Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q3 2011 Earnings Presentation
18 slides from Ellington Financial's earnings presentation, Sep 30, 2011
Slide 1: Third Quarter Investor Presentation
Ellington Financial LLC (NYSE: EFC) Third Quarter Investor Presentation September 30, 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: Themes of the Quarter
Ellington Financial: Themes of the Quarter EFC protected shareholders’ equity in Q3 2011 and is positioned to take advantage of a very attractive entry point for distressed RMBS. Q3 Total NAV-based Return: (0.31%), YTD NAV-based Return: 1.94% EFC announced $10mm share repurchase program; manag
Slide 4: Non-Agency Long Portfolio
EFC: Non-Agency Long Portfolio Previous Quarter Current Quarter Non-Agency Long Portfolio 6/30/11: $386MM¹, ² Non-Agency Long Portfolio 9/30/11: $420MM¹, ² CMBS and CMBS, CMBX and Newer Vintage Commercial Loans Seasoned Commercial Loans Seasoned Manufactured Subprime and Alt-B 4% Manufactured 6% Hou
Slide 5: September 30, 2011 Portfolio – Non-Agency
EFC: September 30, 2011 Portfolio – Non-Agency EFC non-Agency MBS strategy is the main driver of EFC’s earnings. Non-Agency Long Portfolio Value: $420MM¹ as of 9/30/2011: Fair Value Average Weighted Historical 1- Est. Yield at Market Est. Yield at Market MBS Sector (millions) Price² Average Life
Slide 6: Credit Hedging Portfolio
EFC: Credit Hedging Portfolio Previous Quarter Current Quarter Credit Hedging Portfolio 6/30/11: $88MM¹ Credit Hedging Portfolio 9/30/11: $90MM¹ Corporate CDS: $19.9mm Corporate CDS: $19.6mm CDS on MBS: $67.6mm CDS on MBS: $55.6mm CDX IG CDX IG Single Name ABSCDS 28% CMBX CMBX 7% 20% Equity Swaps: $
Slide 7: Credit Hedging Portfolio Cont.
EFC: Credit Hedging Portfolio Cont. Non-Agency Short Portfolio Value: $90MM¹ as of 9/30/2011. − 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 sensitive, doll
Slide 8: Agency Long Portfolio
EFC: Agency Long Portfolio Previous Quarter Current Quarter Agency Long Portfolio 6/30/11: $785MM¹ Agency Long Portfolio 9/30/11: $834MM¹ GNMA/FNMA/FHL M Fixed IO GNMA/FNMA/FHLM FNMA/FHLM ARMS Fixed IOs 1% 6% 1% FNMA/FHLM ARMs GNMA Fixed - 30 7% GNMA Fixed - 30 Yr Yr FHLM Fixed - 30 Yr 16% 11% 22% F
Slide 9: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Previous Quarter Current Quarter Agency Interest Rate Hedging Portfolio 6/30/11: Agency Interest Rate Hedging Portfolio 9/30/11: $405MM 10-year equivalents $255MM 10-year equivalents Eurodollar Futures 1.5% 2-5 Yr Interest Rate Swaps 2-5 Yr Interest Rate 1
Slide 10: Agency Interest Rate Hedging Portfolio Cont.
EFC: Agency Interest Rate Hedging Portfolio Cont. Calculation of Exposure to Agency RMBS Based on TBA Portfolio Fair Value (In millions) Agency-related Portfolio 6/30/11 9/30/11 Long Agency RMBS $785 $834 Net Short TBA Positions (475) (492) Net Long Exposure to Agency RMBS $310 $342 Shorting “Gene
Slide 11: Strong Results and Preservation of Book Value
EFC: Strong Results and Preservation of Book Value Ellington Financial has successfully preserved book value through market cycles, while producing strong results for investors. $35.00 BVPS Cumulative Dividends A B X 2006-2 A A A Price of ABX 2006-2 AAA $29.93 $30.06 $29.97 $29.90 has been $29.42
Slide 12: Repo Borrowings
EFC: Repo Borrowings As of 9/30/11, EFC had repo borrowings with a remaining weighted average maturity of 44 days; maturities are staggered to mitigate liquidity risk. (In Millions) Repo Borrowings Remaining Days to Non-Agency Agency % of Total Maturity Borrowings 30 Days or Less $32.0 $397.3 48.5
Slide 13: Gross Profit and Loss: Last Four Quarters
EFC: Gross Profit and Loss: Last Four Quarters Profit/Loss over time has shown that: Non-Agency strategy has been primary driver of earnings in most quarters. In times of RMBS market distress, the use of hedging instruments has been effective in insulating long non-Agency portfolio from credit
Slide 14: Additional Metrics
EFC: Additional Metrics… Expense Ratio Capital Usage Across Entire Portfolio 3.35% Liquidity Management CRE 3.30% 9/30/11 Non-Agency RMBS Agency 3.30% Strategy (“Liquidity”) 3.25% CRE 6/30/11 Non-Agency RMBS Agency Liquidity 3.20% CRE 3.15% 3/31/11 Non-Agency RMBS Agency Liquidity 3.10% 3.10% 3.10%
Slide 15: Additional Metrics Cont.
EFC: Additional Metrics…Cont. Non-Agency and Agency Portfolios by Fair Value Average Price - Non-Agency and Agency Non-Ag Non-Ag $ In Millions Ag Ag 1,000.0 $938.1 120 107.12 103.31 102.96 105.09 900.0 $851.0 $833.8 $785.4 100 800.0 700.0 80 72.63 69.36 68.67 600.0 59.12 500.0 $415.5 60 $372.4 $373.
Slide 16: 2011 Portfolio Earnings and Dividends
EFC: 2011 Portfolio Earnings and Dividends Annual Cumulative Earnings and Dividends ($ In Millions) 45.00 2010 40.57 2011 $ In Millions 40.00 Earnings 40.58 35.00 27.34 Dividends 30.00 25.00 Dividends 20.00 20.27 18.45 15.00 11.33 13.51 10.00 7.60 11.11 Earnings 8.63 5.00 6.76 9.79 3.09 4.95 - Q1 20
Slide 17: About Ellington
About Ellington Ellington Financial LLC 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-
Slide 18: Investor Contact
Ellington Financial LLC (NYSE: EFC) Third Quarter Investor Presentation September 30, 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