken were at probably is probably curve telling some quarter, It’s July used so Fed of the in subside. we There profitable where has Fannie market, the Agency the for out set than which the of tailwinds some that space we the volatility moments end grow In yet in recharged. earlier. traded a Xs that of but MBS, modestly

ADE strong yields, many which are sectors our unlevered and too. have Looking very yields are to sure, be from to insurance high are support asset our tailwind commercial especially there competition ahead, but mortgage classes, gives headwinds dividend. asset non-QM our RTL, in fierce. These bridge and a Origination portfolio loans, including low and in is many companies, volumes

Great enhance We and but of of incremental advantage our to capital do, work ahead lot have when we strategic the broad only Arlington take to Ajax investments strategies. a of a complete investment range should acquisitions, ability the and

Now back to Larry.

to Thanks economic the be six Mark. this what in far fluid with interest a of return pleased performance environment, generated annualized EFC of I a through months Financial’s continues our rate X.X% XXXX. so the regional banking crisis market. origination am volatility, Ellington year and first an Despite difficult

highlighted, distressed as banks competition returns. distributable we’re good MSR well, on adjusted in margins for in purchase. long-term at strong, to going that from forward be risk-adjusted both we’re a HECM and think net in in lending earnings catalyst which another and gain Mark position as Agency, with I benefiting margins, could improving grow with interest and reduced Credit from wider Longbridge businesses, sale our recent And

strategies our Ajax strategic and for increasing further enhance of Financial’s represent Ellington within stock, important Arlington a liquidity substantial these coming boot. milestones expertise. and and our align ratios bringing add be these acquisitions lowering transactions to to us And existing Great our year. transactions Ellington will that of the We expense Of these complement each additional of Each by diversify and course, group operating should accretive while shareholders, with earnings of that of project investment common our will assets scale Financial. significantly transactions the pending our

at before should no the end base double EFC’s equity both transactions of close right That be less. base equity end which $X.X these at our would the to billion. of COVID, expect XXXX, We before exceed XXXX, time around

is expecting strong record these you a mortgage of partner transactions. an sheet the in It to REIT consider time When consolidation Financial’s be clearly and of attractive the us enabled Ellington and in track have accretive balance steady space, returns set two increased of we are M&A we an for is front that attractive definitely the benefits for from exciting powder earnings of opportunity the to us, time Ellington scale impact available have these the transactions, Financial. in it and dry

to as you, shareholders. sincerely close to you well. Great pending by Arlington you our We your that accretive like introducing these and attractive transactions ownership hope be forward We Finally, that should and look and agree hope highly to for we existing I’d addressing ourselves and company Ajax continues.

now questions. With to the call that, we’ll open up Operator?

George from KBW. comes [Operator Please Our Instructions] Bose go first question with ahead.

good morning. Hey everyone,

Good morning.

of to figure acquisition. the impact the pending Trying out

So acquisition. in like million much was there closing? $X.X I guess, it of expenses how the And of that place the ahead the related was hedges of was, that to impact financial were the deal

end, Sorry, mean at had quarter guess, You I deals mean haven’t the that closed? maybe? you

Yes.

comment you these deal’s on, rate that think guess, of right interest closing. that that Is anticipation the I I had in you the made that hedges… hedging some

Yes. That’s right.

impact running quarter? what related just this that So that was the there also through a financial earnings to was impact curious

Yes.

were material, $X.X million in you number second put not the got is $X.X the the And QX, expenses that of hedges those we transactions the the impact related very to small. were and of through the right For million, quarter.

the – until half deal Okay. the year for terms is of it? much expenses? second the is before there kind deal of bulk And transaction this closes, then of of in just or Or the the

have still right? banker then. do expenses legal The success incurred, and that’s so between So then based, There otherwise, now taken fees are right. to And work more are as the we are.

I are – the the primary – big those think it’s So, components.

distressed MSR much on then did how Okay. you that MSR, the the capital acquired, reverse just And entail?

Negligible.

small. pretty was It

ahead powder? capital. excess Okay. And excess on keeping one your also just would dry acquisitions? then sort And you are the some How of of characterize your you

Sure.

of $XXX of is had NAV. we million, which XX% cash our about So

was other Xx. XX% of to $XXX on million encumbered about assets typically, agency we leverage So and XX% keep

So, our of between X.X to are debt In categories, to In X.X probably those a we equity. times based XXXX were XXXX, But agency. to times granted X.X a what’s I X capital and two just we times, range finance. times borrowing could, times. recourse times are the add. area X.X today, capacity of X.X on XXXX, that allocation from on get could pretty larger think, unencumbered comfortably times we additional into to X.X we assets

great. you. Okay, Thank

Thank you.

Thanks.

We’ll take Crispin our Thank with next Love question from you. Piper Sandler.

are Thanks. I expand that appreciate I’m of you on out? portfolios of losses calling seeing? commercial and little levels are primarily curious taking the my low call, a other and there delinquencies in if in levels could you a you questions. any on In Or but they and are the the areas pickup bit? release just credit What strength RTL? mentioned delinquencies. you And worth

Sure.

really will qualitative precise the those? where don’t in credit to want it’s I still, the things know, So RTL of there’s small. small speak mean if I and we’re out to tomorrow Mark, and are The losses those commercial scheme flush I upticks. bridge Q numbers. the you And think, certainly, seeing

know, But that expand we’re you the seeing a into I your talk got Mark, on that prepared RTL, you which theme? especially think about in maybe want And in remarks? bit I don’t if trends to

Crispin. Yes. Hi,

three drifted of last they’ve recent increasing, that believe, gradually comments my in of represented lower last prices, I And peak second mentioned I XXXX now this second quarter half of months or been of four and or the they year. for year. the sort three four areas in most most months, the So, then home

sell in went taking of put they the is the construction when So to longer a them properties, historically that quarter to the we second bought was have sell it money what partners lend than happens to the we seen. – XXXX, property bit homes properties that little the

were finish longer we for that lot the stuff. XXXX; quarter a we also their took geography and second and market have of data how the could the features, that houses all a them complex informed at little It renovation. little model looks a And bit good renovation is by bit historical see on So longer. to a

going home That what – we’re a focus. anymore. little is we prices through have well, see So that. of been a trend working sort pretty to up tick see Everything don’t and It’s started stabilized, now bit. now is that back trend you

at we sort of quarter XXXX coming that resolutions sort of would first exactly quarter fourth the the now, So have rate predicted. XXXX, of the of those are and

it’s think a performance a line extension. bit be be a sort there of it’s time extension just issue. don’t going there of I to and I really is to little are that economics think wanted last months company I loans have it a do been so going fees, to on it But when we through. working And accrue been focusing a extend. we’ve and trend just the that to mention – because was something for few

Mark, opportunities the the of the one little there And seeing bit last key some like a see over to where quarters? talk you several any just color are bought in in you’ve market? the one can you’ve you opportunities, CRE Thank JR; you NPL NPL the there. the expect these next me. begun – curious were from so yet? sounds all majority opportunities appreciate I if Mark what distressed And are and areas It

great They first not are securities, yes. you the So, loans. coming No, flavors, CMBS a that’s two mortgage-backed the is right? seeing commercial flavor market, so in question. are in So,

curve in they You relatively XXX been the to are investment priced and investment grade to so came previously market. inside XXX, to when grade where and traded tight CMBS those were spreads, seeing tranches came had market markets [indiscernible] that

prices Some now of price. are those down substantially, so sub-$XX

enhancement so, high or in deals, are more that, is say just the pickup of conduit of pricing delinquency single than some us. less relative And single Some that's market seen them we've asset, is recovery so the a of exciting deals amount for the a month so them levels, I'd in borrower par. are to past where in the

earn dried opportunity it great opportunity. Now been – bridge But back that, we bank in to strategy to to non-performing from did seeing we substantial is we've We But opportunity below estate and to loans that it's add our play early on much that your to commercial thing some FTC some it's would is more some pivoted. of the was dollar. going opposed and capital characterize the used really the loans, right? other buying area pretty so opportunities these now, is takeover delinquent be stages. putting going that discounts you're where come a seen par, then By XXXX, just in the out – $X.XX be And volume. main as commercial XXXX, we're mortgage to up. just right? real at think to that, back there's of obviously There by away coupon, on a And going you're origination, loans, I going that

Look, upon and have depending Loan regulatory mentioned probably Officer to banks more going have SLOOS, to of probably that an – environment be that going some Opinion going They're more to – to be more the right, scrutiny probably we loans. delinquent in going size, on commercial are Survey, that going requirements. capital activities Senior to where they're the is have they're

want to partner and catalyst capital. might for you're to of bank and a the a be the to loans are to smaller loan inject going new some going maturity loan, Either loan that is in going so at that's or come than And old a have we think need be sort size opportunity. the come to discount where to that there to sell

of persistent of early resources opportunity stages, we a And we an be we – have of very We've going of requires have lot manager, bunch lot done that but of a think we're set a experience that's opportunity. expertise that that – it's it's So set big, a a area. in it. to part and a on a specific have that

we going excited place returns. deploy And are that high can can think we an so that have very deploy and be lot in area and I a where that's have – capital that we expected to of a

appreciate I the answers. Thanks.

Credit you. with Thank Doug Suisse. from our take next We'll Harter question

larger the balancing in Thanks. to of benefits scale the you across Can diversification that and talk of any and you're all versus opportunities how kind the opportunities? kind of about ability of have those be

know. don't I that [Indiscernible]

Sorry.

Mark. ahead, go you No,

I say, you if it's to have Yes. economics are was substantially you have question. just very sectors Sure. a that scale. so certain There better going interesting

think I was from our and this is to went we our a partners, $XX you If year are deal. a taking when So XXXX; origination great to a a origination ramp volumes million in right? example, through it non-QM back month – were

means you've year, and So a change REPO that for lot. year loans market got on securitization a hedging and can to for have you're them a

much have so ramp much we we quicker. to greater deal And can now, size volume,

that We have sort a cycle tighter we than have your originators. better of new get repeat being of of a You of spreads on kind sort issuer economics transactions. virtuous

there, So its helpful. super scale, question no

to has EFC And [indiscernible] enough capital in scale have businesses, to these going are to got with matters. enough and capital to the major got have that. right? So have We've us help acquisitions all scale

it RTL, matters, in think I too.

You've got to be partners. takeout a for meaningful your

borrowed customers. to from got You from levels the past REPO get good had have of back. bridge, lot us come thing, People experience, have have your Commercial counterparties. loan that meaningful a best repeat they the a in same we balances to

need and be another they to some have your them You are property want buy you value partners when on to available to like-minded have of the capital with proposition.

don't right? those It's prepayments a interesting hedge excited. where been enough. think we I'm attributes. right? have understanding we're It's core thing an of servicing in a but I function to we loan a Arlington enough, have X value I Larry competence investments being is our getting into rates going with able and to appropriately. and think I in And is it, mentioned – interest matter has lot sector servicing, sector.

getting and that's scale Arlington, And be to meaningful. where with have need to sector in you scale sector, another that so we're

couple the potentially bigger this really think kind Do servicing rate, else important duration going to have zero something of seen part everything range because much like negative you diversification, like of is that hadn't having a huge help is maybe venture diversify. we Pretty And of to duration years you because duration base is asset. So ago, at things positive lets and it so floating the of assets. be a a that was a or that's you scaled I just capital get capital? hard be you enough was scale. to have So to reason it the to

of in agency really that help. the non-agency security. an with [indiscernible] a now lot is market; market can So and discount distress play, Servicing and have we

have of things we I most good It's something to the about, we scale us and think a question. interest all So are for it's enough think that right now.

And our we I long a have, obviously, – residential. Mark. are particular that the recognize right, would in would lot been focused I REIT there's commercial add, sectors, I just time for mean Financial mortgage has important. really peers you thanks diversification of versus more just space. add that mean, a Ellington in I for

it's we that got agency non-agency, best terms point in capital how securities loans, see You've and to versus but affirmative where opportunities time. in of we be we the each to important at versus can really rotate allocate us

our to have Now trading advantage take able dry to liquidity do be have that to portfolio you obviously, you a need need of and sometimes powder, in to mentality.

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success, important to really it's to I been that's forward. think really important I to So going be think our continue and going

answer. I appreciate that

you guys asset? do more Any like of where shorter-duration you of Kind just assets. kind that are then Or kind assets? change willing And to have given would today, returns be you longer-duration on take still been to of focused that? shorter-duration

think longer-duration duration at assets short think assets, are interesting if look there profits I I very those realize mean, non-QM, like some in asset. you mortgage that's not talking I Well, a they're and different to are and about And we've profits – loans opportunities it's sales, not short-duration some interesting, reverse a right? now securitizable loan good ways. whole been get but There's

going Longbridge short, around the think in distress. reverse intend but seeing take to in to been general, very as distressed that of keep – visible starting I acquired are more year corner happened this we'll look mortgage at now see be we or we mortgage are especially July think that mortgage the we in And that the space And coming beginning acquisition of when pretty buyout in duration bridge, profitable. end of yes, it of last that able commercial like how some servicing that So opportunities year, advantage distressed like those well. to inclined be and of could when opportunities rights that in has loans that there early are opportunities there

where So it's a you not know. sure I'm as sector lot that's of there's – a competition,

Thank it. Appreciate you. Great.

with Thank JMP you. We'll Goberman take our Securities. next from Mikhail question

answered. digesting the are my space that taking questions one Most the morning. just have moment? REIT Thanks. I seeing two squeeze opportunities in already of are more; the been M&A-type of completed? If at Or you and a Good step guys. kind any you of Hey outside guys back just you've if could

not at interest. we're controlling Well, looking Right. any

we various in taking modest intensity, stakes usually We – of antenna have out always there smaller and are our levels – with originators. are pursuing stakes,

even we're some, that So tremendously in at there, necessarily point, but material certainly the I deals but we still this exploring, controlling nothing it deals at wouldn't that and this would nothing be call point. have pipeline

luck, best All luck right. going Thanks forward. Good of guys.

Thank you, too.

take from We'll Hagen next Eric you. our with question Thank BTIG.

you Thanks. guys. How are

you now? you the you get strategy? seen any guys historically you I'm and MBS even can you devote Given other capital there? Looking MSR up strategy, can Have in run you strategy run that how and investor past? can differently the performance here. at any guys at being the just might in wondering just the strategy MSR broadly the managed an more much from on paired Ellington? Thank think than How – We've that MSR companies share stocks following curious how big you. do results that

Sure.

at let's so okay, – take one a that So time.

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at packages bigger Sometimes than the trade the packages. higher smaller prices

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be As it's with continue achieve consistent to we'll right? the it add there going not think can strategy, a costs available not given currently, to long be, are It's that on financing not what is risk think trading to leverage given into at be the a attractive and as, But strategy. huge the basis. that's was But make and something yields to So at to frankly, and to they're attractive continues there, an a I diversify to that financing I trading MSRs, be saying or levels think, well don't I our the key. profile returns, before, soon. able finance to I going that mid-teens anytime part – it's just portfolio higher returns of continues that

thing. want one Yes. to add I just

our to to relative peer of more it about how relative view. going think to a We're we're probably group. take think I going value

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So do I one don't we'll think do. thing that others that's

our if fast our about opportunity and we and that money, the and you You of that at larger were the to make interesting when and the fast loans, we about What's turned like S-Curve buying a a So work get on those be in they servicing Rocket, can can in right? get the money, XXXX, is – models of technology way in very buying loans the efficiencies right? efficient larger think prepayments case, on of right? UWM, lot kind is just of way the now servicers set tend look way stuff, prepayment so loans we to lot kind very into out new production that non-bank, getting believe saw the

XXX of have of that now, basis pool out money. you loans well you points are though, giant over a What have

play. of a a turnover bit think I play just relative market. little better relative and that that more value see we more – a of seasonal it's So It's in

a maybe interesting So does than ago? that few now makes it years more

the big it because those And lofty banks other they valuations was Freddie have to had It a force Fargo, They're Bank not JPMorgan, those in and the banks. time stuff. that really just be. as cross-selling time America also, used all to were And from had as origination Wells nearly was of they servicing Fannie, back. pulled was two, it

agency down. come is it's space, in kind world valuations a of the Now non-bank have

a now. for it's us think good sector I

It's it's like. things and we're a lined we have mortgages. scale this – money big pretty this like stuff, rate pool you out which of up, originating And to that just who's to through been in of sort it's get way of able move So evolution Arlington the quickly.

Yes. Thank That's helpful guys. you really commentary.

Thank you.

the Thank final Financial for participating Ellington We Conference you XXXX today. thank Call. for Earnings you. our in That question was

disconnect have this may line your and time, day. a at You wonderful