Slide 1: Fourth Quarter Investor Presentation
Ellington Financial LLC (NYSE: EFC) Fourth Quarter Investor Presentation December 31, 2011
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: Ellington Financial: Current Themes
Ellington Financial: Current Themes EFC protected shareholders’ equity in 2011 during a time of extreme volatility in the market for non-Agency and Agency RMBS. Many non-Agency securities saw a downward re-pricing of 10%-30% over the last three quarters of 2011, which created an extremely attrac
Slide 4: Non-Agency Long Portfolio
EFC: Non-Agency Long Portfolio Previous Quarter Current Quarter Non-Agency Long Portfolio 9/30/11: $420MM¹, ² Non-Agency Long Portfolio 12/31/11: $451MM¹, ² CMBS, CMBX and CMBS, CMBX and Seasoned Manufactured Commercial Loans Seasoned Manufactured Commercial Loans Housing 6% Housing 6% 14% 16% Other
Slide 5: December 31, 2011 Portfolio – Non-Agency
EFC: December 31, 2011 Portfolio – Non-Agency EFC non-Agency MBS strategy is the main driver of EFC’s earnings. Non-Agency Long Portfolio Value: $451MM¹ as of 12/31/2011 (which includes $438.0 million of long non-Agency MBS and loans and $13.1 million of bond equivalent value of long credit hedg
Slide 6: Credit Hedging Portfolio
EFC: Credit Hedging Portfolio Previous Quarter Current Quarter Credit Hedging Portfolio 9/30/11: $90MM¹ Credit Hedging Portfolio 12/31/11: $182MM¹ Corporate CDS: $19.6mm Corporate CDS: $105.5mm CDS on MBS: $55.6mm CDS on MBS: $55.6mm CDX IG CDX IG CMBX CMBX 27% 20% Equity Swaps: $14.6mm Equity Swaps
Slide 7: Credit Hedging Portfolio Continued
EFC: Credit Hedging Portfolio Continued Non-Agency Short Portfolio Value: $181.7MM¹ as of 12/31/2011. − Historically, our long portfolio has been more concentrated in seasoned RMBS, and our short portfolio has been more concentrated in newer vintage RMBS. − Seasoned RMBS are generally less sensiti
Slide 8: Agency Long Portfolio
EFC: Agency Long Portfolio Previous Quarter Current Quarter Agency Long Portfolio 9/30/11: $834MM¹ Agency Long Portfolio 12/31/11: $732MM¹ GNMA/FNMA/FHLM GNMA/FNMA/FHLM FNMA/FHLM ARMS FNMA/FHLM ARMS Fixed IOs Fixed IOs 6% 5% 1% 1% GNMA Fixed - 30 Yr GNMA Fixed - 30 Yr 11% <1.0% FHLM Fixed - 30 Yr FN
Slide 9: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Previous Quarter Current Quarter Agency Interest Rate Hedging Portfolio 9/30/11: Agency Interest Rate Hedging Portfolio 12/31/11: Short $255MM 10-year equivalents Short $207MM 10-year equivalents¹ 2-5 Yr Interest Rate 2-5 Yr Interest Rate Swaps Swaps 25.0%
Slide 10: Agency Interest Rate Hedging Portfolio Continued
EFC: Agency Interest Rate Hedging Portfolio Continued Calculation of Exposure to Agency RMBS Based on TBA Portfolio Fair Value (In millions) Agency-related Portfolio 9/30/11 12/31/11 Long Agency RMBS $834 $732 Net Short TBA Positions (492) (415) Net Long Exposure to Agency RMBS $342 $317 Shorting
Slide 11: Strong Results and Preservation of Book Value
EFC: Strong Results and Preservation of 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 $35.00 BVPS Cumulative Dividends EFC’s stable book value $29.93 $30
Slide 12: Repo Borrowings
EFC: Repo Borrowings (In Millions) Repo Borrowings Remaining Days to Non-Agency Agency % of Total Maturity Borrowings 30 Days or Less $56.6 $502.1 62.4% 31-60 Days 91.8 158.2 27.9 61-90 Days 38.0 0.0 4.2 121-150 Days 4.3 0.0 0.5 151-180 Days 45.2 0.0 5.0 Totals $235.9 $660.3 100.0% At 12/31/11, EF
Slide 13: Gross Profit and Loss: 2008-2011
EFC: Gross Profit and Loss: 2008-2011 In times of RMBS market distress, the use of credit hedging instruments has been effective in insulating the long non-Agency portfolio from credit risk. Historically, and over time, non-Agency hedges have contributed gains to the overall portfolio. 2011 2010
Slide 14: Additional Metrics…
EFC: Additional Metrics… Expense Ratio Capital Usage Across Entire Portfolio 3.20% Liquidity Management CRE 3.10% 3.10% 3.10% 12/31/2011 Non-Agency RMBS Agency 3.10% Strategy (“Liquidity”) 3.00% CRE 9/30/2011 Non-Agency RMBS Agency Liquidity 2.90% 2.80% 2.68% CRE 2.70% 6/30/2011 Non-Agency RMBS Agen
Slide 15: Additional Metrics…Continued
EFC: Additional Metrics…Continued Average Price - Non-Agency and Agency Non-Ag Non-Agency and Agency Portfolios by Fair Value Non-Ag In Millions Ag Ag $ 1,000.0 938.1 $ 120.00 107.12 107.03 900.0 833.8 110.00 102.96 105.09 785.4 800.0 732.3 100.00 700.0 90.00 600.0 80.00 72.63 500.0 415.5 438.0 68.6
Slide 16: 2011 Portfolio Earnings and Dividends
EFC: 2011 Portfolio Earnings and Dividends YTD Cumulative Earnings and Dividends (In Millions) $ 45.00 2010 40.57 2011 In Millions 40.00 Earnings 40.58 35.00 27.34 Dividends 30.00 25.00 26.99¹ 20.26 20.00 Dividends 18.45 13.51 15.00 11.33 11.11 10.00 7.60 10.33 9.79 8.63 Earnings 5.00 3.09 4.95 6.76
Slide 17: About Ellington
About Ellington EFC is managed by Ellington Financial Management LLC, an affiliate of Ellington Management Group LLC (“EMG”). EMG was founded in 1994 by Michael Vranos and five partners, and has over 100 employees, giving EFC access to time-tested infrastructure and industry-leading resources in
Slide 18: Investor Contact
Ellington Financial LLC (NYSE: EFC) Fourth Quarter Investor Presentation December 31, 2011 Investor Contact: Media Contact: Neha Mathur Shawn Pattison or Dana Gorman Vice President The Abernathy MacGregor Group, for Ellington Financial LLC Ellington Financial LLC (203) 409-3575 (212) 371-5999 17