Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Debt Investor Presentation (August 2023)
47 slides from Ellington Financial's debt investor presentation, August 2023
Slide 1: Presentation to Debt & Preferred Equity Investors
Presentation to Debt & Preferred Equity Investors August 2023
Slide 2: Important Notice
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: Table of Contents
Table of Contents Ellington Financial Overview 4 The Ellington Platform 5 Ellington Financial Inc. (NYSE: EFC) 16 Supplemental Information 27 3
Slide 4: Ellington Financial Overview
Ellington Financial Overview Hybrid mortgage REIT with diversified investment portfolio and income stream: residential and commercial mortgage, consumer / corporate loans, as well as multiple proprietary loan origination businesses; ability to shift capital allocation across various asset classes Re
Slide 5: The Ellington Platform
Ellington Financial The Ellington Platform a
Slide 6: About Ellington Management Group
About Ellington Management Group Ellington and its Affiliated Management Companies Ellington Profile • Our external manager Ellington Financial Management LLC is part of the As of 6/30/2023 Ellington family of SEC-registered investment advisors(4) Founded: 1994 Employees: >170 • Ellington Management
Slide 7: Ellington Management Group
Ellington Management Group Headcount by Department Strategy Breakdown ($bn) Whole Loan Acquisitions & Business Management, 5% Development / Administration, Investor Relations, Treasury & 8% 8% Middle Office, Traditional 8% Ellington Mandate Executive, $4.0 1% Sponsored EARN CLO Systems / IT, $0.1 $0
Slide 8: Access to Experienced Management
Access to Experienced Management Years of Years at Experience(3) Ellington(3) • Founder and CEO of Ellington Michael Vranos Co-Chief Investment 38 28 • Former head of RMBS trading and origination at Kidder Peabody Officer (1) • B.A. in Mathematics from Harvard University (magna cum laude, Phi Beta K
Slide 9: Our Infrastructure Is A Competitive Advantage
Our Infrastructure Is A Competitive Advantage Ellington has over 170 employees supporting approximately $9.4 billion(1) in assets under management Ellington Principals ` Services Agreement Ellington Management Group, L.L.C. Ellington Financial Management LLC Management ` Agreement ` ` Portfolio Mana
Slide 10: Integrated Investment Process, with an Emphasis on Risk Management
Integrated Investment Process, with an Emphasis on Risk Management Portfolio Risk Measurement, Risk Management Construction Hedging and Trade Execution and Compliance • CEO, Portfolio Management (PM) • Exposures assessed relative to • Trade suitability and allocation based Committee and Risk Oversig
Slide 11: Ellington's Approach to Risk Management
Ellington’s Approach to Risk Management Principles Process Protection Trading / Monitor / Portfolio Mitigate: Monitoring Threshold Notification Workflow Spread risk / technical market risk Preserve Capital and Stress Safeguards Testing Risk Fundamental / cashflow / default risk Oversight Daily Group
Slide 12: Access to Robust Compliance and Internal Audit Program
Access to Robust Compliance and Internal Audit Program Compliance Program Extensive Surveillance Infrastructure • Chief Compliance Officer and dedicated team • Oversight integrated with proprietary portfolio management system (automated diagnostics and • Compliance Committee full data transparency)
Slide 13: Ellington's Technology
Ellington’s Technology ◼ Modeling, research and infrastructure have Trading and Research been at the heart of Ellington’s business Borrower behavior models, collateral surveillance, model since it was founded relative valuation monitoring within and among sectors − 20% of Ellington’s employees are i
Slide 14: An Integrated Platform
An Integrated Platform Robust infrastructure provides a constant, dynamic feedback loop between Research, Trading, Portfolio Management, and Oversight disciplines • Automated trade allocation • Source, clean, link, aggregate and • Threshold monitoring analyze data to build predictive models: • Trade
Slide 15: 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 16: Ellington Financial Inc. (NYSE: EFC)
Ellington Financial Inc. (NYSE: EFC) 16
Slide 17: Portfolio Summary as of June 30, 2023
Portfolio Summary as of June 30, 2023(1) Allocated Fair Value Average Price WAVG Mkt Equity and Asset (2) Credit Equity ($ in $1,000s) (%)(3)(7) WAVG Life(5)(7) Yield(6)(7) Allocation by Strategy Residential Transition Loans and Other Residential Mortgage Loans and REO (8) $ 963,772 99.3 0.8 8.9% No
Slide 18: 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 19: 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 Q2 2023 is approximately 257%, or 8.3% annualized(1) Diluted BVP
Slide 20: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs, Q1-2011 – Q2-2023(1)(2) Standard Company Deviation EFC 3.8% Hybrid REIT #02 5.6% Hybrid REIT #03 6.2% Hybrid REIT #04 6.4% Hybrid REIT #05 7.2% Hybrid REIT #06 12.1% Hybrid REIT #07 13.5% Hybrid REIT #08 13.7% H
Slide 21: Resilient Profit Generation Over Market Cycles
Resilient Profit Generation Over Market Cycles(1)(2) COVID Pandemic Six-Month Period Ended June 30 ($ in thousands) Years Ended 2023 2022 2021 2020 2019 2018 2017 2016 Long: Credit 63,570 4.8% (74,934) -6.0% $188,562 18.1% $53,736 6.2% $73,919 11.1% $61,201 10.0% $61,136 9.6% $36,203 5.3% Credit Hed
Slide 22: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Estimated Change in Fair Value 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates ($ in thousands) ∆ Fair Value % of Total Equity ∆ Fair Value % of Total Equity Agency RMBS – Fixed Pools and IOs excluding TBAs $ 20,430 1.52% $ (22
Slide 23: Agency Interest Rate Hedging Portfolio
Agency Interest Rate Hedging Portfolio We deploy a dynamic and adaptive hedging strategy to preserve book value Agency Interest Rate Hedging Portfolio 6/30/23: Net Agency Pool Exposure Based on Fair Value(2) Short $558.8mm 10-yr Equivalents(1) <2Yr Interest <2 Yr Treasuries, rate Swaps 2-5Yr Interes
Slide 24: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Corporate CDS Indices/ Instrument Tranches/ Options/ Single Name ABS CDS European Category Single Names and ABX Indices Sovereign Debt Equity/Equity Swap CMBX HY CDX OTR Bond Equivalent Units Value(3)(4) Bond Equivalent Value(4) Market Value Market Value Bond Equivalen
Slide 25: Diversified Sources of Financing
Diversified Sources of Financing Recourse Borrowings ($ in thousands) As of 6/30/23 Three-Month Period Ended 6/30/23 Average Average Cost Outstanding Weighted Average Collateral Type Borrowings Borrowing Rate Borrowings of Funds Credit(1) $1,553,915 7.32% $ 1,534,114 7.39% Agency RMBS 797,100 5.28%
Slide 26: EFC Portfolio – Schedule of Unencumbered Assets as of June 30, 2023
EFC Portfolio – Schedule of Unencumbered Assets as of June 30, 2023 Asset Type Fair Value ($000s) (1) Residential transition loans and other residential mortgage $ 110,322 loans and REO Agency RMBS 77,563 Debt and Equity Investments in Loan Origination Entities 38,815 Non-QM loans and retained non-Q
Slide 27: Supplemental Information
Supplemental Information 27
Slide 28: EFC's Best-in-Class Performance Since Inception
EFC’s Best-in-Class Performance Since Inception Percentage of Book Value per Share Since Inception(1) Cumulative Total Economic Return Since Inception (1) EFC #4 EFC #4 #8 #3 #8 #5 #7 #7 #3 #6 #5 #9 #9 #6 #2 #2 Note: EFC peers are other hybrid mortgage REITs. Above charts have been normalized for st
Slide 29: EFC: Stable Returns During Financial Crises, including 2008…
EFC: Stable Returns During Financial Crises, including 2008… Percentage of 9/30/07 Book Value per Share, 9/30/07-12/31/08 Cumulative Total Economic Return 9/30/07-12/31/08 125% 0% EFC 100% EFC #4 (25%) 75% #4 (50%) 50% #5 25% (75%) #5 #3 #3 #2 0% #2 2007 2007 Q4 2007 Q12008 2008 Q22008 2008 Q32008 2
Slide 30: …and 2020
…and 2020 Hybrid REITs’ 2020 Cumulative Total Economic Return 10% EFC (10%) #3 #5 #2 (30%) #4 #8 (50%) #9 (70%) #6 #7 (90%) (110%) 2019 Q12020 2020 Q22020 2020 Q32020 2020 Q42020 2020 EFC Peer #2 Peer #3 Peer #4 Peer #5 Peer #6 Peer #7 Peer #8 Peer #9 Note: EFC peers are other hybrid mortgage REITs.
Slide 31: Demonstrated Outperformance Managing Agency RMBS Assets
Demonstrated Outperformance Managing Agency RMBS Assets The Ellington platform also has deep expertise in managing Agency assets, as demonstrated by the performance of Ellington Residential Mortgage REIT (NYSE: EARN) Percentage of 3/31/2013 Book Value per Share Cumulative Total Economic Return Since
Slide 32: Long Credit Portfolio
Long Credit Portfolio* F GH I F G H I 1%1% 2%1%1%1% 2% 1% E E D 4% A: Residential Transition Loans and other residential D 4% mortgage loans & REO(3) 9% B: Non-QM loans and Retained Non-QM RMBS(2) 9% C: CMBS & Commercial Loans & REO(3)(4) 39% 39% A A D: Non-Agency RMBS C 18% $2.45 bn E: Consumer Loa
Slide 33: Diversified Credit Portfolio
Diversified Credit Portfolio Diversified sources of return to perform over market cycles Other Commercial Mortgages 2% • Bridge Loans • CMBS, B-Pieces & Credit Bonds Residential Mortgages • NPLs • Non-QM Loans 22% • REO • Residential Transition Loans • NPL / RPL • Non-Agency / Non-Conforming • REO •
Slide 34: Small Balance Commercial Mortgage Loan Portfolio – Detail
Small Balance Commercial Mortgage Loan Portfolio – Detail(1)(2) Office Self-Storage Mobile TX 1% 11% All Other 21% Home 4% States <5% 35% Retail 6% Mixed 3% Use Property Type Geography 4% Industrial 19% 7% 64% FL 5% Hotel AZ 9% Multifamily 11% NY GA Floating First Lien with floor Seniority Interest
Slide 35: Long Agency Portfolio
Long Agency Portfolio RM ARMs Fixed IOs RM ARMs Fixed IOs 1% 1% Fixed 1% 15-Year Fixed 15-Year 3% 2% 20-Year Fixed 3% Fixed Fixed 1% 8% 20-Year 9% 1% Fixed $918.5 mm $853.1 mm 84% 86% 30-Year 30-Year Fixed Fixed As of 6/30/2023(1) As of 3/31/2023(1) Fair Value(1) Wtd. Avg. Fair Value(1) Wtd. Avg. (2
Slide 36: Longbridge Portfolio
Longbridge Portfolio(1) D D <1% <1% C A 26% A 26% A: Reverse MSRs (HMBS and proprietary)(2) 31% B: Unsecuritized HECM loans(3) 43% C C: Proprietary reverse mortgage loans $429.8 mm D: Other $442.5 mm 31% 42% B B As of 6/30/2023(1) As of 3/31/2023(1) • Longbridge originates reverse mortgage loans, in
Slide 37: Repo Borrowings
Repo Borrowings(1) Borrowings by Days to Maturity ($ in thousands) Repo Borrowings as of June 30, 2023 Reverse % of Total >364 Remaining Days to Maturity Credit Agency U.S. Treasury Total Days, Mortgage Loans Borrowings 8% 30 Days 181-364 or Less, 30 Days or Less $ 32,734 $ 561,294 $ 160,329 $ - $ 7
Slide 38: Condensed Consolidated Statement of Operations
Condensed Consolidated Statement of Operations Six-Month Period Ended Year Ended (In thousands, except per share amounts) June 30, 2023 December 31, 2022 (1) Net Interest Income Interest income $ 175,266 $ 282,218 Interest expense (123,050) (141,777) Total net interest income $ 52,216 $ 140,441 Othe
Slide 39: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet (in thousands, except share and per share amounts) June 30, 2023 December 31, 2022 (1) Assets Cash and cash equivalents $ 194,595 $ 217,053 Restricted cash 1,602 4,816 Securities, at fair value 1,500,863 1,459,465 Loans, at fair value 11,822,695 11,626,008 Loan c
Slide 40: Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings
Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings(1) Six-Month Period Ended June 30, 2023 Investment (in thousands, except per share amounts) Portfolio Longbridge Corporate/Other Total Net Income (Loss) $ 73,632 $ 8,974 $ (27,114) $ 55,492 Income tax expense (benefit) - - 104 10
Slide 41: 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 42: Endnotes
Endnotes Slide 6 – About Ellington Management Group (1) $9.4 billion in assets under management includes approximately $0.9 billion in Ellington-managed CLOs. For these purposes, the Ellington-managed CLO figure represents the aggregate outstanding balance of CLO notes and market value of CLO equity
Slide 43: Endnotes
Endnotes Slide 17 – Portfolio Summary as of June 30, 2023 (1) Includes REO at the lower of cost or fair value. Excludes hedges and other derivative positions. (2) Of deployed capital, 76% allocated to credit, 10% to agency, and 14% to Longbridge. (3) Average price excludes interest only, principal o
Slide 44: Endnotes
Endnotes Slide 21 – Resilient Profit Generation Over Market Cycles (1) Gross profit excludes expenses other than interest expense and other investment related expenses. Figures in “%” columns are as a percentage of average total equity for the period which includes common and preferred equity as wel
Slide 45: Endnotes
Endnotes Slide 28 – EFC’s Best-in-Class Performance Since Inception (1) Percentage of Book Value per Share and Cumulative Total Economic Return for Peer #2 is based on book value estimate as of June 30, 2023. Slide 32 – Long Credit Portfolio (1) Includes REO at the lower of cost or fair value. Exclu
Slide 46: Endnotes
Endnotes Slide 40 – Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings (1) We calculate Adjusted Distributable Earnings as U.S. GAAP net income (loss) as adjusted for: (i) realized and unrealized gain (loss) on securities and loans, REO, mortgage servicing rights, financial deriv
Slide 47: Investor Relations Contact
JR Herlihy (203) 698-1200 Investors: Investor Relations Ellington Financial Inc. (203) 409-3575 Info@ellingtonfinancial.com Media: Amanda Shpiner or Sara Widmann Gasthalter & Co. for Ellington Financial Inc. (212) 257-4170 Ellington@gasthalter.com Ellington Financial Inc. 53 Forest Ave Old Greenwich
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