Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q3 2013 Earnings Presentation
31 slides from Ellington Financial's earnings presentation, Nov 6, 2013
Slide 1: Third Quarter 2013 Earnings Conference Call
Ellington Financial LLC (NYSE: EFC) Third Quarter 2013 Earnings Conference Call November 6, 2013
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 2013
Third Quarter 2013
Slide 4: Operating Results
Operating Results Nine Quarter % of Quarter % of Months % of Ended Per Average Ended Per Average Ended Per Average (In thousands, except per share amounts) 9/30/2013 Share Equity 6/30/2013 Share Equity 9/30/2013 Share Equity Non-Agency MBS, ABS, loans, and other: Interest income $ 15,500 $ 0.59 2.45
Slide 5: Ellington Financial: Third Quarter Highlights
Ellington Financial: Third Quarter Highlights 3rd quarter net income of $11.7 million or $0.45 per share; year-to-date net income of $63.7 million or Overall Results $2.73 per share, equating to a non-annualized return on shareholders’ equity of 11.1% Non-Agency 3rd quarter non-Agency MBS strate
Slide 6: Ellington Financial: Highlights Continued
Ellington Financial: Highlights Continued Non-Agency Long Portfolio including long credit default swaps: $794.9 million with a market yield of 7.23%(1) at the end of the third quarter, as compared to $796.0 million at the end of the second quarter with a market yield of 6.82%(1) Portfolios New p
Slide 7: Ellington Financial: Non-Agency Strategy
Ellington Financial: Non-Agency Strategy Fundamentals of housing remain strong, with home price appreciation and borrower performance continuing to improve each month Technicals have improved relative to the second quarter, as supply of non-Agency MBS from selling institutions declined Overall M
Slide 8: Ellington Financial: Agency Strategy
Ellington Financial: Agency Strategy Agency RMBS market was extremely volatile during the 3rd quarter The mortgage basis reached its widest level of the year in early July after stronger than expected economic data; it then retraced much of this widening after the September 18th Fed decision not
Slide 9: Ellington Financial: Market Outlook
Ellington Financial: Market Outlook We anticipate non-Agency supply from selling institutions to continue to slow during the 4th quarter We expect to continue to opportunistically purchase attractively priced securities in other sectors Alt-A CMBS/CDOs/CLOs Non-Agency Small balance non-per
Slide 10: Non-Agency Portfolio
Non-Agency Portfolio
Slide 11: EFC: Non-Agency Long Portfolio
EFC: Non-Agency Long Portfolio Previous Quarter Current Quarter Non-Agency Long Portfolio 6/30/13: $796MM(1)(2) Non-Agency Long Portfolio 9/30/13: $795MM(1)(2) Seasoned Seasoned MBS CDO CLO Manufactured CLO Manufactured Avg Px 52.1 MBS CDO Avg Px 92.2 Housing Housing Avg Px 37.4 Avg Px 93.6 Avg Px 8
Slide 12: EFC: Non-Agency Long Portfolio as of September 30, 2013
EFC: Non-Agency Long Portfolio as of September 30, 2013 EFC non-Agency strategy is the main driver of earnings Non-Agency long portfolio value: $795 million(1) as of 9/30/13 (which includes $746 million of long non-Agency MBS and loans and $49 million of bond equivalent value of long credit deri
Slide 13: EFC: Credit Hedging and Other Portfolio
EFC: Credit Hedging and Other Portfolio Previous Quarter Current Quarter Credit Hedging & Other Portfolio 6/30/13: $183MM(1) Credit Hedging & Other Portfolio 9/30/13: $251MM(1) Corporate CDS: $110.5mm Corporate CDS: $192.2mm CDS on MBS: $65.0mm CDS on MBS: $83.7mm ABX Indices ABX Indices 4% 8% Singl
Slide 14: Agency Portfolio
Agency Portfolio
Slide 15: Agency Long Portfolio
EFC: Agency Long Portfolio Previous Quarter Current Quarter Agency Long Portfolio 6/30/13: $861MM(¹) Agency Long Portfolio 9/30/13: $983MM(¹) 8% 6% 3% 4% 1% FNMA Fixed - 30 Yr 4% FNMA Fixed - 30 Yr 1% FNMA Fixed - 15 Yr 1% FNMA Fixed - 15 Yr FHLM Fixed - 30 Yr FHLM Fixed - 30 Yr 20% FHLM Fixed - 15
Slide 16: EFC: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Previous Quarter Current Quarter Agency Interest Rate Hedging Portfolio 6/30/13: Agency Interest Rate Hedging Portfolio 9/30/13: Short $518 MM 10-year equivalents Short $565 MM 10-year equivalents 2-5 Yr Interest Rate Swaps 2-5 Yr Interest 18.8% Rate Swaps
Slide 17: EFC: 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 6/30/2013 9/30/2013 Long Agency RMBS $861 $983 Net Short TBA Positions (458) (400) Net Long Exposure to Agency RMBS $403 $583 Sh
Slide 18: Borrowings
Borrowings
Slide 19: EFC: Repo Borrowings as of September 30, 2013
EFC: Repo Borrowings as of September 30, 2013 ($ In Millions) Repo Borrowings % of Total Remaining Days to Maturity Non-Agency Agency Total Borrowings 30 Days or Less $109.6 $367.2 $476.8 35.4% 31-60 Days 119.9 246.7 366.6 27.3 61-90 Days 105.7 84.7 190.4 14.1 91-120 Days 0.0 7.4 7.4 0.6 121-150 Day
Slide 20: EFC: Average Cost of Borrowings
EFC: Average Cost of Borrowings ($ In thousands) As of September 30, 2013 For the Quarter Ended September 30, 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 $452,008 $447,218 2.00% Ag
Slide 21: Supplemental Information
Supplemental Information
Slide 22: EFC: Gross Profit and Loss
EFC: Gross Profit and Loss Nine Months Ended Years Ended September 30, 2013 2012 2011 2010 2009 2008 ($ In thousands) $ % $ % $ % $ % $ % $ % Long: Non-Agency 80,595 13.92 129,830 30.02 1,505 0.39 70,840 21.87 101,748 36.33 (64,565) (26.20) Credit Hedge and Other: Non- Agency (10,494) (1.81) (14,642
Slide 23: EFC: Capital and Leverage
EFC: Capital and Leverage Capital Usage Across Entire Portfolio(1) Notes 9/30/2013 (1) Capital usage based on pro forma calculation of leverage generally applicable to long positions in target asset classes 6/30/2013 (2) Assets per strategy capital includes in the numerator holdings on a trade date
Slide 24: EFC: 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 $ In millions Non-Agency Agency $ 1,200.0 983.2 1,000.0 861.0 860.7 774.3 765.8 800.0 745.4 584.9 600.0 557.2 400.0 200.0 - 12/31/2012 3/31/2013 6/30/2013 9/30/2013 Average Price – Non-Agency and
Slide 25: EFC: Yields and Net Interest Margin
EFC: Yields and Net Interest Margin Yields – Agency and Non-Agency Non-Agency 12.00% Agency Total 9.72% 9.42% 10.00% 8.61% 8.67% 8.00% 5.70% 5.46% 5.61% 5.80% 6.00% 3.57% 3.63% 4.00% 3.01% 2.73% 2.00% 0.00% Q4 2012 Q1 2013 Q2 2013 Q3 2013 Note: Yields are based on amortized cost, not fair value. Net
Slide 26: EFC: Dividends and Expense Ratio
EFC: Dividends and Expense Ratio Dividends Per Share $1.55 $1.50 Dividend Yield as of November 05, 2013 $1.45 $0.75 (2) 13.4% (1) $0.80 $0.75 $0.70 $0.65 $0.77 $0.77 $0.77 $0.77 $0.60 $0.55 (1) Based on NYSE closing price as of 11/05/2013. (2) Special dividend. $0.50 (3) Expense ratios annualized. Q
Slide 27: EFC: 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 $40 EFC’s stable book value $80 $35 $70 $11.48$12.25$13.02 $30 $9.96 $60 $8.56 $9.26 Price of ABX 2006-
Slide 28: Income Statement
Income Statement (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF OPERATIONS Three Month Period Ended Nine Month Period Ended September 30, June 30, September 30, (In thousands, except per share data) 2013 2013 2013 Investment income Interest income $ 24,069 $ 20,335 $ 62,786 Expenses B
Slide 29: 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) 2013 2013 2012(1) ASSETS Cash and cash equivalents $ 186,737 $ 201,795 $ 59,084 Investments, financial derivatives
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