Ellington Financial Inc. Common Stock

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Financial fourth quarter 2020 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If at any time your question has been answered, you may remove yourself from the queue by pressing the pound key. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the call over to Jason Frank, Deputy General Counsel and Secretary. Sir, you may begin.

Thank you. Before we start, I would like to remind everyone that certain statements made during this conference call may constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature. As described under Item 1A of our annual report on Form 10-K filed on March 13, 2020, and under Part 2, Item 1A of our quarterly report on Form 10-Q as amended for the three-month period ended March 31, 2020, Forward-looking statements are subject to a variety of risks and uncertainties that could cause the company's actual results to differ from its beliefs, expectations, estimates, and projections. Consequently, you should not rely on these forward-looking statements as predictions of future events. Statements made during this conference call are made as of the date of this call, and the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. I am joined on the call today by Larry Penn, Chief Executive Officer of Ellington Financial, Mark Takotsky, Co-Chief Investment Officer of EFC, and J.R. Herlihy, Chief Financial Officer of EFC. As described in our earnings press release, our fourth quarter earnings conference call presentation is available on our website, ellingtonfinancial.com. Management's prepared remarks will track the presentation. Please note that any references to figures in this presentation are qualified in their entirety by the end notes at the back of the presentation. With that, please turn to slide three, and I will now turn the call over to Larry.

Thanks, Jay, and good morning, everyone. As always, thank you for your time and interest in Ellington Financial. Ellington Financial was again firing on all cylinders in the fourth quarter as we delivered strong results in all of our diversified credit and agency strategies. As you can see on slide three, we generated net income of $1.44 per share, which translated into a non-annualized economic return of 8.7% for the quarter, and we generated core earnings of 37 cents per share. I am pleased to report that with our strong fourth quarter results, we more than made back the losses from earlier in the year and have positive net income and a positive economic return for the full year 2020. Given the extreme volatility of last March and April, I think that this is a remarkable accomplishment for a hybrid mortgage REIT. And 2021 is off to a great start. Our economic return in January was more than 3%, and our estimated January 31st book value per common share was $18.05, which is now within just 22 cents of where it was last February prior to the COVID-related volatility. And that's before giving credit to the $1.06 of dividends on our common stock since last February. Now getting back to the fourth quarter results. Our loan origination businesses again led the way. In the reverse mortgage space, Longbridge concluded an outstanding year. In fact, a record year for both origination volume and net income. In the non-QM business, Lendsure had a record quarter for origination volumes and earnings. And in October, we completed our second non-QM securitization of the year, which drove strong performance on the portfolio side of that business. Meanwhile, we had strong credit performance from our short-duration loan portfolios, particularly residential transition mortgage loans, small balance commercial mortgage loans, and our consumer loan portfolios. Notably, for most of these investments, we either originated the loans directly ourselves or through our origination partners. In November, we securitized a pool of unsecured consumer loans purchased through one of our loan flow agreements. Finally, I'll also add that post-quarter end, in fact, just earlier this week, we priced yet another very successful non-QM securitization, which Mark will discuss in more detail later. As we have highlighted before, we believe that the loan origination platforms that we are building at Ellington Financial are crucial to ensuring us a continued steady flow of high-quality investments. These origination platforms also provide significant franchise value to Ellington Financial. In fact, I believe that this franchise value already represents tremendous underappreciated upside for EFC stock price, especially given the sizable premiums at which many public loan origination companies currently trade. I believe that these platforms will continue to differentiate EFC's business model moving forward. In addition to our loan strategies performing well, our credit securities also performed very well in the quarter, most notably CLOs, CMBS, non-agency RMBS, and European RMBS, as prices continue to recover from the March selloff. Finally, our agency portfolio delivered another quarter of excellent results, driven by tightening yield spreads, attractive dollar rolls, hedging gains, and attractive financing rates. During the quarter, we were able to further extend and improve our sources of financing. In addition to the loan securitizations I mentioned, we also extended the term of one of our loan financing facilities and also added another such loan financing facility, which closed shortly after year end. Okay, many may not view details about asset financing facilities as the most exciting news, but I'm mentioning it in part to remind everyone That in no small part, it's not just our lower leverage, but it's also our disciplined approach to managing our financings that enabled us to weather the COVID liquidity crunch last year as well as we did. Finally, I'll point out that we were again able to deliver strong results this past quarter, even while maintaining leverage below our historical averages. We finished the year with a recourse debt-to-equity ratio of 1.6 to 1, down from 1.7 to 1 last quarter. and significantly lower than the average of 2.7 to 1 in 2019. With this low leverage and ample cash on the balance sheet, we have plenty of dry powder to add assets and grow earnings from here, and that's exactly what we plan to do. And with that, I'll pass it to JR to discuss our fourth quarter financial results in more detail.