Executive Summary

Q4 delivered $0.45 ADE/share, up $0.05 QoQ, again covering $0.39 dividends; GAAP EPS was $0.25, up from $0.19 in Q3, driven by Longbridge strength, securitization gains, and wider credit NIM, partially offset by Agency losses amid rate volatility .
Credit portfolio NIM rose to 3.02% (from 2.64%), and the adjusted long credit portfolio grew 5% QoQ to $3.42B; Agency RMBS was reduced another 25% QoQ and posted a modest loss due to underperformance vs hedges .
Leverage steady on a recourse basis at 1.8x; overall D/E rose to 8.8x reflecting more non-recourse securitization debt; liquidity remained ample with $192.4M cash and $619.8M other unencumbered assets .
Management set 2025 catalysts: maintain securitization momentum (four Q4 deals; three more already closed in first two months of 2025), expand warehouse capacity, and pursue unsecured debt issuance if cost attractive—supporting ongoing ADE coverage of the dividend; estimate comparisons vs Street were unavailable due to S&P Global data limits this cycle .

What Went Well and What Went Wrong

What Went Well
- “Another excellent quarter” from Longbridge: $26.8M to common; origination volume rose 21% QoQ to $419.9M with improved HECM margins; HMBS MSR Equivalent gains and positive hedge P&L; proprietary reverse securitization executed at tighter levels .
- Credit engine firing: sequentially higher net interest income, gains across non‑Agency RMBS, HELOCs, forward MSR investments, ABS; equity stakes in originators contributed gains; credit NIM expanded to 3.02% .
- Financing & liability optimization: four Q4 securitizations across three products (gains, non‑mark‑to‑market term financing, retained high‑yield tranches), tighter warehouse terms with new counterparties, and redemption/refi of higher‑cost preferred/debt .
What Went Wrong
- Agency underperformed: rising rates and intra‑quarter volatility led to losses in Agency RMBS exceeding hedge gains; Agency portfolio cut to $296.7M (-25% QoQ) .
- Pockets of credit pressure: net losses in non‑QM loans/tranches, commercial mortgage loans, and consumer loans driven by slight credit performance declines; negative REO workout income .
- Corporate hedging drag: unrealized loss on unsecured borrowings (tighter credit spreads/shortening duration) and losses on fixed‑receiver swaps used to hedge fixed payments on long‑term debt and preferred in a rising‑rate quarter .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
Net Income Attributable to Common ($M)	$52.35	$16.18	$22.39
Diluted EPS ($)	$0.62	$0.19	$0.25
Adjusted Distributable Earnings per Share ($)	$0.33	$0.40	$0.45
Book Value per Common Share ($, period end)	$13.92	$13.66	$13.52
Net Interest Income ($M)	$33.60	$33.63	$38.13
Recourse Debt-to-Equity (x)	1.6	1.8	1.8
Overall Debt-to-Equity (x)	8.2	8.3	8.8
Credit Portfolio NIM (%)	2.76%	2.64%	3.02%
Agency Portfolio NIM (%)	1.99%	2.03%	2.22%
Adjusted Long Credit Portfolio ($B)	$2.73	$3.25	$3.42
Longbridge New Originations ($M)	$304.5	$354.7	$419.9
Cash & Cash Equivalents ($M)	$198.5	$217.7	$192.4
Other Unencumbered Assets ($M)	$565.1	$546.8	$619.8

Segment earnings contribution (per share)

Segment EPS Contribution	Q2 2024	Q3 2024	Q4 2024
Credit	$0.80	$0.45	$0.32
Agency	$0.01	$0.06	$(0.04)
Longbridge	$0.05	$(0.03)	$0.30
Corporate/Other	$(0.24)	$(0.29)	$(0.33)
Total EPS	$0.62	$0.19	$0.25

KPIs and portfolio mix highlights

KPI / Mix	Q2 2024	Q3 2024	Q4 2024
Agency RMBS (fair value, $M)	$457.7	$394.6	$296.7
Pay‑ups on specified pools (%)	0.91%	0.68%	0.67%
Home equity/seconds & HELOCs (credit FV, $M)	$62.7	$186.1	$432.9
Non‑QM loans & retained RMBS (credit FV, $M)	$1,802.8	$2,165.4	$2,007.7

Note: EFC emphasizes ADE/share, NIM, book value, leverage, and securitization economics rather than GAAP “revenue.” All figures above are as reported.

Guidance Changes

Metric	Period	Previous Guidance/Commentary	Current Guidance/Commentary	Change
Dividend (common)	Ongoing	$0.13/month declared Oct 7, 2024; Q3 ADE covered $0.39 total	$0.13/month declared Feb 10, 2025; Q4 ADE covered $0.39 total	Maintained
ADE coverage of dividend	2024 exit / 2025	Management targeted ADE to cover dividend; Q3 run-rate supported coverage	“We anticipate EFC’s overall ADE will continue to cover the dividend moving forward”	Reaffirmed
Longbridge ADE run-rate	LT run-rate	~$0.09/share per quarter baseline (Q3 call)	~$0.09/share reiterated; Q4 nearly doubled; volatility acknowledged	Maintained run-rate; near-term outperformance
Securitizations cadence	2025	Mgmt expected 4–6 non‑QM deals (Q3)	Four Q4 deals; three securitizations already closed in first two months of 2025; intent to maintain momentum	Accelerating early 2025
Liability strategy	2025	Redeem high-cost preferred; consider unsecured issuance	Will pursue unsecured notes in 2025 if cost attractive; improved warehouse terms	Progressing

EFC did not provide quantitative revenue/margin/EPS guidance; management commentary focuses on dividend coverage, securitization pace, financing costs, and capital structure .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2024)	Current Period (Q4 2024)	Trend
Securitization momentum	Q2: Restarted non‑QM; completed prop‑reverse; saw tight AAA spreads . Q3: Completed 2 non‑QM + 1 prop‑reverse; strong execution; call rights optionality .	Four Q4 deals across 3 products; gains, match‑funding, retained high‑yield tranches; three more deals closed early 2025 .	Strengthening and accelerating
Warehouse & funding terms	Q2–Q3: Added facilities; widening capacity; repo spreads improving .	Tighter terms with more counterparties; plan for more unsecured if cost justifies .	Improving cost of funds
Longbridge performance	Q2: Turnaround with prop‑reverse; ADE +$0.06/share . Q3: ADE +$0.12/share; GAAP loss on hedges .	$26.8M to common; higher volumes/margins; HMBS MSR gains; reiterated ~$0.09/share LT run‑rate .	Positive with rate‑sensitive volatility
Agency allocation	Q2–Q3: Shrinking Agency to fund higher‑yield credit; Agency NIM improved .	Agency loss amid volatility; portfolio cut 25% QoQ to $296.7M .	Smaller; tactical
Non‑QM/consumer credit	Q2–Q3: Gains in non‑QM; noted consumer loan headwinds .	Some uptick in non‑QM delinquencies; modest losses in non‑QM/consumer; underwriting tightened .	Monitoring tighter underwriting
Commercial workouts	Q2–Q3: Active management; small number of NPLs/REO .	Three key loans in workout; resolutions expected but proceeds not “game‑changing” .	Resolution progress
Second liens/HELOCs	Q2–Q3: Built sourcing/modeling; opportunity from “locked‑in” low‑rate first liens .	Portfolio more than doubled QoQ; inaugural closed‑end second securitization executed .	Rapid expansion
Regulatory (HMBS 2.0/GSE)	Q3: Policy watch; private capital role rising .	HMBS 2.0 impact TBD; potential GSE changes could cause volatility; private label likely to gain share .	Policy watch, balanced view

Management Commentary

“Our adjusted distributable earnings increased by another $0.05 per share sequentially to $0.45, again covering our $0.39 of dividends for the quarter.” — CEO, Laurence Penn .
“We completed four securitization transactions across three different product lines… generated gains… secured non‑mark‑to‑market term financing… retained the highest‑yielding tranches.” — CEO .
“The robust [Longbridge] results were attributable to… higher volumes… improved origination margins… net gain on the HMBS MSR Equivalent… net gains on interest rate hedges.” — CFO, JR Herlihy .
“A definite goal for us in 2025 is to issue another round of unsecured notes, assuming we can get the cost of funds that we think we deserve.” — CEO .
“We do anticipate that EFC’s overall ADE will continue to cover the dividend moving forward, which, of course, is always our goal.” — CEO .
“We had a large overall credit hedging portfolio on the books at year‑end… credit spreads have widened in early 2025, and so we’ve taken off some of our credit hedges recently.” — CEO .

Q&A Highlights

Originator stakes and non‑QM delinquencies: Small, synergistic investments to secure flow, tighten underwriting (up in FICO/down in LTV). Delinquencies higher than immediate post‑COVID years but aligned with long‑term underwriting assumptions .
Longbridge earnings power: Management reiterated ~$0.09/share per quarter as a reasonable LT run‑rate; Q4 nearly doubled that; expect variability with rates and securitization timing .
Net interest income trajectory: Lower funding costs and wider NIM supportive; Q4 a “good run‑rate” guide into Q1, with product mix caveats .
Commercial workouts: Three main loans; proceeds “not game‑changing” (<$100M across REO and delinquent loans), but ADE drag should abate as resolutions free capital .
Second liens/HELOCs runway: Large opportunity anchored by borrowers with low‑rate first liens; rate path shifts economics vs cash‑out refi; EFC completed first closed‑end second securitization to lock term financing .

Estimates Context

We attempted to retrieve Street consensus from S&P Global (EPS, revenue, EBITDA, etc.), but the request was rate‑limited this cycle; therefore, we could not compare results vs. consensus. We will update once S&P Global data access is restored.

Key Takeaways for Investors

ADE flywheel intact: Q4 ADE/share ($0.45) exceeded dividends, supported by Longbridge outperformance, securitization gains, and credit NIM expansion—management expects dividend coverage to continue near‑term .
Portfolio mix pivot: Agency trimmed again; capital cycling into higher‑yielding, vertically‑integrated loan strategies (non‑QM, second liens/HELOCs, commercial bridge) with securitization match‑funding and retained high‑yield tranches .
Funding tailwinds: Warehouse competition tightening spreads; overall cost of funds down; recourse leverage stable at 1.8x with room to add unsecured if attractive—supportive of NII and ADE momentum .
Watch non‑QM/consumer credit and commercial workouts: Modest losses and some delinquency uptick are being managed via tightened underwriting and active asset management; near‑term ADE drag from workouts should diminish as resolutions occur .
Near‑term catalysts: Additional securitizations (already three in early 2025), improved warehouse terms, potential unsecured issuance—each accretive to earnings resilience and dividend coverage .
Risk factors: Interest‑rate volatility (Agency), regulatory shifts (HMBS 2.0, GSE policies), and credit normalization in non‑QM and consumer loans could pressure GAAP P&L; EFC’s credit hedging and diversification help buffer shocks .

Additional Relevant Press Releases (Q4 context)

Common and preferred dividends declared: $0.13/month common payable Apr 25, 2025; preferred series distributions detailed (Series A/B/C/D) .
Estimated BVPS post‑quarter: $13.41 as of Jan 31, 2025 (includes Feb dividend) .

All statements and quantitative figures are sourced from EFC’s Q4 2024 8‑K/press release, earnings call transcript, and related company press releases as cited above.

Ellington Financial Inc. (EFC)·Q4 2024 Earnings Summary