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What changed in Ellington Financial Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Ellington Financial Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+808 added−838 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in Ellington Financial Inc.'s 2024 10-K

808 paragraphs added · 838 removed · 590 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

40 edited+4 added−10 removed151 unchanged
Biggest changeManagement's Discussion and Analysis of Financial Condition 4 Table of Content s and Results of Operations—Our Targeted Asset Classes." Subject to maintaining our qualification as a REIT, we expect to continue to invest in these targeted asset classes: • residential mortgage loans, including (i) residential mortgage loans that are not deemed to be "qualified mortgage," or "QM," loans under the rules of the Consumer Financial Protection Bureau, or "non-QM loans," (ii) residential transition loans, and (iii) non-performing and re-performing residential mortgage loans, or "residential NPLs and RPLs"; • commercial mortgage loans, commercial mortgage-backed securities, or "CMBS," and other commercial real estate debt; • residential mortgage-backed securities, or "RMBS," for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS"; • RMBS backed by U.S. residential mortgage loans for which the principal and interest payments are not guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "non-Agency RMBS," credit risk transfer securities, or "CRTs," and RMBS backed by European residential mortgage loans, or "European RMBS"; • retained tranches from non-Agency RMBS securitizations to which we have contributed assets, including non-QM loan securitizations; • residential reverse mortgage loans, including home equity conversion mortgage loans, or “HECMs,” which are insured by the Federal Housing Administration, or "FHA," and which are eligible for inclusion in HECM-backed MBS, or "HMBS," which are guaranteed by the Government National Mortgage Association, or "GNMA," and "proprietary reverse mortgage loans," which are not insured by FHA, as well as mortgage servicing rights, or "MSRs" related to reverse mortgage loans, or "Reverse MSRs," and held by our subsidiary Longbridge Financial, LLC ("Longbridge"); • MSR-related investments referencing MSRs related to forward mortgage loans, or "Forward MSR-related investments"; • consumer loans and asset-backed securities, or "ABS," including ABS backed by consumer loans, and retained tranches from securitizations to which we have contributed consumer loan assets; • collateralized loan obligations, or "CLOs," including retained tranches from CLO securitizations; • mortgage-related and non-mortgage-related derivatives; • strategic equity and/or debt investments in companies from which we purchase, or may in the future purchase, targeted assets, and other strategic investments in companies related to our business; and • other investments, including corporate debt and equity securities, corporate loans, and other financial assets.
Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations—Our Targeted Asset Classes." Subject to maintaining our qualification as a REIT, we expect to continue to invest in these targeted asset classes: 4 Table of Contents • residential mortgage loans, including (i) residential mortgage loans that are not deemed to be "qualified mortgage loans" under the rules of the Consumer Financial Protection Bureau ("non-QM loans"), (ii) residential transition loans ("RTLs"), (iii) closed-end second lien mortgage loans ("CES loans") and home equity line of credit loans ("HELOCs"); and (iv) non-performing and re-performing residential mortgage loans ("residential NPLs and RPLs"); • commercial mortgage loans, commercial mortgage-backed securities ("CMBS") and other commercial real estate debt; • residential mortgage-backed securities ("RMBS") for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity ("Agency RMBS"); • RMBS backed by U.S. residential mortgage loans for which the principal and interest payments are not guaranteed by a U.S. government agency or a U.S. government-sponsored entity ("non-Agency RMBS") credit risk transfer securities, or "CRTs," and RMBS backed by European residential mortgage loans ("European RMBS"); • retained tranches from non-Agency RMBS securitizations to which we have contributed assets, including non-QM, RTL, HELOC, and CES loan securitizations; • residential reverse mortgage loans, including home equity conversion mortgage loans ("HECMs") which are insured by the Federal Housing Administration ("FHA") and which are eligible for inclusion in HECM-backed MBS ("HMBS") which are guaranteed by the Government National Mortgage Association ("GNMA") and "proprietary reverse mortgage loans," which are not insured by FHA, as well as mortgage servicing rights ("MSRs") related to reverse mortgage loans ("Reverse MSRs"); • retained tranches from residential reverse mortgage loan securitizations to which we have contributed assets; • MSR-related investments referencing MSRs related to forward mortgage loans ("Forward MSR-related investments"); • consumer loans and asset-backed securities ("ABS") including ABS backed by consumer loans, and retained tranches from securitizations to which we have contributed consumer loan assets; • collateralized loan obligations ("CLOs"); • mortgage-related and non-mortgage-related derivatives; • strategic equity and/or debt investments in companies from which we purchase, or may in the future purchase, targeted assets, and other strategic investments in companies related to our business; and • other investments, including corporate debt and equity securities, corporate loans, and other financial assets.
Ellington makes available to our Manager all opportunities to acquire assets that it determines, in its reasonable and good faith judgment, based on our objectives, policies and strategies, and other relevant factors, are appropriate for us in accordance with Ellington's written investment allocation policy, it being understood that we might not participate in each such opportunity, but will on an overall basis equitably participate with Ellington's other accounts in all such opportunities.
Ellington makes available to our Manager all opportunities to acquire assets that it determines, in its reasonable and good faith judgment, based on our objectives, policies and strategies, and other relevant factors, are appropriate for us in accordance with Ellington's written investment allocation policy, it being understood that we might not participate in each such opportunity, but will equitably participate with Ellington's other accounts in all such opportunities on an overall basis.
These laws and regulations include, but are not limited to: • the Truth in Lending Act, or "TILA," which regulates mortgage loan origination activities, requires certain disclosures be made to mortgagors regarding terms of mortgage financing and regulates certain mortgage servicing activities; • the Fair Credit Reporting Act, which regulates the use and reporting of information related to the credit history of consumers; • the Equal Credit Opportunity Act, which prohibits discrimination on the basis of age, race and certain other characteristics in the extension of credit; • the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; • the Real Estate Settlement Procedures Act, or "RESPA," which governs certain mortgage loan origination activities and practices and the actions of servicers related to transfers, lender-placed insurance, loss mitigation, error resolution, and other customer communications; 15 Table of Content s • the Homeowners Protection Act, the CARES Act, and similar state laws; • laws that require and govern communications with consumers or reporting of public data, such as the Gramm-Leach-Bliley Act, which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession, and the Home Mortgage Disclosure Act / Regulation C, which requires reporting of certain public loan data; • state and federal restrictions on marketing activities conducted by telephone, mail, email, mobile device or the internet, including the Telemarketing Sales Rule, the Telephone Consumer Protection Act, state telemarketing laws, and federal and state privacy laws; • the Controlling the Assault of Non-Solicited Pornography and Marketing and the Federal Trade Commission Act, together with their accompanying regulations and guidelines; • federal and state laws requiring company, branch and individual licensing for the solicitation of or brokering of consumer loans, including the SAFE Act; • federal and state laws relating to identity theft; • the Fair Debt Collection Practices Act, which regulates the timing and content of communications on debt collections; • the California Consumer Privacy Act, which provides California consumers with additional privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers; • the Servicemembers Civil Relief Act; • the anti-money laundering and counter-terrorist financing provisions of the Bank Secrecy Act, including the USA Patriot Act, which require non-bank lenders to monitor for, detect, and report suspicious activity to the U.S.
These laws and regulations include, but are not limited to: • the Truth in Lending Act, or "TILA," which regulates mortgage loan origination activities, requires certain disclosures be made to mortgagors regarding terms of mortgage financing and regulates certain mortgage servicing activities; • the Fair Credit Reporting Act, which regulates the use and reporting of information related to the credit history of consumers; • the Equal Credit Opportunity Act, which prohibits discrimination on the basis of age, race and certain other characteristics in the extension of credit; • the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; • the Real Estate Settlement Procedures Act, or "RESPA," which governs certain mortgage loan origination activities and practices and the actions of servicers related to transfers, lender-placed insurance, loss mitigation, error resolution, and other customer communications; • the Homeowners Protection Act, the CARES Act, and similar state laws; • laws that require and govern communications with consumers or reporting of public data, such as the Gramm-Leach-Bliley Act, which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession, and the Home Mortgage Disclosure Act / Regulation C, which requires reporting of certain public loan data; • state and federal restrictions on marketing activities conducted by telephone, mail, email, mobile device or the internet, including the Telemarketing Sales Rule, the Telephone Consumer Protection Act, state telemarketing laws, and federal and state privacy laws; • the Controlling the Assault of Non-Solicited Pornography and Marketing and the Federal Trade Commission Act, together with their accompanying regulations and guidelines; • federal and state laws requiring company, branch and individual licensing for the solicitation of or brokering of consumer loans, including the SAFE Act; • federal and state laws relating to identity theft; • the Fair Debt Collection Practices Act, which regulates the timing and content of communications on debt collections; 15 Table of Contents • the California Consumer Privacy Act, which provides California consumers with additional privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers; • the Servicemembers Civil Relief Act; • the anti-money laundering and counter-terrorist financing provisions of the Bank Secrecy Act, including the USA Patriot Act, which require non-bank lenders to monitor for, detect, and report suspicious activity to the U.S.
Such prior approval includes approval of the pricing methodology to be used, including with respect to assets for which there are no readily observable market prices. • Investment in Other Ellington Accounts— pursuant to the management agreement, if we invest at issuance in the equity of any collateralized debt obligation, or "CDO," that is managed, structured, or originated by Ellington or one of its affiliates, or if we invest in any other investment fund or other investment for which Ellington or one of its affiliates receives management, origination, or structuring fees, then, unless agreed otherwise by a majority of our independent directors, the base management and incentive fees payable by us to our Manager will be reduced by (or our Manager will otherwise rebate to us) an amount equal to the applicable portion (as described in the management agreement) of any such management, origination or structuring fees. • Split Price Executions— pursuant to the management agreement, our Manager is authorized to combine purchase or sale orders on our behalf together with orders for other accounts managed by Ellington, our Manager or their affiliates and allocate the securities or other assets so purchased or sold, on an average price basis or other fair and consistent basis, among such accounts.
Such prior approval includes approval of the pricing methodology to be used, including with respect to assets for which there are no readily observable market prices. • Investment in Other Ellington Accounts— pursuant to the management agreement, if we invest at issuance in the equity of any collateralized debt obligation, or "CDO," that is managed, structured, or originated by Ellington or one of its affiliates, or if we invest in any other investment fund or other investment for which Ellington or one of its affiliates receives management, origination, or structuring fees, then, unless agreed otherwise by a majority of our independent 12 Table of Contents directors, the base management and incentive fees payable by us to our Manager will be reduced by (or our Manager will otherwise rebate to us) an amount equal to the applicable portion (as described in the management agreement) of any such management, origination or structuring fees. • Split Price Executions— pursuant to the management agreement, our Manager is authorized to combine purchase or sale orders on our behalf together with orders for other accounts managed by Ellington, our Manager or their affiliates and allocate the securities or other assets so purchased or sold, on an average price basis or other fair and consistent basis, among such accounts.
Competition In acquiring our assets, we compete with other mortgage REITs, specialty finance companies, loan originators and servicers, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies, private equity firms, and other entities.
Competition In acquiring our assets, we compete with other mortgage REITs, specialty finance companies, loan originators and servicers, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies, private equity and private credit firms, and other entities.
Treasury rate for such fiscal quarter, (ii) the sum of (A) the weighted average gross proceeds per share of all common share and operating partnership unit, or "OP Unit," issuances since our inception and up to the end of such fiscal quarter, with each issuance weighted by both the number of shares and OP Units issued in such issuance and the number of days that such issued shares and OP Units were outstanding during such fiscal quarter, using a first-in first-out basis of accounting (i.e., attributing any share and OP Unit repurchases to the earliest issuances first) and (B) the result obtained by dividing (I) retained earnings attributable to common shares and OP Units at the beginning of such fiscal quarter by (II) the average number of common shares and OP Units outstanding for each day during such fiscal quarter, and (iii) the sum of (x) the average number of common shares and long term incentive plan units, or "LTIP Units," outstanding for each day during such fiscal quarter and (y) the average number of OP Units, and limited liability company interests in the Operating Partnership which are designated as LTIP Units, or "OP LTIP Units," outstanding for each day during such fiscal quarter.
Treasury rate for such fiscal quarter, (ii) the sum of (A) the weighted average gross proceeds per share of all common share and operating partnership unit, or "OP Unit," issuances since our inception and up to the end of such fiscal quarter, with each issuance weighted by both the number of shares and OP Units issued in such issuance and the number of days that such issued shares and OP Units were outstanding during such fiscal quarter, using a first-in first-out basis of accounting (i.e., attributing any share and OP Unit repurchases to the earliest issuances first) and (B) the result obtained by dividing (I) retained earnings attributable to common shares and OP Units at the beginning of such fiscal quarter by (II) the average number of common shares and OP Units outstanding for each day during such fiscal quarter, and (iii) the sum of (x) the average number of common shares and long term incentive plan units, or "LTIP Units," 10 Table of Contents outstanding for each day during such fiscal quarter and (y) the average number of OP Units, and limited liability company interests in the Operating Partnership which are designated as LTIP Units, or "OP LTIP Units," outstanding for each day during such fiscal quarter.
Business Except where the context suggests otherwise, references in this Annual Report on Form 10-K to "EFC," "we," "us," and "our" refer to Ellington Financial Inc. and its consolidated subsidiaries, including Ellington Financial Operating Partnership LLC, our operating partnership subsidiary, which we refer to as our "Operating Partnership." References in this Annual Report on Form 10-K to (1) "common shares" refer to shares of our common stock, $0.001 par value per share and (2) "common shareholders" refer to holders of shares of our common stock.
Business Except where the context suggests otherwise, references in this Annual Report on Form 10-K to "EFC," "we," "us," and "our" refer to Ellington Financial Inc. and its consolidated subsidiaries, including Ellington Financial Operating Partnership LLC, our operating partnership subsidiary, which we refer to as our "Operating Partnership." References in this Annual Report on Form 10-K to (1) "common shares" refer to shares of our common stock, $0.001 par value per share and (2) "common stockholders" refer to holders of shares of our common stock.
In addition, our Manager currently does not have any employees and instead relies on the employees of Ellington to perform its obligations to us. Ellington is an investment management firm and registered investment advisor with a 29-year history of investing in a broad spectrum of mortgage-backed securities, or "MBS," and related derivatives.
In addition, our Manager currently does not have any employees and instead relies on the employees of Ellington to perform its obligations to us. Ellington is an investment management firm and registered investment advisor with a 30-year history of investing in a broad spectrum of mortgage-backed securities, or "MBS," and related derivatives.
Term and Termination The management agreement has a current term that expires on December 31, 2024, and will automatically renew for a one year term on each anniversary date thereafter unless notice of non-renewal is delivered by either party to the other party at least 180 days prior to the expiration of the then current term.
Term and Termination The management agreement has a current term that expires on December 31, 2025, and will automatically renew for a one year term on each anniversary date thereafter unless notice of non-renewal is delivered by either party to the other party at least 180 days prior to the expiration of the then current term.
We may also terminate the management agreement without payment of the termination fee with 30 days prior written notice from our Board of Directors for cause, which is defined as: • our Manager's continued material breach of any provision of the management agreement following a period of 30 days after written notice of such breach; • our Manager's fraud, misappropriation of funds, or embezzlement against us; • our Manager's gross negligence in performance of its duties under the management agreement; • the occurrence of certain events with respect to the bankruptcy or insolvency of our Manager, including, but not limited to, an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary 11 Table of Content s bankruptcy petition; • the dissolution of our Manager; and • certain changes of control of our Manager, including but not limited to the departure of Mr.
We may also terminate the management agreement without payment of the termination fee with 30 days prior written notice from our Board of Directors for cause, which is defined as: • our Manager's continued material breach of any provision of the management agreement following a period of 30 days after written notice of such breach; • our Manager's fraud, misappropriation of funds, or embezzlement against us; • our Manager's gross negligence in performance of its duties under the management agreement; • the occurrence of certain events with respect to the bankruptcy or insolvency of our Manager, including, but not limited to, an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition; • the dissolution of our Manager; and • certain changes of control of our Manager, including but not limited to the departure of Mr.
Longbridge maintains its corporate office in Mahwah, New Jersey, with branch offices in multiple states. Longbridge is approved as a Title II, non-supervised direct endorsement mortgagee with the U.S. Department of Housing and Urban Development, or "HUD." In addition, Longbridge is an approved issuer of HMBS.
Longbridge maintains its corporate office in Paramus, New Jersey, with branch offices in multiple states. Longbridge is approved as a Title II, non-supervised direct endorsement mortgagee with the U.S. Department of Housing and Urban Development, or "HUD." In addition, Longbridge is an approved issuer of HMBS.
Pursuant to our Manager's current policies and procedures, assets for which there are no readily observable market prices may be purchased or sold in cross transactions (i) at prices based upon third-party bids received through auction, (ii) at the average of the highest bid and 12 Table of Content s lowest offer quoted by third-party dealers, or (iii) according to another pricing methodology approved by our Manager's Chief Compliance Officer. • Principal Transactions— defined as transactions between Ellington or our Manager (or any related party of Ellington or our Manager, which includes employees of Ellington and our Manager and their families), on the one hand, and us or one of our subsidiaries, on the other hand.
Pursuant to our Manager's current policies and procedures, assets for which there are no readily observable market prices may be purchased or sold in cross transactions (i) at prices based upon third-party bids received through auction, (ii) at the average of the highest bid and lowest offer quoted by third-party dealers, or (iii) according to another pricing methodology approved by our Manager's Chief Compliance Officer. • Principal Transactions— defined as transactions between Ellington or our Manager (or any related party of Ellington or our Manager, which includes employees of Ellington and our Manager and their families), on the one hand, and us or one of our subsidiaries, on the other hand.
In addition, throughout Ellington's 29-year investing history, it has developed strong relationships with a wide range of dealers and other market participants that provide Ellington access to a broad range of trading opportunities and market information.
In addition, throughout Ellington's 30-year investing history, it has developed strong relationships with a wide range of dealers and other market participants that provide Ellington access to a broad range of trading opportunities and market information.
As of December 31, 2023, the majority of our recourse borrowings consisted of repurchase agreements, or "repos." Currently, the majority of our repos are collateralized by Agency RMBS and residential mortgage loans.
As of December 31, 2024, the majority of our recourse borrowings consisted of repurchase agreements, or "repos." Currently, the majority of our repos are collateralized by Agency RMBS and residential mortgage loans.
Human Capital Resources Other than with respect to our subsidiary Longbridge, we have no employees and all of our executive officers, and our dedicated or partially dedicated personnel, which include our Chief Financial Officer, Chief Accounting Officer, controller, accounting staff, in-house legal counsel, internal audit staff, and other personnel providing services to us are employees of 16 Table of Content s Ellington or one or more of its affiliates.
Human Capital Resources Other than with respect to our subsidiary Longbridge, we have no employees and all of our executive officers, and our dedicated or partially dedicated personnel, which include our Chief Financial Officer, Chief Accounting Officer, controller, accounting staff, in-house legal counsel, internal audit staff, and other personnel providing services to us are employees of Ellington or one or more of its affiliates.
Therefore, our Operating Partnership's investments in its 3(c)(7) subsidiaries and its other investment securities cannot exceed 40% of the value of our Operating Partnership's total assets (excluding U.S. government securities and cash) on an 14 Table of Content s unconsolidated basis.
Therefore, our Operating Partnership's investments in its 3(c)(7) subsidiaries and its other investment securities cannot exceed 40% of the value of our Operating Partnership's total assets (excluding U.S. government securities and cash) on an unconsolidated basis.
Management's Discussion and Analysis of Financial Condition and Results of Operations—Our Targeted Asset Classes," our 6 Table of Content s acquisition and management decisions depend on prevailing market conditions and our targeted asset classes may vary over time in response to market conditions. We may engage in a high degree of trading volume as we implement our strategy.
Management's Discussion and Analysis of Financial Condition and Results of Operations—Our Targeted Asset Classes," our acquisition and management decisions depend on prevailing market conditions and our targeted asset classes may vary over time in response to market conditions. We may engage in a high degree of trading volume as we implement our strategy.
The investment and risk management committee has authority delegated by our Board of Directors to authorize transactions consistent with our investment guidelines. Ellington has focused investment teams for many of our targeted asset classes.
The investment and risk management committee has authority delegated by our Board of Directors to authorize transactions consistent with our investment guidelines. 7 Table of Contents Ellington has focused investment teams for many of our targeted asset classes.
Our Manager is responsible for: • the selection, purchase, and sale of assets in our portfolio; 9 Table of Content s • our financing and risk management activities; • providing us with advisory services; and • providing us with a management team, inclusive of a partially dedicated Chief Financial Officer and appropriate support personnel as necessary.
Our Manager is responsible for: • the selection, purchase, and sale of assets in our portfolio; • our financing and risk management activities; • providing us with advisory services; and • providing us with a management team, inclusive of a partially dedicated Chief Financial Officer and appropriate support personnel as necessary.
In the event our Manager terminates the management agreement due to our default in the performance or observance of any material term, condition, or covenant in the management agreement, we will be required to pay our Manager the termination fee.
In the event our Manager terminates the management agreement due to our 11 Table of Contents default in the performance or observance of any material term, condition, or covenant in the management agreement, we will be required to pay our Manager the termination fee.
The process is managed by an investment and risk management committee, which includes, among others, the following three officers of our 7 Table of Content s Manager: Mr. Vranos, Mr. Penn, and Mr. Tecotzky. These officers of our Manager also serve as our Co-Chief Investment Officer, Chief Executive Officer, and Co-Chief Investment Officer, respectively.
The process is managed by an investment and risk management committee, which includes, among others, the following three officers of our Manager: Mr. Vranos, Mr. Penn, and Mr. Tecotzky. These officers of our Manager also serve as our Co-Chief Investment Officer, Chief Executive Officer, and Co-Chief Investment Officer, respectively.
The information on our website is not, and shall not be deemed to be, a part of this report or incorporated into any other filing we make with the SEC. In addition, all of our reports filed with or furnished to the SEC can be obtained at the SEC's website at www.sec.gov . 17 Table of Content s
The information on our website is not, and shall not be deemed to be, a part of this report or incorporated into any other filing we make with the SEC. In addition, all of our reports filed with or furnished to the SEC can be obtained at the SEC's website at www.sec.gov . 16 Table of Contents
See "—Management Agreement" above. As of December 31, 2023, Longbridge had over 400 employees.
See "—Management Agreement" above. As of December 31, 2024, Longbridge had over 400 employees.
Because many of our targeted assets are typically available only in specified quantities and are also targeted assets for other Ellington accounts, Ellington often is not able to buy as much of any given asset as required to satisfy the needs of all of its accounts.
Because many of our targeted assets are typically available only in specified quantities and are also targeted assets for other Ellington accounts, Ellington often is not able to buy as much of any given asset or group of assets as would be required to satisfy the needs of all of Ellington's accounts.
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 our securities or our investments; market volatility; changes in the prepayment rates on the mortgage loans underlying the securities owned by us for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity; increased rates of default and/or decreased recovery rates on our assets; our ability to borrow to finance our assets and the available terms for such borrowings; changes in government regulations affecting our business; our ability to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or the "Investment Company Act"; our ability to achieve cost savings and efficiencies, operating efficiencies, synergies and other benefits, including the increased scale, and avoid potential business disruption from our completed merger with Arlington Asset Investment Corp.; our ability to maintain our qualification as a real estate investment trust, or "REIT"; and risks associated with investing in real estate assets, including changes in business conditions and the general economy such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations.
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 our securities or our investments; market volatility; changes in the prepayment rates on the mortgage loans underlying the securities owned by us for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity; increased rates of default and/or decreased recovery rates on our assets; our ability to borrow to finance our assets and the available terms for such borrowings; changes in government regulations affecting our business; our ability to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or the "Investment Company Act"; our ability to maintain our qualification as a real estate investment trust, or "REIT"; and risks associated with investing in real estate assets, including changes in business conditions and the general economy such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations.
An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect the market price of our common or preferred stock.
A proliferation of such companies may increase the competition for equity capital and thereby adversely affect the market price of our common or preferred stock. An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect the market price of our common or preferred stock.
Our credit hedging portfolio can vary significantly from period to period, and can encompass a wide variety of financial instruments, including corporate debt or equity-related instruments, RMBS or CMBS-related instruments, or instruments involving other markets.
Our credit hedging portfolio can vary significantly from period to period, and can encompass a wide variety of financial instruments, including corporate debt or equity-related instruments, RMBS or CMBS-related instruments, or instruments involving other markets. Our hedging instruments can include both "single-name" instruments (i.e., instruments referencing one underlying entity or security) and hedging instruments referencing indices.
Our Financing Strategies and Use of Leverage We finance our assets with what we believe to be a prudent amount of leverage, the level of which varies from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions.
In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk. 8 Table of Contents Our Financing Strategies and Use of Leverage We finance our assets with what we believe to be a prudent amount of leverage, the level of which varies from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions.
Additionally, many of our competitors are not subject to REIT tax compliance or required to maintain an exemption from the Investment Company Act. Our competitors may include other investment vehicles managed by Ellington or its affiliates, including Ellington Residential Mortgage REIT.
Additionally, many of our competitors are not subject to REIT tax compliance or required to maintain an exemption from the Investment Company Act. Our competitors also include other investment vehicles managed by Ellington or its affiliates. In addition to existing competitors, other companies may be organized for similar purposes in the future, including companies focused on purchasing mortgage assets.
As of December 31, 2023, Ellington had over 170 employees and had assets under management of approximately $10.3 billion, of which approximately $7.2 billion consisted of our company and Ellington Residential Mortgage REIT, a REIT listed on the New York Stock Exchange, or the "NYSE," under the ticker "EARN," that focuses its investment strategy primarily on Agency RMBS, and various hedge funds and other alternative investment vehicles that employ financial leverage, and approximately $3.1 billion consisted of accounts that do not employ financial leverage.
As of December 31, 2024, Ellington had over 160 employees and had assets under management of approximately $13.7 billion, of which: (i) approximately $7.4 billion consisted of our company, various hedge funds and other alternative investment vehicles that employ financial leverage, and Ellington Credit Company, a Maryland company listed on the New York Stock Exchange, or the "NYSE," under the ticker "EARN," and (ii) approximately $6.2 billion consisted of accounts that do not employ financial leverage.
Operating and Regulatory Structure Tax Requirements We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or "the Code," commencing with our taxable year ended December 31, 2019.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. 13 Table of Contents Operating and Regulatory Structure Tax Requirements We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or "the Code," commencing with our taxable year ended December 31, 2019.
In addition, we believe that these relationships, along with our strategic equity investments in loan originators, enable us to compete more effectively for attractive asset acquisition opportunities. However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.
In addition, we believe that these relationships, along with our strategic equity investments in loan originators, enable us to compete more effectively for attractive asset acquisition opportunities.
Our "credit portfolio," which includes all of our assets other than Agency RMBS, has historically been the primary driver of our risk and return, and we expect that this will continue in the near to medium term.
(the "Arlington Merger"), through which we increased our capital base and added a portfolio of investments and borrowings that we believe were complementary to our existing investment portfolio and liability structure. 5 Table of Contents Our "credit portfolio," which includes all of our assets other than Agency RMBS, has historically been the primary driver of our risk and return, and we expect that this will continue in the near to medium term.
GAAP, as well as non-cash charges after discussion between our Manager and our independent directors and approval by a majority of our independent directors in the case of non-cash charges. 10 Table of Content s For purposes of calculating the incentive fee, the "Hurdle Amount" means, with respect to any fiscal quarter, the product of (i) one-fourth of the greater of (A) 9% and (B) 3% plus the 10-year U.S.
For purposes of calculating the incentive fee, the "Hurdle Amount" means, with respect to any fiscal quarter, the product of (i) one-fourth of the greater of (A) 9% and (B) 3% plus the 10-year U.S.
On August 31, 2011, the SEC published a concept release entitled "Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments" (Investment Company Act Rel. No. 29778). This release notes that the SEC is reviewing the Section 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans and mortgage-backed securities.
On August 31, 2011, the SEC published a concept release entitled "Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments" (Investment Company Act Rel. No. 29778).
Foreign Currency Hedging To the extent we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates, subject to maintaining our qualification as a REIT. In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk.
We also opportunistically overlay our credit hedges with certain relative value long/short positions involving the same or similar instruments. Foreign Currency Hedging To the extent we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates, subject to maintaining our qualification as a REIT.
Our Manager is responsible for our day-to-day operations and performs (or causes to be performed) such services and activities relating to the management, operation, and administration of our assets and liabilities, and business as may be appropriate.
Our Manager is responsible for our day-to-day operations and performs (or causes to be performed) such services and activities relating to the management, operation, and administration of our assets and liabilities, and business as may be appropriate. 9 Table of Contents Under the management agreement, we pay our Manager a management fee quarterly in arrears, which includes a "base" component and an "incentive" component, and we reimburse certain expenses of our Manager.
As of December 31, 2023, Ellington managed various funds, accounts, and other vehicles, comprising approximately $8.7 billion of assets under management (excluding our assets but including $3.1 billion of accounts that do not employ financial leverage), with strategies that are similar to, or that overlap with, our strategy.
Conflicts of Interest; Equitable Allocation of Opportunities Ellington manages, and expects to continue to manage, other funds, accounts, and vehicles that have strategies that are similar to, or that overlap with, our strategy; as of December 31, 2024, these other funds, accounts, and vehicles, represented approximately $12.1 billion of assets under management (including $6.2 billion of accounts that do not employ financial leverage).
Moreover, although our independent directors may periodically review our investment guidelines and our portfolio, they generally do not review our proposed asset acquisitions or asset management decisions. We believe that Ellington's capabilities allow our Manager to identify attractive assets, value these assets, monitor and forecast the performance of these assets, and opportunistically hedge our risk with respect to these assets.
We believe that Ellington's capabilities allow our Manager to identify attractive assets, value these assets, monitor and forecast the performance of these assets, and opportunistically hedge our risk with respect to these assets.
We believe that we are organized and operate so that we qualify to be treated as a REIT for U.S. federal income tax purposes. We acquire and manage mortgage-related, consumer-related, corporate-related, and other financial assets.
We have elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code") and we believe that we are organized and operate in such a manner as to qualify for taxation as a REIT. We acquire and manage mortgage-related, consumer-related, corporate-related, and other financial assets.
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Our Company We were originally formed as a Delaware limited liability company in July 2007 and commenced operations in August 2007.
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Our Company We were organized in July 2007 and commenced operations in August 2007. We are a Delaware corporation that is externally managed by Ellington Financial Management LLC, an investment advisor registered with the Securities and Exchange Commission ("SEC").
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In February 2019, we elected to be taxed as a corporation for U.S. federal income tax purposes effective as of January 1, 2019, and we elected to be treated as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2019.
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Moreover, although our independent directors may 6 Table of Contents periodically review our investment guidelines and our portfolio, they generally do not review our proposed asset acquisitions or asset management decisions.
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(the "Arlington Merger"), through which we increased our capital base 5 Table of Content s and added a portfolio of investments and borrowings that we believe were complementary to our existing investment portfolio and liability structure.
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GAAP, as well as non-cash charges after discussion between our Manager and our independent directors and approval by a majority of our independent directors in the case of non-cash charges.
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The $10.3 billion and $7.2 billion in assets under management include approximately $0.8 billion in Ellington-managed CLOs. For these purposes, the Ellington-managed CLO figure represents the aggregate outstanding balance of CLO notes and market value of CLO equity, excluding any notes and equity held by other Ellington-managed funds and accounts.
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This release notes that the SEC is reviewing the Section 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans and mortgage- 14 Table of Contents backed securities.
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Since the global financial crisis in 2008/2009, capital requirements and other regulations in the banking industry have curtailed bank origination and ownership of certain types of loans, and as a result, capital availability for certain loan products is lower than it was historically, thus creating better opportunities for Ellington to invest in these loan products.
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Our hedging instruments can include both "single-name" instruments (i.e., instruments referencing one underlying entity or security) and hedging instruments referencing 8 Table of Content s indices. We also opportunistically overlay our credit hedges with certain relative value long/short positions involving the same or similar instruments.
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Under the management agreement, we pay our Manager a management fee quarterly in arrears, which includes a "base" component and an "incentive" component, and we reimburse certain expenses of our Manager.
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Conflicts of Interest; Equitable Allocation of Opportunities Ellington manages, and expects to continue to manage, other funds, accounts, and vehicles that have strategies that are similar to, or that overlap with, our strategy, including Ellington Residential Mortgage REIT.
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The $8.7 billion in assets under management include approximately $0.8 billion in Ellington-managed CLOs. For these purposes, the Ellington-managed CLO figure represents the aggregate outstanding balance of CLO notes and market value of CLO equity, excluding any notes and equity held by other Ellington-managed funds and accounts.
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In addition to existing companies, other companies may be 13 Table of Content s organized for similar purposes in the future, including companies focused on purchasing mortgage assets. A proliferation of such companies may increase the competition for equity capital and thereby adversely affect the market price of our common or preferred stock.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur failure to maintain our qualification as a REIT would subject us to U.S. federal, state and local income taxes, which could adversely affect the value of our common stock and would substantially reduce the cash available for distribution to our stockholders. • Our failure to maintain our qualification as a REIT would subject us to U.S. federal, state and local income taxes, which could adversely affect the value of our common stock and would substantially reduce the cash available for distribution to our stockholders. • We could face adverse tax consequences if Arlington failed to qualify as a REIT prior to the Merger. • Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments. • Complying with REIT requirements may limit our ability to hedge effectively.
Biggest changeFederal Income Tax Risks • Failure to maintain REIT qualification would subject us to significant corporate tax liabilities, reducing cash available for distributions and potentially impacting stockholder returns. • Changes in tax laws or regulatory rulings could alter the tax treatment of REITs, negatively affecting our financial position, investment strategy, and distributions to stockholders. • Complying with our election to be treated as REIT may cause us to forgo or liquidate otherwise attractive investments and/or may limit our ability to hedge efficiently. • Complying with REIT requirements may limit our ability to hedge effectively.
Many securities that we acquire are subordinated in cash flow priority to other more "senior" securities of the same securitization. Certain subordinated securities ("first loss securities") absorb all losses from default before any other class of securities is at risk. Such securities therefore are considered to be highly speculative investments.
Many securities that we acquire are subordinated in cash flow priority to other more "senior" securities of the same securitization. Certain subordinated securities ("first loss securities") absorb all losses from default before any other class of securities is at risk. Such securities are therefore considered to be highly speculative investments.
Office properties are subject to potential valuation declines related disruptions or changes in business practices caused by technological or other innovations (such as businesses adopting remote work policies, shared spaces, and/or co-working environments), workforce reductions in certain market segments, or other factors, which has recently negatively impacted, and may continue to negatively impact, office demand in the commercial real estate sector, rental rates and occupancy levels.
Office properties are subject to potential valuation declines related to disruptions or changes in business practices caused by technological or other innovations (such as businesses adopting remote work policies, shared spaces, and/or co-working environments), workforce reductions in certain market segments, or other factors, which has recently negatively impacted, and may continue to negatively impact, office demand in the commercial real estate sector, rental rates and occupancy levels.
These circumstances could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." Our access to financing may not be available on favorable terms, may be limited or completely shut off, and our lenders and derivative counterparties may require us to post additional collateral.
These circumstances could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." Our access to financing may not be available on favorable terms, or may be limited or completely shut off, and our lenders and derivative counterparties may require us to post additional collateral.
As such, these assets may be subject to legal and other restrictions on resale, transfer, pledge or other disposition, or will otherwise be less liquid than publicly traded securities. Other assets that we acquire, while publicly traded, have limited liquidity on account of their complexity, turbulent market conditions, or other factors.
As such, these assets may be subject to legal and other restrictions on resale, transfer, pledge or other disposition, or will otherwise be less liquid than publicly traded securities. Other assets that we acquire, while publicly traded, may have limited liquidity on account of their complexity, turbulent market conditions, or other factors.
Collateral managers are subject to removal or replacement by other holders of CLO securities without our consent and may also voluntarily resign as collateral manager or assign their role as collateral manager to another entity.
CLO collateral managers are subject to removal or replacement by other holders of CLO securities without our consent and may also voluntarily resign as collateral manager or assign their role as collateral manager to another entity.
The CLOs in which we invest may acquire interests in corporate loans indirectly, by way of participations. In a participation, the underlying debt obligation remains with the institution that has sold the participation, which typically results in a contractual relationship only with such selling institution, and not with the corporate obligor directly.
We may acquire, and the CLOs in which we invest may acquire, interests in corporate loans indirectly, by way of participations. In a participation, the underlying debt obligation remains with the institution that has sold the participation, which typically results in a contractual relationship only with such selling institution, and not with the corporate obligor directly.
There is no guarantee that the ultimate outcome of any case will be in line with outside counsel's or expert's initial assessment of the validity and merit of a legal claim. Various laws restrict the ability to assign certain legal claims or to participate in a lawyer's contingent fee interest in a claim.
There is no guarantee that the ultimate outcome of any case will be in line with outside counsel's or any expert's initial assessment of the validity and merit of a legal claim. Various laws restrict the ability to assign certain legal claims or to participate in a lawyer's contingent fee interest in a claim.
Further, our MSR financing facilities may also include other customers of the related Forward MSR Master Servicer as borrowers, whose MSR-related investments (that may or may not be similar to our Forward MSR-related investments) are commingled with our own investments in securing the MSR financing facility.
Further, our MSR financing facilities also include other customers of the related Forward MSR Master Servicer as borrowers, whose MSR-related investments (that may or may not be similar to our Forward MSR-related investments) are commingled with our own investments in securing the MSR financing facility.
Moreover, if the Subservicer is not vigilant in encouraging borrowers to make their real estate tax and property insurance premium payments, the borrowers may be less likely to make these payments, which could result in a higher frequency of borrower default for failure to make these payments.
Moreover, if a Subservicer is not vigilant in encouraging borrowers to make their real estate tax and property insurance premium payments, the borrowers may be less likely to make these payments, which could result in a higher frequency of borrower default for failure to make these payments.
Ellington makes available to us all opportunities to acquire assets that it determines, in its reasonable and good faith judgment, based on our objectives, policies and strategies, and other relevant factors, are appropriate for us in accordance with Ellington's written investment allocation policy, it being understood that we might not participate in each such opportunity, but will on an overall basis equitably participate with Ellington's other accounts in all such opportunities.
Ellington makes available to us all opportunities to acquire assets that it determines, in its reasonable and good faith judgment, based on our objectives, policies and strategies, and other relevant factors, are appropriate for us in accordance with Ellington's written investment allocation policy, it being understood that we might not participate in each such opportunity, but will equitably participate with Ellington's other accounts in such opportunities on an overall basis.
If our Subsidiary REIT were to fail to maintain its qualification as a REIT, then (i) that Subsidiary REIT would become subject to regular U.S. federal, state and local corporate income tax, (ii) our interest in such Subsidiary REIT would cease to be a qualifying asset for purposes of the REIT asset tests, and (iii) it is possible that we would fail certain of the REIT asset and/or income tests, in which event we also would fail to maintain our qualification as a REIT unless we could avail ourselves of certain relief provisions.
If a Subsidiary REIT were to fail to maintain its qualification as a REIT, then (i) that Subsidiary REIT would become subject to regular U.S. federal, state and local corporate income tax, (ii) our interest in such Subsidiary REIT would cease to be a qualifying asset for purposes of the REIT asset tests, and (iii) it is possible that we would fail certain of the REIT asset and/or income tests, in which event we also would fail to maintain our qualification as a REIT unless we could avail ourselves of certain relief provisions.
While we believe that the Subsidiary REIT has qualified as a REIT under the Code, we have joined the Subsidiary REIT in filing a "protective" TRS election under Section 856(l) of the Code for each taxable year in which we have owned an interest in the Subsidiary REIT.
While we believe that each Subsidiary REIT has qualified as a REIT under the Code, we have joined the Subsidiary REIT in filing a "protective" TRS election under Section 856(l) of the Code for each taxable year in which we have owned an interest in the Subsidiary REIT.
There can be no assurance that we will be able to comply with either or both of these tests in all market conditions. Our inability to comply with both of these tests could have a material adverse effect on our business, financial condition, liquidity, results of operations, qualification as a REIT and ability to make distributions to our stockholders.
There can be no assurance that we will be able to comply with either or both of these tests in all market conditions. Our inability to comply with either of these tests could have a material adverse effect on our business, financial condition, liquidity, results of operations, qualification as a REIT and ability to make distributions to our stockholders.
Real estate assets are subject to various risks, including: • declines in the value of real estate, including due to declining property cash flows or rising capitalization rates; • acts of God, including pandemics, such as the COVID-19 pandemic, earthquakes, floods, wildfires, hurricanes, mudslides, volcanic eruptions and other natural disasters, which may result in uninsured losses; • war or geopolitical conflict or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001; • adverse changes in national and local economic and market conditions, including those related to high unemployment, elevated inflation and high energy costs; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and zoning ordinances; • costs of remediation and liabilities associated with environmental conditions such as indoor mold; • potential liabilities for other legal actions related to property ownership including tort claims; and • the potential for uninsured or under-insured property losses.
Real estate assets are subject to various risks, including: • declines in the value of real estate, including due to declining property cash flows or rising capitalization rates; • acts of God, including pandemics, such as the COVID-19 pandemic, earthquakes, floods, droughts, wildfires, hurricanes, mudslides, volcanic eruptions and other natural disasters, which may result in uninsured losses; • war or geopolitical conflict or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001; • adverse changes in national and local economic and market conditions, including those related to high unemployment, elevated inflation and high energy costs; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and zoning ordinances; • costs of remediation and liabilities associated with environmental conditions such as indoor mold; • potential liabilities for other legal actions related to property ownership including tort claims; and • the potential for uninsured or under-insured property losses.
Generally, covenant-lite loans provide the obligor with more freedom to take actions that could negatively impact their lenders because the obligor's covenants are incurrence-based and not maintenance-based, which means that they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition.
Generally, covenant-lite corporate loans provide the obligor with more freedom to take actions that could negatively impact their lenders because the obligor's covenants are incurrence-based and not maintenance-based, which means that they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition.
In order for us to maintain our qualification as a REIT, no more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. "Individuals" for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts.
Additionally, in order for us to maintain our qualification as a REIT, no more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. "Individuals" for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts.
If a CLO issuer fails to comply with the investment guidelines, or if the Internal Revenue Service otherwise successfully asserts that the CLO should be treated as engaged in a U.S. trade or business, such CLO could be subject to U.S. federal income tax, which could reduce the amount available to distribute to mezzanine debt and equity holders in such CLO, including us.
If a CLO issuer fails to comply with its investment guidelines, or if the Internal Revenue Service otherwise successfully asserts that the CLO should be treated as engaged in a U.S. trade or business, such CLO could be subject to U.S. federal income tax, which could reduce the amount available to distribute to mezzanine debt and equity holders in such CLO, including us.
General factors, including a general economic downturn, high energy costs, high unemployment, acts of God, pandemics such as the COVID-19 pandemic, war or other geopolitical conflict, terrorism, elevated inflation, social unrest, and civil disturbances may also affect the financial stability of borrowers and impair their ability or willingness to repay their loans.
General factors, including a general economic downturn, high energy costs, high unemployment, acts of God, pandemics such as the COVID-19 pandemic, war or other geopolitical conflict, terrorism, elevated inflation, tariffs, social unrest, and civil disturbances may also affect the financial stability of borrowers and impair their ability or willingness to repay their loans.
The frequency at which prepayments (including both voluntary prepayments by borrowers and liquidations due to defaults and foreclosures) occur on mortgage loans, including those underlying our RMBS and Forward MSR-related investments, affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, and other factors.
The frequency at which prepayments (including both voluntary prepayments by borrowers and liquidations due to defaults and foreclosures) occur on mortgage loans, including those underlying our RMBS and Forward MSR-related investments, is affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, and other factors.
Such defaults and losses, especially those in excess of the market’s or our expectations, would have a negative impact on the fair value of our CLO investments, and reduce the cash flows that we receive from our CLO investments, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders.
Such defaults and losses, especially those in excess of the market’s or our expectations, would have a negative impact on the fair value of our investments, and reduce the cash flows that we receive from our investments, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders.
A number of factors, including a general economic downturn, high unemployment, high energy costs, acts of God, pandemics such as the COVID-19 pandemic, war or other geopolitical conflict, terrorism, elevated inflation, social unrest, and civil disturbances, may impair borrowers' abilities to repay their mortgage loans.
A number of factors, including a general economic downturn, high unemployment, high energy costs, acts of God, pandemics such as the COVID-19 pandemic, war or other geopolitical conflict, terrorism, elevated inflation, tariffs, social unrest, and civil disturbances, may impair borrowers' abilities to repay their mortgage loans.
If Longbridge is found to have violated FHA underwriting guidelines, it could face regulatory penalties and damages in litigation, suffer reputational damage, and it could incur losses due to an inability to collect on such insurance, any of which could materially and adversely impact Longbridge’s business, financial condition and results of operations.
If Longbridge is found to have violated FHA guidelines, it could face regulatory penalties and damages in litigation, suffer reputational damage, and it could incur losses due to an inability to collect on such insurance, any of which could materially and adversely impact Longbridge’s business, financial condition and results of operations.
Additionally, in the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
Some of the risks of relying on analytical models and third-party data include the following: • collateral cash flows and/or liability structures may be incorrectly modeled in all or only certain scenarios, or may be modeled based on simplifying assumptions that lead to errors; • information about assets or the underlying collateral may be incorrect, incomplete, or misleading; • asset, collateral or MBS historical performance (such as historical prepayments, defaults, cash flows, etc.) may be incorrectly reported, or subject to interpretation (e.g., different MBS issuers may report delinquency statistics based on different definitions of what constitutes a delinquent loan); and • asset, collateral or MBS information may be outdated, in which case the models may contain incorrect assumptions as to what has occurred since the date information was last updated.
Some of the risks of relying on analytical models and third-party data include the following: • collateral cash flows and/or liability structures may be incorrectly modeled in all or only certain scenarios, or may be modeled based on simplifying assumptions that lead to errors; • information about assets or the underlying collateral may be incorrect, incomplete, or misleading; • asset, collateral or MBS historical performance (such as historical prepayments, defaults, cash flows, etc.) may be incorrectly reported, or subject to interpretation (e.g., different MBS issuers may report delinquency and default statistics based on different definitions of what constitutes a delinquent or defaulted loan); and • asset, collateral or MBS information may be outdated, in which case the models may contain incorrect assumptions as to what has occurred since the date information was last updated.
Furthermore, we may not obtain third-party valuations for all of our assets. Changes in the fair value of our assets directly impact our net income through recording unrealized appreciation or depreciation of our investments and derivative instruments, and so our Manager's determination of fair value has a material impact on our net income.
Furthermore, we may not obtain third-party valuations for all of our assets. Changes in the fair value of our assets directly impact our net income and book value through recording unrealized appreciation or depreciation of our investments and derivative instruments, and so our Manager's determination of fair value has a material impact on our net income.
Our business is materially affected by conditions in the residential and commercial mortgage markets, the residential and commercial real estate markets, the financial markets, and the economy, including inflation, interest rates, energy costs, unemployment, geopolitical issues, concerns over the creditworthiness of governments worldwide and the stability of the global banking system.
Our business is materially affected by conditions in the residential and commercial mortgage markets, the residential and commercial real estate markets, the financial markets, and the economy, including inflation, interest rates, energy costs, unemployment, geopolitical issues, tariffs, concerns over the creditworthiness of governments worldwide and the stability of the global banking system.
Net operating income of an income-producing property can be adversely affected by, among other things: • tenant mix; 29 Table of Content s • declines in tenant income and/or changes to tenant businesses; • property management decisions; • property location, condition, and design; • new construction of competitive properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional, or local economic conditions and/or specific industry segments, including the credit and securitization markets; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates, and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation, and the related costs of compliance; and • general economic downturn, high energy costs, high unemployment, acts of God, pandemics such as the COVID-19 pandemic, war or other geopolitical conflict, terrorism, elevated inflation, social unrest, and civil disturbances.
Net operating income of an income-producing property can be adversely affected by, among other things: • tenant mix; • declines in tenant income and/or changes to tenant businesses; • property management decisions; • property location, condition, and design; • new construction of competitive properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional, or local economic conditions and/or specific industry segments, including the credit and securitization markets; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates, and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; 29 Table of Contents • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation, and the related costs of compliance; and • general economic downturn, high energy costs, high unemployment, acts of God, pandemics such as the COVID-19 pandemic, war or other geopolitical conflict, terrorism, elevated inflation, social unrest, and civil disturbances.
In addition, the policies permit departure from proportional allocations under certain circumstances, for example when such allocation would result in an inefficiently small amount of the security or assets being purchased for an account, which may also result in our not participating in certain allocations.
In addition, the policies permit departure from proportional allocations under certain circumstances, including, for example, when such allocation would result in an inefficiently small amount of the security or assets being purchased for an account, which may also result in our not participating in certain allocations.
Because our Manager earns base management fees that are based on the total amount of our equity capital, and earns incentive fees that are based in part on the total net income that we are able to generate, our Manager may have an incentive to recommend that we issue additional debt or equity securities.
Because our Manager earns base management fees that are based on the total amount of our equity capital, and earns incentive fees that are based in large part on the total net income that we are able to generate, our Manager may have an incentive to recommend that we issue additional debt or equity securities.
If we fail or are perceived to fail to comply with applicable rules, regulations and stakeholder expectations, it could negatively impact our reputation and our business results. Further, our business could become subject to additional regulations, penalties and/or risks of regulatory scrutiny and enforcement in the future.
If we fail or are perceived to fail to comply with or meet applicable rules, regulations and stakeholder expectations, it could negatively impact our reputation and our business results. Further, our business could become subject to additional regulations, penalties and/or risks of regulatory scrutiny and enforcement in the future.
For some of our Forward MSR-related investments, we may allow the Forward MSR Master Servicer to apply leverage to the underlying MSRs by pledging them under an MSR financing facility, in which case the lender would have a secured interest in the pledged underlying MSRs.
For some of our Forward MSR-related investments, we allow the Forward MSR Master Servicer to apply leverage to the underlying MSRs by pledging them under an MSR financing facility, in which case the lender would have a secured interest in the pledged underlying MSRs.
Our failure to maintain our qualification as a REIT would subject us to U.S. federal, state and local income taxes, which could adversely affect the value of our common stock and would substantially reduce the cash available for distribution to our stockholders.
Our failure to maintain our qualification as a REIT would subject us to U.S. federal, state and local income taxes, which could adversely affect the value of our common and preferred stock and would substantially reduce the cash available for distribution to our stockholders.
Physical effects of climate change such as increases in temperature, sea levels, the severity of weather events and the frequency of natural disasters, such as hurricanes, tropical storms, tornadoes, wildfires, floods and earthquakes, among other effects, could damage the properties underlying our investments.
Physical effects of climate change such as increases in temperature, sea levels, the severity of weather events and the frequency of natural disasters, such as hurricanes, tropical storms, tornadoes, wildfires, droughts, floods and earthquakes, among other effects, could damage the properties underlying our investments.
Furthermore, our Manager has only a limited internal credit function to evaluate the creditworthiness of its counterparties, mainly relying on its experience with such counterparties and their general reputation as participants in these markets.
Furthermore, our Manager has only a limited internal credit function to evaluate the creditworthiness of its counterparties, mainly relying on its experience with such counterparties and/or their general reputation as participants in these markets.
Distress in the commercial real estate sector, including office properties, such as that experienced during 2023, has negatively impacted and may continue to negatively impact certain commercial real estate-related markets in which we invest, including for example, as a result of low occupancy rates, tenant defaults, the maturation of a significant amount of commercial real estate loans amid an elevated interest rate environment, tightening credit conditions imposed by traditional sources of real estate financing and refinancing, and commercial mortgage loan defaults.
Distress in the commercial real estate sector, including office properties, such as that experienced since 2023, has negatively impacted and may continue to negatively impact certain commercial real estate-related markets in which we invest, including for example, as a result of low occupancy rates, tenant defaults, the maturation of a significant amount of commercial real estate loans amid an elevated interest rate environment, tightening credit conditions imposed by traditional sources of real estate financing and refinancing, and commercial mortgage loan defaults.
If these commercial properties do not generate sufficient income to pay for ongoing operating expenses, our commercial mortgage loans and/or our CMBS may not generate enough principal and/or interest to justify their investment.
If these commercial properties do not generate sufficient income to pay for ongoing operating expenses, our commercial mortgage loans and/or our CMBS may not generate enough principal and/or interest to justify our investment.
In addition, a sufficiently large decline in value of the unaffiliated MSR-related investments could lead to an impairments of our own Forward MSR-related investments given the commingled nature of the MSR Financing Facility.
In addition, a sufficiently large decline in value of the unaffiliated MSR-related investments could lead to impairments of our own Forward MSR-related investments given the commingled nature of the MSR Financing Facility.
This could adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders. Failure to comply with FHA underwriting guidelines could adversely impact Longbridge’s business.
This could adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders. Failure to comply with FHA guidelines could adversely impact Longbridge’s business.
Hence, subsequent changes to the purchased securities or in the applicable law may cause such opinions to become inaccurate or outdated despite being accurate when issued and may also adversely affect our REIT qualification and result in significant corporate-level tax. General Risk Factors We, Ellington, or its affiliates may be subject to adverse legislative or regulatory changes.
Hence, subsequent changes to the purchased securities or in the applicable law may cause such opinions to become inaccurate or outdated despite being accurate when issued and may also adversely affect our REIT qualification and result in significant corporate-level tax. General Risk Factors We, Ellington, or its affiliates may be subject to adverse legislative, regulatory or public policy changes.
In evaluating asset acquisition and other management strategies, the opportunity to earn an incentive fee based on net income may lead our Manager to place undue emphasis on the maximization of net income at the expense of other criteria, such as preservation of capital, maintaining liquidity, and/or management of credit risk or market risk, in order to achieve a higher incentive fee.
In evaluating asset acquisition and other management strategies, the opportunity to earn an incentive fee based on net income may lead our Manager to place undue emphasis on the maximization of net income at the expense of other criteria, such as preservation of capital, maintaining liquidity, and/or management of credit risk, interest rate risk, or market risk, in order to achieve a higher incentive fee.
These circumstances could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." Our consolidation of Longbridge presents significant risks. We are required to consolidate Longbridge in our financial statements starting with our Annual Report on Form 10-K for the year ended December 31, 2022.
These circumstances could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." Our consolidation of Longbridge presents significant risks. We were required to consolidate Longbridge in our financial statements starting with our Annual Report on Form 10-K for the year ended December 31, 2022.
In addition, recent increases in mortgage rates have led to significant higher monthly costs for homeowners who have purchased their homes recently and they have also led to slower prepayments of older, more affordable mortgages, each of which could lead to an increase in defaults on the mortgage loans underlying many of our investments.
Further, recent increases in mortgage rates have led to significant higher monthly costs for homeowners who have purchased their homes recently, and they have also led to slower prepayments of older, more affordable mortgages, each of which could lead to an increase in defaults on the mortgage loans underlying many of our investments.
The underwriting guidelines for the mortgage loans that collateralize the non-Agency RMBS and European RMBS in which we invest are more permissive as to borrower credit history or credit score, borrower debt-to-income ratio, loan-to-value ratio, and/or as to documentation (such as whether and to what extent borrower income was required to be disclosed or verified).
The underwriting guidelines for the mortgage loans that collateralize many of the non-Agency RMBS and European RMBS in which we invest are more permissive as to borrower credit history or credit score, borrower debt-to-income ratio, loan-to-value ratio, and/or as to documentation (such as whether and to what extent borrower income was required to be disclosed or verified).
The management agreement has a current term that expires on December 31, 2024, and will be automatically renewed for successive one-year terms thereafter unless notice of non-renewal is delivered by either party to the other party at least 180 days prior to the expiration of the then current term.
The management agreement has a current term that expires on December 31, 2025, and will be automatically renewed for successive one-year terms thereafter unless notice of non-renewal is delivered by either party to the other party at least 180 days prior to the expiration of the then current term.
See "—General Risk Factors—Future offerings of debt securities, which would rank senior to our common and preferred stock upon our liquidation, and future offerings of equity securities, which could dilute our existing stockholders and, in the case of preferred equity, may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock." The officers of our Manager and its affiliates devote as much time to us as our Manager deems appropriate; however, these officers may have conflicts in allocating their time and services among us and Ellington and its affiliates' accounts.
See "—General Risk Factors—Future offerings of debt securities, which would rank senior to our common and preferred stock upon our liquidation, and future offerings of equity 53 Table of Contents securities, which could dilute our existing stockholders and, in the case of preferred equity, may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock." The officers of our Manager and its affiliates devote as much time to us as our Manager deems appropriate; however, these officers may have conflicts in allocating their time and services among us and Ellington and its affiliates' accounts.
Some of the factors that could negatively affect our common stock price, our preferred stock price, or result in fluctuations in the price or trading volume of our common stock and/or our preferred stock include: • actual or anticipated variations in our dividends or quarterly operating results; • changes in our earnings estimates, failure to meet earnings or operating results expectations of public market analysts and investors, or publication of research reports about us or the real estate specialty finance industry; 67 Table of Content s • increases in market interest rates that lead purchasers of our common stock or our preferred stock to demand a higher yield; • repurchases and issuances by us of our common stock or our preferred stock; • passage of legislation, changes in applicable law, court rulings, enforcement actions, or regulatory developments that adversely affect us or our industry; • changes in government policies or changes in timing of implementation of government policies, including with respect to Fannie Mae, Freddie Mac, and Ginnie Mae; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by stockholders; • speculation in the press or investment community; • adverse changes in global, national, regional and local economic and market conditions, including those relating to pandemics, such as the COVID-19 pandemic, high unemployment, elevated inflation, volatile interest rates, concerns regarding a recession, geopolitical conflicts, social unrest, or civil disturbances; • our inclusion in, or exclusion from, various stock indices; • our operating performance and the performance of other similar companies; and • changes in accounting principles.
Some of the factors that could negatively affect our common stock price, our preferred stock price, or result in fluctuations in the price or trading volume of our common stock and/or our preferred stock include: • actual or anticipated variations in our dividends or quarterly operating results; • changes in our earnings estimates, failure to meet earnings or operating results expectations of public market analysts and investors, or publication of research reports about us or the real estate specialty finance industry; • increases in market interest rates that lead purchasers of our common stock or our preferred stock to demand a higher yield; • repurchases and issuances by us of our common stock or our preferred stock; • passage of legislation, changes in applicable law, court rulings, enforcement actions, or regulatory developments that adversely affect us or our industry; • changes in government policies or changes in timing of implementation of government policies, including with respect to Fannie Mae, Freddie Mac, and Ginnie Mae; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by stockholders; • speculation in the press or investment community; • adverse changes in global, national, regional and local economic and market conditions, including those relating to pandemics, such as the COVID-19 pandemic, high unemployment, elevated inflation, tariffs, volatile interest rates, volatile and/or elevated credit spreads, concerns regarding a recession, geopolitical conflicts, social unrest, or civil disturbances; • our inclusion in, or exclusion from, various stock indices; • our operating performance and the performance of other similar companies; and • changes in accounting principles.
If long-term rates were to increase significantly, such as we saw during 2022 and 2023, not only would the market value of these assets be expected to decline, but these assets could lengthen in duration because borrowers would be less likely to prepay their mortgages.
If long-term rates were to increase significantly, such as we saw during 2022 and parts of 2023 and 2024, not only would the market value of these assets be expected to decline, but these assets could lengthen in duration because borrowers would be less likely to prepay their mortgages.
To the extent that we overestimate the value of, and/or projected net income to be generated by certain assets or investment portfolios, and/or underestimated liabilities related to a company or its assets or investment portfolio or we are otherwise incorrect in our assumptions, we may be unable to realize the anticipated benefits of an acquisition or merger.
To the extent that we overestimate the value of, and/or projected net income to be generated by certain assets or investment portfolios, and/or underestimate liabilities related to a company or its assets or investment portfolio or we are otherwise incorrect in our assumptions, we may be unable to realize the anticipated benefits of an acquisition or merger.
During turbulent conditions in the mortgage industry, distress in the credit markets or other times when we will need focused support and assistance from our Manager and Ellington employees, other entities that Ellington advises or manages will likewise require greater focus and attention, placing our Manager and Ellington's resources in high demand.
During times when there are turbulent conditions in the mortgage industry, distress in the credit markets or other times when we will need focused support and assistance from our Manager and Ellington employees, other entities that Ellington advises or manages will likewise require greater focus and attention, placing our Manager and Ellington's resources in high demand.
If Longbridge fails to comply with FHA underwriting guidelines when originating an FHA loan, it could negatively affect Longbridge's business, including by preventing Longbridge from collecting on FHA insurance on such loan, including such loans in a Ginnie Mae pool, or financing such loan via one of Longbridge's warehouse facilities.
If Longbridge fails to comply with FHA guidelines when originating or servicing an FHA loan, it could negatively affect Longbridge's business, including by preventing Longbridge from collecting on FHA insurance on such loan, including such loans in a Ginnie Mae pool, or financing such loan via one of Longbridge's warehouse facilities.
We acquire assets and other instruments that are not publicly traded, including privately placed RMBS, residential and commercial mortgage loans, CLOs, consumer loans, ABS backed by consumer and commercial assets, distressed corporate debt and equity, MSR-related assets, and other private investments, such as investments in loan originators.
We acquire assets and other instruments that are not publicly traded, including privately placed RMBS, residential and commercial mortgage loans, CLOs, consumer loans, ABS backed by consumer and commercial assets or aircraft, distressed corporate debt and equity, MSR-related assets, and other private investments, such as investments in loan originators.
The reverse mortgage industry is largely dependent upon FHA and HUD, and there can be no guarantee that these entities will continue to participate in the reverse mortgage industry or that they will not make material changes to the laws, regulations, rules or practices applicable to reverse mortgage programs.
The reverse mortgage industry is largely dependent upon FHA, Ginnie Mae and HUD, and there can be no guarantee that these entities will continue to participate in the reverse mortgage industry or that they will not make material changes to the laws, regulations, rules or practices applicable to reverse mortgage programs.
Our certificate of incorporation provides that each person that is or was a director, officer, employee, or agent of ours shall not be liable to us or any of our stockholders for any acts or omissions by any such person arising from the performance of their duties and obligations in connection with us, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law.
Our certificate of incorporation provides that each person that is or was a director, officer, employee, or agent of ours shall not be liable to us or any of our stockholders for any acts or omissions by any such person arising from the performance of their 57 Table of Contents duties and obligations in connection with us, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law.
Under the terms of the management agreement, our Manager, Ellington, and their affiliates and each of their officers, directors, members, shareholders, managers, investment and risk management committee members, employees, agents, successors and assigns, will not be liable to us for acts or omissions performed in accordance with and pursuant to the management agreement, except because of acts or omissions constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the management agreement.
Under the terms of the management agreement, our Manager, Ellington, and their affiliates and each of their officers, directors, members, shareholders, managers, investment and risk management committee members, employees, agents, successors and assigns, will not be liable to us for acts or omissions performed in accordance with and pursuant to the management agreement, except because of acts or omissions constituting bad faith, willful misconduct, 54 Table of Contents gross negligence, or reckless disregard of their duties under the management agreement.
Further, certain hedging transactions could result in significant losses. Qualification as a REIT may require that we undertake certain hedging activities in a TRS. Our domestic TRSs are subject to U.S. federal, state, and local income tax.
Further, certain hedging transactions could result in significant losses. Qualification as a REIT may require that we forgo certain hedging activities or undertake certain hedging activities in a TRS. Our domestic TRSs are subject to U.S. federal, state, and local income tax.
Any failure or interruption of Ellington's, Longbridge's, or certain third-party service providers' systems or cyber-attacks or security breaches 39 Table of Content s of their networks or systems could cause delays or other problems in our securities trading activities, could allow unauthorized access for purposes of misappropriating assets, stealing proprietary and confidential information, corrupting data or causing operational disruption, or could prevent us from receiving distributions to which we are entitled, any of which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders.
Any failure or interruption of Ellington's, Longbridge's, or certain third-party service providers' systems or cyber-attacks or security breaches of their networks or systems could cause delays or other problems in our securities trading activities, could allow unauthorized access for purposes of misappropriating assets, stealing proprietary and confidential information, corrupting data or causing operational disruption, or could prevent us from receiving distributions to which we are entitled, any of which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders.
However, to the extent that our funding commitments exceed our borrowing capacity under this facility, or if we are unable to renew this facility upon its maturity in May 2024, we would be dependent on available cash to meet these commitments.
However, to the extent that our funding commitments exceed our borrowing capacity under this facility, or if we are unable to renew this facility upon its maturity in May 2025, we would be dependent on available cash to meet these commitments.
Pursuant to the management agreement, our Manager will not assume any responsibility other than to render the services called for thereunder and will not be responsible for any action of our Board of Directors in following or declining to follow its advice or recommendations.
Pursuant to the management agreement, our Manager will not assume any responsibility other than to render the services called for thereunder and will not be responsible for any action of our Board of Directors in following or declining to follow our Manager's advice or recommendations.
These adverse tax consequences could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders. Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments.
These adverse tax consequences could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders. Complying with REIT requirements may cause us to forgo or liquidate otherwise attractive investments.
For a discussion of some of the risks associated with this hedging activity, see "—Hedging against credit events, interest rate changes, foreign currency fluctuations, and other risks could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." Risks Related to Our Loan Origination Businesses If we, or our loan originator affiliates, are unable to obtain sufficient capital to meet the financing requirements of our loan origination businesses, or if we, or our loan originator affiliates, fail to comply with debt agreements, our business, financing activities, financial condition and results of operations will be adversely affected.
For a discussion of some of the risks associated with this hedging activity, see "—Hedging against 44 Table of Contents credit events, interest rate changes, foreign currency fluctuations, and other risks could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." Risks Related to Our Loan Origination and Servicing Businesses If we, or our loan originator affiliates, are unable to obtain sufficient capital to meet the financing requirements of our loan origination businesses, or if we, or our loan originator affiliates, fail to comply with debt agreements, our business, financing activities, financial condition and results of operations will be adversely affected.
These changes could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders. Any such change may increase our exposure to the risks described herein or expose us to new risks that are not currently contemplated. We operate in a highly competitive market.
These changes could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders. Any such change may increase our exposure to the risks described herein or expose us to new risks that are not currently contemplated. 47 Table of Contents We operate in a highly competitive market.
As a REIT, we may be required to pay dividends to stockholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT.
As a REIT, we may be required to pay dividends to stockholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue investments that would be otherwise advantageous to us in order 60 Table of Contents to satisfy the source of income or asset diversification requirements for qualifying as a REIT.
Investing directly or indirectly in non-U.S. issuers may expose us to additional risks, including political and social instability, expropriation, imposition of foreign taxes, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards, currency fluctuations and greater price volatility.
Investing directly or indirectly in non-U.S. issuers may expose us to additional risks, including political and social 32 Table of Contents instability, expropriation, imposition of foreign taxes, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards, currency fluctuations and greater price volatility.
In the event that we cannot obtain sufficient funding and capital on acceptable terms, there may be a negative impact on the value of our shares of common stock and our ability to pay dividends to our stockholders, and you may lose part or all of your investment. Climate change has the potential to impact the properties underlying our investments.
In the event that we cannot obtain sufficient funding and capital on acceptable terms, there may be a negative impact on the value of our shares of common stock and our ability to pay dividends to our stockholders, and stockholders may lose part or all of their investment. Climate change has the potential to impact the properties underlying our investments.
Commercial whole mortgage loans are also subject to special hazard risk and to bankruptcy risk. In addition, claims may be assessed against us on account of our position as mortgage holder or property owner, including assignee liability, responsibility for tax payments, environmental hazards and other liabilities.
Commercial whole mortgage loans are also subject to special hazard risk and to bankruptcy risk. In addition, claims may be assessed against us on account of our position as mortgage holder or property owner, including assignee liability, 31 Table of Contents responsibility for tax payments, environmental hazards and other liabilities.
If we fail to meet or satisfy any of these covenants, subject to any applicable cure provisions, we would be in default under these agreements and our indebtedness could be declared due and payable. In addition, our lenders could terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral.
If we fail to meet or satisfy any of these covenants, subject to any applicable cure provisions, we would be in default under these agreements and our indebtedness could be declared due and payable. In addition, our lenders could terminate their 34 Table of Contents commitments, require the posting of additional collateral and enforce their interests against existing collateral.
In addition, in order to preserve our liquidity, our Board of Directors may not declare a dividend at all or declare all or any portion of a dividend to be payable in stock, may delay the record date or payment date for any previously declared, but unpaid, dividend, convert a previously declared, but unpaid, cash dividend on our common stock to a dividend paid partially or completely in stock, or even revoke a declared, but unpaid, dividend.
In addition, in order to preserve our liquidity, our Board of Directors may not declare a dividend at all or declare all or any portion of a dividend to 55 Table of Contents be payable in stock, may delay the record date or payment date for any previously declared, but unpaid, dividend, convert a previously declared, but unpaid, cash dividend on our common stock to a dividend paid partially or completely in stock, or even revoke a declared, but unpaid, dividend.
Furthermore, because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data, and, in the case of predicting performance in scenarios with little or no historical precedent (such as extreme broad-based declines in home prices, deep economic recessions or depressions, or pandemics), such models must employ greater degrees of extrapolation and are therefore more speculative and of more limited reliability.
Furthermore, because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data, and, in the case of predicting performance in scenarios with little or no historical precedent (such as extreme broad-based declines in 22 Table of Contents home prices, deep economic recessions or depressions), such models must employ greater degrees of extrapolation and are therefore more speculative and of more limited reliability.
In addition, the Holding Subsidiary's investment in its 3(c)(7) subsidiaries and its other investment securities cannot exceed 40% of the value of our Holding Subsidiary's total assets (excluding U.S. government securities and cash) on an unconsolidated basis. These requirements limit the types of businesses in which we may engage and the assets we may hold.
In addition, the Holding Subsidiary's investment in its 3(c)(7) subsidiaries and its other investment 58 Table of Contents securities cannot exceed 40% of the value of our Holding Subsidiary's total assets (excluding U.S. government securities and cash) on an unconsolidated basis. These requirements limit the types of businesses in which we may engage and the assets we may hold.
The timing and amount of Longbridge’s obligation with respect to MCA Repurchases is uncertain as repurchase is dependent largely on circumstances outside of Longbridge’s control including the amount and timing of future draws and the status of the loan.
The timing and amount of Longbridge’s obligation with respect to MCA Repurchases is uncertain as repurchase is dependent largely on circumstances outside of Longbridge’s control, including the amount and timing of future draws, the status of the loan, and interest rates.
Since all of Longbridge’s portfolio is subserviced by one entity, as opposed to multiple subservicers, there is a greater risk to Longbridge if the Subservicer fails to perform its duties properly, than if Longbridge were to use multiple subservicers. In the reverse mortgage business, the number of third-party subservicers is highly limited.
Since all of Longbridge’s portfolio is subserviced by one entity, as opposed to multiple subservicers, there is a greater risk to Longbridge if the Subservicer fails to perform its duties properly, than if Longbridge were to use multiple subservicers. 46 Table of Contents In the reverse mortgage business, the number of third-party subservicers is highly limited.
In evaluating opportunities for us and other management strategies, this may lead our Manager to emphasize certain asset acquisition, disposition, or management objectives over others, such as balancing risk or capital preservation objectives against return objectives. This could increase the risks, or decrease the returns, of your investment.
In evaluating opportunities for us and other management strategies, this may lead our Manager to emphasize certain asset acquisition, disposition, or management objectives over others, such as balancing risk or capital preservation objectives against return objectives. This could increase the risks, or decrease the returns, of a stockholder's investment.
Furthermore, if a syndicated loan is subordinated to one or more senior loans made to the applicable obligor, the ability of us to exercise such rights may be subordinated to the exercise of such rights by the senior lenders.
Furthermore, if a syndicated loan is subordinated to one or more senior loans made to the applicable obligor, our ability to exercise such rights may be subordinated to the exercise of such rights by the senior lenders.
Forward MSR-related investments also generally entitle us to distributions of corresponding proceeds upon a sale of the underlying MSRs. We rely on the Forward MSR Master Servicer to maintain the state licenses required to hold and manage the underlying MSRs, and, when the underlying MSRs related to mortgage loans are guaranteed by a GSE, to maintain the required GSE approvals.
Forward MSR-related investments also generally entitle us to distributions of corresponding proceeds upon a sale of the underlying MSRs. 42 Table of Contents We rely on the Forward MSR Master Servicer to maintain the state licenses required to hold and manage the underlying MSRs, and, when the underlying MSRs related to mortgage loans are guaranteed by a GSE, to maintain the required GSE approvals.
Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us, and the borrower or junior lenders 31 Table of Content s may continue to challenge whether the foreclosure process was commercially reasonable, which could result in additional costs and potential liability.
Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us, and the borrower or junior lenders may continue to challenge whether the foreclosure process was commercially reasonable, which could result in additional costs and potential liability.
Our lenders also have revised, and may continue to revise, their eligibility requirements for the types of assets that they are willing to finance or the terms of such financing arrangements, including increased haircuts and requiring additional cash collateral, based on, 33 Table of Content s among other factors, the regulatory environment and their management of actual and perceived risk, particularly with respect to assignee liability.
Our lenders also have revised, and may continue to revise, their eligibility requirements for the types of assets that they are willing to finance or the terms of such financing arrangements, including increased haircuts and requiring additional cash collateral, based on, among other factors, the regulatory environment and their management of actual and perceived risk, particularly with respect to assignee liability.
GAAP. Furthermore, in determining the fair value of our assets, our Manager uses proprietary models that require the use of a significant amount of judgment and the application of various assumptions including, but not limited to, assumptions concerning future prepayment rates, interest rates, default rates and loss severities.
GAAP. Furthermore, in determining the fair value of our assets, our Manager uses proprietary models 24 Table of Contents that require the use of a significant amount of judgment and the application of various assumptions including, but not limited to, assumptions concerning future prepayment rates, interest rates, default rates and loss severities.
Generally we will seek to reserve the right to terminate our hedging transactions upon a counterparty's insolvency, but absent an actual insolvency, we may not be able to terminate a hedging transaction without the consent of the hedging counterparty, and we may not be able to assign or otherwise dispose of a hedging transaction to another counterparty without the consent of both the original hedging counterparty and the potential assignee.
Generally we will seek to reserve the right to terminate derivative transactions upon a counterparty's insolvency, but absent an actual insolvency, we may not be able to terminate derivative transaction without the consent of the counterparty, and we may not be able to assign or otherwise dispose of derivative transactions to another counterparty without the consent of both the original counterparty and the potential assignee.
Our domestic TRSs will pay U.S. federal, state and local income tax on their taxable income (net of deductible interest expense) at regular corporate tax rates, and their after-tax net income will be available for distribution to us but is not required to be distributed to us.
Our domestic TRSs will pay U.S. federal, state and local income tax on their taxable income (net of deductible interest expense) at regular corporate tax rates, and their after-tax 63 Table of Contents net income will be available for distribution to us but is not required to be distributed to us.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo date, no risks from cybersecurity threats to Ellington have materially affected or are reasonably likely to materially affect the Company. While Ellington did experience two business email compromise incidents in recent years, neither had a material impact on our business strategy, results of operations or financial condition.
Biggest changeRisk Factors—We are highly dependent on Ellington's and Longbridge's information systems and those of third-party service providers, including mortgage servicers, and system failures could significantly disrupt our business, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders." and "—Because we are highly dependent on information systems when sharing information with third party service providers, systems failures, breaches or cyber-attacks could 72 Table of Contents significantly disrupt our business, which could have a material adverse effect on our results of operations and cash flows." While Ellington did experience two business email compromise incidents in recent years, neither had a material impact on our business strategy, results of operations or financial condition.
In such continued maintenance of its cybersecurity posture, Longbridge conducts continuous depreciation of obsolete or unsuitable technology, including legacy hardware and software, has a robust patch and vulnerability management process, and has an external firm dedicated to the continued monitoring of new developments in threat actors’ activities in order to take preventative actions.
In such continued maintenance of its cybersecurity posture, Longbridge conducts continuous deprecation of obsolete or unsuitable technology, including legacy hardware and software, has a robust patch and vulnerability management process, and has an external firm dedicated to the continued monitoring of new developments in threat actors’ activities in order to take preventative actions.
During his tenure at Ellington, the DPI Head has lead several critical efforts such as the revitalization of Ellington’s hardware, networking and disaster recovery facilities, major improvements to Ellington’s cybersecurity infrastructure, and the development and maintenance of Ellington’s Data Engineering infrastructure.
During his tenure at Ellington, the DPI Head has led several critical efforts such as the revitalization of Ellington’s hardware, networking and disaster recovery facilities, major improvements to Ellington’s cybersecurity infrastructure, and the development and maintenance of Ellington’s Data Engineering infrastructure.
Each of Ellington and Longbridge employ internal or external resources whose responsibilities include oversight of their respective firm’s cybersecurity posture. Ellington's cybersecurity team is lead by Ellington's outsourced Chief Technology Officer (the "CTO"), who is primarily responsible for assessing and managing material risks from cybersecurity threats to Ellington.
Each of Ellington and Longbridge employ internal or external resources whose responsibilities include oversight of their respective firm’s cybersecurity posture. Ellington's cybersecurity team is led by Ellington's Chief Technology Officer (the "CTO"), who is primarily responsible for assessing and managing material risks from cybersecurity threats to Ellington.
In such continued monitoring of its cybersecurity posture, Ellington conducts continuous depreciation of obsolete or unsuitable technology, including legacy hardware and software, has a robust patch and vulnerability management process, and has 71 Table of Content s personnel dedicated to the continued monitoring of new developments in threat actors’ activities in order to take preventative actions.
In such continued monitoring of its cybersecurity posture, Ellington conducts continuous deprecation of obsolete or unsuitable technology, including legacy hardware and software, has a robust patch and vulnerability management process, and has personnel dedicated to the continued monitoring of new developments in threat actors’ activities in order to take preventative actions.
Ellington's Risk Management and Strategy Ellington’s cybersecurity program is focused on the following key areas: • Governance : As discussed in more detail below under "Governance,” our Board of Directors’ oversight of cybersecurity risk management is supported by the Audit Committee of our Board of Directors (the “Audit Committee”), which regularly interacts with our management team and other professionals who are responsible for assessing and managing material risks from cybersecurity threats at Ellington. • Collaborative Approach : Ellington has implemented a cross-functional approach to identifying and evaluating, preventing, mitigating and remediating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents.
Longbridge had over 400 employees as of December 31, 2024. 71 Table of Contents Ellington's Risk Management and Strategy Ellington’s cybersecurity program is focused on the following key areas: • Governance : As discussed in more detail below under "Governance," our Board of Directors' oversight of cybersecurity risk management is supported by the Audit Committee of our Board of Directors (the "Audit Committee"), which regularly interacts with our management team and other professionals who are responsible for assessing and managing material risks from cybersecurity threats at Ellington. • Collaborative Approach : Ellington has implemented a cross-functional approach to identifying and evaluating, preventing, mitigating and remediating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents.
In general, Longbridge also seeks to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that Longbridge collects and stores by identifying, preventing and mitigating cybersecurity threats and responding to cybersecurity incidents when they occur. Longbridge had over 400 employees as of December 31, 2023.
In general, Longbridge also seeks to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that Longbridge collects and stores by identifying, preventing and mitigating cybersecurity threats and responding to cybersecurity incidents when they occur.
The CTO has extensive experience in application development, database architecture, systems design, and third-party software integration. During his tenure at Ellington, the CTO has lead large technical efforts such as the development of Ellington’s proprietary whole loan management system and the overhaul of Ellington’s engineering infrastructure and development services.
The CTO has extensive experience in application development, database architecture, systems design, and third-party software integration. During his tenure at Ellington, the CTO led large technical efforts such as the development of Ellington's proprietary internally hosted rapid application system and the overhaul of Ellington’s engineering infrastructure and development services.
The results of such assessments, tests and reviews are reported to our Audit Committee and Board of Directors, and Longbridge adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments, tests and reviews, including the implementation of new software and technologies. 72 Table of Content s To date, no risks from cybersecurity threats from Longbridge have materially affected or are reasonably likely to materially affect our Company.
The results of such assessments, tests and reviews are reported to our Audit Committee and Board of Directors, and Longbridge adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments, tests and reviews, including the implementation of new software and technologies.
Removed
Governance Our Board of Directors, through the Audit Committee, oversees our cybersecurity risk management process.
Added
To date, no risks from cybersecurity threats to Ellington have materially affected or are reasonably likely to materially affect the Company. Cyber criminals do, however, target us, Ellington and Ellington’s employees and other third parties. Ongoing or future attacks such as these could have impacts on our or Ellington’s operations.
Added
For additional information on these ongoing risks, please refer to "Part 1. Item 1A.
Added
To date, no risks from cybersecurity threats from Longbridge have materially affected or are reasonably likely to materially affect our Company. Cyber criminals do, however, target us and Longbridge’s employees and other third parties. Ongoing or future attacks such as these could have impacts on our or Longbridge’s operations.
Added
For additional information on these ongoing risks, please refer to “Part 1. Item 1A.
Added
Risk Factors—We are highly dependent on Ellington's and Longbridge's information systems and those of third-party service providers, including mortgage servicers, and system failures could significantly disrupt our business, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our stockholders.” and “—Because we are highly dependent on information 73 Table of Contents systems when sharing information with third party service providers, systems failures, breaches or cyber-attacks could significantly disrupt our business, which could have a material adverse effect on our results of operations and cash flows.” Governance Our Board of Directors, through the Audit Committee, oversees our cybersecurity risk management process.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed0 unchanged
Biggest changeItem 2. Properties We do not own any properties. Our principal offices are located in leased space at 53 Forest Avenue, Old Greenwich, CT 06870. The offices of our Manager and Ellington are at the same location.
Biggest changeItem 2. Properties Our principal offices are located in leased space at 53 Forest Avenue, Old Greenwich, CT 06870. The offices of our Manager and Ellington are at the same location.
As part of our management agreement, our Manager is responsible for providing offices necessary for all operations, and accordingly, all lease responsibilities related to our office spaces in Old Greenwich, CT belong to our Manager. 73 Table of Content s
As part of our management agreement, our Manager is responsible for providing offices necessary for all operations, and accordingly, all lease responsibilities related to our office spaces in Old Greenwich, CT belong to our Manager.
Added
For an overview of our real estate owned (“REO”), see Note 9—Real Estate Owned, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. 74 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+3 added−8 removed9 unchanged
Biggest changePerformance This performance graph is furnished and shall not be deemed filed with the SEC or subject to Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act.
Biggest changeThe Series E Preferred Stock redemption price was $25.540558 per share of Series E Preferred Stock, which was equal to the liquidation preference of $25.00 per share plus $0.540558 per share representing accrued and unpaid dividends to the Redemption Date. 76 Table of Contents Performance This performance graph is furnished and shall not be deemed filed with the SEC or subject to Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act.
The following graph provides a comparison of the cumulative total return on our common shares to the cumulative total return on the Standard & Poor's 500 Composite Stock Price Index, or the "S&P 500," and the FTSE National Association of Real Estate Investment Trusts Mortgage REIT Index, or the "FTSE NAREIT MREIT." The comparison is for the period from December 31, 2018 to December 31, 2023, and assumes in each case, a $100 investment on December 31, 2018 and the reinvestment of dividends.
The following graph provides a comparison of the cumulative total return on our common shares to the cumulative total return on the Standard & Poor's 500 Composite Stock Price Index, or the "S&P 500," and the FTSE National Association of Real Estate Investment Trusts Mortgage REIT Index, or the "FTSE NAREIT MREIT." The comparison is for the period from December 31, 2019 to December 31, 2024, and assumes in each case, a $100 investment on December 31, 2019 and the reinvestment of dividends.
Holders of Our Common Stock Based upon a review of a securities position listing as of the close of business on February 15, 2024, we had an aggregate of 179 holders of record and holders of our common stock who are nominees for an undetermined number of beneficial owners.
Holders of Our Common Stock Based upon a review of a securities position listing as of the close of business on February 21, 2025, we had an aggregate of 186 holders of record and holders of our common stock who are nominees for an undetermined number of beneficial owners.
Unregistered Sales of Equity Securities Pursuant to our 2017 Plan, on December 14, 2023, we granted 39,673 OP LTIP Units to certain of our partially dedicated employees.
Unregistered Sales of Equity Securities Pursuant to our 2017 Plan, on December 12, 2024, we granted 48,826 OP LTIP Units to certain of our partially dedicated employees.
We cannot assure you that we will pay any future dividends to our stockholders and previously declared dividends are not intended to be indicative of the amount and timing of future dividends, if any.
There can be no assurance that we will pay any future dividends to our stockholders and previously declared dividends are not intended to be indicative of the amount and timing of future dividends, if any. We have in the past reduced, and may in the future reduce, our monthly dividend.
The actual cumulative total returns shown on the graph above are as follows: December 31, 2018 2019 2020 2021 2022 2023 Ellington Financial Inc. $ 100.00 $ 132.43 $ 119.41 $ 150.86 $ 123.22 $ 145.59 S&P 500 $ 100.00 $ 132.61 $ 157.00 $ 202.02 $ 164.98 $ 208.30 FTSE NAREIT MREIT $ 100.00 $ 121.27 $ 98.69 $ 114.05 $ 84.00 $ 96.76 The performance information above has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness can be guaranteed.
The actual cumulative total returns shown on the graph above are as follows: December 31, 2019 2020 2021 2022 2023 2024 Ellington Financial Inc. $ 100.00 $ 90.17 $ 113.92 $ 93.05 $ 109.94 $ 119.53 S&P 500 100.00 118.39 152.34 124.73 157.48 196.85 FTSE NAREIT MREIT 100.00 81.38 94.05 69.27 79.79 79.96 The performance information above has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness can be guaranteed.
The OP LTIP Units are subject to forfeiture restrictions that will lapse with respect to 22,135 of the OP LTIP Units on December 14, 2024 and 17,538 of the OP LTIP Units on December 14, 2025. On December 14, 2023, we granted 7,657 OP LTIP Units to Ronald I.
The OP LTIP Units are subject to forfeiture restrictions that will lapse with respect to 30,443 of the OP LTIP Units on December 12, 2025 and 18,383 of the OP LTIP Units on December 12, 2026.
Removed
Simon, Ph.D., 7,657 OP LTIP units to Edward Resendez, 7,657 OP LTIP units to Lisa Mumford, and 7,657 OP LTIP units to Stephen J. Dannhauser, as compensation for serving as directors; such OP LTIP Units are subject to forfeiture restrictions that will lapse on September 14, 2024.
Added
Such grants were exempt from the registration requirements of the Securities Act based on the exemption provided in Section 4(a)(2) of the Securities Act. On December 27, 2024, 16,756 unvested OP LTIP Units previously issued on September 11, 2024 were exchanged for shares of restricted common stock on a one-for-one basis.
Removed
Such grants were exempt from the registration requirements of the Securities Act based on the exemption provided in Section 4(a)(2) of the Securities Act. Issuer Purchases of Equity Securities On March 21, 2023, our Board of Directors approved the adoption of a share repurchase program under which we are authorized to repurchase up to $50 million of common stock.
Added
The 16,756 shares of restricted common stock are subject to forfeiture restrictions that will lapse on December 26, 2025.
Removed
The common share repurchase program, which is open-ended in duration, allows us to make repurchases from time to time on the open market or in negotiated transactions, including under 10b5-1 plans. Repurchases are at our discretion, subject to applicable law, share availability, price and our financial performance, among other considerations.
Added
Issuer Purchases of Equity Securities We redeemed all 957,133 outstanding shares of our 8.250% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") on December 13, 2024 (the "Redemption Date"), pursuant to the terms of the Certificate of Designations relating to the Series E Preferred Stock.
Removed
As of December 31, 2023, the Company had remaining authorization to repurchase up to $45.8 million of the Company's common stock under the common share repurchase program. We did not repurchase any shares of our common stock pursuant to the common share repurchase program during the three months ended December 31, 2023.
Removed
On February 21, 2022, our Board of Directors approved the adoption of a share repurchase program under which we are authorized to repurchase up to $30.0 million of Series A Preferred Stock and Series B Preferred Stock.
Removed
The preferred share repurchase program, which is open-ended in duration, allows us to make repurchases from time to time on the open market or in negotiated transactions, including under 10b5-1 plans. Repurchases are at our discretion, subject to applicable law, share availability, price and our financial performance, among other considerations.
Removed
As of December 31, 2023, the Company had 75 Table of Content s remaining authorization to repurchase up to $30.0 million of the Company’s Series A Preferred Stock and Series B Preferred Stock under the preferred share repurchase program.
Removed
We did not repurchase any shares of our Series A Preferred Stock and Series B Preferred Stock pursuant to the preferred share repurchase during the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

228 edited+69 added−141 removed147 unchanged
Biggest changeResults of Operations The following tables summarizes our results of operations by segment (as applicable) for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 (In thousands except per share amounts) Investment Portfolio Longbridge Corporate/ Other Total Interest Income (Expense) Interest income $ 344,575 $ 18,913 $ 6,684 $ 370,172 Interest expense (223,814) (25,822) (12,815) (262,451) Net interest income 120,761 (6,909) (6,131) 107,721 Other Income (Loss) Realized and unrealized gains (losses) on securities and loans, net 57,605 23,348 (3,650) 77,303 Realized and unrealized gains (losses) on financial derivatives, net 3,812 7,623 13,559 24,994 Realized and unrealized gains (losses) on real estate owned, net (3,052) — — (3,052) Unrealized gains (losses) on other secured borrowings, at fair value, net (51,554) — — (51,554) Unrealized gains (losses) on unsecured borrowings, at fair value — — 146 146 Net change from reverse mortgage loans, at fair value — 503,831 — 503,831 Net change related to HMBS obligations, at fair value — (451,598) — (451,598) Bargain purchase gain — — 28,175 28,175 Other, net 5,646 35,308 — 40,954 Total other income (loss) 12,457 118,512 38,230 169,199 Expenses Base management fee to affiliate, net of fee rebates (2) — — 20,419 20,419 Other investment related expenses 9,949 27,275 — 37,224 Other operating expenses 6,238 74,633 49,196 130,067 Total expenses 16,187 101,908 69,615 187,710 Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities 117,031 9,695 (37,516) 89,210 Income tax expense (benefit) — — 457 457 Earnings (losses) from investments in unconsolidated entities (855) — — (855) Net Income (Loss) 116,176 9,695 (37,973) 87,898 Net income (loss) attributable to non-controlling interests 3,125 (41) 730 3,814 Dividends on preferred stock — — 23,182 23,182 Net Income (Loss) Attributable to Common Stockholders $ 113,051 $ 9,736 $ (61,885) $ 60,902 Net Income (Loss) Per Common Share $ 1.65 $ 0.14 $ (0.90) $ 0.89 (1) See Note 16 of the notes to the consolidated financial statements for further details on management fee rebates. 99 Table of Content s Year Ended December 31, 2022 (1) Year Ended December 31, 2021 (In thousands except per share amounts) Investment Portfolio Longbridge Corporate/Other Total Investment Portfolio Corporate/ Other Total Interest Income (Expense) Interest income $ 277,141 $ 2,859 $ 2,218 $ 282,218 $ 175,419 $ 86 $ 175,505 Interest expense (124,308) (4,628) (12,841) (141,777) (38,990) (5,040) (44,030) Net interest income 152,833 (1,769) (10,623) 140,441 136,429 (4,954) 131,475 Other Income (Loss) (1) Realized and unrealized gains (losses) on securities and loans, net (582,611) 1,355 — (581,256) (25,785) — (25,785) Realized and unrealized gains (losses) on financial derivatives, net 194,236 (106) (19,750) 174,380 23,688 (1,831) 21,857 Realized and unrealized gains (losses) on real estate owned, net 5 — — 5 452 — 452 Unrealized gains (losses) on other secured borrowings, at fair value, net 258,140 — — 258,140 15,844 — 15,844 Unrealized gains (losses) on Unsecured borrowings, at fair value — — 18,165 18,165 — — — Net change from reverse mortgage loans, at fair value — 199,189 — 199,189 — — — Net change related to HMBS obligations, at fair value — (162,381) — (162,381) — — — Bargain purchase gain 7,932 — — 7,932 — — — Other, net 3,501 1,878 — 5,379 7,194 — 7,194 Total other income (loss) (118,797) 39,935 (1,585) (80,447) 21,393 (1,831) 19,562 Expenses Base management fee to affiliate, net of fee rebates (2) — — 16,847 16,847 — 13,422 13,422 Incentive fee to affiliate — — — — — 15,658 15,658 Other investment related expenses 21,435 5,899 3,615 30,949 18,544 — 18,544 Other operating expenses 4,482 17,775 14,912 37,169 3,094 14,723 17,817 Total expenses 29,532 23,674 31,759 84,965 21,638 43,803 65,441 Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities 4,504 14,492 (43,967) (24,971) 136,184 (50,588) 85,596 Income tax expense (benefit) — — (17,716) (17,716) — 3,144 3,144 Earnings (losses) from investments in unconsolidated entities (63,614) — — (63,614) 58,104 — 58,104 Net Income (Loss) (59,110) 14,492 (26,251) (70,869) 194,288 (53,732) 140,556 Net income (loss) attributable to non-controlling interests 212 32 (1,066) (822) 5,294 1,799 7,093 Dividends on preferred stock — — 15,292 15,292 — 8,117 8,117 Net Income (Loss) Attributable to Common Stockholders $ (59,322) $ 14,460 $ (40,477) $ (85,339) $ 188,994 $ (63,648) $ 125,346 Net Income (Loss) Per Common Share $ (0.99) $ 0.24 $ (0.68) $ (1.43) $ 3.89 $ (1.31) $ 2.58 (1) Conformed to current period presentation.
Biggest changeResults of Operations The following tables summarizes our results of operations by segment (as applicable) for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 (In thousands except per share amounts) Investment Portfolio Longbridge Corporate/ Other Total Interest Income (Expense) Interest income $ 358,308 $ 50,660 $ 7,047 $ 416,015 Interest expense (216,144) (45,187) (18,275) (279,606) Net interest income 142,164 5,473 (11,228) 136,409 Other Income (Loss) Realized and unrealized gains (losses) on securities and loans, net 33,665 24,794 — 58,459 Realized and unrealized gains (losses) on financial derivatives, net 31,554 15,977 (6,785) 40,746 Realized and unrealized gains (losses) on real estate owned, net (4,893) — — (4,893) Unrealized gains (losses) on other secured borrowings, at fair value, net (39,959) 4,098 — (35,861) Unrealized gains (losses) on unsecured borrowings, at fair value — — (9,147) (9,147) Net change from HECM reverse mortgage loans, at fair value — 637,019 — 637,019 Net change related to HMBS obligations, at fair value — (545,673) — (545,673) Other, net 8,254 20,334 — 28,588 Total other income (loss) 28,621 156,549 (15,932) 169,238 Expenses Base management fee to affiliate, net of fee rebates (1) — — 23,460 23,460 Other investment related expenses 15,201 41,863 — 57,064 Other operating expenses 5,523 82,814 20,515 108,852 Total expenses 20,724 124,677 43,975 189,376 Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities 150,061 37,345 (71,135) 116,271 Income tax expense (benefit) — — 612 612 Earnings (losses) from investments in unconsolidated entities 32,445 — — 32,445 Net Income (Loss) 182,506 37,345 (71,747) 148,104 Net income (loss) attributable to non-controlling interests 1,010 77 1,156 2,243 Dividends on preferred stock — — 27,697 27,697 (Gain) loss on redemption of preferred stock — — 335 335 Net Income (Loss) Attributable to Common Stockholders $ 181,496 $ 37,268 $ (100,935) $ 117,829 Net Income (Loss) Per Common Share $ 2.09 $ 0.43 $ (1.16) $ 1.36 (1) See Note 16 of the notes to the consolidated financial statements for further details on management fee rebates. 99 Table of Contents Year Ended December 31, 2023 (In thousands except per share amounts) Investment Portfolio Longbridge Corporate/Other Total Interest Income (Expense) Interest income $ 344,575 $ 18,913 $ 6,684 $ 370,172 Interest expense (223,814) (25,822) (12,815) (262,451) Net interest income 120,761 (6,909) (6,131) 107,721 Other Income (Loss) Realized and unrealized gains (losses) on securities and loans, net 57,605 23,348 (3,650) 77,303 Realized and unrealized gains (losses) on financial derivatives, net 3,812 7,623 13,559 24,994 Realized and unrealized gains (losses) on real estate owned, net (3,052) — — (3,052) Unrealized gains (losses) on other secured borrowings, at fair value, net (51,554) — — (51,554) Unrealized gains (losses) on unsecured borrowings, at fair value — — 146 146 Net change from HECM reverse mortgage loans, at fair value — 503,831 — 503,831 Net change related to HMBS obligations, at fair value — (451,598) — (451,598) Bargain purchase gain — — 28,175 28,175 Other, net 5,646 35,308 — 40,954 Total other income (loss) 12,457 118,512 38,230 169,199 Expenses Base management fee to affiliate, net of fee rebates (1) — — 20,419 20,419 Other investment related expenses 9,949 27,275 — 37,224 Other operating expenses 6,238 74,633 49,196 130,067 Total expenses 16,187 101,908 69,615 187,710 Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities 117,031 9,695 (37,516) 89,210 Income tax expense (benefit) — — 457 457 Earnings (losses) from investments in unconsolidated entities (855) — — (855) Net Income (Loss) 116,176 9,695 (37,973) 87,898 Net income (loss) attributable to non-controlling interests 3,125 (41) 730 3,814 Dividends on preferred stock — — 23,182 23,182 Net Income (Loss) Attributable to Common Stockholders $ 113,051 $ 9,736 $ (61,885) $ 60,902 Net Income (Loss) Per Common Share $ 1.65 $ 0.14 $ (0.90) $ 0.89 (1) See Note 16 of the notes to the consolidated financial statements for further details on management fee rebates.
See Note 5— Investments in Loans , Note 7— Forward MSR-related Investments , and Note 8— Investments in Unconsolidated Entities to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
See Note 5— Investments in Loans , Note 7— Forward MSR-related Investments , and Note 8— Investments in Unconsolidated Entities, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
(2) Includes equity investments in securitization-related vehicles. (3) REO is not eligible to elect the fair value option as described in Note 2 of the notes to the consolidated financial statements and, as a result, is included at the lower of cost or fair value. (4) Includes investments in unconsolidated entities holding commercial mortgage loans and REO.
(2) Includes related REO. REO is not eligible to elect the fair value option as described in Note 2 of the notes to the consolidated financial statements and, as a result, is included at the lower of cost or fair value. (3) Includes investments in unconsolidated entities holding commercial mortgage loans and REO. (4) Includes equity investments in securitization-related vehicles.
Other, net, another component of Other income (loss), includes rental income and income related to loan originations, as well as loan commitments, MSRs and Forward MSR-related investments, realized gains (losses) on foreign currency transactions, and unrealized gains (losses) on foreign currency remeasurement.
Other, net, another component of Other income (loss), includes rental income and income related to loan originations, as well as income on MSRs and Forward MSR-related investments, unrealized gains (losses) on loan commitments, realized gains (losses) on foreign currency transactions, and unrealized gains (losses) on foreign currency remeasurement.
Longbridge For the year ended December 31, 2023, other income (loss) from the Longbridge segment was $118.5 million, consisting primarily of gains from Net change from reverse mortgage loans, at fair value of $503.8 million, other income of $35.3 million, net unrealized gains of $23.3 million on securities and loans, and net realized and unrealized gains of $7.6 million on financial derivatives.
For the year ended December 31, 2023, other income (loss) from the Longbridge segment was $118.5 million, consisting primarily of gains from Net change from reverse mortgage loans, at fair value of $503.8 million, other income of $35.3 million, net unrealized gains of $23.3 million on securities and loans, and net realized and unrealized gains of $7.6 million on financial derivatives.
In addition, in accordance with the terms of the Arlington Merger Agreement (i) each of the 379,668 outstanding shares of Arlington’s 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of our 7.000% Series D Preferred Stock, $0.001 par value per share ("Series D Preferred Stock"); and (ii) each of the 957,133 outstanding shares of Arlington’s 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of our 8.250% Series E Preferred Stock, $0.001 par value per share ("Series E Preferred Stock").
In addition, in accordance with the terms of the Arlington Merger Agreement (i) each of the 379,668 outstanding shares of Arlington’s 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of our 7.000% Series D Preferred Stock, $0.001 par value per share ("Series D Preferred Stock"); and (ii) each of the 957,133 outstanding shares of Arlington’s 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of our 8.250% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series E Preferred Stock").
Corporate/Other For the year ended December 31, 2023, other income (loss) was $38.2 million, consisting primarily of net realized and unrealized gains on the fixed payer interest rate swaps associated with the then-pending Great Ajax merger and unrealized gains on our Unsecured borrowings, at fair value, partially offset by net realized and unrealized losses on the fixed receiver interest rate swaps that we use to hedge the fixed payments on both our Unsecured borrowings and our preferred equity.
For the year ended December 31, 2023, other income (loss) was $38.2 million, consisting primarily of net realized and unrealized gains on the fixed payer interest rate swaps associated with the then-pending Great Ajax merger and unrealized gains on our Unsecured borrowings, at fair value, partially offset by net realized and unrealized losses on the fixed receiver interest rate swaps that we use to hedge the fixed payments on both our Unsecured borrowings and our preferred equity.
After pooling the HECM loans into HMBS, Longbridge retains the mortgage servicing rights associated with such HMBS, which we refer to as the "HMBS MSR Equivalent." Additionally, Longbridge typically retains the MSRs associated with the proprietary reverse mortgage loans that it originates and has acquired MSRs on reverse mortgage loans in the secondary market ("Reverse MSRs").
After pooling the HECM loans into HMBS, Longbridge retains the mortgage servicing rights associated with such HMBS, which we refer to as the "HMBS MSR Equivalent." Additionally, Longbridge typically retains the MSRs associated with the proprietary reverse mortgage loans that it originates and has acquired MSRs on reverse mortgage loans in the secondary market (collectively, "Reverse MSRs").
For the year ended December 31, 2023, we issued 9,140,986 shares of common stock under the 2021 Common ATM Program and the Amended Common ATM Program, which provided $122.1 million of net proceeds after approximately $1.1 million of commissions and $0.3 million of offering costs.
For the year ended December 31, 2023, we issued 9,140,986 shares of common stock under the 2021 Common ATM Program, which provided $122.1 million of net proceeds after approximately $1.1 million of commissions and $0.3 million of offering costs.
As of December 31, 2023, our outstanding unsecured borrowings were comprised of $210.0 million of 5.875% Senior Notes due April 2027, $34.9 million of 6.75% Senior Notes due March 2025, $37.8 million of 6.00% Senior Notes due August 2026, and $15.0 million of unregistered junior subordinated unsecured debt securities, the "Trust Preferred Debt." The Trust Preferred Debt includes $10.0 million which accrues and requires the payment of interest quarterly at three-month term SOFR plus 3.26% and which matures on October 7, 2033, and $5.0 million which accrues and requires the payment of interest quarterly at three-month term SOFR plus 2.51% and which matures on July 7, 2035.
As of both December 31, 2024 and 2023, our outstanding unsecured borrowings were comprised of $210.0 million of 5.875% Senior Notes due April 2027, $34.9 million of 6.75% Senior Notes due March 2025, $37.8 million of 6.00% Senior Notes due August 2026, and $15.0 million of unregistered junior subordinated unsecured debt securities, the "Trust Preferred Debt." The Trust Preferred Debt includes $10.0 million which accrues and requires the payment of interest quarterly at three-month term SOFR plus 3.26% and which matures on October 7, 2033, and $5.0 million which accrues and requires the payment of interest quarterly at three-month term SOFR plus 2.51% and which matures on July 7, 2035.
In our investment portfolio, we invest in a diverse array of financial assets, including residential mortgage-backed securities, or "RMBS," including RMBS for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS"; residential and commercial mortgage loans; commercial mortgage-backed securities, or "CMBS"; consumer loans and asset-backed securities, or "ABS," including ABS backed by consumer loans; investments referencing mortgage servicing rights on traditional forward mortgage loans, or "Forward MSR-related investments"; collateralized loan obligations, or "CLOs"; non-mortgage- and mortgage-related derivatives; equity investments in loan origination companies; and other strategic investments.
In our Investment Portfolio Segment, we invest in a diverse array of financial assets, including residential and commercial mortgage loans; residential mortgage-backed securities, or "RMBS," including RMBS for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS"; commercial mortgage-backed securities, or "CMBS"; consumer loans and asset-backed securities, or "ABS," including ABS backed by consumer loans; investments referencing mortgage servicing rights on traditional forward mortgage loans, or "Forward MSR-related investments"; collateralized loan obligations, or "CLOs"; non-mortgage- and mortgage-related derivatives; debt and equity investments in loan origination companies; and other strategic investments.
GAAP, and as a result, such transactions are treated as secured borrowings on our Consolidated Balance Sheet. The HECM loans are included in Loans, at fair value, and the related liabilities are reflected as HMBS-related obligations, at fair value.
GAAP, and as a result, such transactions are treated as secured borrowings on our Consolidated Balance Sheet. The pooled HECM loans are included in Loans, at fair value, and the related liabilities are reflected as HMBS-related obligations, at fair value.
Finally, as of December 31, 2023, we had $297.7 million of outstanding Unsecured borrowings including (i) senior notes of $210.0 million, maturing in April 2027 and bearing an interest rate of 5.875%; (ii) senior notes of $34.9 million, maturing in March 2025 and bearing an interest rate of 6.75%; and (iii) senior notes of $37.8 million, maturing in August 2026 and bearing an interest rate of 6.00% (collectively, the "Senior Notes") as well as $15.0 million of unregistered junior subordinated unsecured debt securities (the "Trust Preferred Debt").
Finally, as of December 31, 2024, we had $297.7 million of outstanding Unsecured borrowings including: (i) senior notes of $210.0 million, maturing in April 2027 and bearing an interest rate of 5.875%; (ii) senior notes of $34.9 million, maturing in March 2025 and bearing an interest rate of 6.75%; and (iii) senior notes of $37.8 million, maturing in August 2026 and bearing an interest rate of 6.00% (collectively, the "Senior Notes") as well as $15.0 million of unregistered junior subordinated unsecured debt securities (the "Trust Preferred Debt").
Critical Accounting Estimates Our consolidated financial statements include the accounts of Ellington Financial Inc., its Operating Partnership, its subsidiaries, including Longbridge, and variable interest entities, or "VIEs," for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The preparation of our consolidated financial statements in accordance with U.S.
Critical Accounting Estimates Our consolidated financial statements include the accounts of Ellington Financial Inc., its Operating Partnership, its subsidiaries, and variable interest entities, or "VIEs," for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The preparation of our consolidated financial statements in accordance with U.S.
December 31, 2023 Notional Net Fair Value (In thousands) Long Short Net Mortgage-Related Derivatives: CDS on MBS and MBS Indices $ 290 $ (42,146) $ (41,856) $ 3,294 Total Net Mortgage-Related Derivatives 3,294 Corporate-Related Derivatives: CDS on Corporate Bonds and Corporate Bond Indices 151,000 (550,299) (399,299) (8,835) Total Return Swaps on Corporate Bond Indices and Corporate Debt (3) 1,389 — 1,389 6 Warrants (3) 202 — 202 1,702 Total Net Corporate-Related Derivatives (7,127) Interest Rate-Related Derivatives: TBAs 375,154 (433,098) (57,944) (3,638) Interest Rate Swaps 1,859,330 (3,129,277) (1,269,947) 97,494 U.S.
Notional Net Fair Value (In thousands) Long Short Net Mortgage-Related Derivatives: CDS on MBS and MBS Indices $ 290 $ (42,146) $ (41,856) $ 3,294 Total Net Mortgage-Related Derivatives 3,294 Corporate-Related Derivatives: CDS on Corporate Bonds and Corporate Bond Indices 151,000 (550,299) (399,299) (8,835) Total Return Swaps on Corporate Bond Indices and Corporate Debt (3) 1,389 — 1,389 6 Warrants (3) 202 — 202 1,702 Total Net Corporate-Related Derivatives (7,127) Interest Rate-Related Derivatives: TBAs 375,154 (433,098) (57,944) (3,638) Interest Rate Swaps 1,859,330 (3,129,277) (1,269,947) 97,494 U.S.
Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
In addition to our borrowings under repos, we have entered into various other types of transactions to finance certain of our investments, including non-QM loans and REO, commercial mortgage loans, consumer loans and ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs; such transactions are accounted for as secured borrowings.
In addition to our borrowings under repos, we have entered into various other types of transactions to finance certain of our investments, including non-QM loans and REO, European residential mortgage loans, commercial mortgage loans, consumer loans and ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs; such transactions are accounted for as secured borrowings.
The remaining ownership interest of approximately 0.7% in the Operating Partnership represents the interests in the Operating Partnership that are owned by an affiliate of our Manager, our current and certain former directors, and certain current and former Ellington employees and their related parties, and is reflected in our financial statements as a non-controlling interest.
The remaining ownership interest of approximately 0.8% in the Operating Partnership represents the interests in the Operating Partnership that are owned by an affiliate of our Manager, our current and certain former directors, and certain current and former Ellington employees and their related parties, and is reflected in our financial statements as a non-controlling interest.
The residential transition loans that we originate or purchase include: (i) "fix and flip" loans, which are made to real estate investors for the purpose of acquiring residential homes, making value-add improvements to such homes, and reselling the newly rehabilitated homes for a potential profit, and (ii) loans made to real estate investors for a "business purpose," such as purchasing a rental investment property, financing or refinancing a fully rehabilitated home awaiting sale, or securing short-term financing pending qualification for longer-term lower-rate financing.
The residential transition loans that we purchase are typically newly originated loans and include: (i) "fix and flip" loans, which are made to real estate investors for the purpose of acquiring residential homes, making value-add improvements to such homes, and reselling the newly rehabilitated homes for a potential profit, and (ii) loans made to real estate investors for a "business purpose," such as purchasing a rental investment property, financing or refinancing a fully rehabilitated home awaiting sale, or securing short-term financing pending qualification for longer-term lower-rate financing.
We use mortgage-related credit derivatives primarily to hedge credit risk in certain credit strategies, although we also take net long positions in certain CDS on RMBS and CMBS indices. Our CDS on individual RMBS represent "single-name" positions whereby we have synthetically purchased credit protection on specific non-Agency RMBS bonds.
We use mortgage-related credit derivatives primarily to hedge credit risk in certain credit strategies, although we have also taken net long positions in certain CDS on RMBS and CMBS indices. Our CDS on individual RMBS represent "single-name" positions whereby we have synthetically purchased credit protection on specific non-Agency RMBS bonds.
Our commercial mortgage loans may be fixed or floating rate and will generally have maturities ranging from one to ten years. We typically originate and acquire first-lien loans but may also originate and acquire subordinated loans. As of December 31, 2023, all of our commercial mortgage loans were first-lien loans.
Our commercial mortgage loans may be fixed or floating rate and will generally have maturities ranging from one to ten years. We typically originate and acquire first-lien loans but may also originate and acquire subordinated loans. As of December 31, 2024, all of our commercial mortgage loans were first-lien loans.
Financing—Overall We have various financing arrangements in place as of December 31, 2023, including both secured and unsecured borrowings. We use repos, secured lines of credit, and various other secured borrowings to finance our portfolios, each of which we account for as collateralized borrowings.
Financing—Overall We have various financing arrangements in place as of December 31, 2024, including both secured and unsecured borrowings. We use repos, secured lines of credit, and various other secured borrowings to finance our portfolios, each of which we account for as collateralized borrowings.
Investment Portfolio For the year ended December 31, 2023, other income (loss) was $12.5 million, consisting primarily of net realized and unrealized gains of $57.6 million on our securities and loans, net realized and unrealized gains of $3.8 million on our financial derivatives, and $5.6 million of Other, net.
For the year ended December 31, 2023, other income (loss) was $12.5 million, consisting primarily of net realized and unrealized gains of $57.6 million on our securities and loans, net realized and unrealized gains of $3.8 million on our financial derivatives, and $5.6 million of Other, net.
Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for further information. VIEs : We evaluate each of our investments and other contractual arrangements to determine whether our interest constitutes a variable interest in a VIE, and if so whether we are the primary beneficiary of such VIE.
Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for further information. 94 Table of Contents VIEs : We evaluate each of our investments and other contractual arrangements to determine whether our interest constitutes a variable interest in a VIE, and if so whether we are the primary beneficiary of such VIE.
We are externally managed and advised by our Manager, an affiliate of Ellington. Ellington is a registered investment adviser with a 29-year history of investing in the Agency and credit markets.
We are externally managed and advised by our Manager, an affiliate of Ellington. Ellington is a registered investment adviser with a 30-year history of investing in the Agency and credit markets.
Currently, our credit hedges consist primarily of financial instruments tied to corporate credit, such as CDS on corporate bond indices, short positions in and CDS on corporate bonds; and positions involving exchange traded funds, or "ETFs," of corporate bonds.
Our credit hedges consist of financial instruments tied to corporate credit, such as CDS on corporate bond indices, short positions in and CDS on corporate bonds, and positions involving exchange traded funds, or "ETFs," of corporate bonds.
(5) Includes equity investment in an unconsolidated entity which purchases certain other loans for eventual securitization. (6) Includes corporate loans to certain loan origination entities in which we hold an equity investment. (7) Retained non-QM RMBS represents RMBS issued by non-consolidated Ellington-sponsored non-QM loan securitization trusts, and interest in entities holding such RMBS.
(5) Includes equity investment in Ellington affiliate. (6) Includes equity investment in an unconsolidated entity which purchases certain other loans for eventual securitization. (7) Includes corporate loans to certain loan origination entities in which we hold an equity investment. (8) Retained RMBS represents RMBS issued by non-consolidated Ellington-sponsored loan securitization trusts, and interest in entities holding such RMBS.
In making these determinations we use both qualitative and quantitative analyses involving a significant amount of judgment, taking into consideration factors such as which interests in the VIE create or absorb variability, the contractual terms related to such 94 Table of Content s interests, other transactions or agreements with the entity, key decision makers and their impact on the VIE’s economic performance, and related party relationships.
In making these determinations we use both qualitative and quantitative analyses involving a significant amount of judgment, taking into consideration factors such as which interests in the VIE create or absorb variability, the contractual terms related to such interests, other transactions or agreements with the entity, key decision makers and their impact on the VIE’s economic performance, and related party relationships.
Dollars to be received by us at the maturity of the forward contract. The following table summarizes our financial derivatives portfolio (1)(2) as of December 31, 2022.
Dollars to be received by us at the maturity of the forward contract. The following table summarizes our financial derivatives portfolio (1)(2) as of December 31, 2023.
Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet. 87 Table of Content s The table below summarizes our interests in commercial mortgage loans by geographic location of the underlying real estate collateral, as a percentage of total outstanding unpaid principal balance, as of December 31, 2023: Property Location by U.S.
Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet. The table below summarizes our interests in commercial mortgage loans by geographic location of the underlying real estate collateral, as a percentage of total outstanding unpaid principal balance, as of December 31, 2024: Property Location by U.S.
On January 20, 2022, we commenced an "at-the-market" offering for our Series A Preferred Stock and Series B Preferred Stock, or the "Preferred ATM Program," by entering into equity distribution agreements with third party sales agents under which we are authorized to offer and sell up to $100.0 million of 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series A Preferred Stock") and/or 6.250% Series B Fixed-Rate Reset Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series B Preferred Stock") from time to time.
We have commenced an "at-the-market" offering for our Series A Preferred Stock and Series B Preferred Stock, or the "Preferred ATM Program," by entering into equity distribution agreements with third party sales agents under which we are authorized to offer and sell up to $100.0 million of 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series A Preferred Stock") and/or 6.250% Series B Fixed-Rate Reset Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series B Preferred Stock") from time to time.
Bridge loans are often secured by properties in transition, where the borrower is in the process of either re-developing or stabilizing operations at the property. We also acquire seasoned commercial mortgage bridge loans, as well as longer-term commercial mortgage loans.
Bridge loans are often secured by properties in transition, where the borrower is in the process of either re-developing or stabilizing operations at the property. 80 Table of Contents We also acquire seasoned commercial mortgage bridge loans, as well as longer-term commercial mortgage loans.
As of December 31, 2023, outstanding indebtedness under repos was $1.1 billion for Agency RMBS, $1.6 billion for credit portfolio assets, $150.2 million of reverse mortgage loans, and $155.0 million for U.S. Treasury securities. As of December 31, 2022 indebtedness outstanding on our repos was approximately $2.6 billion.
As of December 31, 2023, outstanding indebtedness under repos was $1.1 billion for Agency RMBS, $1.6 billion for credit portfolio assets, $150.2 million on reverse mortgage loans, and $155.0 million for U.S. Treasury securities.
In addition, Longbridge opportunistically acquires, in the secondary market or otherwise, MSRs associated with either proprietary reverse mortgage loans, HECMs or HECM buyout loans. 81 Table of Content s Strategic Equity Investments in Loan Originators We have made, and in the future may make additional, equity investments in loan originators and other related entities; historically, our investments have generally represented non-controlling interests, although we are not restricted from holding controlling interests in such entities.
In addition, Longbridge opportunistically acquires, in the secondary market or otherwise, MSRs associated with either proprietary reverse mortgage loans, HECMs or HECM buyout loans. 82 Table of Contents Strategic Equity Investments in Loan Originators We have made, and in the future may make additional, equity investments in loan originators and other related entities; historically, our investments have generally represented non-controlling interests, although we are not restricted from holding controlling interests in such entities.
(4) For the year ended December 31, 2023, includes $7.4 million related to the Great Ajax merger, which was terminated in October 2023, $1.7 million of non-capitalized transaction costs, $3.1 million of professional fees related to the acquisition and integration of Longbridge, $1.4 million of non-cash 111 Table of Content s equity compensation expense, and $1.1 million of various other expenses.
For the year ended December 31, 2023, includes $7.4 million related to the Great Ajax merger, which was terminated in October 2023, $3.1 million of professional fees related to the acquisition and integration of Longbridge, $1.7 million of non-capitalized transaction costs, $1.4 million of non-cash equity compensation expense, and $1.1 million of various other expenses.
Including such borrowings, our debt-to-equity ratio based on total recourse borrowings was 2.4:1 and 2.7:1 as of December 31, 2023 and 2022, respectively. (2) For unsettled purchases and sales, assumes associated borrowings are subject to haircuts of 5.1% and 5.3% as of December 31, 2023 and 2022, respectively. (3) All of our non-recourse borrowings are secured by collateral.
Including such borrowings, our debt-to-equity ratio based on total recourse borrowings was 2.1:1 and 2.4:1 as of December 31, 2024 and 2023, respectively. (2) For unsettled purchases and sales, assumes associated borrowings are subject to haircuts of 5.9% and 5.1% as of December 31, 2024 and 2023, respectively. (3) All of our non-recourse borrowings are secured by collateral.
Longbridge originates and services reverse mortgage loans, including both home equity conversion mortgage loans ("HECM loans") which are insured by the Federal Housing Administration ("FHA"), as well as non-FHA-insured reverse mortgage loans, which we refer to as "proprietary reverse mortgage loans." HECM loans are generally eligible for securitization into HECM-backed MBS ("HMBS"), which are guaranteed by the Government National Mortgage Association ("GNMA").
Longbridge originates home equity conversion mortgage loans ("HECM loans"), which are insured by the Federal Housing Administration ("FHA"), and non-FHA-insured reverse mortgage loans, which we refer to as "proprietary reverse mortgage loans." HECM loans are generally eligible for securitization into HECM-backed MBS ("HMBS"), which are guaranteed by the Government National Mortgage Association ("GNMA").
The following table summarizes our aggregate secured borrowings, including repos and Total other secured borrowings, for the years ended December 31, 2023 and 2022.
The following table summarizes our aggregate secured borrowings, including repos and Total other secured borrowings, for the years ended December 31, 2024 and 2023.
Other Income (Loss) Other income (loss) consists of net realized and unrealized gains (losses) on securities and residential mortgage, commercial mortgage, consumer, and corporate loans, financial derivatives, and real estate owned, unrealized gains (losses) on other secured borrowings, at fair value and Unsecured borrowings, at fair value, net change from reverse mortgage loans, at fair value, net change related to HMBS obligations, at fair value, and bargain purchase gain.
Other Income (Loss) Other income (loss) consists of net realized and unrealized gains (losses) on securities and residential mortgage, commercial mortgage, consumer, and corporate loans, financial derivatives, and real estate owned, unrealized gains (losses) on other secured borrowings, at fair value and Unsecured borrowings, at fair value, net change from HECM reverse mortgage loans, at fair value, and net change related to HMBS obligations, at fair value.
As a result, the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain 110 Table of Content s adjustments) to our stockholders, in order to maintain our qualification as a REIT, is not based on whether we distributed 90% of our Adjusted Distributable Earnings.
As a result, the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain adjustments) to our stockholders, in order to maintain our qualification as a REIT, is not based on whether we distributed 90% of our Adjusted Distributable Earnings.
For more information on our targeted assets, see "—Our Targeted Asset Classes" below. Our Targeted Asset Classes Our targeted asset classes currently include investments in the U.S. and Europe (as applicable) in the categories listed below. Subject to maintaining our qualification as a REIT, we expect to continue to invest in these targeted asset classes.
For more information on our targeted assets, see "—Our Targeted Asset Classes" below. 78 Table of Contents Our Targeted Asset Classes Our targeted asset classes currently include investments in the U.S. and Europe (as applicable) in the categories listed below. Subject to maintaining our qualification as a REIT, we expect to continue to invest in these targeted asset classes.
For the years ended December 31, 2023, 2022, and 2021, we recognized a Catch-Up Amortization Adjustment of $(0.1) million, $4.1 million, and 1.3 million respectively. The Catch-up Amortization Adjustment is reflected as an increase (decrease) to Interest income on the Consolidated Statement of Operations.
For the years ended December 31, 2024, 2023, and 2022, we recognized a Catch-Up Amortization Adjustment of $(0.6) million, $(0.1) million, and $4.1 million, respectively. The Catch-up Amortization Adjustment is reflected as an increase (decrease) to Interest income on the Consolidated Statement of Operations.
As of December 31, 2023 and 2022, we had outstanding borrowings related to such transactions in the amount of $1.7 billion and $1.8 billion, respectively, which is reflected under the captions "Other secured borrowings" and "Other secured borrowings, at fair value" on the Consolidated Balance Sheet.
As of December 31, 2024 and 2023, we had outstanding borrowings related to such transactions in the amount of $2.2 billion and $1.7 billion, respectively, which is reflected under the captions "Other secured borrowings" and "Other secured borrowings, at fair value" on the Consolidated Balance Sheet.
We also have acquired, and may acquire in the future, European RMBS, including retained tranches from European RMBS securitizations in which we have participated. Residential Mortgage Loans Our residential mortgage loans include newly originated non-QM loans, residential transition loans, as well as legacy residential NPLs and RPLs.
We also have acquired, and may acquire in the future, European RMBS, including retained tranches from European RMBS securitizations in which we have participated. 81 Table of Contents Residential Mortgage Loans Our residential mortgage loans include newly originated non-QM loans, residential transition loans, as well as legacy residential NPLs and RPLs.
Treasury securities 2.2:1 2.5:1 Debt-to-equity ratio based on total recourse borrowings excluding U.S.
Treasury securities 1.8:1 2.2:1 Debt-to-equity ratio based on total recourse borrowings excluding U.S.
Treasury securities 8.6:1 10.1:1 Debt-to-equity ratio based on total recourse and non-recourse borrowings excluding U.S. Treasury securities, adjusted for unsettled purchases and sales (2) 8.4:1 10.0:1 (1) As of both December 31, 2023 and 2022, excludes borrowings at certain unconsolidated entities that are recourse to us.
Treasury securities 8.8:1 8.6:1 Debt-to-equity ratio based on total recourse and non-recourse borrowings excluding U.S. Treasury securities, adjusted for unsettled purchases and sales (2) 8.8:1 8.4:1 (1) As of December 31, 2024 and 2023, excludes borrowings at certain unconsolidated entities that are recourse to us.
(3) Notional represents the maximum number of shares available to be purchased upon exercise. (4) Notional value represents the total face amount of U.S. Treasury securities underlying all contracts held. As of December 31, 2023, a total of 19 long and 2,882 short U.S. Treasury futures contracts were held. (5) Short notional value represents U.S.
(3) Notional represents the maximum number of shares available to be purchased upon exercise. (4) Notional value represents the total face amount of U.S. Treasury securities underlying all contracts held. As of December 31, 2024, a total of 19 long and 821 short U.S. Treasury futures contracts were held. (5) Short notional value represents U.S.
Additionally, as of December 31, 2023, as an HMBS issuer, we had HMBS-related obligations of $8.4 billion collateralized by $8.5 billion of HMBS assets and as of December 31, 2022, we had HMBS-related obligations of $7.8 billion collateralized by $7.9 billion of HMBS assets; HMBS assets include HECM loans as well as REO and claims and other receivables.
Additionally, as of December 31, 2024, as an HMBS issuer, we had HMBS-related obligations of $9.2 billion collateralized by $9.2 billion of HMBS assets and as of December 31, 2023, we had HMBS-related obligations of $8.4 billion collateralized by $8.5 billion of HMBS assets; HMBS assets include HECM loans as well as REO and claims and other receivables.
Excluding the Catch-up Amortization Adjustment, our net interest margin, defined as the average yield on our portfolio of yield-bearing targeted assets less the average cost of funds on our secured borrowings (including actual and accrued periodic payments on interest rate swaps as described above), was 2.40% and 2.49% for the year ended December 31, 2023 and 2022, respectively.
Excluding the Catch-up Amortization Adjustment, our net interest margin, defined as the average yield on our portfolio of yield-bearing targeted assets less the average cost of funds on our secured borrowings (including actual and accrued periodic payments on interest rate swaps as described above), was 2.73% and 2.40% for the years ended December 31, 2024 and 2023, respectively.
Other, net of $5.6 million, consisted primarily of various origination and loan income, rental income, and income and net realized and unrealized gains on Forward MSR-related investments.
Other, net of $5.6 million, consisted 104 Table of Contents primarily of various origination and loan income, rental income, and income and net realized and unrealized gains on Forward MSR-related investments.
As of December 31, 2023 and 2022, the fair value of assets collateralizing our Total other secured borrowings was $1.9 billion and $2.1 billion, respectively.
As of December 31, 2024 and 2023, the fair value of assets collateralizing our Total other secured borrowings was $2.4 billion and $1.9 billion, respectively.
For the year ended December 31, 2023, Earnings (losses) from investments in unconsolidated entities of $(0.9) million, primarily consisted of unrealized losses on investments in loan originators of $(3.7) million, partially offset by unrealized gains of $1.3 million on investments in entities holding commercial mortgage loans and REO, in which we co-invest with other Ellington affiliates, and $1.9 million on investments in unconsolidated entities related to risk retention related vehicles related to non-QM securitizations.
For the year ended December 31, 2023, Earnings (losses) from investments in unconsolidated entities of $(0.9) million, primarily consisted of unrealized losses on investments in loan originators, partially offset by unrealized gains on investments in entities holding commercial mortgage loans and REO, in which we co-invest with other Ellington affiliates, and investments in unconsolidated entities related to risk retention related vehicles related to non-QM loan securitizations. 105 Table of Contents See "Item 7.
Reverse mortgage loans can have either fixed interest rates or adjustable interest rates. In the case of most fixed-rate reverse mortgage loans, the borrower must draw the loan proceeds up front in one lump sum, while many adjustable-rate mortgage loans provide the borrower with a line of credit that can be drawn over time.
In the case of most fixed-rate reverse mortgage loans, the borrower must draw the loan proceeds up front in one lump sum, while many adjustable-rate mortgage loans provide the borrower with a line of credit that can be drawn over time.
Recent Accounting Pronouncements Refer to Note 2 to our consolidated financial statements for a description of relevant recent accounting pronouncements, if any. 95 Table of Content s Financial Condition The following table summarizes the fair value of our consolidated portfolio of investments (1) as of December 31, 2023 and 2022.
Recent Accounting Pronouncements Refer to Note 2 to our consolidated financial statements for a description of relevant recent accounting pronouncements, if any. 95 Table of Contents Financial Condition The following table summarizes the fair value of our consolidated portfolio of investments (1) as of December 31, 2024 and 2023.
See Note 14 in the notes to our consolidated financial statements for further information on our other secured borrowings and HMBS-related obligations. As of December 31, 2023 and 2022, we had $297.7 million and $210.0 million of outstanding unsecured borrowings; respectively.
See Note 14 in the notes to our consolidated financial statements for further information on our other secured borrowings and HMBS-related obligations. As of December 31, 2024 and 2023, we had $297.7 million of outstanding unsecured borrowings.
Stockholders' equity, which excludes the non-controlling interests related to the minority interest in the Operating Partnership as well as the minority interests of our joint venture partners, was $1.517 billion as of December 31, 2023.
Stockholders' equity, which excludes the non-controlling interests related to the minority interest in the Operating Partnership as well as the minority interests of our joint venture partners, was $1.570 billion as of December 31, 2024.
Other Investment Related Expenses Other investment related expenses consist of servicing fees on our mortgage and consumer loans, as well as various other expenses and fees directly related to our financial assets and certain financial liabilities carried at fair value. For the years ended December 31, 2023 and 2022, other investment related expenses were $37.2 million and $30.9 million, respectively.
Other Investment Related Expenses Other investment related expenses consist of servicing fees on our mortgage and consumer loans, as well as various other expenses and fees directly related to our financial assets and certain financial liabilities carried at fair value. For the years ended December 31, 2024 and 2023, other investment related expenses were $57.1 million and $37.2 million, respectively.
Some of the variability in our interest income and portfolio yields is due to the Catch-up Amortization Adjustment. For the year ended December 31, 2023, we had a negative Catch-up Amortization Adjustment of $(0.1) million, which decreased our interest income.
Some of the variability in our interest income and portfolio yields is due to the Catch-up Amortization Adjustment. For the years ended December 31, 2024 and 2023, we had a negative Catch-up Amortization Adjustment of $(0.6) million and $(0.1) million, respectively, which decreased our interest income.
As of December 31, 2023, our book value per share of common stock, calculated using Total Stockholders' Equity less the aggregate liquidation preference of outstanding preferred stock, was $13.83.
As of December 31, 2024, our book value per share of common stock, calculated using Total Stockholders' Equity less the aggregate liquidation preference of outstanding preferred stock, was $13.52.
Typically, one party pays a fixed interest rate and receives a floating interest rate and the other party pays a floating interest rate and receives a fixed 82 Table of Content s interest rate. Each party's payment obligation is computed using a different interest rate. In an interest rate swap, the notional principal is generally not exchanged.
Typically, one party pays a fixed interest rate and receives a floating interest rate and the other party pays a floating interest rate and receives a fixed 83 Table of Contents interest rate. Each party's payment obligation is computed using a different interest rate. In an interest rate swap, the notional principal is generally not exchanged.
(5) For the year ended December 31, 2023, represents the reversal of the bargain purchase gain of $28.2 million net of the reversal of expenses related to the Arlington Merger of $24.6 million. For the year ended December 31, 2022, represents the reversal of the bargain purchase gain related to the Longbridge Transaction.
(6) For the year ended December 31, 2023, represents the reversal of the bargain purchase gain of $28.2 million net of the reversal of expenses related to the Arlington Merger of $24.6 million.
Our credit hedges also currently include CDS tied to individual MBS or an index of several MBS, such as CDS on CMBS indices, or "CMBX." Foreign Currency Hedging To the extent that we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates, subject to maintaining our qualification as a REIT.
They also include put contracts on certain equity indices, as well as CDS tied to individual MBS or an index of several MBS, such as CDS on CMBS indices, or "CMBX." Foreign Currency Hedging To the extent that we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates, subject to maintaining our qualification as a REIT.
Our investments in securities sold short and financial derivatives included in total liabilities were $216.1 million and $263.4 million as of December 31, 2023 and 2022, respectively. As of both December 31, 2023 and 2022, investments in securities sold short consisted principally of short positions in U.S. Treasury securities and sovereign bonds. We primarily use short positions in U.S.
Our investments in securities sold short and financial derivatives included in total liabilities were $364.6 million and $216.1 million as of December 31, 2024 and 2023, respectively. As of both December 31, 2024 and 2023, investments in securities sold short consisted principally of short positions in U.S. Treasury securities and sovereign bonds. We primarily use short positions in U.S.
The table below summarizes our interests in commercial mortgage loans by property type of the underlying real estate collateral, as a percentage of total outstanding unpaid principal balance, as of December 31, 2023: Property Type (1) December 31, 2023 Multifamily 64.0 % Hotel 8.0 % Office 7.5 % Retail 5.7 % Healthcare 4.9 % Industrial 4.3 % Mobile Home Community 4.2 % Self Storage 1.4 % 100.0 % (1) Includes our allocable portion of commercial mortgage loans, based on our ownership percentage, held in variable interest entities.
The table below summarizes our interests in commercial mortgage loans by property type of the underlying real estate collateral, as a percentage of total outstanding unpaid principal balance, as of December 31, 2024: Property Type (1) December 31, 2024 Multifamily 63.3 % Hotel 7.6 % Industrial 7.0 % Retail 6.0 % Commercial Mixed Use 6.0 % Office 4.2 % Healthcare 3.2 % Mobile Home Community 1.7 % Self Storage 1.0 % 100.0 % (1) Includes our allocable portion of commercial mortgage loans, based on our ownership percentage, held in variable interest entities.
As of December 31, 2023 and 2022, we had a net short notional TBA position of $57.9 million and $528.4 million, respectively. For a more detailed discussion of our investment portfolio, see "— Trends and Recent Market Developments—Portfolio Overview and Outlook " above.
As of December 31, 2024 and 2023, we had a net short notional TBA position of $13.1 million and $57.9 million, respectively. For a more detailed discussion of our investment portfolio, see "— Trends and Recent Market Developments—Portfolio Overview and Outlook " above.
Amount at risk as of December 31, 2023 and 2022, does not include approximately $(0.6) million and $(1.8) million, respectively, of net accrued interest receivable (payable), which is defined as accrued interest on securities held as collateral less interest payable on cash borrowed.
Amount at risk as of December 31, 2024 and 2023, does not include approximately $3.2 million and $(0.6) million, respectively, of net accrued interest receivable (payable), which is defined as accrued interest on securities held as collateral less interest payable on cash borrowed.
During the year ended December 31, 2023, we repurchased 1,084,336 shares of common stock at an average price per share of $11.39 and a total cost of $12.4 million.
During the year ended December 31, 2024, we repurchased 62,300 shares of common stock at an average price per share of $11.00 and a total cost of $0.7 million. During the year ended December 31, 2023, we repurchased 1,084,336 shares of common stock at an average price per share of $11.39 and a total cost of $12.4 million.
(4) Notional value represents the total face amount of U.S. Treasury securities underlying all contracts held. As of December 31, 2022, a total of 19 long and 2,922 short U.S. Treasury futures contracts were held. (5) Short notional value represents U.S. Dollars to be received by us at the maturity of the forward contract.
Treasury securities underlying all contracts held. As of December 31, 2023, a total of 19 long and 2,882 short U.S. Treasury futures contracts were held. (5) Short notional value represents U.S. Dollars to be received by us at the maturity of the forward contract.
As there is no longer an active market for CDS on individual RMBS, our portfolio in this sector continues to run off. We also use CDS on corporate bond indices, options thereon, and various other instruments as a means to hedge credit risk.
As there is no longer an active market for CDS on individual RMBS or CDS on RMBS indices, our portfolios in these sectors continues to run off. We also use CDS on corporate bond indices, options thereon, and various other instruments as a means to hedge credit risk.
Typical supplemental terms and conditions include the addition of or changes to provisions relating to margin calls, net asset value requirements, cross default provisions, certain key person events, changes in corporate structure, and requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction. These provisions may differ for each of our repo lenders.
Typical supplemental terms and conditions include the addition of or changes to provisions relating to margin calls, net asset value requirements, cross default provisions, certain key person events, changes in corporate structure, and requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction.
As of December 31, 2023, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with nine counterparties of approximately $65.6 million. We also had $56.9 million of initial margin for cleared over-the-counter, or "OTC," derivatives posted to central clearinghouses as of that date.
As of December 31, 2024, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with seven counterparties of approximately $9.4 million. We also had $57.6 million of initial margin for cleared over-the-counter, or "OTC," derivatives posted to central clearinghouses as of that date.
See Note 24 of the notes to our consolidated financial statements for further detail on our other contractual obligations and 119 Table of Content s commitments.
See Note 24 of the notes to our consolidated financial statements for further detail on our other contractual obligations and commitments.
Base Management Fees Corporate/Other For the year ended December 31, 2023, the gross base management fee, which is based on total equity at the end of each quarter, was $20.9 million, and our Manager credited us with rebates on our base management fee of $0.5 million, resulting in a net base management fee of $20.4 million.
Base Management Fees Corporate/Other For the year ended December 31, 2024, the gross base management fee, which is based on total equity at the end of each quarter, was $23.8 million, and our Manager credited us with rebates on our base management fee of $0.3 million, resulting in a net base management fee of $23.5 million.
If we were to include as a component of our cost of funds the actual and accrued periodic payments on our interest rate swaps used to hedge our assets, our total average cost of funds would decrease to 3.95% and 2.56% for the year ended December 31, 2023 and 2022, respectively.
If we were to include as a component of our cost of funds the actual and accrued periodic payments on our interest rate swaps used to hedge our assets, our total average cost of funds would decrease to 4.30% and 3.95% for the years ended December 31, 2024 and 2023, respectively.
We believe that this flexibility, combined with Ellington's 77 Table of Content s experience, will help us generate more consistent returns on our capital throughout changing market cycles.
We believe that this flexibility, combined with Ellington's experience, will help us generate more consistent returns on our capital throughout changing market cycles.
Our investments in securities, loans, MSRs, Forward MSR-related investments, unconsolidated entities, loan commitments, financial derivatives, and real estate owned included in total assets were $14.3 billion as of December 31, 2023. Our investments in securities, loans, MSRs, unconsolidated entities, loan commitments, financial derivatives, and real estate owned included in total assets were $13.4 billion as of December 31, 2022.
Our investments in securities, loans, MSRs, Forward MSR-related investments, unconsolidated entities, loan commitments, financial derivatives, and real estate owned included in total assets were $15.5 billion and $14.3 billion as of December 31, 2024 and December 31, 2023, respectively.
Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet. (4) As of December 31, 2023 all of our commercial mortgage loans were first-lien mortgages, the vast majority of which have floating rates with a rate floor.
Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet. (4) As of December 31, 2024 all of our commercial mortgage loans were first-lien mortgages, the vast majority of which have floating rates, most of which benefit from interest rate floors.
As of December 31, 2023, outstanding borrowings under repos and Total other secured borrowings (which include Other secured borrowings and Other secured borrowings, at fair value, as presented on our Consolidated Balance Sheet) were $4.6 billion, of which approximately 23.6%, or $1.1 billion, related to our Agency RMBS holdings. The remaining outstanding borrowings related to our credit portfolio and Longbridge.
As of December 31, 2024, outstanding borrowings under repos and Total other secured borrowings (which include Other secured borrowings and Other secured borrowings, at fair value, as presented on our Consolidated Balance Sheet) were $4.8 billion, of which approximately 5.0%, or $238.1 million, related to our Agency RMBS holdings. The remaining outstanding borrowings related to our credit portfolio and Longbridge.
This compares to Total other secured borrowings of $1.8 billion as of December 31, 2022, used to finance $2.1 billion of non-QM loans, ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs.
This compares to Total other secured borrowings of $1.7 billion as of December 31, 2023, used to finance $1.9 billion of non-QM loans, ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs.
These gains were partially offset by Net change related to HMBS obligations, at fair value of $(451.6) million.
These gains were partially offset by Net change related to HMBS obligations, at fair value of $(545.7) million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTreasury Securities and Interest Rate Swaps, Options, and Futures (38,326) (2.50) % (77,800) (5.07) % 37,175 2.42 % 73,200 4.77 % Corporate Securities and Other 1,380 0.09 % 2,759 0.18 % (1,379) (0.09) % (2,759) (0.18) % Repurchase Agreements, Reverse Repurchase Agreements, and Unsecured Borrowings (3,408) (0.22) % (6,861) (0.45) % 3,362 0.22 % 6,679 0.43 % Total $ (1,780) (0.12) % $ (9,950) (0.65) % $ (4,610) (0.30) % $ (15,611) (1.02) % The preceding analysis does not show sensitivity to changes in interest rates for instruments for which we believe that the effect of a change in interest rates is not material to the value of the overall portfolio and/or cannot be accurately estimated.
Biggest changeTreasury Securities and Interest Rate Swaps, Options, and Futures (27,794) (1.75) % (56,408) (3.55) % 26,975 1.70 % 53,130 3.34 % Corporate Securities and Other 154 0.01 % 280 0.02 % (183) (0.01) % (395) (0.02) % Repurchase Agreements, Reverse Repurchase Agreements, and Unsecured Borrowings (2,828) (0.18) % (5,681) (0.36) % 2,803 0.18 % 5,581 0.35 % Total $ 2,216 0.14 % $ (3,018) (0.19) % $ (9,665) (0.61) % $ (26,778) (1.68) % The preceding analysis does not show sensitivity to changes in interest rates for instruments for which we believe that the effect of a change in interest rates is not material to the value of the overall portfolio and/or cannot be accurately estimated.
Many of our consumer loans are unsecured, or are secured by collateral (such as an automobile) that depreciates rapidly; as a result, these loans may be at greater risk of loss than residential real estate loans.
Many of our consumer loans are unsecured, or are secured by collateral (such as an automobile) that depreciates rapidly; as a result, these loans may be at greater risk of loss than residential real estate loans.
Additionally, as a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore may require us to utilize debt or equity capital to finance our business and, therefore, we are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock, preferred stock or other equity instruments.
Additionally, as a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore may require us to utilize debt or equity capital to finance our business and, therefore, we are exposed to risks related to the capital markets, and our related ability to raise capital through the issuance of our common stock, preferred stock or other equity or debt instruments.
The following sensitivity analysis table shows the estimated impact on the value of our portfolio segregated by certain identified categories as of December 31, 2023, assuming a static portfolio and immediate and parallel shifts in interest rates from current levels as indicated below.
The following sensitivity analysis table shows the estimated impact on the value of our portfolio segregated by certain identified categories as of December 31, 2024, assuming a static portfolio and immediate and parallel shifts in interest rates from current levels as indicated below.
Credit Risk We are subject to credit risk in connection with many of our assets, especially non-Agency RMBS, CMBS, residential and commercial mortgage loans, corporate debt investments including CLOs and investments in securitization warehouses, and consumer loans.
Credit Risk We are subject to credit risk in connection with many of our assets, especially non-Agency RMBS, CMBS, residential and commercial mortgage loans, proprietary reverse mortgage loans, corporate debt investments including CLOs and investments in securitization warehouses, and consumer loans.
We are subject to interest rate risk in connection with most of our assets and liabilities. For some securities in our portfolio, the coupon interest rates on, and therefore also the values of, such securities are highly sensitive to interest rate movements, such as inverse floating rate RMBS, which benefit from falling interest rates.
We are subject to interest rate risk in connection with most of our assets and liabilities. For some securities in our portfolio, the coupon interest rates on, and therefore also the values of, such securities are highly sensitive to interest rate movements, such as inverse floating rate RMBS, 116 Table of Contents which benefit from falling interest rates.
In addition, these investments could involve loans to companies that are more likely to experience bankruptcy or similar financial distress, such as companies that are thinly capitalized, employ a high degree of financial leverage, are in highly competitive or risky businesses, are in a start-up phase, or are experiencing losses.
In addition, these investments could involve loans to companies that are more likely to experience bankruptcy or similar financial distress, such as companies that are thinly capitalized, employ a high degree of financial leverage, are in 115 Table of Contents highly competitive or risky businesses, are in a start-up phase, or are experiencing losses.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Special Note Regarding Forward-Looking Statements." Liquidity Risk To fund our assets we may use a variety of debt alternatives in addition to equity capital that present us with liquidity risks.
See "Management's Discussion and Analysis of Financial Condition and 117 Table of Contents Results of Operations—Special Note Regarding Forward-Looking Statements." Liquidity Risk To fund our assets we may use a variety of debt alternatives in addition to equity capital that present us with liquidity risks.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk The primary components of our market risk at December 31, 2023 are related to credit risk, prepayment risk, and interest rate risk.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk The primary components of our market risk at December 31, 2024 are related to credit risk, prepayment risk, and interest rate risk.
While the table above reflects the estimated impacts of immediate parallel interest rate increases and decreases on specific categories of instruments in our portfolio, we actively trade many of the instruments in our portfolio, and therefore our current or future portfolios may have risks that differ significantly from those of our December 31, 2023 portfolio estimated 122 Table of Content s above.
While the table above reflects the estimated impacts of immediate parallel interest rate increases and decreases on specific categories of instruments in our portfolio, we actively trade many of the instruments in our portfolio, and therefore our current or future portfolios may have risks that differ significantly from those of our December 31, 2024 portfolio estimated above.
Our corporate investments, especially our lower-rated or unrated CLO investments, corporate equity, and our investments in loan originators, have significant risk of loss, and our efforts to protect these investments may involve substantial costs and 120 Table of Content s may not be successful.
Our corporate investments, especially our lower-rated or unrated CLO investments, corporate equity, and our investments in loan originators, have significant risk of loss, and our efforts to protect these investments may involve substantial costs and may not be successful.
For example, prepayment rates are generally lower in states with substantially higher mortgage recording taxes. 121 Table of Content s Interest Rate Risk Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.
For example, prepayment rates are generally lower in states with substantially higher mortgage recording taxes. Interest Rate Risk Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, inflation, domestic and international economic and political considerations, and other factors beyond our control.
Treasury securities, Eurodollar futures, U.S. Treasury futures, and other instruments. In general, such hedging instruments are used to mitigate the interest rate risk arising from the mismatch between the duration of our financed assets and the duration of the liabilities used to finance such assets. The majority of this mismatch currently relates to our Agency RMBS.
Treasury securities, Eurodollar futures, U.S. Treasury futures, and other instruments. In general, such hedging instruments are used to mitigate the interest rate risk arising from the mismatch between the duration of our financed assets and the duration of the liabilities used to finance such assets.
We seek to mitigate these risks by monitoring the equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise. 123 Table of Content s
We seek to mitigate these risks by monitoring the capital markets to inform our decisions on the amount, timing, and terms of capital we raise. 118 Table of Contents
(In thousands) Estimated Change for a Decrease in Interest Rates by Estimated Change for an Increase in Interest Rates by 50 Basis Points 100 Basis Points 50 Basis Points 100 Basis Points Category of Instruments Market Value % of Total Equity Market Value % of Total Equity Market Value % of Total Equity Market Value % of Total Equity Agency RMBS $ 17,976 1.17 % $ 34,335 2.24 % $ (19,592) (1.28) % $ (40,801) (2.66) % Long TBAs 2,323 0.15 % 4,093 0.27 % (2,876) (0.19) % (6,305) (0.41) % Short TBAs (6,613) (0.43) % (13,002) (0.85) % 6,837 0.45 % 13,898 0.91 % Non-Agency RMBS, CMBS, ABS, Loans, and MSRs 24,888 1.62 % 46,526 3.03 % (28,137) (1.83) % (59,523) (3.88) % U.S.
(In thousands) Estimated Change for a Decrease in Interest Rates by Estimated Change for an Increase in Interest Rates by 50 Basis Points 100 Basis Points 50 Basis Points 100 Basis Points Category of Instruments Market Value % of Total Equity Market Value % of Total Equity Market Value % of Total Equity Market Value % of Total Equity Agency RMBS $ 6,761 0.43 % $ 13,035 0.82 % $ (7,247) (0.46) % $ (14,982) (0.94) % Long TBAs 6,312 0.40 % 11,937 0.75 % (6,998) (0.44) % (14,682) (0.92) % Short TBAs (6,510) (0.41) % (12,132) (0.76) % 7,395 0.46 % 15,677 0.98 % Non-Agency RMBS, CMBS, ABS, Loans, and MSRs 26,121 1.64 % 45,951 2.89 % (32,410) (2.04) % (71,107) (4.47) % U.S.

Other EFC 10-K year-over-year comparisons