Ellington Financial, Inc. (EFC) Q4 2022 Earnings Call Transcript

Ellington Financial, Inc. (NYSE:EFC) Q4 2022 Earnings Conference Call February 24, 2023 11:00 AM ET

Company Participants

Laurence Penn - CEO, President & Director

J. R. Herlihy - CFO & Treasurer

Mark Tecotzky - Co-CIO

Conference Call Participants

Eric Hagen - BTIG

Justin Crowley - Piper Sandler

Trevor Cranston - JMP Securities

Bose George - KBW

Operator

Good morning, ladies and gentlemen. Thank you for opinionated by. Welcome to nan Ellington Financial Fourth Quarter 2022 Earnings Conference Call. Today's telephone is being recorded. [Operator Instructions].

It is now my pleasance to move nan telephone complete to , Vice President of SEC Reporting. You whitethorn begin.

Unidentified Company Representative

Thank you. Before we start, I would for illustration to punctual everyone that definite statements made during this convention telephone whitethorn represent forward-looking statements wrong nan meaning of nan safe harbor provisions of nan Private Securities Litigation Reform Act of 1995. Forward-looking statements are not humanities successful nature. As described nether Item 1A of our yearly study connected Form 10-K and Part 2 Item 1A of our quarterly study connected Form 10-Q for 4th ended September 30, 2022, forward-looking statements are taxable to a assortment of risks and uncertainties that could origin nan company's existent results to disagree from its beliefs, expectations, estimates and projections.

Consequently, you should not trust connected these forward-looking statements arsenic predictions of early events. Statements made during this convention telephone are made arsenic of nan day of this call, and nan institution undertakes nary responsibility to update aliases revise immoderate forward-looking statements, whether arsenic a consequence of caller information, early events aliases otherwise.

I americium joined connected nan telephone coming by Larry Penn, Chief Executive Officer of Ellington Financial; Mark Tecotzky, Co-Chief Investment Officer of EFC; and JR Herlihy, Chief Financial Officer of EFC. As described successful our net property release, our 4th fourth earnings convention telephone position is disposable connected our website, ellingtonnfinancial.com. Management's prepared remarks will way nan presentation. Please statement that immoderate references to figures successful this position are qualified successful their entirety by nan extremity notes astatine nan backmost of nan presentation.

With that, I will now move nan telephone complete to Larry.

Laurence Penn

Thanks, Tara, and bully morning, everyone. As always, convey you for your clip and liking successful Ellington Financial. I'll statesman connected Slide 3 of nan presentation. For nan 4th quarter, we are reporting nett income for nan 4th of $0.37 per stock and adjusted distributable net of $0.42 per share. Excellent capacity from Longbridge Financial, our reverse owe originator, and from our Agency RMBS strategy, successful summation to different affirmative 4th from our indebtedness portfolios, drove Ellington Financial's results.

I'll commencement pinch Longbridge Financial, since that's driving a alteration now and going guardant to our financial reporting. We had a number liking successful Longbridge, making love each nan measurement backmost to 2014. And this past October, we acquired a controlling liking successful nan company. As a result, we are now consolidating Longbridge's equilibrium expanse and results of operations into EFC's financials, opening pinch nan 4th quarter.

During nan 4th quarter, Ginnie Mae HMBS output spreads tightened and that accrued nan worth of nan HECM reverse owe loans and owe servicing authorities that Longbridge holds connected its equilibrium expanse and which by consolidation, we now clasp connected our equilibrium sheet. The tighter output spreads besides expanded Longbridge's summation connected waste margins connected caller originations. But arsenic expected, origination volumes were down seasonally, and that led to humble nett nonaccomplishment connected originations.

Putting it each together, Longbridge generated beardown results for nan quarter. On nan mediate of Slide 3, you tin spot Longbridge contributing $0.24 to our nett income per share. You tin besides spot connected this descent nan important publication from our Agency strategy successful nan quarter. Driven by a much benign outlook connected ostentation and Fed monetary policy, nan Agency owe ground rebounded sharply successful nan 4th quarter, pursuing 3 consecutive quarters of dismal underperformance successful nan sector.

Our Agency strategy delivered nett income per stock of $0.19 for nan 4th arsenic we were capable to retrieve a information of our losses successful nan strategy from earlier successful nan year. We took advantage of nan beardown Agency marketplace to waste immoderate specified pools, particularly astir nan output dispersed tightening successful November. And we rotated that superior to further grow and diversify our in installments portfolio, wherever we spot beardown net imaginable and charismatic nett liking margins going forward.

Our adjusted distributable earnings, aliases ADE, did diminution quarter-over-quarter, but that was not astonishing for a 4th wherever short-term liking rates spiked truthful substantially. Most of our borrowings float disconnected of either SOFR aliases LIBOR, and those indices person skyrocketed pinch nan aggregate caller Fed hikes. So our costs of costs spiked arsenic well. Meanwhile, nan acquisition yields connected immoderate of our existing investments still bespeak nan little liking complaint situation from nan early portion of 2022. This includes galore of nan agency pools that we still clasp arsenic good arsenic galore of nan fixed-rate RTL loans that we originated earlier nan complaint hikes.

The bully news is that our RTL portfolio is very short successful nature, pinch mean lives of good nether a year, but they do person fixed complaint coupons, whereas nan financing is floating rate. So there's a earthy resistance successful our NIM successful a marketplace wherever liking rates are rising and output spreads are widening, but that should beryllium a short-term drag, since we are originating caller RTL loans astatine yields that are often 200-plus ground points supra nan rates connected nan RTL loans that are paying off. So turnover successful this portfolio should beryllium a large boost to our NIM and our ADE successful 2023.

In addition, nan publication to Ellington Financial's ADE from nan Longbridge conception was conscionable $0.01 per stock for nan 4th quarter. The publication was modest, chiefly because of little origination volumes. But arsenic I mentioned, that was owed to seasonal factors. Once outpouring comes, I expect Longbridge to commencement contributing to our ADE successful a important way. Keep successful mind that while nan 4th fourth appreciation successful Longbridge's MSRs contributed to EFC's nett income successful nan 4th quarter, that appreciation isn't factored into ADE.

Another item of nan 4th fourth was nan completion of our 4th non-QM securitization of 2022 successful December. We had primitively intended for this woody to travel to marketplace successful September, but securitization spreads were wide successful September. So we decided to postpone nan motorboat and alternatively support those loans connected equilibrium sheet. That patience was rewarded arsenic we were capable to return advantage of a much constructive marketplace successful December to execute stronger woody execution.

I deliberation it's important to understand really we person nan elasticity to hold because this gets to a halfway tenet of our consequence management. At EFC, we accent maintaining a diverseness of borrowing sources arsenic good arsenic keeping other borrowing capacity and liquidity disposable truthful that our manus is enforced. In this case, we didn't want to beryllium forced to securitize these non-QM loans and fastener successful mediocre semipermanent financing rates conscionable to get nan loans disconnected of repo lines. Our beardown equilibrium expanse and liability guidance enables america to beryllium opportunistic astir erstwhile we motorboat our securitizations. And successful fact, by waiting, we estimate that we were capable to value nan AAA indebtedness astir 30 ground points tighter than what would person cleared nan marketplace successful September.

Looking astatine really this twelvemonth has progressed truthful far. The securitization markets person continued to improve, and we were capable to adjacent different non-QM securitization earlier this period pinch moreover much charismatic semipermanent financing costs. In fact, our blended costs of costs connected this astir caller securitization was moreover little than our costs of repo. So we sewage that use successful summation to each nan important benefits of financing done securitizations. Combined, our past 2 non-QM securitizations person provided america pinch an incremental $406 cardinal of nonrecourse, non-mark-to-market semipermanent locked-in financing.

Finally, we proceed to support a beardown liquidity position during nan 4th quarter. As you tin spot from our rate and unencumbered plus figures, and we were besides capable to entree nan preferred equity marketplace earlier this month, which I'll talk successful my concluding remarks.

And pinch that, I'll move it complete to JR to talk our 4th fourth financial results successful much detail.

J. R. Herlihy

Thanks, Larry, and bully morning, everyone. For nan 4th quarter, we are reporting nett income of $0.30 per stock connected a afloat mark-to-market ground and adjusted distributable net of $0.42 per share. These results comparison to a nett nonaccomplishment of $0.55 per stock and ADE of $0.44 per stock for nan anterior quarter. You'll announcement immoderate changes to our disclosures this 4th astir nan consolidation of Longbridge Financial. As Larry mentioned, we acquired a controlling liking successful Longbridge Financial successful October. And opening pinch our 4th fourth results, we consolidate Longbridge.

In nan net position connected Slide 5, you tin spot nan attribution of net betwixt Longbridge and our existing in installments and Agency portfolios arsenic good arsenic firm level expenses. And connected Slide 29, you tin spot each strategy's publication to EFC's adjusted distributable earnings. If you move adjacent to Slide 27, you tin spot nan effect that nan consolidation has connected our equilibrium sheet. Longbridge's largest business is nan origination of location equity conversion owe loans, aliases HECM, which are insured by nan FHA and eligible for inclusion successful Ginnie Mae guaranteed HMBS pools. When issuing these Ginnie Mae HMBS pools, Longbridge retains nan owe servicing authorities and nan servicing-related obligations that travel pinch those rights.

And moreover though these HMBS pools are sold to unrelated third-party investors, those income transactions are not treated arsenic existent income nether GAAP. This is simply a well-known idiosyncrasy of nan reverse owe industry. In immoderate case, nether GAAP, nan HECM loans stay connected equilibrium expanse moreover aft nan HMBS excavation is sold pinch nan HMBS excavation treated arsenic a semipermanent financing of those HECM loans.

Since July 2017, Longbridge has securitized astir $9.5 cardinal of HECM loans into HMBS pools. Of course, galore of those loans person paid disconnected since origination. But arsenic you tin spot present connected Slide 27, Longbridge's GAAP liability associated pinch these HMBS pools stood astatine $7.8 cardinal arsenic of December 31.

Now that we consolidate Longbridge, we brought these GAAP liabilities connected to EFC's equilibrium sheet, and this much than doubled our full GAAP liabilities. This is nan case, moreover though Longbridge's equity only represents a mini information of EFC's full equity, only astir 10% astatine year-end. And that includes each of nan reverse MSRs and loans that Longbridge holds connected equilibrium sheet. And successful fact, EFC's recourse debt-to-equity ratio really declined quarter-over-quarter aft nan Longbridge consolidation because, among different reasons, Longbridge itself had a little recourse debt-to-equity ratio than nan remainder of EFC astatine year-end.

As Larry mentioned, Longbridge generated beardown capacity for nan 4th fourth arsenic tighter output spreads led to nett gains connected its HMBS MSR and HECM loans. EFC's results for nan 4th fourth besides benefited from a bargain acquisition summation that resulted from nan Longbridge acquisition. Because nan transaction occurred astatine a discount to Longbridge's book worth astatine nan clip of closing, and besides because nan adjacent worth of our existing noncontrolling liking reflected that aforesaid discount to book worth astatine September 30, nan closing of nan transaction generated a bargain acquisition gain, which you tin spot connected our income statement.

Our Agency strategy besides had a beardown 4th arsenic tighter output spreads and accrued pay-ups drove important nett gains connected our portfolio, which, mixed pinch nett liking income exceeded nett losses connected our liking complaint hedges. The in installments portfolio had affirmative results arsenic well, driven by nett liking income, chiefly from our proprietary indebtedness portfolios and nett gains, astir notably mark-to-market gains connected our non-QM retained tranches arsenic good arsenic that bargain acquisition summation successful nan Longbridge acquisition. These gains were partially offset by nett losses connected liking complaint and in installments hedges and mark-to-market losses connected definite equity stakes and indebtedness originators and definite commercialized mortgage-related investments.

Finally, our connection originator LendSure was profitable for nan 4th fourth and for 2022 overall, but nan adjacent worth of our liking successful LendSure did not alteration meaningfully for nan 4th quarter.

Turning backmost to Slide 4, our portfolio summary. You tin spot that we are now showing nan underlying holdings astatine Longbridge and towards nan apical of nan page, we are listing nan RTL and non-QM portfolio separately truthful you tin spot immoderate much item connected our 2 largest portfolios. As of year-end, mean marketplace yields connected nan in installments portfolio were importantly higher arsenic compared to September 30.

As Larry mentioned, nan original acquisition yields connected galore of our assets still bespeak nan little liking complaint situation that we had earlier past year. As we proceed to move complete our assets, we expect that nan spread betwixt our acquisition yields and marketplace yields will narrow, and that should beryllium supportive of our nett liking separator successful ADE.

Turning adjacent to Slide 6. During nan 4th quarter, our full agelong in installments portfolio decreased by 7% to $2.54 cardinal astatine year-end. The alteration was owed to nan closing of nan non-QM indebtedness securitization successful December, important paydowns successful our mini equilibrium commercialized owe portfolio that we did not replenish pinch caller originations and because we nary longer see our finance successful Longbridge arsenic portion of nan agelong in installments portfolio. These factors were partially offset by a larger RTL portfolio. For nan RTL, SBC and user indebtedness portfolios, we received main paydowns of $335 cardinal during nan quarter, which represented 19% of nan mixed adjacent worth of those portfolios coming into nan quarter.

On nan adjacent slide, Slide 7, you tin spot that we reduced nan size of nan agelong Agency portfolio by 15% to $968 cardinal driven by opportunistic income and main repayments.

Slide 8 is simply a caller one. Here, we exemplify nan components of nan Longbridge portfolio. At December 31, nan Longbridge portfolio totaled $328 cardinal and chiefly consisted of reverse MSRs, unsecuritized HECM loans and proprietary reverse owe loans. For nan 4th quarter, Longbridge originated $341 cardinal crossed proprietary, astir 85% done its wholesale and analogous channels and 15% done retail.

Please move adjacent to Slide 9 for a summary of our borrowings. Our weighted mean borrowing complaint accrued by 107 ground points to 4.83%, driven by sharply higher short-term rates and a greater proportionality of our borrowings secured by our indebtedness and now our MSR portfolios, which transportation higher borrowing rates than nan Agency assets. Book plus yields for some our in installments and Agency strategies besides accrued complete nan aforesaid period, acknowledgment to portfolio turnover, though by a lesser magnitude than their respective costs of funds.

Our recourse debt-to-equity ratio adjusted for unsettled purchases and income declined to 2.5:1 from 2.6:1 successful nan 3rd 4th arsenic a consequence of a smaller finance portfolio arsenic good arsenic an summation successful full equity. Also, arsenic I mentioned, Longbridge's stand-alone recourse debt-to-equity ratio declined sequentially and was besides marginally little than nan remainder of EFCs astatine year-end. On nan different hand, our wide debt-to-equity ratio adjusted for unsettled purchases and income accrued to 10.1:1 astatine year-end from 4:1 astatine September 30, driven by consolidation of Longbridge's HMBS-related obligations, which I discussed earlier. This summation was partially offset by nan truth that we recognized existent waste curen connected our 4th fourth non-QM securitization, which intends those loans genuinely came disconnected nan books.

G&A expenses accrued owed to nan expenses associated pinch Longbridge's important operating business and investment-related expenses besides accrued arsenic we now consolidate Longbridge's subservicing expenses and definite indebtedness sourcing expenses onto our income statement.

Finally, astatine December 31, our mixed rate and unencumbered assets totaled astir $495 million, and our book worth per communal stock was $15.5, down 1.1% from September 30. Including nan $0.45 per stock of communal dividends that we declared during nan quarter, our full economical return for nan 4th fourth was 1.8%.

Now complete to Mark.

Mark Tecotzky

Thanks, JR. Over nan first 9 months of 2022, we had seen elevated volatility and that continued to beryllium nan lawsuit successful October. In November and December, however, volatility came down considerably and liking rates ended nan twelvemonth importantly disconnected their intra-quarter highs. Agency MBS, which had been nan first assemblage to widen, was not amazingly besides nan first assemblage to materially outperform hedging instruments, which we saw successful Q4. You often spot dispersed tightening and dispersed widening cycles for Agency MBS and credit-sensitive parts of fixed income that are retired of shape pinch each other. We've seen this galore times, astir notably successful precocious March 2020 erstwhile Fed buying of Agency MBS initially led to utmost outperformance for Agency to spot in installments sectors drawback up and outperform Agency 1 aliases 2 quarters later.

In 2022, we saw a different script play out. When money managers, pension costs and security companies request to raise rate quickly to meet redemptions aliases different -- aliases reside different rate needs, they often waste Agency MBS first because MBS are liquid and these investors typically person ample MBS holdings. This benignant of trading is simply a antagonistic method for Agency MBS, and because prices for MBS are highly transparent, nan underperformance these abrupt income tin origin are very visible to nan marketplace successful existent time.

We saw this script play retired for overmuch of 2022 arsenic trading that was concentrated successful Agency was astatine slightest 1 of nan reasons that Agency importantly underperformed galore credit-sensitive fixed income sectors. But Q4 felt for illustration an inflection constituent for nan enslaved marketplace and for Agency MBS specifically. Beginning successful nan 2nd half of nan quarter, money head outflows stabilized and past turned into inflows and what had been a method headwind for Agency MBS for overmuch of '22, abruptly turned into a tailwind. And drove Agency outperformance for nan 4th fourth overall. You tin spot that EFC's Agency strategy posted immoderate very beardown results arsenic a consequence aft 3 challenging quarters.

Given nan elevated risks of recession, we person been very focused connected underwriting and intimately monitoring capacity of residential and commercialized owe loans. So far, capacity has remained strong. And fixed nan size of our holdings, we person amazingly a fewer headaches to activity through. Recently, location person been a batch of headlines astir accrued existent expected in installments nonaccomplishment aliases CECL reserves connected commercialized loans arsenic good arsenic immoderate high-profile default connected agency buildings. CECL is not a conception that applies to EFC successful nan aforesaid measurement arsenic it does for galore others because we are already afloat mark-to-market and ever person been. So immoderate in installments reserves aliases impairments are automatically reflected successful adjacent worth adjustments, which travel done our income statement.

But putting speech nan CECL nuances, we are seeing large capacity -- we are not seeing large capacity issues successful our commercialized and span indebtedness portfolio. Part of that is sound underwriting and due LTVs, and portion of that is spot type concentrations. As you tin look connected Slide 10, you tin spot that little than 10% of our portfolio is successful office, which is wherever galore of nan caller headlines person been concentrated.

With much labor moving from home, nan economics for agency buildings are challenging, particularly pinch greatly accrued costs of tenant improvements erstwhile replacing an existing tenant. Rising liking rates are predictively pressuring headdress rates higher, and we don't deliberation prices afloat bespeak that yet. Also pinch SOFR marching higher, indebtedness costs person exceeded NOI connected galore properties. Of course, rising liking rates effect each sectors of nan commercialized space, but we deliberation multifamily, which is much than 70% of our portfolio will clasp up nan champion successful a recession.

So far, we person very fewer headaches successful our commercialized owe span indebtedness portfolio. We are watching things very closely, staying successful very adjacent interaction pinch our borrowers and monitoring nan advancement connected implementing their business plans. Thinking much astir nan move wherever our betterment successful Agency MBS assemblage leads to recoveries successful different sectors by nan extremity of '22, we person besides seen a worldly betterment successful non-QM liquidity and pricing.

In fact, what happened to nan non-QM assemblage wide successful 2022 had galore parallels to what happened successful nan Agency owe sector. Yields rose, truthful prices dropped, past bonds extended because prepayments slowed, truthful prices dropped moreover more, past spreads widened connected nan newer longer long bonds, truthful prices dropped moreover more. We were, by nary intends unscathed, but our disciplined rate guidance and attraction connected longer-term staggered financing arrangements was very helpful.

We had ample repo capacity and ample rate to stay disciplined, and we were actively buying loans opportunistically that were turned retired to beryllium very advantageous levels successful galore cases. Working pinch our financing team, we saw large wind clouds perchance gathering measurement backmost successful Q1 of 2022, and we added much repo capacity to some non-QM and RTL, some by adding caller lenders and by expanding capacity connected our existing lines. Eventually, by Q4, nan non-QM assemblage was inexpensive capable comparative to Agency MBS and different sectors to pull caller superior to return advantage of nan opportunity.

First, security companies started buying, which drove securitization liquidity to improve. Then spreads commencement to [indiscernible]. We did 1 woody successful Q4 and person done 1 woody truthful acold successful 2023. And now pinch securitizations -- and now pinch securitization spreads tight again and coupons and caller originations very attractive, we person travel afloat circle and its backmost to being a conflict to bargain loans.

One point I deliberation will play retired successful 2023 for some Agency and non-QM is simply a large driblet successful indebtedness volume, resulting from overmuch slower caller and existing location income and almost nary refinancing. Existing location income dropped again this period for nan 12 months successful a statement that hasn't happened since nan '90s.

Okay. So now for what worked and what didn't this 4th for EFC. I talked astir nan betterment successful agency, and we were good positioned for it arsenic we came into nan 4th pinch less TBA shorts than we typically hold, and we were capable to make backmost a bully information of 2022's losses. Despite a reduced superior allocation, indebtedness strategy was a important contributor to EFC's results successful nan quarter. If you look connected Slide 6, RTL is now our largest in installments portfolio. We grew that strategy importantly during nan year. We added sellers, and we added dedicated unit and has been a awesome performer for us.

In opposition to non-QM, nan loans are truthful short that moreover successful a rising short-term complaint environment, immoderate drags connected NIM thin to beryllium short-lived. And because nan tenors of our repo financing intimately lucifer nan expected maturity of nan loans, we don't request to securitize truthful we aren't penning up and down pinch securitization spreads.

At immoderate constituent successful nan future, if economics are sufficiently compelling, we could opt to securitize these loans, but it's not astatine each necessary. With their short mean lives, these loans are typically maturing earlier nan repo lines mature and that gives america a batch of flexibility. We are watching capacity present very closely. With location prices slumping, this is nan first clip that nan RTL assemblage is confronting an situation wherever location prices are little nationally astatine nan clip nan builder is intending to waste nan spot arsenic compared to erstwhile they bought it. That is simply a clear and evident headwind.

What person we done to protect ourselves? Well, we're focusing connected little loan-to-cost ratios, and we're favoring projects connected much affordable properties and properties pinch little costs renovations. We person an immense magnitude of information that we move complete each month, and we leverage that information successful conjunction pinch our ain origination acquisition successful nan business, accusation drawn from our boots connected nan crushed arsenic good arsenic nan analytics that are Ellington's specialty.

Data is our North Star, and it helps pass our underwriting. For example, we've been reducing vulnerability successful immoderate areas, astir notably definite parts of California, wherever immoderate cities person seen value declines that are a aggregate of what nan declines person been nationally. We did spot immoderate weakness successful our user business successful nan quarter, and we person been tightening underwriting there, too. If you look astatine nan data, you tin intelligibly spot that consumers person been spending down their COVID savings fixed elevated inflation, truthful they are not arsenic flush arsenic they person been.

So really is '23 shaping up? So far, we are disconnected to a bully start. Liquidity and securitizations is overmuch better, and we've had galore financing counterparties scope retired to america astir increasing existing and initiating aliases initiating caller lending facilities. But location prices are still excessively precocious for galore buyers fixed a 6.5% owe rate. We've seen a humble correction successful nan 2nd half of nan year, but not capable yet to bring lodging affordability backmost to humanities norms.

And conscionable arsenic location were a batch of location differences successful HPA and nan measurement up. You're seeing a batch of location differences connected nan measurement down. We deliberation immoderate of nan post-COVID high-flyer markets for illustration , for example, we've person corrected 20% aliases much already. So being really granular successful knowing location prices is crucially important now. Thanks to our originator stakes, we are good positioned to originate, make summation connected standard and securitize precocious ROEs. Given nan short long successful equity cushions, our RTL portfolio has constricted mark-to-market volatility. Our origination squad is joined that they thief pinch our superior markets desk, which allows america to thin successful erstwhile markets are wide and pump nan brakes erstwhile they tighten, but we person to support a laser attraction connected capacity and enactment vigilant successful our underwriting.

Now backmost to Larry.

Laurence Penn

Thanks, Mark. 2022 surely had its challenges. We had to navigate periods of utmost volatility and marketplace dysfunction pinch liking rates rising quickly and output spreads widening on nan way. In nan Agency MBS sector, successful particular, location was genuinely obscurity to hide. As you tin spot connected Slide 24, our Agency strategy was responsible for much than half of our portfolio losses for nan year, moreover though it only represented a mini fraction of our superior allocation. But astir importantly, we were capable to mostly debar crystallizing mark-to-market losses successful our in installments portfolio. We were diligent pinch our securitization activity, opportunistic pinch superior guidance and subject pinch hedging and leverage.

We were capable to limit our book worth diminution during nan year. We maintained our dividend throughout, and we capitalized connected nan marketplace volatility to adhd charismatic assets and adhd origination marketplace share, increasing nan in installments portfolio importantly complete nan people of nan year, while strategically downsizing our Agency portfolio.

We took advantage of immoderate utmost banal marketplace sell-offs past twelvemonth to repurchase our communal shares astatine a large discount to book value. And past erstwhile markets rebounded, we efficiently raise superior done our ATM programme to supply just-in-time superior to money charismatic finance opportunities. We besides extended respective indebtedness accommodation passim nan year, including successful nan 4th quarter.

We acquired Longbridge, a apical 3 reverse owe originator, astatine a very charismatic level. And I judge that acquisition gives america immense upside arsenic good arsenic awesome synergies, including entree to Longbridge's charismatic indebtedness pipeline. We really accomplished a batch past year. We closed retired nan twelvemonth well. We entered 2023 pinch beardown liquidity and a balanced portfolio positioned to thrust net maturation going forward.

On past quarter's net call, we discussed our excitement astir nan ample finance opportunities successful some securities and loans and besides nan opportunity for our indebtedness originator affiliates to proceed adding marketplace stock successful a consolidating market. Earlier this month, we raised $100 cardinal of barren powder successful nan preferred equity marketplace to thief america entree these opportunities. Our recently issued Series C preferred equity, on pinch our existing Series A and B, carries nan only NAIC-1 preferred equity standing successful our sector.

I judge that this standing rightly reflects Ellington Financial's effective consequence guidance and long-standing protection of book worth crossed marketplace cycles, principles that are arsenic important now arsenic ever. Thanks to beardown organization request for nan offering, we were capable to value nan transaction astatine a akin dispersed to wherever we priced our Series B preferred successful December 2021, which was priced successful an situation wherever output spreads connected our targeted assets were overmuch tighter.

This caller superior should let america to return advantage of nan tremendous opportunities that we are seeing crossed our diversified group of finance strategies. I expect our indebtedness origination businesses to proceed to supply overmuch of nan plus sourcing, and that now includes entree to immoderate caller finance strategies specified arsenic proprietary reverse owe loans, that are now disposable to america astatine nan root arsenic a nonstop consequence of our acquisition successful Longbridge.

I'm hopeful that nan timing of our Series C preferred equity issuance will travel successful nan footsteps of different caller well-timed superior transactions for EFC, including our March 2022 issuance of $210 cardinal of azygous A-rated elder unsecured notes. We priced that transaction wrong a model of stableness correct earlier each nan 2nd 4th marketplace turmoil.

While I deliberation EFC is known arsenic a accelerated deployer of capital, we'll beryllium arsenic diligent arsenic we request to be, picking our spots arsenic always, wrong nan wide scope of sectors that we negociate well. Once nan proceeds from this preferred offering are afloat deployed and arsenic we proceed to rotate nan portfolio into higher reinvestment yields, we judge that nan offering will beryllium accretive to some net and adjustable distributable net and that some metrics will again screen nan dividend.

And pinch that, we'll now unfastened up nan telephone to questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. Our first mobility comes from Eric Hagen pinch BTIG.

Eric Hagen

I deliberation I sewage a mates of questions. But nan 1.8x recourse leverage astatine Longbridge, is that nan origination -- does that use to nan origination pipeline aliases nan MSRs? Can you opportunity what that backing is supporting and what nan costs of costs looks like, moreover really galore counterparties you person supporting that funding? And past successful nan resi modulation loans, are you guys buying loans straight from brokers? Or are you buying from different originators that can't needfully clasp nan loans themselves. Maybe you tin besides springiness america immoderate colour astir nan in installments characteristics, nan profile, really [indiscernible] mean equilibrium is, nan LTV and that benignant of thing?

J. R. Herlihy

Eric. Okay. Let maine tackle nan first one. So connected Longbridge, nan recourse leverage we cite, truthful that has to do pinch nan holdings astatine Longbridge, not nan HECM loans that person been securitized, but it's really 2 awesome main categories that HECM loans are waiting, securitization and [indiscernible] nan prop loans connected equilibrium expanse that are connected these indebtedness accommodation and past nan MSRs person financing themselves. So those are nan 3 categories. The magnitude is summarized connected Slide 9. You spot $238 cardinal of Longbridge recourse financing successful nan page. You disagreement that by nan equity successful Longbridge, nan superior allocated to Longbridge, and that's wherever nan ratio comes from.

Laurence Penn

Yes. And buyouts don't correspond a important facet astatine each for Longbridge. Their MSR is comparatively caller and young, I should say, and doesn't acquisition overmuch buyout activity astatine all, right?

J. R. Herlihy

And you tin spot nan weighted mean borrowing complaint was 7.86% mixed connected those portfolios that -- those borrowings astatine year-end, nan number of counterparties, it's pinch 4 aliases 5 counterparties.

Eric Hagen

Okay. That's very helpful.

J. R. Herlihy

And nan adjacent mobility was?

Eric Hagen

Resi modulation loans...

Mark Tecotzky

Right. Yes. So Eric, truthful we don't bargain individual loans from brokers. We person respective originators, immoderate of whom we person an equity liking in, immoderate of whom we conscionable person a very long-standing narration pinch wherever we person seen really they underwrite, spot really they deliberation astir spot improvements, and we're benignant of like-minded connected in installments that we bargain from. So successful position of attributes, that marketplace is opposed for illustration non-QM that conscionable benignant of has a azygous loan-to-value ratio successful nan -- 1 of nan large metrics of consequence power successful residential modulation loans is benignant of 2 LTVs, if you will.

The first is indebtedness to cost. So really overmuch are you lending that builder versus what they're paying for nan property. And it's a spot that mostly needs immoderate benignant of renewal to maximize value. So what are you lending them versus what they're paying for it arsenic is? And past astatine nan clip of loans, astir of nan loans we do, there's a rehab component. So location is simply a rehab budget, there's a rehab plan. Then they get paid successful arrears for draws erstwhile they've done immoderate of that construction.

And truthful astatine nan clip of origination, there's this 2nd LTV, which is really overmuch you're lending versus adhd repaired value? So you're lending a definite magnitude time 1, past you're going to beryllium backing either each aliases immoderate information of that renovations. So past astatine nan end, really overmuch person you going to beryllium -- really overmuch -- what's nan full indebtedness you've expended to that -- extended to that builder versus what your anticipation is and their anticipation of what nan spot is going to beryllium worthy erstwhile nan renovations are done, right?

So 1 important metric, I talked a small spot successful nan prepared comments astir information and real-time study of what's going connected successful nan marketplace because things are benignant of move now. So 1 point that we look astatine a batch is each month, we look at, okay, wherever are nan properties trading versus what we thought nan underwritten as-repaired worth is. And what's bully astir that merchandise is because it's truthful short, you're getting speedy feedback, for illustration feedback successful 6, 7 months, right? So we tin look and say, okay, we -- this month, properties sold 3% higher supra -- 3% supra what we thought nan as-repaired worth is, aliases this month, they're trading correct connected apical of as-repaired value. We tin look astatine that regionally. We tin look astatine that arsenic a usability of nan -- really large nan location is.

And truthful location prices are coming down. We deliberation it's astir apt much apt to travel down more. I deliberation we talked successful nan prepared comments really it's not conscionable going to beryllium each region performed benignant of nan same. You saw immense location differences connected nan measurement up. I deliberation we said successful nan prepared comments, we're going to spot large location differences connected nan measurement down.

One point pinch nan RTL comparative to non-QM is that there's a batch of attraction connected lending successful areas wherever there's a move lodging marketplace because nan measurement you get paid backmost astir of nan clip is nan properties are sold, right? So you request to beryllium successful markets wherever there's immoderate dynamism to nan lodging market. And that's -- and correct now, you're astatine a clip wherever existing location income person evidently travel measurement down. So that's different area we attraction connected a lot.

Operator

Our adjacent mobility comes from Crispin Love pinch Piper Sandler.

Justin Crowley

It's really Justin Crowley, connected for Crispin this morning. So conscionable looking astatine nan in installments and Agency portfolios successful nan quarter, some were down owed to paydowns and different factors. I deliberation you mentioned successful nan prepared remarks, possibly seeing an inflection constituent connected nan Agency side. So I conjecture taking that and past nan preferred issuance this month, funny wherever you're seeing immoderate of nan astir finance opportunities correct now, really deployment -- really you foresee deployment of preferred progressing? And possibly for illustration quadrate that pinch what benignant of a wait-and-see attack you're seeing -- you expect there?

Mark Tecotzky

Yes. So I conjecture I would opportunity that markets aren't arsenic volatile arsenic what they were, say, Q3 and early Q4 2022, but they're still volatile, right? And erstwhile they're volatile, you're incented to invest, I think, astatine a much measured gait because typically, nan markets from clip to time, for illustration possibly today's example, deed immoderate aerial pockets, and past you tin really get immoderate bully investments, right? So I deliberation conscionable nan volatility and nan uncertainty astir really precocious nan Fed is going to hike argues for being a small spot much measured successful nan gait of deployment because nan likelihood of conscionable connected a definite time aliases a mates of days being presented pinch immoderate portfolios, you tin prime up astatine really advantageous levels. That's -- we signed a higher probability of that than we would benignant of successful a normal market.

In position of nan sectors we like, JR talked astir really we had a batch of paydowns successful mini equilibrium commercial. We're looking astatine caller opportunities there. It's a abstraction we like. I deliberation we're besides going to get immoderate opportunities to bargain immoderate nonperforming loans there. There has been a immense driver of EFC returns 2010, 2011, 2012, and past you had deficiency of proviso for nan NPLs for certain. We deliberation that's going to prime up. It's still likely. We talked astir nan residential modulation loans. We talked astir non-QM securitizations tightening. So benignant of nan levered returns connected retained pieces looks beautiful bully to america location and besides still immoderate QSIP opportunities.

So I deliberation each that -- and past Larry mentioned that nan -- now that we person -- now that we ain each of Longbridge, that's going to create immoderate opportunities for america that we didn't person before. I don't cognize if, Larry, you want to grow connected that.

Laurence Penn

Yes. Thanks, Mark. No, that's great. But yes, I would for illustration to add. So first of all, this marketplace is very bipolar, right? I mean everything is to beryllium nan consequence connected aliases consequence off. Then you person a time for illustration coming when, ohio my gosh, ostentation is still a large risk. I mean, obviously, it's been a large risk. So we don't want to beryllium excessively -- beryllium excessively enthusiastic 1 measurement aliases another.

But erstwhile it comes to raising capital, you sewage to spell for what you deliberation is -- because those are opportunities that you're not doing a preferred woody each time aliases a indebtedness woody each day, right? So erstwhile we saw nan opportunity to do a woody astatine a spread, for illustration I said, was akin to what we had done successful December of '21, which was a much, overmuch tighter dispersed finance environment, we had to capitalize connected that.

And arsenic Mark said, you're going to deed a pouch wherever each of a abrupt nan marketplace will overreact connected nan downside, and that's wherever we're going to prime up much assets. I deliberation being diligent present is going to beryllium really, really bully for america because Mark mentioned -- you conscionable mentioned commercialized NPLs. We person very fewer commercialized NPLs correct now. But that was -- we were buying loans arsenic NPLs respective years ago. And we deliberation pinch each nan distress successful agency and moreover unit to immoderate extent, we deliberation that you're going to spot a batch of NPL opportunities. And we want to beryllium fresh for those.

And if you effort to raise superior erstwhile spreads are wide, well, past you're going to beryllium raising superior widespreads, right? So we want to raise superior erstwhile nan opportunity -- and these are semipermanent preferred equity is thing that we're going to unrecorded pinch perchance forever, right? It is simply a perpetual preferred. So -- we want to jump connected those opportunities erstwhile they travel astatine charismatic spreads and past we'll perfectly return advantage of opportunities, but we'll beryllium patient.

And we person truthful galore different strategies. Mark conscionable mentioned pinch nan Longbridge acquisition. I mentioned prop, right? That is simply a caller plus people for us, and it's a very, very charismatic plus class, not 1 that you perceive overmuch astir because it's a mini market. But our biggest competitor successful reverse mortgages, that's rightly 1 of nan focuses of their business model, too.

So pinch this acquisition now Longbridge tin ramp up its activities and prop, and we tin put those spell correct connected our equilibrium sheet, right? So we conscionable person tons and tons of different sectors that we tin take from. And we'll spot wherever those opportunities are. RTL proceed to beryllium large inflows for us. Non-QM goes successful waves. Maybe we want to person luncheon aliases waste those connected nan unfastened market, possibly we want to bargain them and securitize. We person a batch of flexibility.

Justin Crowley

Okay. Got it. That's helpful. And past truthful taking that -- nan thought of nan superior deployment fitting from higher rates to thrust higher ADE. With regards to ADE and covering dividend, what are your thoughts location successful nan adjacent word arsenic acold arsenic covering nan dividend? Could it return a fewer quarters arsenic backing costs stay elevated? Just wanted to get your commentary there.

Laurence Penn

It's a awesome question. It really depends connected nan gait of deployment. It's not going to hap astir apt successful Q1, conscionable fixed nan magnitude of superior that we've raised, but that's okay. Where we person nary plans to trim nan dividend. We look -- that is simply a -- we look longer term, and we're assured that we're going to screen it. And could nan inflection constituent hap successful nan 2nd quarter? Sure, it could hap successful nan 2nd quarter. But we're not going to unit it, but certainly, that would beryllium a bully target.

Justin Crowley

Okay. Got it. Helpful...

Laurence Penn

And nan 2nd 4th -- sorry to adhd 1 much thing. The 2nd 4th besides should beryllium overmuch different for Longbridge arsenic well. And they -- again, I don't want to opportunity past capacity is ever suggestive of early results. But if you look backmost to 2021, what was their nett income for nan twelvemonth was good complete $30 cardinal right? So I judge we'll person to cheque that. But -- truthful that could beryllium a very ample summation to our halfway -- ADE excuse maine successful starting perchance successful nan 2nd quarter. As I mentioned, nan seasonality, right? So successful spring, you should commencement to spot -- 2nd quarter, you should commencement to spot beardown origination income again from Longbridge.

Justin Crowley

Okay. Understood. And then, I guess, shifting gears. You provided immoderate commentary connected in installments value crossed nan portfolio. Are location immoderate areas wherever you're opening to spot signs of stress, areas of becoming much cautious on. I cognize you talk a small spot astir nan agency portfolio and past besides unit to immoderate extent. So I conjecture conscionable wide commentary connected in installments signs that you're paying attraction to? And past surely connected nan agency side, I'd emotion for you to excavation a small spot much into that and benignant of really you spot that plus people shaping retired complete -- conscionable looking into your crystal shot complete nan adjacent mates of years?

Laurence Penn

I'll fto Mark grip that. But earlier he does, I do want to conscionable stress that if you look astatine our portfolio, Mark mentioned, and you tin spot connected Slide 10, really multifamily attraction is, but we person very small agency and retail. And I don't deliberation -- and by nan way, I did conscionable corroborate nan $30 cardinal number for Longbridge successful 2021. But I don't deliberation that we really person immoderate headaches successful those sectors wherever we're seeing nan headaches successful nan remainder of nan market.

But Mark, spell up wherever you deliberation nan problem spots for nan marketplace are going to be.

Mark Tecotzky

So I conjecture nan first point I'd opportunity is that if you look astatine affordability, conscionable really overmuch consumers, really overmuch a location purchaser has to salary if they bargain a location now and they get anyplace adjacent nan Fannie-Freddie rate, which is aliases something, that things aren't affordable, right? Things are not affordable, and you tin -- that tin correct a fewer ways, it tin correct from location prices coming down, and you're already down astir 5% from nan peak. And successful immoderate areas, you're down 20% from nan peak. It tin correct pinch -- if owe rates drop, it tin correct if incomes increase, right? And it's astir apt going to beryllium [indiscernible] possibly immoderate operation of those 3. But correct now, homes mostly are not affordable to astir people, and that's 1 of nan reasons why you're seeing income numbers travel off.

So I deliberation we've sewage to beryllium cautious astir things, and we person to protect ourselves pinch loan-to-value ratios. We person to protect ourselves successful nan residential modulation portfolios by being successful sectors wherever we deliberation that are going to clasp up amended and you person to respond to nan marketplace arsenic it evolves. But it's a -- we started non-QM. We started that originator successful extremity of 2014, pinch nan first indebtedness successful 2015, to nan first securitization successful 2017. So there's a batch -- we had galore years, 6-odd years, wherever location prices were benignant of marching higher, and we thought affordability looks good. And travel past year, things are really different. So I deliberation you person to make focusing connected credit, a big, large portion of really you walk your day.

On nan commercialized side, I deliberation I mentioned it connected -- successful nan prepared comments that you person a batch of -- if you person a mature property, unchangeable spot and nan personification has a 10-year fixed complaint indebtedness pinch Freddie Mae aliases whatever, that's benignant of 1 thing, and they're successful bully style and they'll astir apt turn rents and that's fine. What's successful our portfolio connected nan indebtedness side, not needfully connected nan CMBS securities we own. But connected nan indebtedness side, it's floating complaint debt, right? So we've -- while we're enjoying materially higher statement rates connected that portfolio, you get 4.75% and a indebtedness has a 5.5% SOFR margin, you're astatine 10.25% connected that loan.

So what's awesome for nan portfolio is simply a situation for nan borrower, right? And truthful erstwhile you get to this constituent and [indiscernible] trying to get successful nan prepared remarks, erstwhile you person nan indebtedness cost, it's higher than nan income than nan spot is throwing off, that's ever a challenge, right? It's ever a challenge, and they'll -- it astir apt leads to immoderate correction. So nan correction tin travel from higher rents connected nan multifamily aliases nan correction tin travel from possibly SOFR comes down, if you judge nan guardant curve aliases spot values travel down.

But truthful it's a large point to attraction on, and it's a existent risk. And I deliberation we attraction connected it. And we're very -- we deliberation a batch astir downside and we deliberation a batch astir lodging shocks. And I deliberation astir for illustration -- nan shocks we tally erstwhile we bargain in installments consequence transportation bonds, we're looking astatine really galore multiples of nan location value shocks tin nan enslaved withstand. And that was a 30% decline. I don't deliberation we'll spot that, but we're successful a different world than what we're successful for nan past -- surely nan past 7, 8 years. And truthful we're alert of it, and we're really focused connected it. And I deliberation you sewage to interest astir different sectors.

On nan user side, you tin decidedly spot borrowers person -- they accrued their savings massively during COVID. Now they're starting to walk it down. In auto, you've seen value of utilized car went measurement up. People are taking retired these 7-year loans. They're buying older cars because everything was truthful [indiscernible] you're seeing accrued delinquencies, not successful our portfolio, but conscionable benignant of [indiscernible].

You've spot an summation successful delinquency successful subprime car because you person group that took a 7-year indebtedness connected an older car. And now erstwhile nan car breaks and they person a large indebtedness outstanding, they extremity paying. So there's a batch of things to interest about. But to me, that's what creates nan opportunity, right? If it's -- if everything is sanguine, if everything is performed perfectly, if everything is going according to plan, past that's typically a world wherever spreads are very tight.

So I deliberation nan situation for america is to watch our in installments intimately and person our underwriting continually set to what's happening existent time. But past to beryllium opportunistic and spot for illustration it's a pendulum, right? It ne'er stops nan middle, right? Like group get excessively optimistic and they besides get excessively pessimistic, right? So I deliberation this benignant of marketplace is going to lead to tons and tons of awesome finance opportunities.

With immoderate -- 1 of nan motivations Larry articulated it, down nan preferred deal, he's saying, we did that successful a comparatively unchangeable market, right? And since then, yields person travel disconnected and spreads are a small spot wider and each that stuff, but for illustration you sewage to get your barren powder successful a much unchangeable market, if you want to person reasonable borrowing costs, and I deliberation we achieved that there. And I deliberation now we're sitting successful a bully position to beryllium capable to beryllium opportunistic erstwhile you're going to get immoderate dislocations.

Justin Crowley

Okay. I admit that color. And past benignant of taking that and looking astatine multifamily, which has been a beautiful resilient plus people and squaring that pinch immoderate of nan location affordability hurdles that you mentioned. Do you spot request starting to propulsion backmost conscionable fixed headdress rates compared to that cost? Or are immoderate of those different factors arsenic acold arsenic single-family homeownership? Do you expect that continuing to lend support to nan spot of multifamily?

Mark Tecotzky

So 1 point pinch our attack to multifamily abstraction is it's ne'er really been Class A, right? It's ne'er really been properties that are caller construction, rents of $2,000 a month, tons of amenities. We've ever been benignant of Class B and Class C workforce properties, rent $600 to $800. And nan logic why we've liked that assemblage is, there's conscionable an unfortunate -- it's unfortunate, but there's a immense shortage of affordable lodging successful this country. So there's request and there's request for that apartments that person little rent costs, but also, two, there's nary caller building there.

So 2023 is absorbing because location is simply a batch of multifamily building that's going to travel online successful 2023. But it's each astatine nan higher end, right? No one's building properties to rent them retired for $700 a month, right? So -- and truthful past what happens connected these Class B multis is that we're lending astatine a discount to spot value, obviously, LTV and that's our cushion. But nan purchaser is buying those properties astatine a large discount to replacement costs. So building costs are high. So nan operators we spot buying nan Class B, Class C multis, they're getting into these properties astatine nan marketplace level, but nan marketplace level is measurement beneath nan costs of caller construction. So that's why you're not seeing caller building there. So I deliberation it benignant of gives america a double furniture of protection.

Do I deliberation immoderate of nan [indiscernible] going to person a difficult clip pushing rents arsenic overmuch arsenic they thought they were going to beryllium capable to push them erstwhile they first bought nan thing? Yes. And are they going to beryllium emotion it arsenic SOFRs marched higher since they took up nan loan? They are. We activity intimately pinch them. That's our job. Their occupation is to negociate done it. This is specified a large move successful rates and specified a large U-turn from nan Fed that everyone is going to person -- everyone's going to person their headaches, ours included. I conscionable think, for us, nan headaches we person are going to beryllium mini comparative to nan much, overmuch greater opportunities that this marketplace is presenting to us.

Operator

Our adjacent mobility comes from Trevor Cranston pinch JMP Securities.

Trevor Cranston

You guys mentioned nan imaginable opportunity to adhd much successful nan proprietary reverse owe abstraction aft nan acquisition of Longbridge. Can you elaborate a small spot connected what nan position of nan proprietary reverse loans look for illustration compared to nan benignant of modular Ginnie Mae merchandise and really you guys would look to benignant of utilize nan financing building astir investments successful that space?

Laurence Penn

Yes. I mean it's beautiful simple. They are mostly fixed complaint loans. They person spreads that are evidently wider than nan HECM product. And they -- successful position of -- they tin beryllium securitized. We wouldn't -- we'd astir apt hold to get immoderate captious wide earlier doing so. The large logic why personification gets a prop indebtedness arsenic opposed to a HECM indebtedness is really going to beryllium indebtedness size. So -- and from an underwriting perspective, nan LTVs are going to beryllium overmuch little than connected nan HECM product.

So nan HECM of merchandise is -- nan LTVs location are driven by nan alleged main constricted factors, wherever fundamentally FHA dictates precisely what LTV they are consenting to guarantee nan indebtedness at. In prop, we person overmuch much flexibility. And truthful we tin beryllium much blimpish connected LTVs. But it's a beautiful akin merchandise to nan fixed complaint merchandise that you spot successful -- that goes into nan Ginnie Mae's.

Trevor Cranston

Got it. Okay. And past connected nan book worth update you guys gave for nan extremity of January. I was conscionable curious, in installments spreads and Agency spreads seemed to person done beautiful good successful January. So I was wondering if you could possibly supply immoderate colour astir benignant of what drove nan benignant of level book worth capacity complete nan month.

Laurence Penn

Sure. So right, nan Agency and non-QM had beardown months. We evidently declared a $0.15 dividend, truthful that would beryllium netted out. We besides were progressive successful nan ATM. And truthful that there's immoderate dilution from ATM is factored into that $15 a share. But it's -- if you facet successful that past adjustment, it's beautiful adjacent to connected apical of nan dividend.

Operator

Our adjacent mobility comes from Bose George pinch KBW.

Bose George

In position of nan maturation outlook astatine Longbridge, I was curious, is location immoderate benignant of inorganic opportunities connected nan bulk side, either MSR aliases origination capacity?

Laurence Penn

Sure. I don't deliberation from an origination -- well, truthful I'm judge you saw nan bankruptcy towards nan extremity of past year, right? So we -- I don't cognize if you -- I don't cognize if you telephone this integrated aliases inorganic, but we were capable to prime up a batch of producers, indebtedness officers, et cetera, successful nan aftermath of that bankruptcy. So without having to benignant of to do thing successful position of an outright acquisition, perchance paying a premium whatever. And that besides -- Ginnie Mae fundamentally acquired, took over, seized, if you will, that MSR and that MSR will astir apt travel to marketplace successful nan adjacent future. Now it's a very different MSR from nan MSR that Longbridge presently owns. It's a overmuch older MSR. And truthful it has different benignant of benefits and risks. But that could beryllium a very, very important acquisition and perchance not moreover requiring that overmuch capital.

So yes, truthful we -- I don't deliberation we would person immoderate plans to benignant of spell retired location and look for MSRs to get astatine this constituent successful time, nor looking to benignant of get immoderate different existing operations per se. We -- Longbridge has shown really awesome elasticity successful position of being capable to dial up and down its capacity successful position of its staffing successful consequence to marketplace opportunities.

Bose George

Okay. Great. That makes sense. And past conscionable successful position of nan returns connected HECM MSRs, what are nan benignant of, I guess, nan unlevered yields connected that erstwhile you book them?

Laurence Penn

Talking astir nan reverse MSRs?

Bose George

Yes. Yes, nan reverse MSRs, yes.

Laurence Penn

Yes, they're successful the, I'd say, nan debased -- very debased double digits, betwixt 10% and 15%.

Operator

That was our last mobility for today. We convey you for participating successful Ellington Financial Fourth Quarter 2022 Earnings Conference Call. You whitethorn disconnect your statement astatine this time, and person a awesome day.