Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Debt Investor Presentation (November 2024)
47 slides from Ellington Financial's debt investor presentation, November 2024
Slide 1: Presentation to Debt & Preferred Equity Investors
Presentation to Debt & Preferred Equity Investors November 2024
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 9/30/2024 Ellington family of SEC-registered investment advisors(4) Founded: 1994 Employees: >170 • Ellington Management
Slide 7: Ellington Management Group Headcount and Strategy Breakdown
Ellington Management Group Headcount by Department Strategy Breakdown ($bn) Risk Ellington Management Prepayment & EARN $0.2 Sponsored CLO Legal/Compliance /Internal Audit 5% 3% Related $0.5 Relative Value $0.7 Private Credit $0.5 Treasury & Middle Office Portfolio 7% Management /Trading 30% Adminis
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 • Oversees portfolio construction and implementation of hedging strategies at Ellington Co-Chief Investment 41 29 • Former head of RMBS trading and origination at Kidder Peabod
Slide 9: Our Infrastructure Is A Competitive Advantage
Our Infrastructure Is A Competitive Advantage Ellington has over 170 employees supporting approximately $13.7 billion(1) in assets under management Ellington Principals ` Services Agreement Ellington Management Group, L.L.C. Ellington Financial Management LLC Management ` Agreement ` ` Portfolio Man
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 − Approximately 20% of Ellington’s e
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 September 30, 2024
Portfolio Summary as of September 30, 2024 (1) Allocated Fair Value Average Price WAVG Mkt (2) Equity and Asset (3)(7) (5)(7) Credit Equity ($ in $1,000s) (%) WAVG Life Yield(6)(7) Allocation by Strategy Residential Transition Loans and Other Residential Mortgage Loans (8) $ 1,248,001 99.6 0.9 10.0%
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 Q3 2024 is approximately 285.6%, or 8.2% annualized(1) Diluted B
Slide 20: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs, Q1-2011 – Q3-2024(1)(2) Standard Company 16.0% Deviation EFC 3.6% 14.0% Hybrid REIT #02 6.1% 12.0% Hybrid REIT #03 6.4% Hybrid REIT #04 6.9% 10.0% Hybrid REIT #05 9.2% 8.0% Hybrid REIT #06 13.2% Hybrid REIT #07
Slide 21: Resilient Profit Generation Over Market Cycles
Resilient Profit Generation Over Market Cycles(1)(2) Nine-Month COVID Period Ended Pandemic ($ in thousands) September 30 Years Ended 2024 2023(3) 2022 2021 2020 2019 2018 2017 2016 Long: Credit $ 137,387 8.8% $ 103,239 7.7% $(74,934) -6.0% $188,562 18.1% $53,736 6.2% $73,919 11.1% $61,201 10.0% $61
Slide 22: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Estimated Change in Fair Value As of 9/30/2024 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates ($ in thousands) ∆ Fair Value % of Total Equity ∆ Fair Value % of Total Equity Agency RMBS – Fixed Pools and IOs excluding TBAs $ 7,
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 9/30/24: Net Agency Pool Exposure Based on Fair Value(2) Short $248.1mm 10-yr Equivalents(1) $500 >5Yr Interest Rate Swaps 10.0% $300 Long Agency >5Y
Slide 24: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Instrument Corporate CDS Indices/ Tranches/ European Category Options/ Single Names Sovereign Debt CMBX Units HY CDX OTR Bond Equivalent Value(3)(4) Market Value Bond Equivalent Value(4) $0.00 -$20.00 -$40.00 -$60.00 -$80.00 -$100.00 -$120.00 -$140.00 -$160.00 6/30/202
Slide 25: Diversified Sources of Financing
Diversified Sources of Financing Recourse Borrowings ($ in thousands) As of 9/30/24 Three-Month Period Ended 9/30/24 Average Average Cost Outstanding Weighted Average Collateral Type Borrowings Borrowing Rate Borrowings of Funds Credit(1) $ 2,022,955 7.14% $ 1,759,915 7.50% Agency RMBS 346,193 5.35%
Slide 26: EFC Portfolio – Schedule of Unencumbered Assets
EFC Portfolio – Schedule of Unencumbered Assets as of September 30, 2024 Asset Type Fair Value ($000s) (1) Residential transition loans and other residential mortgage $ 119,397 loans and REO Non-QM loans and retained non-QM RMBS 97,456 Debt and Equity Investments in Loan Origination Entities 54,908
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 Cumulative Total Economic Return Since Inception EFC #4 EFC #4 #8 #3 #8 #7 #7 #5 #3 #6 #9 #9 #5 #2 #2 #6 Note: EFC peers are other hybrid mortgage REITs. Above charts have been normalized for stock spl
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 Q42007 2007 Q12008 2008 Q22008 2008 Q32008 20
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 Credit Company (NYSE: EARN) Percentage of 3/31/2013 Book Value per Share Cumulative Total Economic Return Since 3/31/2013
Slide 32: Long Credit Portfolio
Long Credit Portfolio* H I J H I J G G 3%1% 3% 2% 1% 3% 3% 3% F F 5% A: Residential Transition Loans and other Residential E Mortgage Loans(2) 5% 5% E A B: Non-QM Loans and Retained Non-QM RMBS(2)(4)(5) D 6% D 38% 2% A C: CMBS & Commercial Mortgage Loans (2)(6) 6% 46% $3.25 bn D: HELOCs and Closed-E
Slide 33: Diversified Credit Portfolio
Diversified Credit Portfolio Diversified sources of return to perform over market cycles Other Commercial Mortgages • Bridge Loans 4% • CMBS, B-Pieces & Credit Bonds • NPLs • REO 20% Residential Mortgages • Non-QM Loans • Residential Transition Loans • MSR-Related Investments • HELOCs and CES • NPL
Slide 34: Commercial Mortgage Loan Portfolio – Detail
Commercial Mortgage Loan Portfolio – Detail as of 9/30/24 (1)(2) Mobile Mixed Home 3% Self-Storage Use Healthcare 1% 4% 4% All Other States FL Office <5% 21% 5% Retail 37% 5% Property Industrial 6% Geography NY Type 11% 7% 65% Hotel IL MI Multifamily 11% 5% NJ TX 6% 9% Fixed First Lien 5% 100% Float
Slide 35: Long Agency Portfolio
Long Agency Portfolio Fixed Fixed IOs RM IOs RM 15- Fixed Fixed Year 4% Fixed 7% 2% 15- 9% Year 6% Fixed 5% $394.6 mm $457.7 mm 82% 85% 30-Year 30-Year Fixed Fixed As of 9/30/2024(1) As of 6/30/2024(1) Fair Value(1) Wtd. Avg. Fair Value(1) Wtd. Avg. Category ($ in MMs) Coupon(2) Category ($ in MMs)
Slide 36: Longbridge Portfolio
Longbridge Portfolio* E E <1% <1% D D 6% 6% C C A: Proprietary reverse mortgage loans 18% 20% B: Unsecuritized HECM loans(2) A C: HMBS MSR Equivalent (3) $494.2 mm 48% D: Reverse MSRs $520.8 mm A E: Other 56% B 20% B 26% As of 9/30/2024(1) As of 6/30/2024(1) • Longbridge originates reverse mortgage
Slide 37: Repo Borrowings
Repo Borrowings(1) Borrowings by Days to Maturity ($ in thousands) Repo Borrowings as of September 30, 2024 Remaining Days to Reverse % of Total Credit Agency U.S. Treasury Total Maturity Mortgage Loans Borrowings 30 Days or Less $ 681,209 $ 332,416 $ 256,302 $ 30,499 $ 1,300,426 49.2% >364 Days 28%
Slide 38: Condensed Consolidated Statement of Operations (Unaudited)
Condensed Consolidated Statement of Operations (Unaudited) Nine-Month Period Ended Year Ended (In thousands, except per share amounts) September 30, 2024 December 31, 2023 Net Interest Income Interest income $ 309,272 $ 370,172 Interest expense (210,993) (262,451) Total net interest income $ 98,279
Slide 39: Condensed Consolidated Balance Sheet (Unaudited)
Condensed Consolidated Balance Sheet (Unaudited) (in thousands, except share and per share amounts) September 30, 2024 December 31, 2023 (1) Assets Cash and cash equivalents $ 217,725 $ 228,927 Restricted cash 10,578 1,618 Securities, at fair value 1,063,774 1,518,377 Loans, at fair value 13,519,786
Slide 40: Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings
Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings(1) Nine-Month Period Ended September 30, 2024 Investment (in thousands, except per share amounts) Portfolio Longbridge Corporate/Other Total Net Income (Loss) $ 156,844 $ 10,511 $ (49,909) $ 117,446 Income tax expense (benefit) -
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) $13.7 billion in assets under management includes approximately $0.5 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 equit
Slide 43: Endnotes
Endnotes Slide 17 – Portfolio Summary as of September 30, 2024 (1) Includes REO at the lower of cost or fair value. Excludes hedges and other derivative positions. (2) Of deployed capital, 84% allocated to credit, 4% to agency, and 12% to Longbridge. (3) Average price excludes interest only, princip
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 26– EFC Portfolio – Schedule of Unencumbered Assets as of September 30, 2024 (1) Includes REO at the lower of cost or fair value. Excludes hedges and other derivative positions. Slide 32 – Long Credit Portfolio (1) Includes REO at the lower of cost or fair value. Excludes hedges and o
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 Contacts
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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