Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q4 2013 Earnings Presentation
31 slides from Ellington Financial's earnings presentation, Feb 13, 2014
Slide 1: Fourth Quarter 2013 Earnings Conference Call
Ellington Financial LLC (NYSE: EFC) Fourth Quarter 2013 Earnings Conference Call February 13, 2014
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 2013
Fourth Quarter 2013
Slide 4: Operating Results
Operating Results Quarter % of Quarter % of Year % of Ended Per Average Ended Per Average Ended Per Average (In thousands, except per share amounts) 12/31/2013 Share Equity 9/30/2013 Share Equity 12/31/2013 Share Equity Non-Agency MBS, mortgage loans, ABS, and other: ` Interest income $ 14,404 0.55
Slide 5: Ellington Financial: Fourth Quarter Highlights
Ellington Financial: Fourth Quarter Highlights 4th quarter net income of $14.9 million or $0.58 per share; full year net income of $78.5 million or $3.28 Overall Results per share, equating to a full year return on average shareholders’ equity of 13.4% 4th quarter non-Agency strategy gross incom
Slide 6: Ellington Financial: Fourth Quarter Highlights (continued)
Ellington Financial: Fourth Quarter Highlights (continued) Non-Agency Long Portfolio including long credit default swaps: $736.7 million with a market yield of 7.29%(1) at the end of the fourth quarter, as compared to $794.9 million at the end of the third quarter with a market yield of 7.23%(1)
Slide 7: Ellington Financial: Non-Agency Strategy
Ellington Financial: Non-Agency Strategy Non-Agency MBS rallied during the quarter—pace of rally slowed in November and December as the market anticipated a decision by the Fed to taper its monthly asset purchases under QE3 The Dutch financial services firm ING sold a $5.1 billion portfolio of U
Slide 8: Ellington Financial: Agency Strategy
Ellington Financial: Agency Strategy Though Agency RMBS continued to rally in response to the “no taper” announcement early in the quarter, the uncertainty regarding the Fed’s impending taper weighed on both the absolute prices of Agency RMBS as well as their spread to interest rates for the major
Slide 9: Ellington Financial: Market Outlook
Ellington Financial: Market Outlook Active management through trading will play a significant role in profit generation As Wall Street balance sheets and risk-taking appetites decline as a result of Basel III and Dodd Frank, we expect continued trading opportunities Asset diversification expec
Slide 10: Non-Agency Portfolio
Non-Agency Portfolio
Slide 11: Non-Agency Long Portfolio
EFC: Non-Agency Long Portfolio Current Quarter Previous Quarter Non-Agency Long Portfolio 12/31/13: $737MM(1)(2) Non-Agency Long Portfolio 9/30/13: $795MM(1)(2) Seasoned Seasoned CLO Manufactured CLO Manufactured MBS CDO Avg Px 94.4 Housing MBS CDO Housing Avg Px 34.8 Avg Px 83.9 Avg Px 37.4 Avg Px
Slide 12: Non-Agency Long Portfolio as of December 31, 2013
EFC: Non-Agency Long Portfolio as of December 31, 2013 EFC non-Agency strategy is the main driver of earnings Non-Agency long portfolio value: $737 million(1) as of 12/31/13 (which includes $700 million of long non- Agency MBS and loans and $37 million of bond equivalent value of long credit der
Slide 13: Credit Hedging and Other Portfolio
EFC: Credit Hedging and Other Portfolio Current Quarter Previous Quarter Credit Hedging & Other Portfolio 12/31/13: $245MM(1) Credit Hedging & Other Portfolio 9/30/13: $251MM(1) Corporate CDS: $198.9mm CDS on MBS: $83.7mm Corporate CDS: $192.2mm CDS on MBS: $80.3mm ABX Indices 4% ABX Indices 4% Sing
Slide 14: Agency Portfolio
Agency Portfolio
Slide 15: Agency Long Portfolio
EFC: Agency Long Portfolio Current Quarter Previous Quarter Agency Long Portfolio 12/31/13: $933MM(¹) Agency Long Portfolio 9/30/13: $983MM(¹) 7% 6% 4% 4% 3% FNMA Fixed - 30 Yr 4% FNMA Fixed - 30 Yr 2% FNMA Fixed - 15 Yr 1% FNMA Fixed - 15 Yr FHLM Fixed - 30 Yr FHLM Fixed - 30 Yr FHLM Fixed - 15 Yr
Slide 16: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 12/31/13: Agency Interest Rate Hedging Portfolio 9/30/13: Short $541 MM 10-year equivalents Short $565 MM 10-year equivalents <2 Yr Interest Rate Swaps 2-5 Yr Interest 1.6% Rate Swaps
Slide 17: Agency Interest Rate Hedging Portfolio (continued)
EFC: Agency Interest Rate Hedging Portfolio (continued) Calculation of Exposure to Agency RMBS Based on Fair Value of TBA Portfolio: (In millions) Agency-related Portfolio 12/31/2013 9/30/2013 Long Agency RMBS $933 $983 Net Short TBAs (377) (400) Net Long Exposure to Agency RMBS $556 $583 Shorting
Slide 18: Borrowings
Borrowings
Slide 19: Repo Borrowings as of December 31, 2013
EFC: Repo Borrowings as of December 31, 2013 ($ in thousands) Repo Borrowings % of Total Remaining Days to Maturity Non-Agency Agency Total Borrowings 30 Days or Less $32,115 $337,746 $369,861 29.9% 31-60 Days 175,219 226,987 402,206 32.5% 61-90 Days 85,210 234,951 320,161 25.9% 91-120 Days 4,460 3,
Slide 20: Average Cost of Borrowings
EFC: Average Cost of Borrowings ($ In thousands) As of December 31, 2013 For the Quarter Ended December 31, 2013 (1) (1) (1) Average Borrowings for Collateral for Borrowing Outstanding Borrowings1 the Quarter Ended1 Average Cost of Funds1 Non-Agency RMBS, CMBS, and Other $393,853 $404,924 2.00% Agen
Slide 21: Supplemental Information
Supplemental Information
Slide 22: Gross Profit and Loss
EFC: Gross Profit and Loss Years Ended 2013 2012 2011 2010 2009 2008 ($ In thousands) $ % $ % $ % $ % $ % $ % Long: Non-Agency 109,689 18.56 129,830 30.02 1,505 0.39 70,840 21.87 101,748 36.33 (64,565) (26.20) Credit Hedge and Other: Non- Agency (22,173) (3.75) (14,642) (3.39) 19,895 5.16 (7,958) (2
Slide 23: Capital and Leverage
EFC: Capital and Leverage Capital Usage Across Entire Portfolio(1) Notes (1) Capital usage based on pro forma calculation of leverage generally applicable to long 12/31/2013 positions in target asset classes (2) Assets per strategy capital includes in the numerator holdings on a trade date basis of:
Slide 24: Non-Agency and Agency Fair Values and Average Prices
EFC: Non-Agency and Agency Fair Values and Average Prices Non-Agency and Agency Portfolios by Fair Value(1) $ In millions Non-Agency Agency $ 1,200.0 983.2 1,000.0 933.5 861.0 860.7 800.0 765.8 745.4 699.8 584.9 600.0 400.0 200.0 - 3/31/2013 6/30/2013 9/30/2013 12/31/2013 Average Price – Non-Agency
Slide 25: Yields and Net Interest Margin
EFC: Yields and Net Interest Margin Yields – Agency and Non-Agency Non-Agency Agency 10.00% 9.42% Total 8.97% 8.61% 8.67% 9.00% 8.00% 7.00% 5.61% 5.80% 5.46% 5.54% 6.00% 5.00% 3.57% 3.63% 4.00% 3.37% 3.01% 3.00% 2.00% 1.00% 0.00% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Note: Yields are based on amortized co
Slide 26: Dividends and Expense Ratio
EFC: Dividends and Expense Ratio Dividends Per Share $0.80 Dividend Yield as of February 12, 2014 $0.75 12.7% (1) $0.70 $0.65 $0.77 $0.77 $0.77 $0.77 $0.60 (1) Based on NYSE closing price as of 02/12/2014. $0.55 (2) Expense ratios annualized. $0.50 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Expense Ratio(2) 2.
Slide 27: Book Value
EFC: Book Value EFC has successfully preserved book value through market cycles, while producing strong results for investors Price of ABX 2006-2 AAA has been extremely volatile in comparison to EFC’s stable book value $80 BVPS Cumulative Dividends ABX 2006-2 AAA $45.00 $70 $40.00 $35.00 $60 $11.4
Slide 28: Income Statement
Income Statement (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF OPERATIONS Three Month Period Ended Year Ended (In thousands, except per share data) December 31, 2013 September 30, 2013 December 31, 2013 Investment income Interest income $ 22,954 $ 24,069 $ 85,740 Expenses Base manage
Slide 29: Balance Sheet
Balance Sheet (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES AND EQUITY As of December 31, September 30, December 31, (In thousands, except share amounts) 2013 2013 2012(1) ASSETS Cash and cash equivalents $ 183,489 $ 186,737 $ 59,084 Investments, financial derivat
Slide 30: About Ellington
About Ellington EFC is managed by Ellington Financial 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 130 employees, giving EFC access to time-tested infrastructure and proprietary resource
Slide 31: Investor Contact
Investor Contact: Media Contact: Lisa Mumford Steve Bruce or Katrina Allen Chief Financial Officer ASC Advisors, for Ellington Financial LLC Ellington Financial LLC (203) 409-3575 (203) 992-1230 Ellington Financial LLC 53 Forest Ave Old Greenwich, CT 06870 www.ellingtonfinancial.com