Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q1 2015 Earnings Presentation
31 slides from Ellington Financial's earnings presentation, May 7, 2015
Slide 1: First Quarter 2015 Earnings Conference Call
Ellington Financial LLC (NYSE: EFC) First Quarter 2015 Earnings Conference Call May 7, 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: First Quarter 2015
First Quarter 2015
Slide 4: Operating Results
Operating Results Quarter % of Quarter % of Ended Per Average Ended Per Average (In thousands, except per share amounts) 3/31/2015 Share Equity 12/31/2014 Share Equity Non-Agency MBS, mortgage loans, ABS, and other: Interest income and other investment income $ 17,646 $ 0.52 2.25% $ 17,365 $ 0.51 2.
Slide 5: First Quarter Highlights
Ellington Financial: First Quarter Highlights 1st quarter net income of $19.3 million, or $0.57 per share; 4th quarter net income of $2.6 million, or Overall Results $0.08 per share 1st quarter non-Agency strategy gross income of $18.5 million(1), or $0.55 per share Primary driver was interest incom
Slide 6: First Quarter Highlights (continued)
Ellington Financial: First Quarter Highlights (continued) Total non-Agency Long Portfolio, including long credit swaps: $791.9 million as of March 31, 2015 as compared to $882.2 million as of December 31, 2014 Portfolios Agency Long Portfolio: $1,140.9 million at the end of the first quarter, as com
Slide 7: Non-Agency Strategy
Ellington Financial: Non-Agency Strategy During the first quarter: Prices of non-Agency RMBS were supported by ongoing improvements in fundamental data, including mortgage delinquency and foreclosure rates CMBS spreads generally tightened; leverage of loans underlying 2015 new issuance is observably
Slide 8: Agency Strategy
Ellington Financial: Agency Strategy During the first quarter: The yield curve experienced significant flattening Overall Market Prepayment rates increased in response to lower mortgage rates and policy action Conditions TBA roll prices weakened Specified pools performed well, but the decline in mor
Slide 9: Market Outlook
Ellington Financial: Market Outlook As spreads have tightened, careful asset selection continues to be of paramount importance in non-Agency RMBS As we reduce our non-Agency RMBS legacy portfolio, we continue to scale our other non-Agency strategies European MBS, CLOs, and ABS CLOs (U.S.) Non-Agency
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 3/31/15: $792MM(1)(2)(3) Non-Agency Long Portfolio 12/31/14: $882MM(1)(2)(3)(4) Distressed Corporate Loans, 4% Consumer ABS and Distressed Corporate Consumer ABS and Euro CLO, 2% Average Px 91.5 Loans, 3% Loans
Slide 12: Non-Agency Long Portfolio (continued)
EFC: Non-Agency Long Portfolio (continued) Holdings Overview Holdings Overview Non-Agency Long Portfolio 3/31/15: $792MM(1)(2) Non-Agency Long Portfolio 12/31/13: $702MM(1)(3) RMBS, 56% RMBS, 82% Consumer Loans and ABS, 4% Residential Loans, 3% Investments in Mortgage-Related Entities, 3% CLOs, 6% E
Slide 13: Non-Agency Long Portfolio as of March 31, 2015
EFC: Non-Agency Long Portfolio as of March 31, 2015 Non-Agency strategy is the main driver of earnings Non-Agency long securities and loan portfolio value: $747.7 million--excludes REO, equity investments in mortgage related entities, and long credit swaps Est. Yield at Market Price at Fair Value We
Slide 14: Agency Portfolio
Agency Portfolio
Slide 15: Agency Long Portfolio
EFC: Agency Long Portfolio Current Quarter Previous Quarter Agency Long Portfolio 3/31/15: $1,141MM(¹) Agency Long Portfolio 12/31/14: $1,218MM(¹) FNMA Fixed - 30 Yr FNMA Fixed - 30 Yr 6% 1% 1% 3% 5% 1% <1% 2% FNMA Fixed - 15 Yr 1% FNMA Fixed - 15 Yr 1% 2% FHLM Fixed - 30 Yr 3% FHLM Fixed - 30 Yr FH
Slide 16: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 3/31/15: Agency Interest Rate Hedging Portfolio 12/31/14: Short $418 MM 10-year equivalents Short $526 MM 10-year equivalents 0-5 Yr Interest 0-5 Yr Interest Rate Swaps Rate Swaps 2.8%
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 3/31/2015 12/31/2014 Long Agency RMBS $1,141 $1,218 Net Short TBAs (664) (733) Net Long Exposure to Agency RMBS $477 $485 Shorti
Slide 18: Borrowings
Borrowings
Slide 19: Repo Borrowings as of March 31, 2015
EFC: Repo Borrowings as of March 31, 2015 ($ in thousands) Repo Borrowings % of Total Remaining Days to Maturity Non-Agency Agency U.S. Treasury Total Borrowings 30 Days or Less $21,506 $481,086 $429 $503,021 36.0% 31-60 Days 70,064 266,793 — 336,857 24.1% 61-90 Days 37,026 244,163 — 281,189 20.2% 9
Slide 20: Average Cost of Borrowings
EFC: Average Cost of Borrowings ($ In thousands) As of March 31, 2015 For the Quarter Ended March 31, 2015 Average Borrowings for Collateral for Borrowing Outstanding Borrowings1 (1) the Quarter Ended (1) 1 Funds1 Average Cost of (1) Non-Agency RMBS, CMBS, and Other $315,802 $347,815 2.07% Agency RM
Slide 21: Supplemental Information
Supplemental Information
Slide 22: Gross Profit and Loss
EFC: Gross Profit and Loss Quarter Ended March 31, 2015 Years Ended 2015 2014 2013 2012 2011 2010 2009 2008 ($ In thousands) $ % $ % $ % $ % $ % $ % $ % $ % Long: Non-Agency 19,758 2.52 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 and O
Slide 23: Capital and Leverage
EFC: Capital and Leverage(1) Capital Usage Across Entire Portfolio(2) Notes 3/31/2015 (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. 12/31/2014 (3) Assets per strategy capital includes
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 $ 1,400.0 1,217.7 1,200.0 1,140.9 1,064.2 961.8 1,000.0 880.4 764.8 800.0 719.7 656.1 600.0 400.0 200.0 - 6/30/2014 9/30/2014 12/31/2014 3/31/2015 Average Price
Slide 25: Yields and Net Interest Margin
EFC: Yields and Net Interest Margin Yields – Agency and Non-Agency Non-Agency Agency 10.00% 9.50% 9.35% Total 9.08% 8.75% 9.00% 8.00% 7.00% 5.52% 5.39% 5.63% 5.43% 6.00% 5.00% 4.00% 3.37% 3.22% 3.22% 3.00% 3.00% 2.00% 1.00% 0.00% Q2 2014 Q3 2014 Q4 2014 Q1 2015 Note: Yields are based on amortized co
Slide 26: Dividends and Expense Ratio
EFC: Dividends and Expense Ratio Dividends Per Share $0.70 Dividend Yield as of May 5, 2015 13.0% (1) $0.65 $0.77 $0.77 $0.60 $0.65 $0.65 $0.55 $0.50 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Expense Ratio(2) 3.15% 3.03% 3.05% 2.95% 2.85% 2.76% 2.75% 2.63% 2.65% 2.59% 2.55% 2.45% 2.35% 2.25% Q2 2014 Q3 2014 Q
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 $90 BVPS Cumulative Dividends ABX 2006-2 AAA $45.00 $80 $40.00 $70 $35.00 Price o
Slide 28: Income Statement
Income Statement (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF OPERATIONS Three Month Period Ended (In thousands, except per share data) March 31, 2015 December 31, 2014 Investment income Interest income $ 26,513 $ 28,688 Other investment income 293 150 Total Investment Income 26,806
Slide 29: Balance Sheet
Balance Sheet (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES AND EQUITY As of March 31, December 31, (In thousands, except share amounts) (1) 2015 2014 ASSETS Cash and cash equivalents $ 156,250 $ 114,140 Investments, financial derivatives and repurchase agreements
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 150 employees, giving EFC access to time-tested infrastructure and proprietary resources in
Slide 31: Investor and Media Contacts
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