Slide 1: Earnings Conference Call Q4 2020
Earnings Conference Call Q4 February 19, 2021 2020 Q 4 2 0 2 0 E AR N I N GS
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: Fourth Quarter Highlights
Fourth Quarter Highlights(1) • Net income: $63.2 million or $1.44 per common share; full year 2020 net income of $17.2 million, or $0.39 per share Overall Results • Economic return(2) of 8.7% for the quarter, and 2.0% for 2020 • Core Earnings(3) of $16.0 million or $0.37 per share • Credit gross inc
Slide 4: 2020 Highlights
2020 Highlights 1 Delivered a positive economic return and positive net income during an unprecedented year 2 Generated core earnings of $1.63 per share, and declared dividends of $1.26 per share Disciplined risk and liquidity management protected book value and preserved liquidity during 3 COVID-re
Slide 5: Portfolio Summary as of December 31, 2020
Portfolio Summary as of December 31, 2020(1) Proprietary portfolio of high-yielding, short-duration loans, and opportunistic securities Allocated Fair Value Average Price WAVG WAVG Mkt Equity and Asset Strategy Equity ($ in $1,000s) (%) (2)(6) Life (4)(6) Yield (5)(6) Allocation by Strategy Credit R
Slide 6: Operating Results by Strategy
Operating Results by Strategy Three-Month Three-Month Period Ended Per Period Ended Per Year Ended Per December 31, Share September 30, Share December 31, Share (In thousands, except per share amounts) 2020 2020 2020 Credit: Interest income and other income(1) $ 34,089 $ 0.77 $ 37,764 $ 0.85 $150,26
Slide 7: Long Credit Portfolio
Long Credit Portfolio* G H F G H 1% F 4% 5% A 3%1% 4% E 27% A: CMBS & Commercial Loans & REO(3)(4) E A 11% B: Consumer Loans and ABS(2) 12% 30% C: Residential Loans & REO(3) $1.43 bn D: CLO(2) $1.40 bn D 13% E: Non-Agency RMBS D 12% 8% F: Equity Investments in Loan Originators B G: Non-Dollar MBS, A
Slide 8: Long Agency Portfolio
Long Agency Portfolio Fixed Fixed IOs IOs ARMs ARMs RM Fixed 1% 5% RM <1% 6% Fixed 10% 11% 15-Year Fixed 7% 15-Year Fixed 8% 20-Year 6% $959mm <1% $920mm 20-Year Fixed 74% 30-Year 71% 30-Year Fixed Fixed Fixed As of 12/31/2020(1) As of 9/30/2020(1) Wtd. Avg. Wtd. Avg. Category Fair Value(1) (2) Fair
Slide 9: Summary of Borrowings
Summary of Borrowings ($ in thousands) As of 12/31/2020 Three-Month Period Ended 12/31/2020 Outstanding Weighted Average Average Average Cost Collateral Type Borrowings Borrowing Rate Borrowings of Funds Credit(1) $ 1,381,053 2.59% $ 1,374,149 2.89% Agency RMBS 921,861 0.27% 870,760 0.30% Borrowings
Slide 10: Diversified Credit Portfolio
Diversified Credit Portfolio Diversified sources of return to perform over market cycles Other Residential Mortgages • Non-QM Loans • Residential Transition Loans 14% • NPL / RPL • Non-Agency / Non-Conforming • Reverse Mortgages Commercial Mortgages • REO • NPLs • Single-Family Rental MBS • Bridge L
Slide 11: Small Balance Commercial Mortgage Loan Portfolio – Detail
Small Balance Commercial Mortgage Loan Portfolio – Detail(1)(2) Other All Other Multifamily States 13% 23% <5% FL 20% Retail 25% 11% Property MA 5% Type Geography 13% 5% Mixed 21% CA 6% Hotel 23% OH 19% 7% NY 9% MO Industrial CT Floating without Fixed First Lien 100% floor 2% 11% Seniority Interest
Slide 12: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs, Q1-2011 – Q3-2020(1)(2) Standard 16.0% Company Deviation EFC 3.8% 14.0% Hybrid REIT #02 4.9% 12.0% Hybrid REIT #03 5.6% Hybrid REIT #04 5.9% 10.0% Hybrid REIT #05 6.7% 8.0% Hybrid REIT #06 7.9% 6.0% Hybrid REIT
Slide 13: 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 – ARM Pools $ 280 0.03% $ (178) -0.02% Agency RMBS – Fixe
Slide 14: Commitment to ESG
Commitment to ESG Ellington is committed to corporate 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 shareholder performance, and make a positive im
Slide 15: Supplemental Slides
Supplemental Slides Q 4 2 0 2 0 E AR N I N GS 15
Slide 16: Fourth Quarter Market Update
Fourth Quarter Market Update Quarter Ended 12/31/2020 9/30/2020 Q/Q 6/30/2020 Q/Q 3/31/2020 Q/Q 12/31/2019 Q/Q (1) UST (%) 3M UST 0.06 0.09 -0.03 0.13 -0.04 0.06 +0.07 1.54 -1.48 2Y UST 0.12 0.13 -0.01 0.15 -0.02 0.25 -0.10 1.57 -1.32 5Y UST 0.36 0.28 +0.08 0.29 -0.01 0.38 -0.09 1.69 -1.31 10Y UST 0
Slide 17: Derivatives Summary as of December 31, 2020
Derivatives Summary as of December 31, 2020(1) Long Short ($ in thousands) Notional Notional Net Notional Fair Value Mortgage-Related Derivatives: CDS on MBS and MBS Indices $ 874 $(13,846) $(12,972) $ 2,401 Total Net Mortgage-Related Derivatives $ 2,401 Corporate-Related Derivatives: CDS on Corpora
Slide 18: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Instrument Corporate CDS Indices/ Single Name ABS CDS European Category Tranches/ 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) - (5.0) (10.0) (15.0)
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 F E F E D E 10.2% 1.9% 1.9% 4.4% 3.0% 8.9% A A: >5Yr Interest Rate Swaps D 33.7% C 10.4% B: 2-5Yr Treasuries and Treasury Futures 13.3% C: >5Yr Treasuries and Treasury Futures $198.9mm
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 12/31/2020 As of 9/30/2020 $1,200 $1,200 $1,000 $1,000 $800 Long Agency $800 Pools Long Agency $912 Pools $600 $600 $868 ($ in millions) ($ in millions) $400 Net Long $400 Net Long Exposure Expos
Slide 21: CPR Breakout of Agency Fixed Long Portfolio
CPR Breakout of Agency Fixed Long Portfolio Average for Quarter Ended 12/31/2020(1) Average for Quarter Ended 9/30/2020(1) Other Other 15% 16% Jumbo Jumbo <1% <1% Geography 7% Geography 7% 49% Loan 47% Loan Non- 6% 6% Balance Balance Non- Owner Owner 17% 17% Low 6% Low 6% FICO FICO MHA MHA Collatera
Slide 22: Repo Borrowings
Repo Borrowings(1) ($ in thousands) Repo Borrowings as of December 31, 2020 Borrowings by Days to Maturity % of Total Remaining Days to Maturity Credit Agency U.S. Treasury Total Borrowings >360 30 Days or Less $ 37,795 $ 265,556 $ - $ 303,351 20.3% 181-360 Da ys , Da ys , 6% 30 Days or 5% Less, 20%
Slide 23: Gross Profit and Loss
Gross Profit and Loss(1) Resilient Profit Generation Over Market Cycles ($ in thousands) Years Ended 2020 2019 2018 2017 2016 2015 2014 Long: Credit COVID $63,052 8.4% $73,919 11.6% $61,201 10.0% $61,136 9.6% $36,203 5.3% $46,892 6.1% $77,636 11.4% Pandemic Credit Hedge and Other (1,289) -0.2% (11,2
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 2020 is approximately 229%, or 9.3% annualized(1) Diluted BVPS P
Slide 25: Capital, Leverage & Portfolio Composition
Capital, Leverage & Portfolio Composition Capital Usage Across Entire Portfolio(1) Leverage by Strategy (Debt-to-Equity)(1) 10.0 10.2 5.0 12/31/2020 9.0 4.5 8.0 9/30/2020 4.0 6. 5 6. 5 6. 2 3. 5 3.5 6/30/2020 3.0 2. 7 2. 7 2. 6 2.5 3/31/2020 2. 3 2.0 2. 2 2. 0 1. 9 0% 10% 20% 30% 40% 50% 60% 70% 80%
Slide 26: Condensed Consolidated Balance Sheet (Unaudited)
Condensed Consolidated Balance Sheet (Unaudited) (in thousands except per share amounts) December 31, 2020 September 30, 2020 Assets Cash and cash equivalents $ 111,647 $ 126,783 Restricted cash 175 175 Securities, at fair value 1,514,185 1,451,420 Loans, at fair value 1,453,480 1,442,612 Investment
Slide 27: Condensed Consolidated Statement of Operations (Unaudited)
Condensed Consolidated Statement of Operations (Unaudited) Three-Month Period Ended Year Ended (In thousands, except per share amounts) December 31, 2020 September 30, 2020 December 31, 2020 Net Interest Income Interest income $ 39,067 $ 43,075 $ 173,531 Interest expense (11,952) (12,937) (61,665) T
Slide 28: Reconciliation of Net Income (Loss) to Core Earnings
Reconciliation of Net Income (Loss) to Core Earnings(1) Three-Month Period Ended Year Ended (in thousands except per share amounts) December 31, 2020 September 30, 2020 December 31, 2020 Net Income (Loss) $ 66,578 $ 49,702 $ 28,377 Income tax expense (benefit) 7,888 2,494 11,377 Net income (loss) be
Slide 29: 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 12/31/2020 Ellington family of SEC-registered investment advisors(4). Ellington Founded: 1994 Management Group and its a
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 – Fourth Quarter Highlights (1) Holdings, leverage, equity and book value amounts are as of December 31, 2020. (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 (L
Slide 32: Endnotes
Endnotes Slide 7 – 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 $2.173 bi
Slide 33: Endnotes
Endnotes Slide 16 – Fourth Quarter Market Update (1) Source: Bloomberg (2) Source: Mortgage Bankers Association via Bloomberg (3) LIBOR-based OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options emb
Slide 34: Endnotes
Endnotes Slide 23 – Gross Profit and Loss (1) Gross profit excludes expenses other than interest expense and other investment related expenses. Figures in ―%‖ columns are as a percentage of average equity for the period. Slide 24 – Total Return Since Inception (1) Total return is based on $18.61 net
Slide 35: Investor Relations Contact
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