Edgar Filing: Ellington Financial LLC

EllingtonFinancial-2013.06.30-10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34569

Ellington Financial LLC

(Exact Name of Registrant as Specified in Its Charter)



Delaware		26-0489289
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

53 Forest Avenue, Old Greenwich, Connecticut 06870
(Address of Principal Executive Office) (Zip Code)

(203) 698-1200

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filers" "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	¨	Accelerated Filer	x
Non-Accelerated Filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



Class		Outstanding at August 2, 2013
Common Shares Representing Limited Liability Company Interests, no par value		25,417,155

Table of Contents

ELLINGTON FINANCIAL LLC

INDEX



Part I. Financial Information		3
	Item 1. Consolidated Financial Statements (unaudited)	3
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	48
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	69
	Item 4. Controls and Procedures	71
Part II. Other Information		72
	Item 1. Legal Proceedings	72
	Item 1A. Risk Factors	72
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	72
	Item 6. Exhibits	73

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

ELLINGTON FINANCIAL LLC

CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES, AND EQUITY

(UNAUDITED)



	June 30, 2013		December 31, 2012
(In thousands except share amounts)	Expressed in U.S. Dollars
ASSETS
Cash and cash equivalents	$	201,795	$	59,084
Investments, financial derivatives, and repurchase agreements:
Investments at fair value (Cost – $1,675,134 and $1,328,153)	1,710,422		1,375,116
Financial derivatives – assets at fair value (Net cost – $47,291 and $65,860)	46,977		48,504
Repurchase agreements (Cost – $41,188 and $13,650)	41,188		13,650
Total investments, financial derivatives, and repurchase agreements	1,798,587		1,437,270
Due from brokers	48,294		22,744
Receivable for securities sold	672,035		626,919
Interest and principal receivable	6,571		5,719
Other assets	1,125		379
Total Assets	$	2,728,407	$	2,152,115
LIABILITIES
Investments and financial derivatives:
Investments sold short at fair value (Proceeds – $614,208 and $621,048)	$	608,922	$	622,301
Financial derivatives – liabilities at fair value (Net proceeds – $16,042 and $13,171)	18,543		15,212
Total investments and financial derivatives	627,465		637,513
Reverse repurchase agreements	1,287,992		905,718
Due to brokers	30,345		30,954
Payable for securities purchased	136,084		57,333
Securitized debt (Proceeds – $1,150 and $1,311)	1,168		1,335
Accounts payable and accrued expenses	1,917		1,995
Base management fee payable	2,405		1,934
Incentive fee payable	1,182		7,343
Other payables	311		903
Interest and dividends payable	1,680		732
Total Liabilities	2,090,549		1,645,760
EQUITY	637,858		506,355
TOTAL LIABILITIES AND EQUITY	$	2,728,407	$	2,152,115
ANALYSIS OF EQUITY:
Common shares, no par value, 100,000,000 shares authorized;
(25,412,011 and 20,370,469 shares issued and outstanding)	$	624,096	$	497,373
Additional paid-in capital – LTIP units	9,066		8,982
Total Shareholders' Equity	633,162		506,355
Non-controlling interest	4,696		—
Total Equity	$	637,858	$	506,355
PER SHARE INFORMATION:
Common shares	$	24.92	$	24.86

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013

(UNAUDITED)



Current Principal/ Notional Value/Number of Shares		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
North America (r)
Long Investments (268.15%) (a) (p)
Mortgage-Backed Securities (260.25%)
Agency Securities (147.62%) (b)
Fixed Rate Agency Securities (143.67%)
Principal and Interest - Fixed Rate Agency Securities (129.00%)
$	75,125	Federal National Mortgage Association Pool	3.50%	2/43	$	75,620
39,607		Federal National Mortgage Association Pool	3.50%	1/43	39,769
19,593		Federal National Mortgage Association Pool	4.50%	12/41	20,895
16,806		Federal National Mortgage Association Pool	4.50%	9/41	17,922
17,552		Federal National Mortgage Association Pool	3.50%	8/42	17,846
16,329		Federal National Mortgage Association Pool	5.00%	8/41	17,740
17,128		Federal National Mortgage Association Pool	3.00%	6/28	17,574
16,033		Federal National Mortgage Association Pool	4.50%	10/41	17,098
15,831		Federal Home Loan Mortgage Corporation Pool	5.00%	7/41	17,076
13,767		Federal National Mortgage Association Pool	5.00%	3/41	15,027
12,008		Federal National Mortgage Association Pool	4.00%	8/42	12,523
12,607		Federal Home Loan Mortgage Corporation Pool	3.00%	10/42	12,308
11,105		Federal National Mortgage Association Pool	4.50%	9/41	11,775
11,076		Federal National Mortgage Association Pool	4.00%	11/41	11,558
10,519		Federal National Mortgage Association Pool	5.00%	7/41	11,480
9,995		Federal Home Loan Mortgage Corporation Pool	4.00%	7/43	10,447
9,753		Federal National Mortgage Association Pool	4.00%	1/42	10,177
9,853		Federal Home Loan Mortgage Corporation Pool	3.00%	2/43	9,618
8,923		Federal Home Loan Mortgage Corporation Pool	4.50%	10/41	9,454
8,372		Federal National Mortgage Association Pool	4.50%	4/26	8,905
6,614		Federal National Mortgage Association Pool	5.50%	10/39	7,250
6,788		Federal Home Loan Mortgage Corporation Pool	4.50%	2/41	7,203
6,480		Federal Home Loan Mortgage Corporation Pool	3.00%	1/43	6,325
6,446		Federal Home Loan Mortgage Corporation Pool	3.00%	4/43	6,291
5,593		Government National Mortgage Association Pool	4.54%	11/62	6,177
5,542		Government National Mortgage Association Pool	4.46%	2/63	6,108
5,965		Federal National Mortgage Association Pool	3.50%	5/43	6,064
5,647		Federal National Mortgage Association Pool	4.00%	7/26	5,955
5,385		Government National Mortgage Association Pool	4.58%	10/62	5,952
5,319		Government National Mortgage Association Pool	4.52%	1/63	5,875
5,771		Federal National Mortgage Association Pool	3.50%	6/43	5,869
5,178		Government National Mortgage Association Pool	4.60%	6/62	5,718

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value/Number of Shares		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
Principal and Interest - Fixed Rate Agency Securities (129.00%) (continued)
$	5,157	Government National Mortgage Association Pool	4.63%	6/61	$	5,661
5,062		Federal National Mortgage Association Pool	5.00%	6/41	5,474
5,252		Federal Home Loan Mortgage Corporation Pool	4.00%	5/42	5,473
5,355		Federal National Mortgage Association Pool	3.50%	8/42	5,444
5,034		Federal National Mortgage Association Pool	4.00%	4/42	5,277
5,040		Federal National Mortgage Association Pool	4.00%	10/41	5,260
5,023		Federal National Mortgage Association Pool	3.50%	6/43	5,056
4,638		Federal National Mortgage Association Pool	5.00%	11/40	5,038
4,624		Federal National Mortgage Association Pool	5.00%	7/41	4,999
5,092		Federal Home Loan Mortgage Corporation Pool	3.00%	6/43	4,970
4,658		Federal National Mortgage Association Pool	4.50%	8/41	4,939
4,669		Federal National Mortgage Association Pool	3.50%	7/42	4,747
4,730		Federal Home Loan Mortgage Corporation Pool	3.00%	2/43	4,617
4,418		Federal Home Loan Mortgage Corporation Pool	4.00%	2/42	4,605
4,465		Federal National Mortgage Association Pool	3.50%	11/42	4,543
4,456		Federal National Mortgage Association Pool	3.50%	7/42	4,528
4,173		Federal National Mortgage Association Pool	4.00%	9/42	4,357
3,965		Federal National Mortgage Association Pool	5.00%	10/41	4,280
4,267		Federal Home Loan Mortgage Corporation Pool	3.50%	6/43	4,274
4,010		Federal National Mortgage Association Pool	3.00%	7/27	4,129
3,886		Federal National Mortgage Association Pool	3.50%	8/42	3,950
3,511		Federal National Mortgage Association Pool	5.00%	10/35	3,834
3,439		Government National Mortgage Association Pool	4.66%	1/63	3,821
3,368		Government National Mortgage Association Pool	4.80%	2/61	3,698
3,300		Government National Mortgage Association Pool	4.48%	2/63	3,639
3,587		Federal Home Loan Mortgage Corporation Pool	3.50%	11/42	3,637
3,453		Federal National Mortgage Association Pool	4.00%	6/26	3,634
3,429		Federal National Mortgage Association Pool	3.50%	6/27	3,581
3,483		Federal Home Loan Mortgage Corporation Pool	3.00%	6/28	3,572
3,552		Federal Home Loan Mortgage Corporation Pool	3.50%	6/43	3,566
3,387		Federal National Mortgage Association Pool	4.00%	4/42	3,535
3,469		Federal National Mortgage Association Pool	3.50%	1/43	3,529
3,229		Federal National Mortgage Association Pool	5.00%	6/40	3,514
3,292		Federal National Mortgage Association Pool	4.50%	4/42	3,500
3,145		Government National Mortgage Association Pool	4.68%	10/61	3,466
3,326		Federal National Mortgage Association Pool	3.00%	6/28	3,430
3,338		Federal National Mortgage Association Pool	3.00%	3/28	3,426
3,242		Federal National Mortgage Association Pool	4.00%	9/42	3,385
3,170		Federal National Mortgage Association Pool	4.50%	12/41	3,374

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value/Number of Shares		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
Principal and Interest - Fixed Rate Agency Securities (129.00%) (continued)
$	3,383	Federal Home Loan Mortgage Corporation Pool	3.00%	11/42	$	3,301
3,162		Federal Home Loan Mortgage Corporation Pool	4.00%	1/42	3,293
3,361		Federal Home Loan Mortgage Corporation Pool	3.00%	4/43	3,281
3,228		Federal National Mortgage Association Pool	3.50%	12/42	3,280
3,026		Federal Home Loan Mortgage Corporation Pool	4.50%	9/41	3,206
3,148		Federal National Mortgage Association Pool	3.50%	5/43	3,202
131,020		Other Federal National Mortgage Association Pools	3.00% - 6.00%	3/26 - 7/43	136,057
45,976		Other Federal Home Loan Mortgage Corporation Pools	3.00% - 6.00%	4/26 - 7/43	46,836
13,609		Other Government National Mortgage Association Pools	4.49% - 4.69%	7/61 - 11/62	15,018
					822,835
Interest Only - Fixed Rate Agency Securities (1.98%)
53,465		Other Federal National Mortgage Association	3.00% - 5.50%	12/20 - 4/43	6,177
24,264		Other Federal Home Loan Mortgage Corporation	3.00% - 5.50%	12/32 - 1/43	3,393
22,552		Other Government National Mortgage Association	3.00% - 5.50%	3/36 - 11/42	3,043
					12,613
TBA - Fixed Rate Agency Securities (12.69%)
65,800		Federal Home Loan Mortgage Corporation (30 Year)	3.00%	7/13	64,135
15,570		Federal National Mortgage Association (30 Year)	4.00%	7/13	16,221
600		Other Federal National Mortgage Association (15 Year)	2.50%	7/13	603
					80,959
Total Fixed Rate Agency Securities (Cost $938,872)					916,407
Floating Rate Agency Securities (3.95%)
Principal and Interest - Floating Rate Agency Securities (1.63%)
3,804		Federal National Mortgage Association Pool	2.53%	5/38	4,005
3,243		Federal National Mortgage Association Pool	2.55%	12/35	3,407
2,851		Other Federal National Mortgage Association Pools	2.69% - 4.93%	4/36 - 9/37	3,013
					10,425
Interest Only - Floating Rate Agency Securities (2.32%)
46,845		Other Government National Mortgage Association	2.58% - 6.56%	11/42 - 4/61	6,165
31,510		Other Federal National Mortgage Association	5.50% - 6.56%	8/36 - 2/43	5,865
23,104		Resecuritization of Government National Mortgage Association (q)	4.28%	8/60	2,754
					14,784
Total Floating Rate Agency Securities (Cost $25,535)					25,209
Total Agency Securities (Cost $964,407)					941,616

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value/Number of Shares		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
Private Label Securities (112.63%)
Principal and Interest - Private Label Securities (112.06%)
$	989,570	Various	0.28% - 9.35%	5/19 - 6/47	$	714,797
Total Principal and Interest - Private Label Securities (Cost $656,261)					714,797
Principal Only - Private Label Securities (0.39%)
5,800		Various	—%	8/30	2,466
Total Principal Only - Private Label Securities (Cost $2,355)					2,466
Interest Only - Private Label Securities (0.18%)
54,772		Various	0.50%-2.00%	6/44 - 9/47	1,153
Total Interest Only - Private Label Securities (Cost $569)					1,153
Other Private Label Securities (0.00%)
136,465		Various	—%	6/37	—
Total Other Private Label Securities (Cost $370)					—
Total Private Label Securities (Cost $659,555)					718,416
Total Mortgage-Backed Securities (Cost $1,623,962)					1,660,032
Other Asset-Backed Securities (6.25%)
43,432		Various	0% - 9.78%	6/17 - 12/49	39,840
Total Other Asset-Backed Securities (Cost $40,767)					39,840
Commercial Mortgage Loans (1.18%) (o)
9,041		Various	0% - 7.25%	11/13 - 6/14	7,563
Total Commercial Mortgage Loans (Cost $7,453)					7,563
Common Stock (0.47%)
130		Publicly Traded Real Estate Investment Trusts			2,987
Total Common Stock (Cost $2,952)					2,987
Total Long Investments (Cost $1,675,134)					$	1,710,422



Repurchase Agreements (6.46%) (a) (c)
$	18,116	J.P. Morgan Securities Inc. Collateralized by Par Value $18,700 U.S. Treasury Note, Coupon 2.00%, Maturity Date 2/23	0.03%	7/13	$	18,116
13,422		J.P. Morgan Securities Inc. Collateralized by Par Value $13,000 U.S. Treasury Note, Coupon 1.75%, Maturity Date 5/16	0.12%	7/13	13,422
9,650		Bank of America Securities Collateralized by Par Value $10,000 U.S. Treasury Note, Coupon 1.13%, Maturity Date 12/19	0.08%	7/13	9,650
Total Repurchase Agreements (Cost $41,188)					$	41,188

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value/Number of Shares			Description	Rate	Maturity	Fair Value
(In thousands)						Expressed in U.S. Dollars
Investments Sold Short (-95.46%) (a)
TBA - Fixed Rate Agency Securities Sold Short (-88.08%) (d)
$	(193,482	)	Federal National Mortgage Association (30 Year)	3.50%	7/13	$	(196,437	)
(77,380		)	Federal National Mortgage Association (30 Year)	4.50%	7/13	(81,893		)
(61,400		)	Federal National Mortgage Association (30 Year)	5.00%	7/13	(66,091		)
(42,160		)	Federal National Mortgage Association (15 Year)	3.00%	7/13	(43,369		)
(40,400		)	Federal National Mortgage Association (30 Year)	3.50%	8/13	(40,900		)
(27,950		)	Federal National Mortgage Association (30 Year)	3.00%	7/13	(27,320		)
(20,100		)	Federal Home Loan Mortgage Corporation (30 Year)	3.50%	7/13	(20,356		)
(16,500		)	Federal Home Loan Mortgage Corporation (30 Year)	5.00%	7/13	(17,621		)
(15,800		)	Federal National Mortgage Association (15 Year)	3.50%	7/13	(16,475		)
(14,104		)	Federal National Mortgage Association (15 Year)	4.00%	7/13	(14,869		)
(11,000		)	Federal National Mortgage Association (15 Year)	4.50%	7/13	(11,656		)
(9,200		)	Federal Home Loan Mortgage Corporation (30 Year)	4.00%	7/13	(9,564		)
(7,400		)	Federal National Mortgage Association (30 Year)	4.00%	8/13	(7,689		)
(3,500		)	Federal National Mortgage Association (30 Year)	5.50%	7/13	(3,801		)
(2,500		)	Other Federal National Mortgage Association (30 Year)	6.00%	7/13	(2,720		)
(1,000		)	Other Federal Home Loan Mortgage Corporation (30 Year)	6.00%	7/13	(1,084		)
Total TBA - Fixed Rate Agency Securities Sold Short (Proceeds -$566,128)						(561,845		)
U.S. Treasury Securities Sold Short (-6.42%)
(18,700		)	U.S. Treasury Note	2.00%	2/23	(17,989		)
(13,000		)	U.S. Treasury Note	1.75%	5/16	(13,408		)
(10,000		)	U.S. Treasury Note	1.13%	12/19	(9,580		)
Total U.S. Treasury Securities Sold Short (Proceeds -$41,929)						(40,977		)
Common Stock Sold Short (-0.96%)
(439)			Publicly Traded Real Estate Investment Trusts			(6,100		)
Total Common Stock Sold Short (Proceeds -$6,151)						(6,100		)
Total Investments Sold Short (Proceeds -$614,208)						$	(608,922	)

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013 (CONTINUED)

(UNAUDITED)



	Primary Risk Exposure	Notional Value			Range of Expiration Dates	Fair Value
(In thousands)						Expressed in U.S. Dollars
Financial Derivatives - Assets (7.36%) (a)
Swaps (7.36%)
Long Swaps:
Credit Default Swaps on Corporate Bond Indices (Cost - $171) (f)	Credit	$	4,875		12/17	$	127
Credit Default Swaps on Asset-Backed Indices (Proceeds - $217) (e)	Credit	2,192			12/37	65
Total Return Swaps (k)	Equity Market	2,922			3/14 - 6/15	65
Short Swaps:
Credit Default Swaps on Asset-Backed Securities (g)	Credit	(26,625		)	11/34 - 5/36	21,134
Credit Default Swaps on Asset-Backed Indices (h)	Credit	(63,937		)	5/46 - 5/63	9,553
Interest Rate Swaps (i)	Interest Rates	(647,200		)	3/15 - 6/23	15,967
Total Return Swaps (k)	Equity Market	(5,590		)	9/13	61
Total Swaps (Net cost $47,291)						46,972
Futures (0.00%)
Long Futures:
U.S. Treasury Note Futures (m)	Interest Rates	6,700			9/13	5
Total Futures						5
Total Financial Derivatives - Assets (Net cost $47,291)						$	46,977
Financial Derivatives - Liabilities (-2.91%) (a)
Swaps (-2.90%)
Long Swaps:
Credit Default Swaps on Asset-Backed Indices (Proceeds - $13,953) (e)	Credit	$	41,455		12/49 - 5/52	$	(13,543	)
Total Return Swaps (k)	Equity Market	4,817			3/14 - 6/15	(118		)
Short Swaps:
Interest Rate Swaps (i)	Interest Rates	(4,200		)	7/23	(22		)
Credit Default Swaps on Corporate Bond Indices (j)	Credit	(111,438		)	12/17 - 6/18	(4,236		)
Credit Default Swaps on Asset-Backed Securities (g)	Credit	(4,638		)	9/34 - 3/35	(541		)
Total Return Swaps (k)	Equity Market	(6,354		)	9/13	—
Total Swaps (Net proceeds -$16,042)						(18,460		)
Futures (-0.01%)
Long Futures:
U.S. Treasury Note Futures (n)	Interest Rates	27,800			9/13	$	(54	)
Short Futures:
Eurodollar Futures (l)	Interest Rates	(21,000		)	9/13	(29		)
Total Futures						(83		)
Total Financial Derivatives - Liabilities (Net proceeds -$16,042)						$	(18,543	)

See Notes to Consolidated Financial Statements

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT JUNE 30, 2013 (CONCLUDED)

(UNAUDITED)


(a)	See Note 2 and Note 3 in Notes to Consolidated Financial Statements.


(b)	At June 30, 2013, the Company's long investments guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association represented 97.77%, 37.76%, and 12.09% of equity, respectively.


(c)	In general, securities received pursuant to repurchase agreements were delivered to counterparties in short sale transactions.


(d)	At June 30, 2013, the Company's short investments guaranteed by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation represented 80.46% and 7.62% of equity, respectively.


(e)	For long credit default swaps on asset-backed indices, the Company sold protection.


(f)	For long credit default swaps on corporate bond indices, the Company sold protection.


(g)	For short credit default swaps on asset-backed securities, the Company purchased protection.


(h)	For short credit default swaps on asset-backed indices, the Company purchased protection.


(i)	For short interest rate swap contracts, a fixed rate is being paid and a floating rate is being received.


(j)	For short credit default swaps on corporate bond indices, the Company purchased protection.


(k)	Notional value represents number of underlying shares or par value times the closing price of the underlying security.


(l)	Every $1,000,000 in notional value represents one contract.


(m)	Notional value represents the total face amount of U.S. Treasury Notes underlying all contracts held; as of June 30, 2013 67 contracts were held.


(n)	Notional value represents the total face amount of U.S. Treasury Notes underlying all contracts held; as of June 30, 2013 229 contracts were held.


(o)	Includes a loan with a fair value in the amount of $5.0 million where the maturity date may be extended through November 4, 2015 as well as a non-performing commercial whole loan.

(p)

The table below shows the ratings on the Company's long investments, excluding common stock, from Moody's, Standard and Poor's, or Fitch, as well as the Company's long investments that were unrated but affiliated with Fannie Mae, Freddie Mac, or Ginnie Mae. Ratings tend to be a lagging credit indicator; as a result, the credit quality of the Company's long investment holdings may be lower than the credit quality implied based on the ratings listed below. In situations where an investment has a split rating, the lowest provided rating is used. The ratings descriptions include ratings qualified with a "+," "-," "1," "2," or "3."



Rating Description	Percent of Equity
Unrated but Agency-Guaranteed	146.99	%
Aaa/AAA/AAA	0.00	%
Aa/AA/AA	0.00	%
A/A/A	1.16	%
Baa/BBB/BBB	1.81	%
Ba/BB/BB or below	113.82	%
Unrated	3.90	%


(q)	Private trust 100% backed by interest in Government National Mortgage Association collateralized mortgage obligation certificates.


(r)	Classification percentages are based on Total Equity.

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT DECEMBER 31, 2012

(UNAUDITED)



Current Principal/ Notional Value		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
North America (p)
Long Investments (271.57%) (a) (n)
Mortgage-Backed Securities (269.68%)
Agency Securities (161.52%) (b)
Fixed Rate Agency Securities (157.46%)
Principal and Interest - Fixed Rate Agency Securities (148.21%)
$	49,427	Federal National Mortgage Association Pool	3.50%	12/42	$	52,864
45,304		Federal Home Loan Mortgage Corporation Pool	3.50%	11/42	48,596
35,601		Federal National Mortgage Association Pool	5.00%	7/37	38,657
21,338		Federal National Mortgage Association Pool	4.50%	12/41	23,268
18,227		Federal National Mortgage Association Pool	3.50%	8/42	19,552
17,845		Federal National Mortgage Association Pool	4.50%	9/41	19,459
17,634		Federal Home Loan Mortgage Corporation Pool	5.00%	7/41	19,218
17,621		Federal National Mortgage Association Pool	5.00%	8/41	19,201
17,113		Federal National Mortgage Association Pool	4.50%	10/41	18,661
15,869		Federal National Mortgage Association Pool	5.00%	3/41	17,430
14,911		Federal National Mortgage Association Pool	3.00%	10/42	15,642
14,242		Federal National Mortgage Association Pool	4.00%	8/42	15,407
13,519		Federal Home Loan Mortgage Corporation Pool	3.00%	10/42	14,157
11,985		Federal National Mortgage Association Pool	4.50%	9/41	12,994
11,942		Federal National Mortgage Association Pool	4.00%	11/41	12,848
11,003		Federal National Mortgage Association Pool	5.00%	7/41	12,058
10,576		Federal National Mortgage Association Pool	4.00%	1/42	11,355
9,576		Federal National Mortgage Association Pool	4.50%	4/26	10,338
9,002		Federal Home Loan Mortgage Corporation Pool	4.50%	10/41	9,772
8,321		Federal Home Loan Mortgage Corporation Pool	4.50%	2/41	9,038
7,395		Federal National Mortgage Association Pool	5.50%	10/39	8,075
7,428		Federal National Mortgage Association Pool	3.50%	10/42	7,984
7,352		Federal National Mortgage Association Pool	4.00%	7/26	7,888
6,324		Federal National Mortgage Association Pool	5.00%	6/41	6,891
5,929		Federal National Mortgage Association Pool	3.50%	5/42	6,356
5,689		Federal Home Loan Mortgage Corporation Pool	4.00%	5/42	6,141
5,592		Federal National Mortgage Association Pool	4.00%	10/41	6,079
5,642		Federal National Mortgage Association Pool	3.50%	11/42	6,020
5,494		Federal National Mortgage Association Pool	3.50%	8/42	5,862
5,085		Federal National Mortgage Association Pool	5.00%	10/41	5,534
5,085		Federal National Mortgage Association Pool	4.00%	4/42	5,531
5,045		Federal National Mortgage Association Pool	5.00%	11/40	5,497
5,025		Federal National Mortgage Association Pool	5.00%	7/41	5,444
4,944		Federal National Mortgage Association Pool	4.50%	8/41	5,361
4,911		Federal Home Loan Mortgage Corporation Pool	3.50%	9/42	5,242

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT DECEMBER 31, 2012 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
Principal and Interest - Fixed Rate Agency Securities (148.21%) (continued)
$	4,676	Federal National Mortgage Association Pool	4.00%	9/42	$	5,059
4,725		Federal National Mortgage Association Pool	3.50%	7/42	5,042
4,699		Federal National Mortgage Association Pool	4.00%	6/26	5,041
4,513		Federal National Mortgage Association Pool	3.50%	11/42	4,828
4,465		Federal Home Loan Mortgage Corporation Pool	4.00%	2/42	4,787
4,456		Federal National Mortgage Association Pool	3.00%	7/27	4,710
4,261		Federal National Mortgage Association Pool	3.50%	11/42	4,573
4,009		Federal Home Loan Mortgage Corporation Pool	4.00%	11/41	4,303
3,964		Federal Home Loan Mortgage Corporation Pool	3.50%	11/42	4,229
3,926		Federal National Mortgage Association Pool	3.50%	8/42	4,189
3,798		Federal National Mortgage Association Pool	5.00%	10/35	4,172
3,864		Federal Home Loan Mortgage Corporation Pool	3.50%	10/42	4,116
3,728		Federal National Mortgage Association Pool	5.00%	6/40	4,062
3,726		Federal National Mortgage Association Pool	4.50%	12/41	4,040
3,763		Federal National Mortgage Association Pool	3.50%	6/27	4,022
3,766		Federal National Mortgage Association Pool	3.00%	8/27	3,980
3,606		Federal National Mortgage Association Pool	4.50%	4/42	3,941
3,526		Federal Home Loan Mortgage Corporation Pool	6.00%	4/39	3,848
3,534		Federal National Mortgage Association Pool	3.50%	12/42	3,770
3,442		Federal Home Loan Mortgage Corporation Pool	4.50%	9/41	3,737
3,483		Federal Home Loan Mortgage Corporation Pool	3.50%	11/42	3,712
3,419		Federal National Mortgage Association Pool	4.00%	4/42	3,706
3,404		Federal Home Loan Mortgage Corporation Pool	4.00%	1/42	3,653
3,344		Federal National Mortgage Association Pool	4.00%	9/42	3,618
3,415		Federal Home Loan Mortgage Corporation Pool	3.00%	11/42	3,573
3,288		Federal Home Loan Mortgage Corporation Pool	3.50%	2/42	3,518
3,182		Federal National Mortgage Association Pool	4.00%	8/42	3,440
3,095		Federal National Mortgage Association Pool	4.50%	11/41	3,355
3,053		Federal National Mortgage Association Pool	3.50%	11/42	3,262
2,931		Federal National Mortgage Association Pool	4.00%	8/42	3,178
2,947		Federal National Mortgage Association Pool	3.50%	7/27	3,145
2,921		Federal National Mortgage Association Pool	3.50%	6/27	3,123
2,828		Federal National Mortgage Association Pool	4.50%	10/41	3,076
2,605		Government National Mortgage Association	4.55%	10/62	2,977
2,676		Federal National Mortgage Association Pool	4.50%	10/41	2,901
2,566		Federal National Mortgage Association Pool	4.00%	8/42	2,774
2,490		Federal National Mortgage Association Pool	4.50%	8/42	2,719
2,497		Federal National Mortgage Association Pool	4.00%	9/42	2,699
2,519		Federal National Mortgage Association Pool	3.50%	11/42	2,690
2,520		Federal Home Loan Mortgage Corporation Pool	3.50%	11/42	2,685

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT DECEMBER 31, 2012 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
Principal and Interest - Fixed Rate Agency Securities (148.21%) (continued)
$	2,498	Federal National Mortgage Association Pool	3.50%	8/42	$	2,679
2,500		Federal Home Loan Mortgage Corporation Pool	3.50%	1/42	2,667
2,452		Federal National Mortgage Association Pool	3.50%	11/42	2,619
2,377		Federal National Mortgage Association Pool	4.00%	6/42	2,564
69,330		Other Federal National Mortgage Association Pools	2.50% - 6.00%	3/26 - 1/43	74,508
19,340		Other Federal Home Loan Mortgage Corporation Pools	3.50% - 6.00%	4/26 - 12/42	20,744
					750,454
Interest Only - Fixed Rate Agency Securities (0.64%)
20,095		Other Federal National Mortgage Association	4.00% - 5.50%	1/36 - 10/40	1,920
10,426		Other Federal Home Loan Mortgage Corporation	5.00% - 5.50%	6/33 - 1/39	1,195
4,269		Other Government National Mortgage Association	5.50%	3/36	135
					3,250
TBA - Fixed Rate Agency Securities (8.61%)
18,950		Federal Home Loan Mortgage Corporation (30 Year)	4.00%	1/13	20,232
16,600		Federal National Mortgage Association (15 Year)	3.00%	1/13	17,523
5,600		Federal Home Loan Mortgage Corporation (30 Year)	3.00%	1/13	5,855
					43,610
Total Fixed Rate Agency Securities (Cost $789,964)					797,314
Floating Rate Agency Securities (4.06%)
Principal and Interest - Floating Rate Agency Securities (3.39%)
6,045		Federal National Mortgage Association Pool	5.08%	5/38	6,374
4,537		Federal National Mortgage Association Pool	3.14%	12/35	4,783
2,478		Federal National Mortgage Association Pool	5.69%	4/36	2,627
3,159		Other Federal National Mortgage Association Pools	4.93% - 5.50%	7/37 - 9/37	3,385
					17,169
Interest Only - Floating Rate Agency Securities (0.67%)
23,140		Resecuritization of Government National Mortgage Association (o)	4.28%	8/60	3,242
1,042		Other Federal National Mortgage Association	5.50%	8/36	152
					3,394
Total Floating Rate Agency Securities (Cost $19,979)					20,563
Total Agency Securities (Cost $809,943)					817,877

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT DECEMBER 31, 2012 (CONTINUED)

(UNAUDITED)



Current Principal/ Notional Value		Description	Rate	Maturity	Fair Value
(In thousands)					Expressed in U.S. Dollars
Private Label Securities (108.16%)
Principal and Interest - Private Label Securities (107.47%)
$	850,320	Various	0.17% - 9.35%	5/19 - 5/47	$	544,208
Total Principal and Interest - Private Label Securities (Cost $505,380)					544,208
Principal Only - Private Label Securities (0.46%)
5,800		Various	—%	8/30	2,320
Total Principal Only - Private Label Securities (Cost $2,242)					2,320
Interest Only - Private Label Securities (0.23%)
61,640		Various	0.50% - 2.00%	6/44 - 9/47	1,165
Total Interest Only - Private Label Securities (Cost $637)					1,165
Other Private Label Securities (0.00%)
158,348		Various	—%	6/37	—
Total Other Private Label Securities (Cost $429)					—
Total Private Label Securities (Cost $508,688)					547,693
Total Mortgage-Backed Securities (Cost $1,318,631)					1,365,570
Commercial Mortgage Loans (1.89%) (m)
10,225		Various	5.00% - 6.25%	11/13 - 5/39	9,546
Total Commercial Mortgage Loans (Cost $9,522)					9,546
Total Long Investments (Cost $1,328,153)					$	1,375,116



Repurchase Agreements (2.70%) (a) (c)
$	13,650	Bank of America Securities	0.20%	1/13	$	13,650
		Collateralized by Par Value $13,000
		U.S. Treasury Note, Coupon 1.75%,
		Maturity Date 5/16
Total Repurchase Agreements (Cost $13,650)					$	13,650

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT DECEMBER 31, 2012 (CONTINUED)

(UNAUDITED)



Current Principal/Notional Value			Description	Rate	Maturity	Fair Value
(In thousands)						Expressed in U.S. Dollars
Investments Sold Short (-122.90%) (a)
TBA - Fixed Rate Agency Securities Sold Short (-120.22%) (d)
$	(198,168	)	Federal National Mortgage Association (30 Year)	3.50%	1/13	$	(211,343	)
(87,500		)	Federal National Mortgage Association (30 Year)	5.00%	1/13	(94,794		)
(77,730		)	Federal National Mortgage Association (30 Year)	4.50%	1/13	(83,982		)
(53,400		)	Federal Home Loan Mortgage Corporation (30 Year)	3.50%	1/13	(56,804		)
(34,510		)	Federal National Mortgage Association (15 Year)	3.00%	1/13	(36,430		)
(31,600		)	Federal National Mortgage Association (30 Year)	3.00%	1/13	(33,128		)
(16,500		)	Federal Home Loan Mortgage Corporation (30 Year)	5.00%	1/13	(17,776		)
(16,450		)	Federal National Mortgage Association (15 Year)	3.50%	1/13	(17,460		)
(15,718		)	Federal National Mortgage Association (30 Year)	4.00%	1/13	(16,852		)
(14,104		)	Federal National Mortgage Association (15 Year)	4.00%	1/13	(15,096		)
(11,000		)	Federal National Mortgage Association (15 Year)	4.50%	1/13	(11,833		)
(7,500		)	Federal National Mortgage Association (30 Year)	5.50%	1/13	(8,148		)
(2,500		)	Federal National Mortgage Association (30 Year)	6.00%	1/13	(2,731		)
(1,200		)	Other Federal National Mortgage Association (15 Year)	2.50%	1/13	(1,255		)
(1,000		)	Other Federal Home Loan Mortgage Corporation (30 Year)	6.00%	1/13	(1,088		)
Total TBA - Fixed Rate Agency Securities Sold Short (Proceeds -$607,967)						(608,720		)
U.S. Treasury Securities Sold Short (-2.68%)
(13,000		)	U.S. Treasury Note	1.75%	05/16	(13,581		)
Total U.S. Treasury Securities Sold Short (Proceeds -$13,081)						(13,581		)
Total Investments Sold Short (Proceeds -$621,048)						$	(622,301	)

See Notes to Consolidated Financial Statements

Table of Contents

ELLINGTON FINANCIAL LLC

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

AT DECEMBER 31, 2012 (CONTINUED)

(UNAUDITED)



	Primary Risk Exposure	Notional Value	Range of Expiration Dates	Fair Value
(In thousands)				Expressed in U.S.Dollars
Financial D