Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q1 2022 Earnings Presentation
35 slides from Ellington Financial's earnings presentation, May 6, 2022
Slide 1: Earnings Conference Call Q1 2022
Earnings Conference Call Q1 May 6, 2022 2022 Q1 2022 EARNINGS
Slide 2: Important Notice: Forward-Looking Statements
Important Notice Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may diff
Slide 3: First Quarter Highlights
First Quarter Highlights(1) • Net loss: $(9.9) million or $(0.17) per share Overall Results • Economic return:(2) (1.1)% for the quarter • Core Earnings:(3) $23.2 million or $0.40 per share • Credit gross income: $16.5 million(4) or $0.28 per share Credit Strategy • Long credit portfolio: $2.301 bil
Slide 4: Portfolio Summary as of March 31, 2022
Portfolio Summary as of March 31, 2022(1) Proprietary portfolio of high-yielding, short-duration loans, and opportunistic securities Allocated Fair Value Average Price WAVG Mkt Strategy Equity(2) ($ in $1,000s) (%) (3)(7) WAVG Life (5)(7) Yield(6)(7) Equity and Asset Credit Allocation by Strategy Re
Slide 5: Operating Results by Strategy
Operating Results by Strategy Three-Month Three-Month Period Ended Per Period Ended Per (1) (In thousands, except per share amounts) March 31, 2022 Share December 31, 2021 Share Credit: Interest income and other income(2) 44,506 $ 0.76 $ 41,647 $ 0.73 Realized gain (loss), net 7,339 0.13 (497) (0.01
Slide 6: Long Credit Portfolio
Long Credit Portfolio* G H G H F 1% 1% F 1% 1% A A E 6% E 7% 20% D 2% 8% 24% A: CMBS & Commercial Loans & REO(3)(4) 9% B: Consumer Loans & ABS(2) D 3% C: Residential Loans & REO(3) B $2.30 bn 5% B D: CLOs(2) $2.06 bn 8% E: Non-Agency RMBS F: Debt and Equity Investments in Loan Originators G: Non-Dol
Slide 7: Long Agency Portfolio
Long Agency Portfolio ARMs Fixed ARMs Fixed RM 1% IOs RM IOs 1% 15-Year Fixed 15-Year Fixed Fixed 3% 2% Fixed 3% 2% 20-Year 13% 14% Fixed <1% 20-Year Fixed 3% $1.50 bn $1.70bn $1.70 bn 81% 77% 30-Year 30-Year Fixed Fixed As of 3/31/2022(1) As of 12/31/2021(1) (1) Wtd. Avg. (1) Fair Value Fair Value
Slide 8: Summary of Borrowings
Summary of Borrowings ($ in thousands) As of 3/31/2022 Three-Month Period Ended 3/31/22 Average Average Cost Outstanding Weighted Average Collateral Type Borrowings Borrowing Rate Borrowings of Funds (1) Credit $2,484,015 2.18% $ 2,199,651 2.07% Agency RMBS 1,498,106 0.31% 1,563,201 0.24% Borrowings
Slide 9: Small Balance Commercial Mortgage Loan Portfolio – Detail
Small Balance Commercial Mortgage Loan Portfolio – Detail(1)(2) Other FL Retail 10% 18% Mixed 6% 3% All Other Use States 40% 6% NY Industrial 6% <5% Property Type Geography 6% 6% AZ Hotel 69% 11% Multifamily 19% GA TX Floating First Lien with floor Seniority Interest Rate Type 100% 100% • Small bala
Slide 10: Proprietary Loan Origination Businesses
Proprietary Loan Origination Businesses Ellington Financial’s vertically integrated, proprietary loan origination businesses are designed to: • Lock in a steady flow of high-quality loan originations • Leverage Ellington’s core strengths of data analysis and modeling to help shape the underwriting c
Slide 11: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs, Q1-2011 – Q4-2021(1)(2) Standard Company Deviation EFC 3.7% Hybrid REIT #02 5.5% Hybrid REIT #03 5.6% Hybrid REIT #04 6.3% Hybrid REIT #05 7.5% Hybrid REIT #06 9.7% Hybrid REIT #07 12.9% Hybrid REIT #08 13.4% Hy
Slide 12: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Estimated Change in Fair Value 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates ($ in thousands) ∆ Fair Value % of Total Equity ∆ Fair Value % of Total Equity Agency RMBS – Fixed Pools and IOs excluding TBAs $ 35,074 2.65% $ (37
Slide 13: Commitment to ESG
Commitment to ESG Ellington is committed to corporate social responsibility. We recognize the importance of environmental, social and governance (“ESG”) factors, and believe that the implementation of ESG policies will benefit our employees, support long-term stockholder performance, and make a posi
Slide 14: Supplemental Slides
Supplemental Slides Q1 2022 EARNINGS 14
Slide 15: First Quarter Market Update
First Quarter Market Update Quarter Ended 3/31/2022 Q1/Q4 12/31/2021 Q4/Q3 9/30/2021 Q3/Q2 6/30/2021 Q2/Q1 3/31/2021 (1) UST (%) 3M UST 0.48 +0.45 0.03 -0.00 0.03 -0.01 0.04 +0.03 0.02 2Y UST 2.33 +1.60 0.73 +0.46 0.28 +0.03 0.25 +0.09 0.16 5Y UST 2.46 +1.20 1.26 +0.30 0.96 +0.08 0.89 -0.05 0.94 10Y
Slide 16: Derivatives Summary as of March 31, 2022
Derivatives Summary as of March 31, 2022(1) Short ($ in thousands) Long Notional Notional Net Notional Fair Value Mortgage-Related Derivatives: CDS on MBS and MBS Indices $ 556 $ (11,384) $ (10,828) $ 1,459 Total Net Mortgage-Related Derivatives $ 1,459 Corporate-Related Derivatives: CDS on Corporat
Slide 17: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Instrument Corporate CDS Indices/ Tranches/ Single Name ABS CDS European Category Options/ Single Names and ABX Indices Sovereign Debt CMBX Units HY CDX OTR Bond Equivalent Value(3)(4) Bond Equivalent Value(4) Market Value Bond Equivalent Value(4) • EFC’s dynamic credi
Slide 18: Diversified Credit Portfolio
Diversified Credit Portfolio Diversified sources of return to perform over market cycles Other Commercial Mortgages • Bridge Loans • CMBS, B-Pieces & Credit Bonds Residential Mortgages • NPLs • Non-QM Loans • REO • Residential Transition Loans • NPL / RPL • Non-Agency / Non-Conforming • Reverse Mort
Slide 19: Agency Interest Rate Hedging Portfolio
Agency Interest Rate Hedging Portfolio(1) We deploy a dynamic and adaptive hedging strategy to preserve book value E F E F <1% 1.1% <1% 4.9% D 22.2% 34.3% A A: >5 Yr Interest Rate Swaps 37.4% A D 41.1% B: 2-5Yr Treasuries and Treasury Futures $801.5mm C: >5 Yr Treasuries and Treasury Futures $531.4m
Slide 20: Agency Interest Rate Hedging Portfolio (continued)
Agency Interest Rate Hedging Portfolio (continued) Net Agency Pool Exposure Based on Fair Value(1) As of 3/31/2022 As of 12/31/2021 $1,600 $1,600 Long Agency $1,400 $1,400 Pools Long Agency $1,663 $1,200 Pools $1,200 $1,476 $1,000 $1,000 $800 $800 ($ in millions) ($ in millions) $600 $600 Net Long N
Slide 21: CPR Breakout of Agency Fixed Long Portfolio
CPR Breakout of Agency Fixed Long Portfolio Average for Quarter Ended 3/31/2022(1) Average for Quarter Ended 12/31/2021 (1) Other Other 24% 23% Loan Loan 34% Balance 36% Balance Jumbo Jumbo <1% <1% 10% 11% Geography Geography 9% 11% 2% Non- 2% 17% MHA 20% Non- Owner MHA Owner Low Low FICO FICO Colla
Slide 22: Repo Borrowings
Repo Borrowings(1) Borrowings by Days to Maturity ($ in thousands) Repo Borrowings as of March 31, 2022 % of Total Remaining Days to Maturity Credit Agency U.S. Treasury Total Borrowings 30 Days or Less $ 9,228 $ 202,858 $ - $ 212,086 7.8% 31-90 Days 334,377 592,385 - 926,762 34.1% 91-180 Days 409,7
Slide 23: Resilient Profit Generation Over Market Cycles
Resilient Profit Generation Over Market Cycles(1) Three-Month COVID Period Ended Pandemic ($ in thousands) March 31 Years Ended (2) (2) 2022 2021 2020 2019 2018 2017 2016 Long: Credit $1,188 0.1% $188,562 18.1% $53,736 6.2% $73,919 11.1% $61,201 10.0% $61,136 9.6% $36,203 5.3% Credit Hedge and Other
Slide 24: Total Return Since Inception
Total Return Since Inception EFC has successfully preserved book value over market cycles, while producing strong results for investors • EFC life-to-date diluted net asset value-based total return from inception in August 2007 through Q1 2022 is approximately 273%, or 9.4% annualized(1) Diluted BVP
Slide 25: Capital, Leverage & Portfolio Composition
Capital, Leverage & Portfolio Composition Capital Usage Across Entire Portfolio(1) Leverage by Strategy (Debt-to-Equity)(1) Credit and Agency Portfolios by Fair Value(7) Average Price – Credit and Agency(6)(7) $ in Millions Q1 2022 EARNINGS 25
Slide 26: Condensed Consolidated Balance Sheet (Unaudited)
Condensed Consolidated Balance Sheet (Unaudited) (1) (in thousands, except share and per share amounts) March 31, 2022 December 31, 2021 Assets Cash and cash equivalents $ 363,529 $ 92,661 Restricted cash 175 175 Securities, at fair value 1,877,529 2,087,360 Loans, at fair value 2,884,627 2,415,321
Slide 27: Condensed Consolidated Statement of Operations (Unaudited)
Condensed Consolidated Statement of Operations (Unaudited) Three-Month Period Ended (1) (In thousands, except per share amounts) March 31, 2022 December 31, 2021 Net Interest Income Interest income $ 51,074 $ 49,390 Interest expense (14,017) (10,918) Total net interest income $ 37,057 $ 38,472 Other
Slide 28: Reconciliation of Net Income (Loss) to Core Earnings
Reconciliation of Net Income (Loss) to Core Earnings(1) Three-Month Period Ended (2) (in thousands, except per share amounts) March 31, 2022 December 31, 2021 Net Income (Loss) $ (6,498) $ 38,850 Income tax expense (benefit) (6,960) (4) Net income (loss) before income tax expense $ (13,458) $ 38,846
Slide 29: About Ellington Management Group
About Ellington Management Group Ellington and its Affiliated Management Companies Ellington Profile As of 3/31/2022 • Our external manager Ellington Financial Management LLC is part of the Ellington family of SEC-registered investment advisors(4) Founded: 1994 Employees: >170 • Ellington Management
Slide 30: Investment Highlights of EFC
Investment Highlights of EFC Diversified investment Proprietary portfolio of high- Dynamic interest-rate and portfolio across residential yielding, short-duration loans credit hedging designed to mortgage, commercial reduce volatility of book value mortgage, consumer loan, and earnings and corporate
Slide 31: Endnotes
Endnotes Slide 3 – First Quarter Highlights (1) Holdings, leverage, equity and book value amounts are as of March 31, 2022. (2) Economic return is based on book value per share. (3) Core Earnings is a non-GAAP financial measure. See slide 28 for a reconciliation of Core Earnings to Net Income (Loss)
Slide 32: Endnotes
Endnotes Slide 6 – Long Credit Portfolio (1) See endnote (5) on slide 3. For our consolidated non-QM securitization trusts, excludes tranches that were sold to third parties, but that are consolidated for GAAP purposes. Including such tranches, the Company’s total long credit portfolio was $3.504 bi
Slide 33: Endnotes
Endnotes Slide 16– Derivatives Summary (1) In the table, fair value of certain derivative transactions are shown on a net basis. The accompanying financial statements separate derivative transactions as either assets or liabilities. As of March 31, 2022, derivative assets and derivative liabilities
Slide 34: Endnotes
Endnotes Slide 24 – Total Return Since Inception (1) Total return is based on $18.61 net diluted book value per share at inception in August 2007 and is calculated assuming the reinvestment of dividends at diluted book value per share and assumes all convertible units were converted into common shar
Slide 35: Investors and Media Contacts
Investors: Investor Relations Ellington Financial Inc. (203) 409-3575 Info@ellingtonfinancial.com Media: Amanda Klein or Kevin FitzGerald Gasthalter & Co. for Ellington Financial Inc. (212) 257-4170 Ellington@gasthalter.com Ellington Financial Inc. 53 Forest Ave Old Greenwich, CT 06870 www.ellington