Slide 1: Investor Presentation May 2019
Investor Presentation May 2019
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 Management Group – Overview
Ellington Management Group – Overview Ellington Profile As of 3/31/2019 Founded: 1994 $8.1 16 26 Years of average 12% Billion in Employee-partners Management’s Employees: >150 assets under industry own the firm(2) ownership of EFC, management as of experience of Investment Professionals: 65 represen
Slide 4: Ellington Financial – Overview
Ellington Financial – Overview Diversified portfolio of residential mortgage, commercial mortgage, consumer loan, and CLO investments o Ability to shift capital allocation across asset classes as credit and liquidity trends evolve(1) Diversified o Largest credit strategy accounts for approximately
Slide 5: Diversified Credit Portfolio
Diversified Credit Portfolio US: 92% Europe: 8% Our flexible approach allocates capital to the sectors where we see the best relative value as market conditions change(1) We believe our analytical expertise, research and systems provide an edge that will generate attractive risk-adjusted returns
Slide 6: Significantly Diversified Sources of Return in Credit Portfolio
Significantly Diversified Sources of Return in Credit Portfolio 3/31/2019 (1 ) 12/31/2013 (1 ) Equity Corporate Residential Investment in Debt & Equity Non-Dollar Loans & REO Loan CLO <1% MBS, ABS, 3% 6% Origination CLO & Other Entities 1% 3% CLO(2) CMBS & 8% Commer cial Residential Loans & REO Loan
Slide 7: Portfolio Summary as of March 31, 2019
Portfolio Summary as of March 31, 2019(1) Diversified sources of return to perform across market cycles Average Allocated Fair Value Price WAVG WAVG Equity and Asset Allocation by Strategy Equity ($K) (%)(2)(6) Life(4)(6) Mkt Yield (5)(6) Strategy CREDIT CMBS and Commercial Mortgage Loans and REO (8
Slide 8: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Corporate CDS Indices / Tranches / Single Name ABS CDS and ABX Corporate Bonds/Corporate Bond Options / Single Names Indices European Sovereign Debt ETFs/Equities CMBX HY CDX OTR Bond Equivalent Units (3)(4) (4) Value Bond Equivalent Value (4) Market Value Market Value
Slide 9: Agency Portfolio
Agency Portfolio Agency Long Portfolio Agency Long Portfolio As of 3/31/2019: $1.14BN (1) As of 12/31/2018: $975MM (1) RM Fixed ARMs Fixed IOs RM Fixed ARMs Fixed IOs < 1% 2% <1% 3% 8% 6% 15-Year 15-Year Fixed Fixed 6% 8% 20-Year Fixed 20-Year < 1% Fixed < 1% 30-Year 30-Year Fixed Fixed 83% 83% Cate
Slide 10: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs Standard Deviation of Q1-2011 – Q4-2018(1)(2) Quarterly Economic Returns of Hybrid REITs Q1-2011 – Q4-2018 The standard deviation of EFC’s quarterly economic return is lower than the Hybrid REIT peer group 10
Slide 11: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Diversified fixed income portfolio has effective duration of less than one year 11
Slide 12: Gross Profit and Loss
Gross Profit and Loss(1) Resilient profit generation through market cycles Three-Month Period Ended Years Ended ($ In thousands) March 31 2019 2018 2017 2016 2015 2014 Long: Credit $ 23,898 4.0% $ 61,201 10.0% $ 61,136 9.6% $ 36,203 5.3% $ 46,892 6.1% $ 77,636 11.4% Credit Hedge and Other (6,556) -1
Slide 13: Expected Effect of Conversion on Investment Strategies
Expected Effect of Conversion on Investment Strategies Non-REIT Strategies to Shrink - Secondary CLO Equity/Notes - UK Non-Conforming RMBS Pro Forma Target Allocation Non-REIT Strategies to Maintain - Consumer Loans & ABS - Ellington-Sponsored CLOs - European NPLs - Equity Investments in Loan- REIT-
Slide 14: Supplemental Slides
Ellington Financial Supplemental Slides
Slide 15: Summary of Borrowings
Summary of Borrowings ($ in thousands) As of 3/31/2019 Weighted Three-Month Period Ended 3/31/2019 Outstanding Average Average Average Collateral Type Borrowings Borrowing Rate Borrowings Cost of Funds Credit(1) $978,683 4.18%(1) $966,679 (1) 4.25% (1) Agency RMBS 941,266 2.71% 893,987 2.74% Subtota
Slide 16: Repo Borrowings
Repo Borrowings(1) Repo borrowings with 24 counterparties, largest representing approximately 17% of total Weighted average remaining days to maturity of 121 days Maturities are staggered to mitigate liquidity risk 16
Slide 17: Agency Interest Rate Hedging Portfolio
Agency Interest Rate Hedging Portfolio(1) We deploy a dynamic and adaptive hedging strategy to preserve book value As of 3/31/2019 As of 12/31/2018 Short $386.5MM 10-yr equivalents(1) Short $424.3MM 10-yr equivalents(1) Eurodollar Eurodollar 0-5 Yr Interest Futures, 0.5% Futures, 0.7% Rate Swaps, >5
Slide 18: Agency Interest Rate Hedging Portfolio (continued)
Agency Interest Rate Hedging Portfolio (continued) Exposure to Agency Pools Based on Net Fair Value As of 3/31/2019 As of 12/31/2018 Net Agency pool Net Agency pool assets-to-equity(1): assets-to-equity(1): 4.4:1 4.9:1 Our net long mortgage exposure was effectively unchanged quarter over quarter
Slide 19: Diluted Book Value per Share
Total Return Since Inception EFC has successfully preserved book value through market cycles, while producing strong results for investors EFC life-to-date diluted net asset value-based total return from inception in August 2007 through Q1 2019 is approximately 207%, or 10.1% annualized(1) $45.00
Slide 20: Operating Results by Strategy, Q1 2019
Operating Results by Strategy, Q1 2019 Three-Month % of Period Ended Per Average (In thousands, except per share amounts) March 31, 2019 Share Equity Credit: Interest income and other income (1) $ 29,409 $ 0.97 4.95% Realized gain (loss), net (4,299) (0.14) -0.72% Unrealized gain (loss), net 11,713
Slide 21: Condensed Consolidated Statement of Operations, Q1 2019 (unaudited)
Condensed Consolidated Statement of Operations, Q1 2019 (unaudited) (In thousands, except per share data) Net Interest Income Interest income $ 36,016 Interest expense (17,618) Total net interest income 18,398 Other Income (Loss) Realized gains (losses) on securities and loans, net (5,322) Realized
Slide 22: Condensed Consolidated Balance Sheet, as of 3/31/2019 (unaudited)
Condensed Consolidated Balance Sheet, as of 3/31/2019 (unaudited) (In thousands, except share amounts) ASSETS Cash and cash equivalents $ 55,876 Restricted cash 175 Securities, at fair value 1,529,485 Loans, at fair value 1,014,990 Investments in unconsolidated entities, at fair value 58,152 Real es
Slide 23: Reconciliation of Net Income (Loss) to Core Earnings, Q1 2019
Reconciliation of Net Income (Loss) to Core Earnings, Q1 2019(1) (In thousands, except per share amounts) Net income (loss) $16,488 Adjustments: Realized (gains) losses on securities and loans, net 5,322 Realized (gains) losses on financial derivatives, net (2) 12,289 Realized (gains) losses on real
Slide 24: Investment Highlights of EFC
Investment Highlights of EFC Diversified investment portfolio across residential mortgage, commercial mortgage, consumer loan, and corporate loan sectors • Diverse range of strategies designed to generate a high-quality earnings stream • Ability to shift capital allocation across asset classes as
Slide 25: Endnotes
Endnotes Slide 3 – Ellington Management Group – Overview (1) $8.1 billion in assets under management includes approximately $1.5 billion in Ellington-managed CLOs. For these purposes, the Ellington-managed CLO figure represents the aggregate outstanding balance of CLO notes and market value of CLO e
Slide 26: Endnotes
Endnotes Slide 7 – Portfolio Summary as of March 31, 2019 (1) See endnote (2) on slide 5. (2) Average price excludes interest only, principal only, equity tranches and other similar securities and non-exchange traded corporate equity. All averages in this table are weighted averages using fair value
Slide 27: Endnotes
Endnotes Slide 10 – Stable Economic Return (1) Source: Company filings. (2) Economic return is computed by adding back dividends to ending book value per share, and comparing that amount to book value per share as of the beginning of the quarter. Slide 11 – Interest Rate Sensitivity Analysis (1) The
Slide 28: Endnotes
Endnotes Slide 19 – Total Return Since Inception (1) Total return is based on $18.61 net diluted book value per share at inception in August 2007 and is calculated assuming the reinvestment of dividends at diluted book value per share and assumes all convertible units were converted into common shar
Slide 29: Investor Relations Ellington Financial Inc.
Investors: Investor Relations Ellington Financial Inc. (203) 409-3575 Info@ellingtonfinancial.com Media: Amanda Klein or Kevin FitzGerald Gasthalter & Co. for Ellington Financial Inc. (212) 257-4170 Ellington@gasthalter.com Ellington Financial Inc. 53 Forest Ave Old Greenwich, CT 06870 www.ellington