Ellington Financial Inc. (NYSE: EFC) (the "Company") today
disclosed the following estimated book value per share of common
stock as of June 30, 2023, and preliminary results of operations
for the quarter ended June 30, 2023:
- Estimated book value per share of common stock of $14.70
as of June 30, 2023, including the effects of dividends of $0.45
per share of common stock declared during the quarter.
- Net income per share of common stock is estimated to be
$0.04 for the quarter ended June 30, 2023.
- Adjusted Distributable Earnings per share of common
stock is estimated to be in the range of $0.35 to $0.39 for the
quarter ended June 30, 2023. The quarter-over-quarter decline in
Adjusted Distributable Earnings was due primarily to a
quarter-over-quarter decline in Adjusted Distributable Earnings
from the Company’s Longbridge segment. Adjusted Distributable
Earnings is a non-GAAP financial measure. See "Non-GAAP Financial
Measures" below for an explanation regarding the calculation of
Adjusted Distributable Earnings.
The above information is preliminary and subject to completion,
including the completion of customary financial statement closing
and review procedures for the quarter ended June 30, 2023. As a
result, the preliminary results set forth above reflect the
Company’s preliminary estimate with respect to such information,
based on information currently available to management. The
Company’s actual financial results for the quarter ended June 30,
2023 may differ materially from these preliminary financial
results, and may be outside the estimated ranges. Further, these
preliminary estimates are not a comprehensive statement or estimate
of the Company’s financial results for the quarter ended June 30,
2023. These preliminary estimates should not be viewed as a
substitute for full interim financial statements prepared in
accordance with GAAP and they are not necessarily indicative of the
results to be achieved in any future period. Accordingly, you
should not place undue reliance on these preliminary estimates.
These preliminary estimates, which are the responsibility of the
Company’s management, were prepared by the Company’s management and
are based upon a number of assumptions. Additional items that may
require adjustments to these preliminary estimates may be
identified and could result in material changes to these
preliminary estimates. Preliminary estimates of results are
inherently uncertain and the Company undertakes no obligation to
update this information. The estimated financial data included in
this press release has been prepared by the Company and is the
Company’s responsibility. PricewaterhouseCoopers LLP, the Company’s
independent registered public accounting firm, has not audited,
reviewed, examined, compiled nor applied agreed-upon procedures
with respect to this preliminary financial information and,
accordingly, PricewaterhouseCoopers LLP does not express an opinion
or provide any other form of assurance with respect thereto.
Non-GAAP Financial Measures
In the “Preliminary Second Quarter Results” section above, the
Company presents an estimated range of its Adjusted Distributable
Earnings per share of common stock for the quarter ended June 30,
2023. The Company calculates "Adjusted Distributable Earnings" as
U.S. GAAP net income as adjusted for: (i) realized and unrealized
gain (loss) on securities and loans, REO, mortgage servicing
rights, financial derivatives (excluding periodic settlements on
interest rate swaps), any borrowings carried at fair value, and
foreign currency transactions; (ii) incentive fee to affiliate;
(iii) catch-up premium amortization adjustment (as described
below); (iv) non-cash equity compensation expense; (v) provision
for income taxes; (vi) certain non-capitalized transaction costs;
and (vii) other income or loss items that are of a non-recurring
nature. For certain investments in unconsolidated entities, the
Company includes the relevant components of net operating income in
Adjusted Distributable Earnings. The catch-up premium amortization
adjustment is a quarterly adjustment to premium amortization
triggered by changes in actual and projected prepayments on the
Company's Agency RMBS (accompanied by a corresponding offsetting
adjustment to realized and unrealized gains and losses). The
adjustment is calculated as of the beginning of each quarter based
on the Company's then-current assumptions about cashflows and
prepayments, and can vary significantly from quarter to quarter.
Non-capitalized transaction costs include expenses, generally
professional fees, incurred in connection with the acquisition of
an investment or issuance of long-term debt. For the contribution
to Adjusted Distributable Earnings from the Company's direct
subsidiary, Longbridge Financial, LLC ("Longbridge"), the Company
adjusts Longbridge's contribution to the Company's net income in a
similar manner, but the Company includes in Adjusted Distributable
Earnings certain realized and unrealized gains (losses) from
Longbridge's origination business.
Adjusted Distributable Earnings is a supplemental non-GAAP
financial measure. The Company believes that the presentation of
Adjusted Distributable Earnings provides information useful to
investors, because the Company: (i) believes that it is a useful
indicator of both current and projected long-term financial
performance, in that it excludes the impact of certain
current-period earnings components that the Company believes are
less useful in forecasting long-term performance and
dividend-paying ability; (ii) uses it to evaluate the effective net
yield provided (I) by the Company’s investment portfolio, after the
effects of financial leverage, and (II) by Longbridge, to reflect
the earnings from Longbridge’s reverse mortgage origination and
servicing operations; and (iii) believes that presenting Adjusted
Distributable Earnings assists investors in measuring and
evaluating the Company’s operating performance, and comparing the
Company’s operating performance to that of the Company’s
residential mortgage REIT and mortgage originator peers. Please
note, however, that: (I) the Company's calculation of Adjusted
Distributable Earnings may differ from the calculation of similarly
titled non-GAAP financial measures by the Company's peers, with the
result that these non-GAAP financial measures might not be directly
comparable; and (II) Adjusted Distributable Earnings excludes
certain items that may impact the amount of cash that is actually
available for distribution.
In addition, because Adjusted Distributable Earnings is an
incomplete measure of the Company’s financial results and differs
from net income computed in accordance with U.S. GAAP, it should be
considered supplementary to, and not as a substitute for, net
income computed in accordance with U.S. GAAP.
Furthermore, Adjusted Distributable Earnings is different from
REIT taxable income. As a result, the determination of whether the
Company has met the requirement to distribute at least 90% of the
Company’s annual REIT taxable income (subject to certain
adjustments) to the Company’s stockholders, in order to maintain
the Company’s qualification as a REIT, is not based on whether the
Company distributed 90% of its Adjusted Distributable Earnings.
In setting dividends, the Company’s board of directors considers
earnings, liquidity, financial condition, REIT distribution
requirements, and financial covenants, along with other factors
that the Company's board of directors may deem relevant from time
to time.
The following table reconciles, for the quarter ended June 30,
2023, the Company’s estimated range of Adjusted Distributable
Earnings per share of common stock to the Company’s estimated range
of net income per share of common stock, which the Company believes
is the most directly comparable U.S. GAAP measure:
Estimated Lower Bound
Estimated Upper Bound
Net Income (Loss) before dividends on
preferred stock
$
0.13
$
0.13
Dividends on preferred stock
(0.09
)
(0.09
)
Net Income (Loss)
0.04
0.04
Income tax expense (benefit)
—
—
Net Income (Loss) before income tax
expense (benefit)
0.04
0.04
Adjustments:
Realized and unrealized (gains)losses,
net(1)
0.09
0.13
Non-capitalized transaction costs and
other expense adjustments(2)
0.07
0.09
Adjusted Distributable Earnings from
investments in unconsolidated entities and other adjustments(3)
0.12
0.16
Adjusted Distributable Earnings
$
0.35
$
0.39
(1)
Includes adjustments for certain realized
and unrealized (gains) losses on securities and loans, REO,
mortgage servicing rights, financial derivatives, borrowings
carried at fair value, and foreign currency transactions.
(2)
Includes non-capitalized transaction
costs, non-cash equity compensation expense, and expenses related
to the agreed upon, but not yet completed, mergers of Arlington
Asset Investment Corp. and Great Ajax Corp.
(3)
Includes net interest income and operating
expenses for certain investments in unconsolidated entities as well
as negative (positive) component of interest income represented by
catch-up premium amortization adjustment.
Cautionary Statement Regarding Forward-Looking Statements
The Company's preliminary results of operations and estimated
book value per share of common stock are subject to change upon
completion of the Company's month-end and quarter-end valuation
procedures relating to its investment positions, and any such
change could be material. There can be no assurance that the
Company's actual results of operations for the quarter ended June
30, 2023 falls within the estimated lower bound or estimated upper
bound presented herein or that the Company's estimated book value
per share of common stock as of June 30, 2023 is indicative of what
the Company's results are likely to be for the three- or six-month
periods ending June 30, 2023 or in future periods, and the Company
undertakes no obligation to update or revise its preliminary
results of operations or estimated book value per share of common
stock prior to issuance of financial statements for such
periods.
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve
numerous risks and uncertainties. The Company's actual results may
differ from its beliefs, expectations, estimates, and projections
and, consequently, you should not rely on these forward-looking
statements as predictions of future events. Forward-looking
statements are not historical in nature and can be identified by
words such as "believe," "expect," "anticipate," "estimate,"
"project," "plan," "continue," "intend," "should," "would,"
"could," "goal," "objective," "will," "may," "seek" or similar
expressions or their negative forms, or by references to strategy,
plans, or intentions. Examples of forward-looking statements in
this press release include statements regarding the Company’s
preliminary financial results for the quarter ended June 30, 2023
and estimated book value per share of common stock as of June 30,
2023. Forward-looking statements are based on our beliefs,
assumptions and expectations of our future operations, business
strategies, performance, financial condition, liquidity and
prospects, taking into account information currently available to
us. These beliefs, assumptions, and expectations are subject to
risks and uncertainties and can change as a result of many possible
events or factors, not all of which are known to us. If a change
occurs, our business, financial condition, liquidity, results of
operations and strategies may vary materially from those expressed
or implied in our forward-looking statements. The following factors
are examples of those that could cause actual results to vary from
our forward-looking statements: changes in interest rates and the
market value of the Company's investments, market volatility,
changes in mortgage default rates and prepayment rates, the
Company's ability to borrow to finance its assets, changes in
government regulations affecting the Company's business, the
Company's ability to maintain its exclusion from registration under
the Investment Company Act of 1940, the Company's ability to
maintain its qualification as a real estate investment trust, or
"REIT," and other changes in market conditions and economic trends,
such as changes to fiscal or monetary policy, heightened inflation,
slower growth or recession, and currency fluctuations. Furthermore,
forward-looking statements are subject to risks and uncertainties,
including, among other things, those described under Item 1A of the
Company's Annual Report on Form 10-K, which can be accessed through
the Company's website at www.ellingtonfinancial.com or at the SEC's
website (www.sec.gov). Other risks, uncertainties, and factors that
could cause actual results to differ materially from those
projected may be described from time to time in reports the Company
files with the SEC, including reports on Forms 10-Q, 10-K and 8-K.
The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
This release and the information contained herein do not
constitute an offer of any securities or solicitation of an offer
to purchase securities.
About Ellington Financial
Ellington Financial invests in a diverse array of financial
assets, including residential and commercial mortgage loans,
reverse mortgage loans, residential and commercial mortgage-backed
securities, consumer loans and asset-backed securities backed by
consumer loans, collateralized loan obligations, non-mortgage and
mortgage-related derivatives, debt and equity investments in loan
origination companies, and other strategic investments. Ellington
Financial is externally managed and advised by Ellington Financial
Management LLC, an affiliate of Ellington Management Group,
L.L.C.
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Investors: Ellington Financial Inc. Investor Relations (203)
409-3575 info@ellingtonfinancial.com
or
Media: Amanda Shpiner/Sara Widmann Gasthalter & Co. for
Ellington Financial (212) 257-4170 Ellington@gasthalter.com
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