Slide 1: Third Quarter 2015 Earnings Conference Call
Ellington Financial LLC (NYSE: EFC) Third Quarter 2015 Earnings Conference Call November 6, 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. Our actual results may diff
Slide 3: Third Quarter 2015
Third Quarter 2015
Slide 4: Operating Results
Operating Results Nine Month Quarter % of Quarter % of Period % of Ended Per Average Ended Per Average Ended Per Average (1) (In thousands, except per share amounts) 9/30/2015 Share Equity 6/30/2015 Share Equity 9/30/2015 Share Equity Credit: Non-Agency MBS, mortgage loans, ABS, and other: Interest
Slide 5: Ellington Financial: Third Quarter Highlights
Ellington Financial: Third Quarter Highlights Overall Results Net income of $3.9 million, or $0.12 per share Credit strategy (previously referred to as “Non-Agency strategy”) gross income of $10.6 million(1), or $0.31 per share Interest income and other income, and net contributions from net c
Slide 6: Ellington Financial: Third Quarter Highlights (continued)
Ellington Financial: Third Quarter Highlights (continued) Total Long Credit Portfolio: $655(1) million as of September 30, 2015 as compared to $753(1) million as of June 30, 2015 Portfolios Agency Long Portfolio: $1,221 million as of September 30, 2015, as compared to $1,124 million as of June 3
Slide 7: Ellington Financial: Credit Strategy
Ellington Financial: Credit Strategy During the third quarter: Weakness in China and other global macroeconomic factors led to sharp decline in interest rates and significant credit spread widening, negatively affecting most sectors of the fixed income market Non-Agency RMBS spreads held up we
Slide 8: Ellington Financial: Agency Strategy
Ellington Financial: Agency Strategy Interest rates fell and the yield curve flattened during the third quarter Swap rates decreased at both ends of the curve; 2-year and 10-year swap rates dropped 0.16% and 0.46%, respectively 10-year swap spread to U.S Treasury securities became negative for
Slide 9: Ellington Financial: Market Outlook
Ellington Financial: Market Outlook We expect to continue to expand our diversified Credit portfolio, with an emphasis on the following: European MBS, CLOs, and NPLs (mortgage and consumer) U.S. CLOs, especially legacy debt and equity CMBS, especially “B-pieces” where the new issue market pr
Slide 10: Credit Portfolio
Credit Portfolio
Slide 11: Long Credit Portfolio
EFC: Long Credit Portfolio Current Quarter Previous Quarter Long Credit Portfolio 9/30/15: $655MM(1)(2) Long Credit Portfolio 6/30/15: $753MM(1)(2) Distressed Corporate Distressed Corporate Loans, 9% Loans, 7% Average Px 58.6 Average Px 68.9 Euro CLO, 4% Euro CLO, 7% Average Px 94.7 Jumbo/ Average P
Slide 12: Long Credit Portfolio (continued)
EFC: Long Credit Portfolio (continued) Holdings Overview Holdings Overview Long Credit Portfolio 9/30/15: $655MM(1) Long Credit Portfolio 12/31/13: $700MM(1) RMBS, 41% RMBS, 82% Residential Loans and REO, 4% CLOs 6% Distressed CMBS and Corporate Commercial Loans, Loans, 9% 14% European Non‐ Dollar D
Slide 13: Long Credit Portfolio as of September 30, 2015
EFC: Long Credit Portfolio as of September 30, 2015 Credit strategy is the main driver of earnings Long Credit securities and loan portfolio value: $632.6 million — excludes REO and equity investments in mortgage related entities Est. Yield at Market Price at Fair Value Weighted Average Historic
Slide 14: Credit Hedging Portfolio
EFC: Credit Hedging Portfolio(1)(2) Corporate CDS Indices / Instrument Tranches / Options / Single Single Name ABS CDS and Corporate Bond Index Category Names ABX Indices European Sovereign Debt ETFs/Equity CMBX HY CDX OTR Bond Equivalent Units (3)(4) (4) (4) Value Bond Equivalent Value Market Value
Slide 15: Agency Portfolio
Agency Portfolio
Slide 16: Agency Long Portfolio
EFC: Agency Long Portfolio Current Quarter Previous Quarter Agency Long Portfolio 9/30/15: $1,221MM(¹) Agency Long Portfolio 6/30/15: $1,124MM(¹) FNMA Fixed - 30 Yr FNMA Fixed - 30 Yr 1% 5%1% 7% 3% 5% <1% FNMA Fixed - 15 Yr FNMA Fixed - 15 Yr 2% 2% 1% 3% FHLM Fixed - 30 Yr FHLM Fixed - 30 Yr 3% FHLM
Slide 17: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 9/30/15: Agency Interest Rate Hedging Portfolio 6/30/15: Short $486 MM 10-year equivalents Short $547 MM 10-year equivalents 0-5 Yr Interest 0-5 Yr Interest Rate Swaps Rate Swaps 19.2%
Slide 18: 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 9/30/2015 6/30/2015 Long Agency RMBS $1,221 $1,124 Net Short TBAs (685) (654) Net Long Exposure to Agency RMBS $536 $470 Short
Slide 19: Borrowings
Borrowings
Slide 20: Repo Borrowings as of September 30, 2015
EFC: Repo Borrowings as of September 30, 2015 ($ in thousands) Repo Borrowings % of Total Remaining Days to Maturity Non-Agency Agency Total Borrowings 30 Days or Less $23,119 $389,834 $412,953 30.1% 31-60 Days 25,571 272,247 297,818 21.7% 61-90 Days 21,250 290,038 311,288 22.7% 91-120 Days 33,860 1
Slide 21: Average Cost of Borrowings
EFC: Average Cost of Borrowings ($ In thousands) As of September 30, 2015 For the Quarter Ended September 30, 2015 Average Borrowings for Collateral for Borrowing Outstanding Borrowings1 (1) the Quarter Ended (1) 1 Average Cost of Funds1 (1) Non-Agency RMBS, CMBS, and Other $226,955 $255,340 2.26% A
Slide 22: Supplemental Information
Supplemental Information
Slide 23: Gross Profit and Loss
EFC: Gross Profit and Loss Nine Months Ended September 30, 2015 Years Ended 2015 2014 2013 2012 2011 2010 2009 2008 ($ In thousands) $ % $ % $ % $ % $ % $ % $ % $ % Long: Credit 43,700 5.61 77,636 11.38 109,536 18.53 129,830 30.02 1,505 0.39 70,840 21.87 101,748 36.33 (64,565) (26.20) Credit Hedge a
Slide 24: Capital and Leverage
EFC: Capital and Leverage(1) Capital Usage Across Entire Portfolio(2) Notes 9/30/2015 (1) Excludes U.S. Treasury securities (2) Capital usage based on pro forma calculation of leverage generally applicable to long positions in target asset classes. 6/30/2015 (3) Assets per strategy capital includes
Slide 25: Credit and Agency Fair Values and Average Prices
EFC: Credit and Agency Fair Values and Average Prices Credit and Agency Portfolios by Fair Value $ In millions Credit Agency $ 1,400.0 1,217.7 1,221.2 1,200.0 1,140.9 1,124.5 1,000.0 880.4 790.1 800.0 753.2 655.5 600.0 400.0 200.0 - 12/31/2014 3/31/2015 6/30/2015 9/30/2015 Average Price – Credit and
Slide 26: Yields and Net Interest Margin
EFC: Yields and Net Interest Margin Yields – Agency and Credit Credit Agency 12.00% Total 10.06% 9.82% 10.00% 9.50% 9.35% 8.00% 5.63% 5.43% 5.44% 5.83% 6.00% 4.00% 3.53% 3.22% 3.00% 2.83% 2.00% 0.00% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Note: Yields are based on amortized cost, not fair value. Excludes l
Slide 27: Dividends and Expense Ratio
EFC: Dividends and Expense Ratio $0.70 Dividends Per Share $0.65 Dividend Yield as of November 4, 2015 $0.60 11.1% (1) $0.55 $0.50 $0.65 $0.65 $0.65 $0.45 $0.40 $0.50 $0.35 $0.30 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Expense Ratio(2) 2.75% 2.65% 2.63% 2.59% 2.54% 2.55% 2.55% 2.45% 2.35% 2.25% (1) Based on
Slide 28: Diluted Book Value
EFC: Diluted 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 $90 DBVPS Cumulative Dividends ABX 2006-2 AAA EFC’s stable book value $45.00 $80 $40.00 $70 $35
Slide 29: Stable Book Value Per Share Relative to Peer Group
EFC: Stable Book Value Per Share Relative to Peer Group Standard Deviation Normalized Book Value Per Share of Hybrid mREITs of Normalized Book Value Per Share Q1 2011 ‐ Q2 2015(1)(2) Q1 2011 – Q2 2015 40% Standard EFC Company 30% Deviation Hybrid REIT #02 EFC 3.12% Hybrid REIT #03 20% Hybrid REIT #0
Slide 30: Sharpe Ratio of Quarterly Economic Returns Relative to Peer Group
EFC: Sharpe Ratio of Quarterly Economic Returns Relative to Peer Group Sharpe Ratio of Normalized Cumulative Compounded Quarterly Economic Returns Quarterly Economic Returns of Hybrid mREITs Q1 2011 – Q2 2015 Q1 2011 ‐ Q2 2015(1)(2)(3) Sharpe 70% EFC Company Ratio Hybrid REIT #02 60% EFC 2.42 Hybrid
Slide 31: Income Statement
Income Statement (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF OPERATIONS Nine Month Three Month Period Ended Period Ended (In thousands, except per share data) September 30, 2015 June 30, 2015 September 30, 2015 Investment income Interest income $ 26,440 $ 25,739 $ 78,692 Other inco
Slide 32: Balance Sheet
Balance Sheet (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES AND EQUITY As of September 30, June 30, December 31, (In thousands, except share amounts) (1) (2) 2015 2015 2014 ASSETS Cash and cash equivalents $ 139,395 $ 123,856 $ 114,140 Restricted Cash 5,580 730 -
Slide 33: 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 160 employees, giving EFC access to time-tested infrastructure and proprietary resource
Slide 34: 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 Financial LLC Ellington Financial LLC (203) 409-3575 (203) 992-1230 Ellington Financial LLC 53 Forest Ave Old Greenwich, CT 06870 w