Slide 1: Second Quarter 2018 Earnings Conference Call
Second Quarter 2018 Earnings Conference Call August 7, 2018
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: Second Quarter Market Update
Second Quarter Market Update Quarter Ended 6/30/2018 3/31/2018 Q/Q 12/31/2017 Q/Q 9/30/2017 Q/Q 6/30/2017 Q/Q 3/31/2017 Q/Q (1) UST (%) 2Y UST 2.53 2.27 +0.26 1.88 +0.38 1.48 +0.40 1.38 +0.10 1.25 +0.13 5Y UST 2.74 2.56 +0.18 2.21 +0.36 1.94 +0.27 1.89 +0.05 1.92 -0.03 10Y UST 2.86 2.74 +0.12 2.41 +
Slide 4: Second Quarter Highlights
Second Quarter Highlights(1) Net income: $21.2 million or $0.69 per share Overall NAV-based total return: 3.8% for the quarter and 8.2% year-to-date (17.1% annualized) Results Net investment income of $11.0 million or $0.36 per share Adjusted net investment income (2) of $11.0 million or $0.
Slide 5: Portfolio Summary as of June 30, 2018
Portfolio Summary as of June 30, 2018(1) Diversified sources of return to perform across market cycles Average Allocated Fair Value Price WAVG WAVG Equity and Asset Allocation by (2)(6) (4)(6) (5)(6) Strategy Equity ($MM) (%) Life Mkt Yield Strategy CREDIT 4% CLO $ 210,935 96.6 4.9 12.3% 16% Consume
Slide 6: Consolidated Statement of Operations (Unaudited)
Consolidated Statement of Operations (Unaudited) Six-Month Three Month Period Ended Period Ended (In thousands, except per share data) June 30, 2018 March 31, 2018 June 30, 2018 Investment income Interest income $ 31,941 $ 28,092 $ 60,033 Other income 1,094 716 1,811 Total investment income 33,035 2
Slide 7: Operating Results by Strategy
Operating Results by Strategy % of % of Six-Month % of Quarter Ended Per Average Quarter Ended Per Average Period Ended Per Average (In thousands, except per share amounts) June 30, 2018 Share Equity March 31, 2018 Share Equity June 30, 2018 Share Equity Credit: Interest income and other income $ 23
Slide 8: Long Credit Portfolio
Long Credit Portfolio 6/30/2018(1)(2) 3/31/2018(1)2) Corporate Debt Corporate Debt Investments in and Equity Investments in and Equity Mortgage-Related 1% Mortgage- 1% Entities Related Entities 3% 3% Residential Residential CLO Mortgage Mortgage CLO 19% Loans and REO Loans and REO 22% 17% 12% CMBS a
Slide 9: Long Agency Portfolio
Long Agency Portfolio 6/30/2018(¹) 3/31/2018(¹) FNMA/FHLM FNMA/FHLM FNMA/FHLM FNMA/FHLM GNMA/ GNMA ARMS Fixed - 20 Yr GNMA/ ARMS Fixed - 20 Yr GNMA FNMA/FHLM Fixed - 15 Yr 1% <1% FNMA/FHLM 1% <1% Fixed - 15 Yr Fixed IOs <1% Fixed IOs <1% 3% 3% GNMA GNMA Fixed - 30 Yr Fixed - 30 Yr 15% 18% GNMA GNMA
Slide 10: Borrowings and Leverage
Borrowings and Leverage(1) For the Quarter Ended ($ In thousands) As of June 30, 2018 June 30, 2018 Weighted (1) (1) Average (1) Outstanding Average Debt-to-Equity Borrowings for the Average Cost of Strategy Borrowings Borrowing Rate Ratio(2) Quarter Ended Funds Credit, Secured Recourse $538,775 3.7
Slide 11: Diversified Credit Portfolio
Diversified Credit Portfolio Consumer Loans - Installment Loans (primarily debt consolidation & home improvement) - Auto Loans - ABS 18% Residential Mortgages - Non-Agency / Non-Conforming - Non-QM Loans - NPL/RPL - Rehab & Bridge Loans 46% Commercial Mortgages - NPLs - Reverse Mortgages 16% - Bridg
Slide 12: 2018 Objectives
2018 Objectives 1. Continue to grow Credit portfolio and earnings - Leverage proprietary pipeline of loans and add securities opportunistically - Credit portfolio is nearing desired size 2. Continue to improve and diversify financing sources - Emphasize long-term non mark-to-market financing - Secur
Slide 13: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs Standard Deviation of Q1-2011 – Q1 -2018(1)(2) Quarterly Economic Returns of Hybrid REITs 9.0% Q1-2011 – Q1-2018 8.0% Standard Company Deviation 7.0% EFC 2.4% Hybrid REIT #02 3.2% 6.0% Hybrid REIT #03 3.3% 5.0% H
Slide 14: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Estimated Change in Fair Value (In thousands) 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates % of Total Market Value % of Total Equity Market Value Equity Agency RMBS - ARM Pools $ 30 0.00% $ (38) -0.01% Agency RMBS - Fixed Po
Slide 15: Supplemental Slides
Ellington Financial Supplemental Slides
Slide 16: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Corporate CDS Indices / Instrument Tranches / Options / Single Single Name ABS CDS and Corporate Bonds/Corporate Names ABX Indices European Sovereign Debt Bond ETFs/Equities CMBX Category HY CDX OTR Bond Equivalent (4) (4) Units Value (3)(4) Bond Equivalent Value Marke
Slide 17: Agency Interest Rate Hedging Portfolio
Agency Interest Rate Hedging Portfolio(1) We deploy a dynamic and adaptive hedging strategy to preserve book value As of 6/30/2018: As of 3/31/2018: Short $448MM 10-year equivalents Short $412MM 10-year equivalents >5 Yr Treasury >5 Yr Treasury Futures Futures 0-5 Yr Interest Rate 15.4% 0-5 Yr Inter
Slide 18: Agency Interest Rate Hedging Portfolio (continued)
Agency Interest Rate Hedging Portfolio (continued) Exposure to Agency Pools Based on Net Fair Value As of 6/30/2018 As of 3/31/2018 $1,000 $1,000 $800 $800 Long Agency Long Agency Pools Pools $600 $916 $600 $896 $400 $400 Net Long ($ in millions) Net Long ($ in millions) Exposure to Exposure to $200
Slide 19: CPR Breakout of Agency Fixed Long Portfolio
CPR Breakout of Agency Fixed Long Portfolio Collateral Characteristics and Historical 3-month CPR Collateral Characteristics and Historical 3-month CPR Average for the Quarter Ended 6/30/2018 (1) Average for the Quarter Ended 3/31/2018(1)(5) 3-Month 3-Month Geography Fair Characteristic(2) Fair Char
Slide 20: Repo Borrowings
Repo Borrowings(1) ($ in tho usands) Repo Borrowings as of June 30, 2018 Borrowings by Days to Maturity % of Total Remaining Days to Maturity Credit Agency U.S. Treasury Total Borrowings 5% 3% 20% 1% 30 Days or Less $25,011 $261,209 $2,639 $288,859 20.3% 31-90 Days 300,292 629,300 — 929,592 65.4% 91
Slide 21: Gross Profit and Loss
Gross Profit and Loss(1) Resilient profit generation through market cycles Six-Month Period Years Ended Ended June 30, ($ In thousands) 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Long: Credit $47,156 7.7% $61,136 9.6% $36,203 5.3% $46,892 6.1% $77,636 11.4% $109,536 18.5% $129,830 30.0%
Slide 22: Diluted Book Value per Share
Total Return Since Inception EFC has successfully preserved book value through 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 2018 is approximately 196%, or 10.5% annualized(1) $45.00
Slide 23: Capital, Leverage & Portfolio Composition
Capital, Leverage & Portfolio Composition Capital Usage Across Entire Portfolio(1) Leverage by Strategy (Debt-to-Equity)(1) 4.00 10.00 9.71 9.11 9.24 3.50 9.00 6/30/2018 7.57 7.00 8.00 3.00 2.62 2.77 2.50 6.00 2.24 3/31/2018 2.00 1.91 1.65 1.50 12/31/2017 1.53 1.00 1.21 0.97 9/30/2017 0.50 - 0% 10%
Slide 24: Consolidated Statement of Assets, Liabilities and Equity
Consolidated Statement of Assets, Liabilities and Equity (Unaudited) As of June 30, March 31, December 31, (In thousands, except share amounts) 2018 2018 2017(1) ASSETS Cash and cash equivalents $ 22,071 $ 25,715 $ 47,233 Restricted Cash 425 425 425 Investments, financial derivatives, and repurchase
Slide 25: About Ellington
About Ellington Ellington Profile As of 6/30/2018 Founded: 1994 $7.4 16 18 12% Billion in Employee-partners Years of average Management’s Employees: >150 assets under own the firm(2) industry experience ownership of EFC, management as of of senior portfolio representing strong Investment Professiona
Slide 26: Endnotes
Endnotes Slide 3 – Second 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 embe
Slide 27: Endnotes
Endnotes Slide 7 – Operating Results by Strategy (1) Includes TBAs and U.S. Treasury securities, if applicable. (2) Includes equity and other relative value trading strategies and related hedges. (3) Includes interest expense on our Senior Notes. (4) Per share information is calculated using weighte
Slide 28: Endnotes
Endnotes Slide 14 – Interest Rate Sensitivity Analysis (1) The table reflects the estimated effects on the value of our portfolio, both overall and by category, of hypothetical, immediate, 50 basis point downward and upward parallel shifts in interest rates, based on the market environment as of Jun
Slide 29: Endnotes
Endnotes Slide 21 – 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 22 – Total Return Since Inception (1) Total return is based on $18.61 net
Slide 30: Investor Contact
Investor Contact: JR Herlihy Chief Financial Officer Ellington Financial LLC (203) 409-3575 Info@ellingtonfinancial.com Media Contact: Amanda Klein or Kevin Fitzgerald Gasthalter & Co. for Ellington Financial LLC (212) 257-4170 Ellington@gasthalter.com Ellington Financial LLC 53 Forest Ave Old Green