Ellington Credit Company · NYSE:EARN
Ellington Credit — Ellington Residential Mortgage REIT — Q4 2014 Earnings Presentation
25 slides from Ellington Credit's earnings presentation, Feb 18, 2015
Slide 1: Fourth Quarter 2014 Earnings Conference Call
Fourth Quarter 2014 Earnings Conference Call February 18, 2015
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. Actual results may differ f
Slide 3: Fourth Quarter 2014
Fourth Quarter 2014
Slide 4: Fourth Quarter Highlights
Ellington Residential: Fourth Quarter Highlights Fourth quarter net loss of $1.2 million, or $0.13 per share Overall Solid performance of long portfolio significantly offset by net losses on interest rate hedges, primarily in Results the form of interest rate swaps and short TBAs Core Earnings
Slide 5: Agency RMBS
Ellington Residential: Agency RMBS Yield curve experienced significant flattening during the fourth quarter Prepayment rates remained relatively muted in response to lower mortgage rates, thus providing support to TBA roll prices Overall Market Specified pools performed well, but the decline i
Slide 6: Non-Agency
Ellington Residential: Non-Agency Prices of non-Agency RMBS were supported by ongoing improvements in fundamental data, including mortgage delinquency and foreclosure rates Steep drops in the price of oil and interest rates during the quarter provided support to non- Overall Market Agency RMBS p
Slide 7: The Cost of Prepayment Protection has Increased
The Cost of Prepayment Protection has Increased Spread (32nds of a point, or ticks) between pay-ups for low loan balance and Jumbo pools 160 140 120 100 80 60 40 20 0 The difference between prices for low loan balance and Jumbo pools measures the trade-off between extra yield vs. prepay protection
Slide 8: Some Efficient Originators Prepay Faster
Some Efficient Originators Prepay Faster One-month CPRs by weighted average loan age observed on Fannie Mae 3.5s for various sellers in January Annual CPR Months since origination Quicken has been able to create tremendous prepayment responsiveness in its borrower base More efficient originators
Slide 9: Yields on TBA Rolls have Declined
Yields on TBA Rolls have Declined Roll Yield for TBA 4.5s 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 The annual yield from rolling TBA 4.5s has decreased substantially since late fall of 2014 Prepayment expectations have increased, and Federal Reserve buying of 4.5s stopped almost one year ago Fo
Slide 10: Portfolio
Portfolio
Slide 11: Portfolio Summary
Ellington Residential: Portfolio Summary December 31, 2014 September 30, 2014 Current Average Average Current Average Average Fair Value Cost Fair Value Cost (In thousands) Principal Price (1) Cost (1) Principal Price (1) Cost (1) Agency RMBS(2) 15-year fixed rate $ 130,720 $ 138,028 $ 105.59 $ 137,
Slide 12: Agency Long Portfolio
Ellington Residential: Agency Long Portfolio Current Quarter Agency Long Portfolio Previous Quarter Agency Long Portfolio As of 12/31/14: $1.36BN(1) As of 9/30/14: $1.33BN(1) GNMA/FNMA/ GNMA/FNMA/ GNMA RM Fixed FHLM Fixed IOs GNMA RM Fixed FHLM Fixed IOs 1.6% 0.8% 2.4% 1.1% FNMA/GNMA FNMA/FHLM FNMA
Slide 13: Agency Long Portfolio: Collateral Characteristics and CPR
Ellington Residential: Agency Long Portfolio Collateral Characteristics and Historical 3-month CPR Collateral Characteristics and Historical 3-month CPR Agency Fixed Rate Pool Portfolio 12/31/14: $1.27BN(1) Agency Fixed Rate Pool Portfolio 9/30/14: $1.25BN(1) Jumbo Geography Jumbo Geography <1% <1%
Slide 14: Non-Agency Long Portfolio
Ellington Residential: Non-Agency Long Portfolio Current Quarter Previous Quarter Non-Agency Long Portfolio 12/31/14: $32.5MM Non-Agency Long Portfolio 9/30/14: $33.7MM Sub Jumbo/ Sub Jumbo/ Alt-A Alt-A 42.1% 42.0% Senior Jumbo/ Senior Jumbo/ Alt-A/Alt-B Alt-A/Alt-B 48.1% 48.8% Seasoned Seasoned Sub
Slide 15: Borrowings and Hedges
Borrowings and Hedges
Slide 16: Repo Borrowings
Ellington Residential: Repo Borrowings December 31, 2014 September 30, 2014 Weighted Average Weighted Average Remaining Days Borrowings Remaining Days Borrowings Remaining Days to Maturity Outstanding Interest Rate to Maturity Outstanding Interest Rate to Maturity (In thousands) (In thousands) 30 da
Slide 17: Interest Rate Hedging Portfolio
Ellington Residential: Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 12/31/14: Agency Interest Rate Hedging Portfolio 9/30/14: Short $598.7MM 10-year equivalents Short $674.1MM 10-year equivalents >5 Yr Treasuries 2.0% TBA Securities 33.7% TB
Slide 18: Interest Rate Hedging
Ellington Residential: Interest Rate Hedging Calculation of Exposure to Agency RMBS Based on Fair Value of TBA Portfolio: (In millions) 12/31/2014 9/30/2014 Agency-related Portfolio Long Agency RMBS $ 1,361 $ 1,334 (1) Net Short TBA Positions (576) (511) Net Long Exposure to Agency RMBS $ 785 $ 823
Slide 19: Interest Rate Hedging (Continued)
Ellington Residential: Interest Rate Hedging (Continued) December 31, 2014 Interest Rate Swap Weighted Weighted Weighted Average Maturity Notional Amount Fair Value Average Pay Average Years Receive Rate Rate to Maturity (In thousands) 2016 $ 48,000 $ (91) 0.80 % 0.23 % 1.77 2017 74,750 (388) 1.21 %
Slide 20: Supplemental Information
Supplemental Information
Slide 21: Income Statement (Unaudited)
Ellington Residential: Income Statement (Unaudited) CONSOLIDATED STATEMENT OF OPERATIONS Three Month Period Ended Year Ended December 31, 2014 September 30, 2014 December 31, 2014 (In thousands except share amounts) INTEREST INCOME (EXPENSE) Interest income $ 11,806 $ 11,484 $ 46,824 Interest expens
Slide 22: Balance Sheet (Unaudited)
Ellington Residential: Balance Sheet (Unaudited) CONSOLIDATED BALANCE SHEET As of Decem ber 31, 2014 Septem ber 30, 2014 Decem ber 31, 2013 (1) (In thousands except share amounts) ASSETS Cash and cash equivalents $ 45,237 $ 51,063 $ 50,112 Mortgage-backed securities, at fair value 1,393,303 1,368,09
Slide 23: Reconciliation of Core Earnings
Reconciliation of Core Earnings(1) Three Month Period Ended Three Month Period Ended (In thousands except share amounts) December 31, 2014 September 30, 2014 Net Income (Loss) $ (1,176) $ 3,533 Less: Net realized gains on mortgage-backed securities 3,070 2,030 Net realized losses on financial deriva
Slide 24: About Ellington
About Ellington EARN is managed by Ellington Residential Mortgage Management LLC, an affiliate of Ellington Management Group, L.L.C. (“EMG”) EMG was founded in 1994 by Michael Vranos and five partners; currently has over 150 employees, giving EARN access to time-tested infrastructure and industr
Slide 25: Investor Contact
Investor Contact: Media Contact: Lindsay Tragler, Investor Relations or Steve Bruce or Taylor Ingraham Lisa Mumford, Chief Financial Officer ASC Advisors, for Ellington Residential Mortgage REIT Ellington Residential Mortgage REIT (203) 409-3773 (203) 992-1230 Ellington Residential Mortgage REIT 53
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