Ellington Credit Company · NYSE:EARN
Ellington Credit — Ellington Residential Mortgage REIT — Investor Presentation (April 2024)
14 slides from Ellington Credit's investor presentation, Apr 1, 2024
Slide 1: Strategic Transformation
an Ellington Company an Ellington Company Strategic Transformation April 1, 2024
Slide 2: Important Notice: Forward-Looking Statements
an Ellington Company 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. Actual
Slide 3: Transformation Highlights
an Ellington Company Transformation Highlights 2 EARN believes there is greater investment return potential for shareholders in the corporate collateralized loan obligations (“CLO”) sector EARN has begun the process to pivot its investment strategy to focus on the mezzanine debt and equity tranches
Slide 4: Corporate Structure
an Ellington Company Corporate Structure Highly Attractive Asset Class ➢ Company has decided to revoke its REIT Election for the 2024 tax year ➢ Later this year, Company intends to convert to a registered closed end fund to be treated as a RIC ➢ In the meantime, Company intends to operate as a taxab
Slide 5: Anticipated Benefits to Shareholders
an Ellington Company Anticipated Benefits to Shareholders 4 Increase earnings by acquiring CLO investments with high risk-adjusted returns Substantially reduce EARN’s leverage as the CLO investment strategy requires significantly less debt financing than the Agency pool strategy Higher net interest
Slide 6: Fundamentals of CLO Collateral and Structure
an Ellington Company Fundamentals of CLO Collateral and Structure 5 Equity Senior Mezzanine Debt Senior Debt Junior Mezzanine Debt • Collateralized loan obligations are actively managed securitizations typically backed by well diversified pools of 200+ corporate credit assets • Typically senior secu
Slide 7: Growing Asset Class with Improving Liquidity and Scalability
an Ellington Company Growing Asset Class with Improving Liquidity and Scalability ➢ CLO market has nearly doubled in size to $1.2 trillion(1) over the past five years, and is now the largest asset class in the private-label securitized products universe ➢ This rapid growth has meaningfully improved
Slide 8: CLO Market Overview
an Ellington Company CLO Market Overview 7 Sources: 1SIFMA 2,3LCD, 4,5BofA Global Research, 6J.P. Morgan • CLOs present a compelling, well-diversified way to access the bank loan market, a seasoned, $1.7 trillion(1) market with over $230 billion in gross issuance in 2023(2) • CLOs are the largest as
Slide 9: Leveraged loans have been resilient historically and continue to enjoy tailwinds
an Ellington Company Leveraged loans have been resilient historically and continue to enjoy tailwinds in the current market environment CLO Market Overview 8 Trailing Twelve Month Morningstar/LSTA Leveraged Loan Default Rate: 1.41%(1) Loan issuance remains low relative to CLO issuance, providing tec
Slide 10: Proven CLO Investment
an Ellington Company ($ in thousands) Category CLO Mezzanine $ 12,152 $ 1,445 23.8% $ (62) $ 1,383 22.8% CLO Equity 2,774 277 20.0% (14) 263 19.0% Total 14,926$ 1,722$ 23.1% (76)$ 1,646$ 22.1% Total Assets (1) Long P&L Unlevered Returns - Long Only (1)(2) P&L on Hedges (3) P&L Net of Hedges Net Unle
Slide 11: Differentiated CLO Investment Strategy
an Ellington Company Differentiated CLO Investment Strategy 10 Opportunistically invest in multiple parts of the CLO capital structure, including mezzanine debt and equity tranches Select investments for their ability to provide a strong total return to drive a sustainable earnings stream and book v
Slide 12: Ellington's Technology, Analytics & Risk Management Systems
an Ellington Company • Ellington’s proprietary models and systems allow for detailed, real-time analysis of investment opportunities and their associated risks across scenarios • Highly analytical approach to CLOs facilitates investments in complex segments of the market, which may offer superior ri
Slide 13: Anticipated 2024 Timeline for Strategic Transformation
an Ellington Company Convert to a RICOperate as a C-Corp Anticipated 2024 Timeline for Strategic Transformation 12 Revoke REIT Election1 2 3 • EARN has decided to revoke its REIT election, effective for the 2024 tax year • As a C-Corp, EARN now has more balance sheet flexibility and is not subject t
Slide 14: About Ellington Management Group
an Ellington Company About Ellington Management Group 13 Ellington Profile As of 12/31/2023 Founded: 1994 Employees: >170 Investment Professionals: >60 Global offices: 3 $10.3 Billion in assets under management(1) 29 Years of average industry experience of senior portfolio managers 9 Employee-partne
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